St. Croix’s only hospital has been sounding the alarm for years and now must either receive more funding or else medical services will be reduced, Gov. Juan F. Luis Hospital Interim Chief Executive Officer Kendall Griffith testified during budget hearings Tuesday.
"Each and every day, JFL struggles to balance the current and past debt with the monthly revenues and appropriations," Griffith said, pointing to a May 30 payroll crisis as evidence of how dire the situation is.
"Even though payroll is the first priority for payment distributions, due to lack of cash, the payroll was delayed for some employees," he said. The crisis "was quickly addressed by the early release of our June 2013 allotment by the central government," Griffith said. But that sort of stopgap emergency reaction will not solve the overall problem, which is fed largely by millions of dollars in medical care the hospital provides but is never compensated for, and made worse by two years of cuts to its government funding, he said.
"Continuing to inadequately fund the level of care provided by any reduction in appropriations is directly linked to an equal reduction in health care services," Griffith said. "When JFL’s appropriations are cut or underfunded, you are making the decision to reduce patient care services and number of employees providing that service to the community of St. Croix.”
Ironically the hospital’s gross revenues from patients have increased steadily over the past few years, even as the closure of Hovensa, poor economic conditions and declining government funding have pushed the hospital deeper into the red, according to the data Griffith provided the committee along with his testimony.
From 2011 to 2012, revenues increased from $86.9 million to $122.1 million, rising to a projected $147.1 million for Fiscal Year 2014. Griffith said the $22 million increase from 2011-12 was about 62 percent due to increased billing rates and 37 percent by better billing.
But it is not enough to outweigh the factors reducing the hospital’s finances, such as uncompensated care, which is projected to be $32 million in FY14. Because that uncompensated care is the result of the hospital’s statutory mandate to provide care regardless of ability to pay, the government should fund the full $32 million, he said.
From 2008 through this fiscal year, the hospital will have "absorbed on average $30 million each year of uncompensated care provided to the people of the Virgin Islands, accounting for a total of approximately $211 million," Griffith said. "Fairly compensating JFL for the uncompensated care it provides will enable us to pay our vendors, invest in new projects, further improve health services and increase revenue," he said.
When questioned as to what he is asking for above and beyond the governor’s budget proposal, Griffith said he realized the government is also facing fiscal difficulties, so he does not expect to get everything the hospital needs, but he said he hoped the Senate could prioritize and help with the most crucial items.
"The reality is you are not going to give it all to us, so we have to put everything in there we need and you can use your judgment to what you can give us," he said.
Griffith said the Senate can approve the proposed $19.8 million appropriation, knowing JFL will be forced to cut services, or it can do some of the following to help the hospital avoid cutting services:
– find the $32 million to offset the cost of uncompensated care;
– provide a $10 million cash infusion to help with debt reduction and improve cash flow;
– appropriate funds to pay roughly $6.8 million owed JFL by various V.I. government agencies;
– and amend V.I. law to allow the hospital to enter into public/private partnerships that will help its bottom line.
The FY14 executive budget proposal recommends $19.8 million to JFL from the General Fund, along with $52.9 million from fees for services, in its revolving fund, for total local funding of $72.5 million.
Of that, $34.8 million is for wages and salaries; $11.1 million for employer contributions to Social Security, Medicare and pensions; $11.2 million for supplies; $10.1 million for other services and charges, including $6 million for contract labor, like traveling nurses. Another $4.9 million is allocated for utilities.
Labor Commissioner Albert Bryan also defended his department’s budget Tuesday, requesting a total Labor Department budget of $13.4 million. Of that, $4.4 million would be from the General Fund and $1.1 million from the Government Insurance Fund. Another $7.9 million is expected from other nonappropriated local and federal funds.
Like other agencies, Labor has seen sharp funding drops and has shed a quarter of its funding and its workforce in the past two years, Bryan said.
“Even though we have vastly decreased our punching power due to the economic times, our aspirations are no less lofty. Much of the country is transitioning from a manufacturing to a service-based economy and it is no different in the Virgin Islands,” Bryan said.
Because of the refinery’s closure, the unemployment rate in the Virgin Islands climbed from 8.7 percent in January 2012 to 13.2 percent in April 2013. On St. Croix, unemployment skyrocketed from 9.5 percent to 17.8 percent in that period, Bryan testified.
The Unemployment Trust Fund, once the most solvent in the nation, has been accumulating debt since 2009 and is a major concern for the department, he said. The balance stands at $71 million with an interest payment due in September of $1.4 million, he said. But borrowing has been steadily decreasing over the last half year – down from $5 million to approximately $2 million per month – so the total is increasing more slowly now. Initial claims, which had reached 450 per month, are down to pre-recession levels of about 250 per month, he said.
The Virgin Islands has paid an average of $30 million per year in unemployment benefits for the last three years, including $21 million so far this year. “We expect it to go as high as $35 million by the end of the calendar year,” Bryan said.
The government has raised the minimum tax rate on the State Unemployment tax in an attempt to bring some form of solvency to the fund.
“We are in the process of preparing the legislation and the appropriate tax plan that would allow us to repay the loan and present an employers tax schedule that would not further impair our economic recovery,” Bryan said, adding that creating a schedule “that allows us to pay back the loan and retain solvency while providing some relief to the taxpayers has proven quite difficult.”
No votes were taken at the information gathering hearing.
