Schneider’s Reported Progress Dimmed by Lawsuit, Cash Flow

Progress in revenue cycle initiatives, reported by Schneider Regional Medical Center officials to the St. Thomas/St. John District Governing Board on Wednesday, was dampened by an ongoing lawsuit and a precarious cash position.

Schneider Chief Executive Officer Bernard Wheatley updated the board on the status of the legal dispute involving Caribbean Kidney Center and its objection to Schneider embarking on a joint venture with DaVita Healthcare Practices for its dialysis needs.

According to Wheatley, CKC filed for injunctive and declaratory relief, as well as damages, against Health Commissioner Darice Plaskett, the St. Thomas-St. John District Board and the Territorial Hospital Governing Board, as well as DaVita and Wheatley himself.

Wheatley said CKC is accusing the defendants of conspiracy and of violating the Certificate of Need laws, the hospital regulatory laws of the territory, the revised Organic Act of 1954 and the United States Constitution.

“Fundamentally, the owner thinks it’s wrong and it’s an outside company that has no interest in the Virgin Islands people, and that’s not the case,” said Wheatley. “They’re reputable, a nationwide company that’s been doing dialysis for many, many years.”

On Feb. 21, Superior Court Judge Adam Christian denied CKC’s motion for the temporary restraining order. A hearing is currently pending with the District Court.

Schneider Hospital remains in compliance with the Department of Planning and Natural Resources in regards to its waste storage practices, according to Wheatley. It has, however, submitted requests to extend the allowable waste storage period from 30 days to 45 days due to turnaround time and issues that might arise during transportation.

Schneider is also requesting a revised freezer temperature requirement, Wheatley said.

“The older freezer had temperature issues trying to maintain 32 degrees at all times,” explained Wheatley, adding that they requested a higher temperature range of 35 and 45 degrees Fahrenheit.

When asked if this is a safe range, Wheatley replied, “The standard is 32 degrees for medical waste, but it’s allowed to vary.”

The hospital’s revenue cycle and billing initiatives are making progress, Wheatley also reported.

“With Advisory Board, conservatively, if we get our revenue cycle right, that’s up to $8 million, maybe $5 million,” echoed Schneider Chief Financial Officer Fred Vitello. Revenue cycle recommendations for MDS could also land the hospital some $2.7 million cash inflow annually, he added.

Board Chairman Cornel Williams expressed concern about Schneider’s ability to maintain the practices used by said companies.

“The Advisory Board and MDS, particularly the Advisory Board, are going to make some recommendations with respect to process changes,” said Williams. “I think the key though is to hardwire that into the organization, hardwire to the point that even if you change personnel, you know how to do this.”

Vitello responded that the companies are performing the needed staff training.

“They are actually showing up weekly to bi-weekly,” he shared. “The engagement is eight months, but they’re onsite giving the guidelines.”

Vitello reported a net patient revenue of $6.42 million for Jan. 2014, which was under the hospital’s budget by $109,000. Gross patient revenue for the same month, however, was over budget by $197,000, at $12.15 million.

The hospital’s cash position, however, is strikingly precarious. As of March 26, Schneider had only four days worth of cash.

“I’ve dealt with it before in doing turnarounds. There’s a definite cash issue, as there has been, but we have a line of credit,” said Vitello, referring to the $2 million credit line approved by FirstBank earlier in the year.

According to Vitello, part of the cash flow problem goes back to issues with the central government’s allotment for the hospital.

“The government allotment is not really covering our salary expenses,” he said, adding that the $180,000 reduction in the annual allotment is compounded by the late release of the funds.

“The allotment is generally a couple of days late,” he said. “We usually get it about the first week of the month, but a lot of times it is not enough to cover that first payroll, so we borrow from our line of credit and then we pay it back.”

To diffuse the immediate cash flow problem, Vitello said the hospital is still looking at reimbursements from Medicare, which should come in a few days, and CIGNA, which is expected to come in about one week. These receivables could reach $2 million, he said.

Present in the Schneider boardroom were Williams, board members Maria Tankenson-Hodge, Greta Hart-Hyndman, Aldria Harley Wade, Mulo Alwani and Judith Richardson. Board member Miles Stair attended via telephone.

In other action, the board unanimously approved a draft of the 2013 audit of the hospital’s finances by external auditing firm CliftonLarsenAllen, which they said would be released to the public after a finalized copy is produced by the firm.

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