Gov. Juan F. Luis Hospital is in critical condition but is on the mend, and with a massive cash infusion, the long-term prognosis is good, hospital Chief Executive Officer Jeff Nelson told the Senate Finance Committee during budget hearings Friday.
After years of struggling with uncompensated care and other financial hurdles, the hospital currently owes $24 million to vendors, another $48.6 million to the V.I. government and has inescapable capital investment needs of $33 million, Nelson said. But even assuming continued improvements in efficiency and increased patient revenues, the hospital projects it will have a 2012 Fiscal Year net cash flow of $2.7 million, and ultimately a net loss of $750,000, he said, leaving it with the capacity to handle about $9.8 million in debt and about $63 million more debt than it can carry.
"A minimum capital injection of $10 million into the hospital is needed immediately" to clean up the hospital’s balance sheet, he said. And if the agencies that certify the hospital direct it to improve facilities or invest in staff or services, the hospital will not be able to comply without capital from some outside source, he said.
Along with $10 million right away, Luis Hospital is also asking the government to forgive the $48 million owed it by the hospital, in consideration of the charity care and past services to government agencies, Nelson said.
Under the current circumstances, the government will not be seeing that $48 million anytime soon in any event, Nelson said.
"Before you ask us to inject $10 million dollars, we have to see changes in-house," said Sen. Carlton "Ital" Dowe, the committee chairman said, with some pointed questions about patient turnover time in the emergency room and asking what Nelson would be doing to increase revenues and cut costs.
Nelson said the hospital has already implemented some major cost savings improvements, such as pre-purchasing its pharmaceutical supplies to save $1.5 million annually, and its budget projections assume the hospital will follow through on its plans, serving more patients, reducing costs and eliminating waste.
“We expect to go from a loss of $8.9 million to a positive cash flow of $2.8 million," Nelson said. The net income is still a loss of three quarters of a million dollars, but is a vast improvement, he said.
The governor’s 2012 budget recommends $21.8 million from the General Fund to Luis Hospital, a 10 percent decline from last year’s appropriation. All of the appropriation is for salaries and benefits. The hospital projects net patient revenues of about $65.6 million in Fiscal Year 2012, a $9.9 million increase over the current year. The large increase in patient revenues assumes the hospital will increase room rates to match those on St. Thomas, increase new surgical procedures, retain and grow existing patient volumes, and continue reducing expenses by increasing efficiency through the Six Sigma error reduction process, Nelson said.
The Senate’s post auditor projected a more modest $46.1 million in patient revenues for 2012. As a result, Luis Hospital projects a total budget of $88.3 million, while the post audit analysis projects a total budget of $67.9 million.
Going by Luis Hospital’s figures, the hospital projects paying $45.3 million in salaries, wages and benefits, spending $13.8 million on supplies, $15.8 million on professional fees, services and other expenses, $18.7 million in bad debt and charity care. At the same time, it anticipates saving $10.5 million through increased efficiency and cost saving measures.
Several times Dowe urged Nelson to talk more with Schneider Regional Medical Center CEO Alice Taylor about combined purchasing, using the same suppliers and service providers and other ways the two hospitals can save money by cooperating. Nelson said he has spoken some already and will be conferring extensively with Schneider. Dowe and other senators also urged Nelson to work with the University of the Virgin Islands on training and hiring more local nurses to replace very expensive traveling nurses. Nelson agreed the hospital needed to reduce its expensive reliance on traveling nurses and said he "concurred" with the senators.
No votes were taken at the information-gathering hearing. Present were Dowe, Sens. Janette Millin-Young, Sammuel Sanes, Patrick Sprauve and non-committee member Usie Richards. Absent were Sens. Patrick Hill, Shawn-Michael Malone, Nereida "Nellie" Rivera-O’Reilly and Celestino White.
