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Senators hear of un-collectable $14M at LBJ

In a Senate Hospital Committee hearing held yesterday, key government witnesses and  LBJ medical center officials updated the senators on the current financial situation at the only hospital in the territory, as well as the state of local health care.  

The first witnesses called before the Senate at yesterday’s committee hearing, chaired by Senator Galea’i Tuufuli, were Gaea Perefoti, the ASG’s internal auditor and Deputy Treasurer Ueligitone Tonumaipe’a who were assigned by Gov. Togiola Tulafono to review hospital funds.

Both men said they verified the dire LBJ financial situation to the governor, with Tonumaipe’a telling the senators their mission was to review the hospital finances to determine if there really was a financial situation.

 “After our review” said Gaea, “the hospital was right.” At that time, about one and a half million dollars was left in the hospital’s bank accounts, and they needed the help; they needed the cash to proceed with operations.”

The Deputy Treasurer said the biggest financial problem faced by the hospital is their accounts receivable which is now at $16 million. “The public received health care and did not pay their hospital bills — which amounted to $16 million — however if the hospital had collected $3 million they would not have encountered their financial situation”, said Tonumaipe’a.

He added that it is questionable if they will ever be able to recover $14 million of that $16 million.

Senator Velega Savali Jr. asked the witnesses if there was a written report given to the governor after their review of the hospital’s finances. The Deputy Treasurer replied that, following their review, a two-page report was given to the governor explaining what is happening at the hospital.

Gaea told Senators the $16 million accounts receivable dated back to the 1960’s, and it has piled up since that time. He said that there were the bills of those who passed on, foreigners, people who moved off island and the public who just won’t pay their bills. “This $16 million will build up every day— maybe next year it will be $17 million,” said Gaea. 

Velega questioned the witnesses, asking if they made recommendations to the governor after their review. “Yes,” replied Tonumaipe’a, and proceeded to tell the senators that “the hospital is using a different pay scale, and it’s different from the pay scale the ASG is using and that is their biggest expense — the payroll. We recommended to the governor that the hospital roll back some of the salaries of the employees.”

Other witnesses called to testify were Treasurer Magalei Logovi’i, hospital CEO Mike Gerstenberger and hospital board Chairman Moananu Va.

Moananu Va said that LBJ has moved forward with the temporary reduction of working hours of hospital employees. “The important issue is that the employees are still working, [but] with a reduction in hours.”

 Senator Galea’i brought the $3 million loan to the attention of the witnesses and said the Fono did not set any conditions for the hospital to follow with regards to the $3 million, saying all there was to do was to transfer the funds to the hospital from the Workmen’s Comp.

“However the loan agreement between the government and the hospital does not coincide with the law that’s already been approved.”

It did not sit well with Galeai as to why a loan agreement and promissory note with regard to the $3 million was signed between the LBJ hospital and Governor Togiola — and yet the hospital is not the one paying for the loan.

Galea’i said the law states that the treasurer must make payment to the Workmen’s Comp on a monthly basis, but the promissory note states that it’s to be made quarterly.

“The law is clear, the hospital has nothing to do with repaying the loan — the hospital’s involvement is accepting the money to assist the hospital.”

Galea’i also asked Moananu if the hospital has received the $3 million. “We have only received $1,500,000 and part of the agreement is that by the second or third week of March we will have remaining half” was the reply.

(The $3 million loan bill states that it is to be paid back to the Workmen’s Comp account with proceeds from a (new) 2% wage tax, collected from everyone who is earning wages. After the loan is repaid, the same wage tax will continue to be collected and given to the hospital to fund its operations, which includes the off-island medical program.)

Senator Galea’i also asked the hospital’s CEO if the government is up to date with payment of the hospital subsidy. The CEO said the government is up to date as of February.

Senator Mauga Tasi Asuega asked Treasurer Magalei why there is a delay in releasing the remaining funds to the hospital.

Magalei told senators he was not aware of the agreement between the hospital and the governor, however there is $4.6 million in the Workmen’s Comp account. “All I was told was to release $1.5 million with the condition that after two to three weeks the remaining $1.5 million will be released”, said Magalei.

The treasurer told Senators the $3 million loan bill has a conflict, because the bill states that the government must pay the loan on the 5th of every month.

He asked, “What if by the 5th, there is only $15.00 in the account, because the only guaranteed funds received from the 2% wage tax are from employees?” adding “But the private sector will not pay their tax until the end of the year.”

“However since the law has been approved, whatever is in the account from the 2% on every 5th, that is what we will pay; and the proceeds will go to the hospital once the $3 million loan is paid off to the Workmen’s Comp”, said Magalei.

Senator Velega asked the hospital’s CEO if the agreement will affect the hospital’s operation the way the agreement is written up.

CEO Gerstenberger did not answer the question directly, instead he said “the agreement was that the hospital will receive 50% upon signing and 50% upon satisfaction of the constituent components of the agreement. We believe that this week we will be able to demonstrate that compliance, and so we will be eligible for the second half.”



Senator Velega asked the hospital’s CEO if he was satisfied with the clinical health care performance the hospital is providing for the public. Gerstenberger replied “absolutely not”. 

He explained that “the territory is budgeted to spend about $500 per person per year for health care and the average the US spends is a little more than $8,000. There is a huge difference between where we are and where we say we would like to be. You can’t deliver $8,000 worth of care for $500 a year. ”

“The fundamental issue — here as in every other state — is the public policy on what it is that we want from our health care system, what can we afford, and how do we pay for it... and unfortunately, we haven’t addressed the latter part of that equation.

“Our patients are pretty clear on what they would like from our health care system, but the vehicles to pay for that service simply don’t exist in the territory”, said the CEO.

He added there are many special areas where the hospital doesn’t have any service available whatsoever; and there are many technological areas where the hospital cannot afford equipment, or the drugs that are needed to treat patients.

There are many customer service expectations said the CEO, adding that the hospital does not have enough resources.  He stated that the hospital staff and physicians are delivering a remarkable quality health care given the limited resources that are available, and the CEO agreed with Senator Velega that the hospital fees should be increased a little bit.