LBJ: Loan money went to pay bills not drastic pay hikes


LBJ Medical Center officials yesterday provided an update to the House on the $3 million loan proceeds from the ASG Workmen’s Compensation Account, and chief executive officer Mike Gerstenberger denied reports of any drastic pay hike for top officials at the government owned medical center.

Gerstenberger, along with board chairman Moananu Va, chief financial officer Viola Babcock and two other LBJ officials were called before the House Health/LBJ Hospital Committee to discuss the status of the $3 million loan, as well as reports received by the House about pay hikes following the higher fees implemented last month, and other hospital issues.

Moananu was the first to address the committee, saying the hospital has received only $1.5 million of the loan and is still waiting for the rest. Regarding pay hikes, Moananu said just like any other government entity, LBJ pays out annual increments to workers, based on job performances.

However, Rep. Larry Sanitoa pointed out during the hearing that Gerstenberger’s report to the committee contradicts Moananu’s statement on the money received by LBJ from the loan and sought further clarification. Sanitoa also said that the CEO’s report appears to show that LBJ had restructured its organizational chart.

Gerstenberger’s report says the hospital has received in full the $3 million loan proceeds— with the first half of $1.5 million in February this year and the other half in April. “These funds qualify for match from Medicaid [and] we did apply for that match and have received those funds, as well,” the report says.

Gerstenberger also provided this same information during his verbal testimony, where he stated that $3 million was received from the federal Medicaid program.

As to how the hospital expended these revenues of $6 million — $3 million in the loan and $3 million from Medicaid — Gerstenberger’s report states that $4.77 million was applied to LBJ’s Accounts Payable, paying vendors for supplies and services rendered in fiscal year 2011 which “we were unable to pay as a result of ASG’s failure to provide us our appropriate subsidy.”

Additionally, $628,000 of the fund was paid to certain LBJ employees to satisfy the Wage and Hour settlement imposed on LBJ in October of last year by the U.S. Labor Department. An investigation by the federal agency found that LBJ had either underpaid workers, was not paying them the correct wages or was not compensating workers at the proper overtime rate, in accordance with federal law.

Gerstenberger’s report further states that $600,000 — of the $6 million — is currently being held as an operational reserve for the hospital.

“Our previous operating reserve of $2 million was exhausted during FY 2011 to cover the subsidy shortfalls,” the report says. “An operating reserve is essential as we are subject to a 3-year audit window from the Center for Medicaid and Medicare (CMS).” (CMS provides funding for the federal Medicaid and Medicare programs)

“CMS or the hospital has three years to question any payment or claim. Sometimes we prevail and CMS pays us additional dollars. In other cases, we are required to refund monies to CMS,” it says.

Regarding personnel promotion and pay hikes, the report says there is “apparently a misconception” that LBJ recently promoted a number of individuals, especially executives.

“This is incorrect, there has been no such advancement. We did change a number of [job] titles in October... to bring consistency to all positions within the organization and to adopt the designations common today in the hospital industry.”

Among the titles changed were the titles for some of the senior leaders. As a carryover from the days when LBJ was part of the Department of Health, some division executives previously carried the title of ‘deputy director’, the report says.

Since the hospital became a semi autonomous ASG agency, these positions now reported to a CEO, not a director and these positions were relabeled as “vice president”, the title common in the industry for the senior executives in these positions, it says.

“This represented a title change only. The job description remained unchanged, the reporting relationships remained unchanged and the salary for these positions was not changed,” says the CEO’s report.

It also states that for every position, salaries are routinely evaluated each year following the annual performance review of each employee. Additionally, factors considered are employee performance, pay equity within the organization, competitiveness in the relevant labor markets, legal requirements and aligning employee incentives with organizational goals.

During the committee hearing, Gerstenberger recited the same information in his written report dealing with the use of the $3 million and the reorganization of jobs titles. He stressed that there were “no recent” pay hikes implemented by LBJ and that pay adjustments are made in accordance with annual review of job performance.


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