Budget: LBJ testimony paints rosier picture for FY2013
LBJ Medical Center shared this week with the Fono some positive financial news, with $1 million at last going into a reserve fund as well as additional money of more than $600,000 projected in the new fiscal year from the Medicare program for cost reporting, something that LBJ in past years had not “completely” done.
However, LBJ is still short more than half a million dollars of ASG's required subsidy for the current fiscal year, which comes to a close at the end of this month.
During Wednesday’s Fono joint budget hearing, LBJ chief financial officer Viola Babcock also noted that since the new facility fee hikes, effective July, “there’s also been a shift in the minds of American Samoans — they pay their facility fees, they do so nicely and they do so consistently.”
And although “internal control” at the LBJ is better now, “I also think that the public is stepping up to pay their facility fees” and provide financial support for LBJ, she said.
LBJ’s proposed budget for FY 2013 stands at $39.51 million with the largest expenditure of $24.39 million for personnel costs while the current fiscal year budget stands at $37.31 million with $19.25 million for personnel costs.
During the hearing, Rep. Larry Sanitoa said the figures presented in the budget all looked good, but he recalled the financial woes faced by LBJ at the start of the current fiscal year (which was last October) when the hospital ran into a shortfall resulting in the $3 million loan cash infusion passed earlier this year by the Fono.
He said the Fono wants to make sure the proposed revenues are sufficient to cover the new fiscal year, adding that a clear explanation is required on the funding sources.
Babcock started off saying that FY 2011, “wasn’t pretty” financially for LBJ and so far for FY 2012 — up to the end of August — LBJ’s “cold hard cash” in the bank... that pays the bills” is $37.69 million from all of the hospital’s revenue sources. She expects $1 million of the money to be in the reserve account for FY 2012 after starting out with a “zero” amount.
She also told lawmakers that the $3 million loan — which came from the Workman’s Compensation fund, and is being repaid by the new 2% wage tax — took care of accounts payable and other vendor invoices carried over from the previous fiscal year, along with other outstanding expenditures.
She said the loan money — as well as LBJ taking responsibility with the rate increase that is “fair and just and consistent” with LBJ collections at the window — put LBJ in a “very well position” so far in FY 2012. “We used our successes in FY 2012 to look at FY 2013,” she added.
According to the budget book, LBJ is projected to receive $14.41 million in “Medicaid & ACA (Affordable Care Act) monies—both federal funds—for the new fiscal year. Babcock explained that ACA is what LBJ will have in additional revenues from 2012 through 2019 and this is the pool of money available to American Samoa.
She said matching funds are required for these funding sources and the local match comes from LBJ’s business office collection, the ASG subsidy and other local revenues. ACA is also referred to as the" Obamacare" law.
LBJ is projecting $7.90 million in U.S. Department of Interior money and these are the funds that come directly to LBJ for operations, not for construction. She explained that proposed DOI funding projection “is a conservative estimation at this point.”
Sanitoa reminded those present that last year there were problems with DOI funding because Congress didn’t pass the entire FY 2012 federal budget on time, causing a delay in DOI funds’ disbursement.
And if the same situation occurs this year — with a delay in Congressional approval of FY 2013 — what is LBJ going to do? asked Sanitoa.
Babcock said the DOI funds are a monthly allotment and it's very predictable it will happen. She said that what happened last year was that DOI was conservative, giving LBJ only a portion in October, and one in November and once the entire federal budget issue was resolved, DOI “played catch up” with the rest of the money.
“So, we have started setting aside funds in the reserve [account] and being very conservative” with the planning, she said. She explained that the reserve fund, now at $1 million, is there to be tapped into when these types of issues surface.
Babcock said LBJ received a letter from the government that the hospital subsidy for FY 2013 is $5 million — which is the amount in the budget book.
Asked by Sanitoa if LBJ received all of its authorized subsidy for FY 2012, Babcock said “no” and explained that LBJ was shorted $100,000 in October, $50,000 each in June and July and the September payment was due on the 5th of the month for $354,000 — but it has not yet been received.
So as of Wednesday morning ASG has shorted LBJ a total of $651,559 for FY 2012, she said and noted that the hospital had a couple of other repayments to be made concerning Medicaid, and therefore the rest of the subsidy will be needed.
LBJ is expecting $3.42 million for Medicare for the dialysis patients and all Medicare recipients, said Babcock, who pointed out that a little over 4,000 people in the territory are eligible for Medicare and the number of Medicare patients is expected to remain the same.
“But what we have separated out, is the Medicare cost report” revenues projected for FY 2013 at $689,000, she said. And in order to get this revenue, every year, every hospital in the country is required to file a Medicare cost report, which is a different type of audit and this report is then submitted to the feds, she said.
“In the history of LBJ, for some unknown reason, we have never completely filed a cost report, adding that it takes a great deal of work and some expertise that hasn’t been here. "The medicare cost report is the additional funding that LBJ expects in FY 2013,” she explained.
Babcock told lawmakers that collections at the business office have increased by up to 40%. For example, in FY 2011, the average collection was $340,000 a month and so far in FY 2012 — up to August — the average collection is $495,000 a month and it's expected for the rest of the fiscal year, and into FY 2013, she said.
She also said the new facility fee hikes, effective July, drove up collection by 3%.
The business office, so far in FY 2012, has put into the bank $5.4 million and LBJ is looking at about $6 million for this fiscal year with only this month left to go, she said and noted that the $6.5 million proposed in FY 2013 in revenue from the business office is “pretty conservative”.
FUEL TAX AND NEW WAGE TAX
LBJ is projecting to collect $350,000 from a portion of the fuel tax and $1.25 million from the 2% wage, or payroll tax. She said money from the payroll tax will only come thru for FY 2013 for LBJ, when the $3 million loan is paid off first.
Sanitoa wanted to know if LBJ has had any communication with ASG Treasury as to when this loan will be paid off, to which Babcock said, Treasury estimates the loan to be repaid at the end of December this year (which is the end of the first quarter for FY 2013) and after that revenues go to the hospital for operations.
ASG officials had testified before the Fono that the administration is estimated to collect between $3 and $4 million a year on the wage tax. Based on this testimony, Babcock said LBJ “is conservative” in putting the $1.25 million on their budget.
However, if this money does not materialize, that means LBJ also loses out $1.2 million in Medicaid funding, she said and reminded lawmakers that this money is also used as matching funds for Medicaid.
Other issues raised in the LBJ hearing will be reported in later editions.