Guam Hospital Continue Struggling To Meet Obligations

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Increased revenues not sufficient to meet shortfall: Audit

By Gaynor Dumat-ol Daleno

HAGÅTÑA, Guam (Pacific Daily News, July 1, 2015) – Guam Memorial Hospital will struggle to survive without cash subsidies from the local government, states an audit report released June 30.

"Without subsidies from the General Fund, it will have a hard time meeting obligations," Public Auditor Doris Flores Brooks said.

Taxpayers and the government of Guam have more than doubled the subsidy for GMH last fiscal year, to $21.5 million, from $9 million in fiscal 2013, the audit report states.

This is the second consecutive year that an audit report raised the red flag on Guam Memorial Hospital Authority's survival without significant cash infusion from the government.

"GMHA has incurred recurring losses and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern," the audit report states.

GMH revenues increased by $10 million to $80 million, but the amount fell short of the $108 million spent on running the hospital last fiscal year.

The increase in expenses came primarily from GMH's nursing department, where payroll costs increased by $3.5 million to $53.2 million last fiscal year, as a result the revised pay levels that also gave raises to GovGuam public officials.

GMH's financial challenges stemmed, in large part, from its mandate to accept patients — even when patients are unable to pay. Patients who have some form of health insurance make up only 29 percent of total patient revenue, the audit findings state.

As GMH faces competition from Guam's first private hospital, the Guam Regional Medical City, which is scheduled to launch patient services July 1, the financial pressure on the government hospital could intensify.

To what extent the new hospital might impact revenues at GMH is unknown at this time, the public auditor said.

GMH billed $22.7 million worth of services to patients whose services weren't covered by insurance last fiscal year, but got paid $8.8 million, or a collection rate of 39 percent.

GMH Chief Executive Ted Lewis said the audit report is an assessment that speaks to GMH's financial past.

"In the last year there was an increase in the amount the local government needed to chip in," Lewis acknowledged.

Lewis was named the hospital's new CEO in May after the abrupt resignation of then-Chief Executive Joseph Verga. Verga's resignation from GMH hasn't been publicly explained in detail.

Lewis said he's not losing faith in GMH because various efforts recently have been undertaken, or are under way, to improve the finances of the government hospital.

"I am optimistic for the future," he said.

GMH recently increased its rates by 5 percent across the board in April, and is hiring a vendor to improve on the collection of unpaid hospital services, GMH management stated.

GMH also is working with a consultant to try to get Medicare to improve the reimbursement rate for Guam, Lewis said, so that the reimbursement rate will be close to the cost of actual services provided to Medicare patients, Lewis said.

Medicare's reimbursement rate for Guam is lower than the reimbursement for the states, he said.

GMH billed $31 million worth of services for Medicare patients in fiscal 2014, but collected only $14 million.

Medicare representatives are receptive to GMH's requests for a higher reimbursement rate, he said.

"So I think we are doing all the right things … a lot of good things are happening here and we take care of a lot of many people, and we take care of a lot of people very well and … We are gonna be here," Lewis said.

The government hospital provided $14.7 million worth of services to Medically Indigent Program patients, which is a local government-run program, but the hospital only collected $3.7 million in payments, or a 25 percent collection rate, GMH's finances show.

Lewis said GMH may have to ask for additional subsidy from GovGuam to factor in a potential loss of revenue from patients who may choose to go to the new private hospital.

In the long run, the co-existence of GMH and the new private hospital won't be a bad thing because the competition will improve the level of care and, as a result, more Guam residents will choose to stay on Guam for hospital services, Lewis said.

"At the end of the day, having another hospital here, I don't see it as a negative because we have more resources in the community to the extent that between them and us, we will attract more patients on island," Lewis said.

The public auditor said a stable leadership at GMH will also help improve GMH's finances.

The audit stated that GMH's revolving door of executives contributed to its inability to address its financial challenges meaningfully.

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