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HomeNewsArchivesJFL Hospital Crippled by Debt; CEO Recommends Major Restructuring

JFL Hospital Crippled by Debt; CEO Recommends Major Restructuring

Saying that "the status quo is unacceptable," Juan F. Luis Hospital CEO Jeff Nelson Wednesday recommended a restructuring of the hospital’s management that would allow the board to find new equity partners that could provide a much-needed influx of cash.

Nelson, who made the recommendation at Wednesday’s regular monthly meeting of the hospital board, said he did not have a specific plan for such a structure, but certain elements were non-negotiable—that the St. Croix hospital would remain a not-for-profit facility owned by the government and open to all regardless of ability to pay.

But under his proposal, while the hospital itself would remain not-for-profit, a management company made up of physicians, staff and administrators would be a for-profit group that would be able to attract investors who could help dig the facility out of a very deep hole of debt.

The recommendation came at the end of a meeting that contrasted the hospital’s woeful financial circumstances with its recent successes in turning things around and moving ahead with its goal of becoming "the most trusted" family health center in the Caribbean.

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The hospital has slowed its negative cash flow, Nelson said. Admissions and the income from fees are up, and costs are being controlled.

But the territory’s 2012 budget reduces the hospital’s revenue from taxes, and that accounts for the projected red ink for next fiscal year. Not only did the Senate not approve a $10 million influx requested to help with the hospital’s debts, it reduced JFL’s tax revenues from $21.8 million to $20.2 million.

More troublesome, the hospital is deeply in debt. The hospital owes its creditors about $27 million and owes the V.I. government another $50 million, and there’s no prospect for repaying that debt any time soon.

Further, JFL needs about $36 million in capital improvements. The hospital desperately needs an influx of cash, but the government will not be able to provide it. So the board has to consider its options.

Nelson ran through a list of alternatives, including "shrinking" the hospital, by which he meant selling off some assets and offering fewer services; reducing the staff, which community members have been adamant in opposing; and even bankruptcy, which would probably create as many problems as it would solve. Nelson said if the hospital took action that would allow it to walk away from its $27 million debt, the creditors who were stiffed would be unwilling to extend any further support.

But something has to be done, and that led Nelson to propose his concept of a for-profit management company. He repeated several times that the hospital would remain not-for-profit. But a for-profit management group would have a chance to attract the kind of money that could keep the hospital afloat.

The devil is in the details, and Nelson said a lot of talks and negotiating will have to happen before any action can be taken. But another part of his report emphasized the need for some kind of action.

Nelson said unless the Senate acts to unfreeze part of the hospital’s restricted funds, it will have a great deal of difficulty making the November payroll. Those checks will be cut no matter what, he said, but it will involve making the kind of decisions that could make further trouble.

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Saying that "the status quo is unacceptable," Juan F. Luis Hospital CEO Jeff Nelson Wednesday recommended a restructuring of the hospital's management that would allow the board to find new equity partners that could provide a much-needed influx of cash.

Nelson, who made the recommendation at Wednesday’s regular monthly meeting of the hospital board, said he did not have a specific plan for such a structure, but certain elements were non-negotiable—that the St. Croix hospital would remain a not-for-profit facility owned by the government and open to all regardless of ability to pay.

But under his proposal, while the hospital itself would remain not-for-profit, a management company made up of physicians, staff and administrators would be a for-profit group that would be able to attract investors who could help dig the facility out of a very deep hole of debt.

The recommendation came at the end of a meeting that contrasted the hospital's woeful financial circumstances with its recent successes in turning things around and moving ahead with its goal of becoming "the most trusted" family health center in the Caribbean.

The hospital has slowed its negative cash flow, Nelson said. Admissions and the income from fees are up, and costs are being controlled.

But the territory's 2012 budget reduces the hospital's revenue from taxes, and that accounts for the projected red ink for next fiscal year. Not only did the Senate not approve a $10 million influx requested to help with the hospital's debts, it reduced JFL's tax revenues from $21.8 million to $20.2 million.

More troublesome, the hospital is deeply in debt. The hospital owes its creditors about $27 million and owes the V.I. government another $50 million, and there's no prospect for repaying that debt any time soon.

Further, JFL needs about $36 million in capital improvements. The hospital desperately needs an influx of cash, but the government will not be able to provide it. So the board has to consider its options.

Nelson ran through a list of alternatives, including "shrinking" the hospital, by which he meant selling off some assets and offering fewer services; reducing the staff, which community members have been adamant in opposing; and even bankruptcy, which would probably create as many problems as it would solve. Nelson said if the hospital took action that would allow it to walk away from its $27 million debt, the creditors who were stiffed would be unwilling to extend any further support.

But something has to be done, and that led Nelson to propose his concept of a for-profit management company. He repeated several times that the hospital would remain not-for-profit. But a for-profit management group would have a chance to attract the kind of money that could keep the hospital afloat.

The devil is in the details, and Nelson said a lot of talks and negotiating will have to happen before any action can be taken. But another part of his report emphasized the need for some kind of action.

Nelson said unless the Senate acts to unfreeze part of the hospital's restricted funds, it will have a great deal of difficulty making the November payroll. Those checks will be cut no matter what, he said, but it will involve making the kind of decisions that could make further trouble.