LBJ Medical Center faced a loss of close to $4 million in its budget at the end of the third quarter of fiscal year 2013, according to the performance report for the quarter, which also states the government owned entity “continues to operate with a significant budget deficit” as money allocated in the fiscal year doesn’t adequately cover expenses.

Submitted by the hospital CEO Joseph Davis-Fleming, the report dated Aug. 23, which covers the period of Apr. 1 — Jun. 30, 2013, said staffing, vendor service contracts and grant applications have been “mismanaged for years”.

LBJ’s third quarter report was not included in the ASG submission of all government entities released last month and it was only received this week by lawmakers, who wanted to see the hospital’s financial status before FY 2014 budget reviews begin.

FINANCIAL PERFORMANCE

According to the report, third quarter net patient revenue was $988,365 less than budgeted, while operating expenses were 8.03% over budget for the quarter. Additionally, cash collections were $1.32 million, a 15.86% decrease from the same quarter last year, due to the high volume of patients covered by the Financial Assistance Program that became effective August 1, 2012.

“Overall, our actual performance in the third quarter resulted in a $3.9 million year-to-date loss to budget, due to the non-recognition of unpaid Medicare claims,” the report says and noted that LBJ was able to secure a $3.4 million advance payment from Medicare to cover unpaid claims from previous quarters.

Of the total advance payment, $1.2 million was for dialysis claims and $2.2 million was for inpatient visits, it says, adding that the advance payment amount was calculated by Palmetto GBA (a Medicare contractor) based on LBJ’s average past history.

It also states there was an agreement between LBJ and Palmetto to recover the advance payment by applying the amount due to future payments, which will be effective in the fourth quarter and therefore no further Medicare payments will be received for the remainder of the 2013 calendar year as a result of this agreement.

“In summary, the hospital continues to operate at a significant budget deficit since ASG funding allocation approved last year does not adequately cover patient care expenses, making it difficult to come up with a enough funds from month to month to pay staff, purchase medication & supplies, and maintain medical equipment as required by federal patient safety and quality standards, the report says.

The ASG subsidy for LBJ for FY 2013 is $4 million and for FY 2014, the total subsidy is $6 million — an increase of $2 million that the governor says is necessary to provide quality health care for local residents as well as providing an additional $2 million in Medicaid funds.

IMPEDIMENTS

In addition to the “chaotic transition” for LBJ with a new board and top management team, the report cited several impediments it encountered in the third quarter.

For example, the new CEO hired in late April only had one transitional orientation day spent with the previous CEO, making it difficult to implement all of the mandates by the governor and the board in a short time frame.

Furthermore, the new chief financial officer, Leilua Stevenson, was hired in June with no transitional orientation time spent with the previous CFO, who departed three weeks prior to Stevenson’s arrival, “during a time when the hospital was in severe financial crisis”.

“This has also made it extremely difficult to prepare a very large and complex budget without any prior instructions provided by the previous CEO or CFO since none of the remaining staff were involved in completing this task on a detailed basis,” it says.

“It has since been determined that previous budget submissions have been flawed in terms of providing accurate financial information that accurately accounts for all hospital costs, as well as true collectible accounts receivable which are deemed overstated, projecting an even higher budget deficit situation,” the report claims.

It also says the hospital’s accumulation of many past-due debts continues to grow at a fast rate due to many years of underfunding, which includes many large unpaid debts owed from previous fiscal years, as well as large unbudgeted items such as property insurance of $879,000.

The report claims LBJ’s patient and insurance accounts receivable are overstated by “several millions of dollars” in terms of actual amounts deemed collectible, projecting an even larger operating loss for FY 2013.

It further claims that staffing, vendor service contracts and grant applications have been “mismanaged for years”, resulting in loss of potential revenue and unauthorized overpayments contributing further to the hospital’s financial problems.

The report also says the hospital’s information systems are very outdated and not in compliance with federal requirements, resulting in inefficient and inaccurate manual processing of patient care and financial data that may adversely affect past and future federal reimbursement, as well as putting the hospital at risk of Medicare and Medicaid payment suspension.

Furthermore, many of the current staff were hired without proper education or experience and are inadequately trained, nor are they knowledgeable about key aspects of the hospital’s operations, as well as local ASG and federal reporting and compliance requirements, resulting in many federal violations, compromising patient safety and quality.

The report also revealed that the lab had a federally required inspection in early June this year without a lab manager on board, and the position has been vacant since last December.

“Preliminary results indicate many violations of federal standards that may put the hospital lab at risk of losing Center for Medicaid and Medicare certification and related funding,” it says and noted that the previous lab manager has been rehired to fill this post.

To conclude on impediments, the report states, “Many other aspects of the hospital operations are underfunded to support increasing demand for patient services, and are in violation of federal government safety and quality standards, placing future funding at risk.

ACCOMPLISHMENTS

Among the accomplishments in the third quarter is the hiring of the new CEO and CFO; and the new Pharmacy Automatic Refill system implemented in June 2013, making this process much more efficient & cost effective, as well as less labor-intensive, resulting in significantly lower wait-times for patients and improved customer service.

Also accomplished this quarter is the new Dental Appointment system implemented in June 2013, making this process much more efficient and less labor-intensive resulting in significantly lower wait-times for patient and improved customer service.

It also says that a contractual agreement was executed with the University of California-San Diego Medical School to administer a new Physician Assessment & Clinical Education (PACE) program to resolve problems with local licensing of foreign-trained local physicians who currently treat patients under the supervision of a relatively small number of licensed medical staff.

“...successful completion of this year-long program will also help resolve the territory’s licensed physician shortage,” it says.

In tomorrow’s edition, a summary of LBJ’s challenge as well as information from today’s LBJ budget hearing for FY 2014.