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Outgoing board chair reveals LBJ's dire finances

The outgoing board chairperson of the LBJ Medical Center board, Sandra King-Young says the government owned hospital has been in a “financial crisis mode” since it became a semi autonomous agency of the government in 1999 and things are not getting any better with a current Accounts Receivable of more than $30 million. 


King-Young’s revelation was made in a letter late last week to Rep. Maugaoali’i S. Anoa’i, who wrote earlier in the week to the LBJ chief executive officer Joseph Davis-Fleming seeking a detailed report on the recent reorganization and restructuring of the LBJ, resulting in the elimination of six top management positions that have since been reinstated.


Maugaoali’i is chairman of the House Health Committee and in her reply letter, King-Young pointed out that the board has reviewed documentation that clearly indicates “the hospital has been operating in a financial deficit and financial crisis mode since it became an Authority in 1999.”


Additionally, it has been well documented publicly, the occasions upon which the hospital has had to take out loans and more unfortunately, has had to pay federal penalties and reimbursement due to poor management oversight on compliance issues.


“These penalties have had to come out of local funds that are so precious and limited,” she said and pointed out that additional data on the financial risks at the hospital that gave the board reasons for the restructuring and reclassification.


For example, she says Accounts Payables aging balance is $3.3 million - of which 38% is over 90 days old while Accounts Receivables balance is $31.4 million —of which “we deem 88% to be uncollectible—approximately $27.7 million.


She also pointed out that LBJ has received only $200,000 of the $1.5 million budgeted in FY 2013 under the 2% payroll tax. 


Other data that shows the hospital at financial risks:


• Continuing repayments to Medicare monthly of $63k until January 2014—due to over billing.


• Advanced payment required on pharmaceuticals approximately $300k per month.  Vendor will no longer provide these on credit.


• Advanced payment required by several other vendors- primarily dialysis suppliers.  The LBJ hospital has extremely poor credit rating with vendors.


• Maxed out Medicaid Assistance Program- need to ensure local match is available to tap into $5 million in Affordable Care Act funding.


• ASG subsidy not received on time — held hostage to Property Insurance, which LBJ currently owes ASG $878,000.


“Given everything that we learned about the poor financial state of the hospital, it was clear to the board that serious corrective action needed to take place immediately in order to help turn the financially insolvent hospital around,” she said. “Because time was critical for an intervention strategy, we had to address some short-term issues quickly in the hope of immediately impacting expenditures.”


She also explained that some of the actions taken by the board to address the financial shortfall faced by the LBJ, includes that the annual $5000 stipends to doctors that perform administrative duties were eliminated.  “These stipends were inconsistently paid over the years.  The doctors have not complained about this loss,” she said.


Additionally, unfunded mandates of automatic 15-20% increases in the renewal of contracts were suspended.  “This was required in the hospital policies and procedures for the renewal of contracts, but the allowance of these automatic increases were never included in the hospital budget.  The board intends to permanently eliminate this policy,” she said.


Other actions taken was the elimination of the Care Management program that was initiated in the last few months of the previous administration because it was unfunded, and the board did not believe it was a sound utilization of clinical staff that were critically needed on the nursing floor or other units. 


“The type of work this program conducted should be done in partnership with the Department of Health and its community clinics,” she said. “This did not save money, but was believed to be a better utilization of the clinical staff to address the critical doctor and nursing shortage at the clinics.”


(This Management Care Service Program was intended to improve the quality of life for those patients with Non-Communicable Diseases, or NCDs, and to reduce the mortality and morbidity rates associated with those conditions. LBJ officials last year told reporters that this “ambitious service/program is to combat the scourge... of NCDs which has hit epidemic levels in American Samoa.”)


King-Young explained that another action taken by the board is the restructuring and reclassifying the top management positions within the hospital to a reasonable and sustainable level comparable to local government compensation standards for similar job positions.  She says these positions were improperly created in violation of hospital policies and procedures.


“Because the critical issue with the hospital is the insolvency of the hospital, the board deliberated extensively on the available options to address the insolvency of the hospital.  We considered across the board furloughs on the employees,” she said.


The board decided this was not an unacceptable option because it would place extreme financial hardship especially on the livelihoods of the low wage earners at the hospital. 


“The board also had the previous CEO and CFO identify personnel redundancies that could be immediately eliminated, but the board held off on the reduction in these positions until we completed the restructure of top management,” she said.