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Failure to pay LBJ subsidy sparked $1MIL loss

fili@samoanews.com

The American Samoa Government’s failure to pay required subsidies of more than $2 million in fiscal year 2011 resulted in a loss of $1 million to the LBJ Medical Center at the close of FY 2011, which ended Sept. 30, 2011, according to the independent auditor Wipfli, LLP, of Spokane, Wash.

The auditors say that as of Sept. 30, 2011 the hospital employed 580 workers and had an annual payroll of $19 million, including benefits.

The audit report states that the hospital’s primary funding comes from a Medicaid Block Grant based on allowable expenditures and local match, and provides for “presumed Medicaid eligibility” for all American Samoan residents.

The majority of the local funding match comes from patient receipts and a subsidy from the American Samoan Government (ASG), it says.

“During FY2011, ASG did not provide $2.9 million [in subsidy] of the approved budget total of $4.6 million, which cost the hospital an additional $2.9 million of loss due to the Medicaid match requirements,” said auditors. “This funding shortfall of $5.8 million represented 17% of the total FY2011 budget of $33.9 million.”

“The shortfall required the hospital to use all but $116,000 of the $2 million plus of cash reserves, significantly reduce travel, education, repairs and maintenance, and budgeted capital expenditures,” the audit report states. “The cost reductions and use of cash reserves were insufficient to offset the shortfall, so $1 million of vendor payables were carried forward into FY2012.”

According to the report, LBJ is concerned with the inability of ASG to provide promised and budgeted funds — referring to the subsidies.

The other hospital funding sources are secure for the foreseeable future, which include Medicare and Medicaid, including additional funding resources available if local match can be secured through the Obama Health Care Plan ACCA funds, Department of Interior, federal grants and patient revenues, it says.

The hospital authority will see some Medicare funding reductions along with all hospitals in the U.S. but such reductions are not significant, it says.

The report also states that in an effort to increase patient revenue collections, LBJ has implemented new billing and collection measures implemented in FY 2011 whereby patients must pay the facility fee prior to receiving services for all non-emergency visits.

In summary, the report says, the medical center “will strive to continue to improve the patient revenues which qualify for local match and in turn increase Medicaid funding, minimize the impact of Medicare reductions, and actively work with the local Territory government to create long term sustainable sources of revenue.”

Despite the loss of $1 million, the report says LBJ made or completed the following capital purchases and improvements in FY2011 funded by Department of Interior grants:

•  $6.1 million of building renovations

• $12,000 of fixed equipment built

•  $3 million of major movable equipment with the primary purchases being: $1 million of fire sprinklers, fire alarm system, and smoke detectors; $826,000 for a cooling tower; and $236,000 of infusion pumps.

Auditors also state that gross patient revenue for FY 2011 was up 13.27% over FY 2010, and net patient revenue increased by 7.23% from the prior year and came in at 11.11% against FY 2011 budget.

Additionally, accounts receivable allowance increased 5.7% from ending FY 2010 to ending FY 2011. Moreover, the report states 71.42% of all receivables were over 120 days, and another 5% at 120 days, with 70% of all receivables self pay resident and self pay non-resident.

“Both self pay resident and self pay non-resident have been historically very difficult to collect,” it says.



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