Pago Pago, AMERICAN SAMOA — In comparing LBJ hospital’s financial performances for FY2021 and 2023, it becomes clear that while there have been efforts to stabilize and improve the hospital’s finances, the financial difficulties LBJ continues to face become apparent in light of its increased operational costs and stagnant revenue streams.

FY2021 is the year the Lemanu- La’apui Administration took office, while FY2023 is the latest financial available for the comparison — allowing for a two-year comparison of key financial metrics, including operating and non-operating revenue and expenses, operating income, salaries, supplies, and other critical aspects.

The comparison of LBJ’s financial performance in FY2023 to FY2021 reveals a healthcare institution struggling under the weight of rising costs and insufficient revenue growth.

While there have been modest improvements in some areas, such as non-operating income and salaries, the overall financial picture remains bleak. The hospital’s significant operating losses, declining cash reserves, and growing accounts receivable and payable are all red flags that need urgent attention.

Operating revenue is a crucial indicator of a hospital's financial health, representing the income generated from patient services and related activities.

In FY2023, LBJ’s total operating revenue was $65,848,116, marking an increase from the $55,072,787 reported in FY2021. The rise in revenue is mainly attributed to an increase in Medicaid reimbursements, which grew by $1,265,225.

However, despite this, the hospital’s financial situation remains precarious, as revenue growth has not kept pace with the increase in operating expenses.

Non-operating revenue, which includes government appropriations, grants, and other non-operating income, plays a vital role in supporting LBJ’s operations.

In FY2023, LBJ reported non-operating revenue of $16,771,560, compared to $14,050,903 in FY2021. The increase in non-operating revenue is primarily due to higher federal and local grants, which rose by nearly $4.7 million. However, this increase has not been sufficient to offset the growing financial pressures from operational costs, particularly as government appropriations have remained relatively flat. (LBJ’s subsidy has remained at $2 million.)

As noted, operating expenses at LBJ have continued to climb, outpacing revenue growth.

In FY2023, LBJ's total operating expenses reached $81,115,050, up from $71,257,309 in FY2021. This increase of nearly $10 million is largely driven by rising costs associated with salaries, supplies, and other operational needs. While some of this growth is attributable to inflation and the increased demand for healthcare services, it also highlights inefficiencies and the need for more robust financial management.

Salaries and compensation are among the largest expense categories for LBJ, reflecting the labor- intensive nature of healthcare.

In FY2023, salaries, wages, and employee benefits totaled $33,280,774, slightly down from $33,850,373 in FY2021. This reduction in salaries may indicate staff shortages or wage suppression.

The cost of supplies, including pharmaceuticals, has risen significantly, reflecting both increased demand and inflationary pressures.

In FY2023, supply costs were $21,504,573, compared to $24,893,737 in FY2021. While the absolute cost has decreased, when adjusted for inflation, the real cost of supplies has likely increased, placing further strain on LBJ's finances.

Travel expenses at LBJ are a smaller but still significant part of its budget.

In FY2023, travel-related costs were managed more tightly, reflecting a broader trend of cost control across the hospital. However, detailed figures on travel expenses were not explicitly broken down in the financial reports, making it difficult to assess their full impact. Given the remote location of American Samoa, travel will always be a necessary expense, but better planning could help mitigate costs.

LBJ’s non-operating expenses have remained relatively stable between FY2021 and FY2023, reflecting the hospital's reliance on external funding to support its operations. However, the hospital's financial stability continues to be at risk due to the volatility of these funding sources.

In FY2023, non-operating expenses were primarily associated with interest and other financial costs, totaling $333,621. While this represents a slight decrease from previous years, the overall financial strain on the hospital remains significant.

The hospital's operating income remains in the negative, with a loss of $15,266,934 reported in FY2023, compared to a loss of $16,184,522 in FY2021. Although the deficit has slightly narrowed, it underscores the persistent financial challenges LBJ faces and the need for potentially new revenue streams.

Despite the challenges in operating income, LBJ's non-operating income saw a modest increase, from $14,050,903 in FY2021 to $16,771,560 in FY2023.

This increase is largely due to additional federal and local grants, which have provided some relief. However, relying heavily on non-operating income is not a sustainable long-term strategy, particularly if these funding sources become less reliable in the future.

LBJ’s cash and cash equivalents decreased significantly, from $16,047,558 in FY2021 to $10,915,394 in FY2023. This decline is concerning as it reduces the hospital’s liquidity and ability to respond to unexpected financial demands.

Accounts receivable (AR) at LBJ have increased sharply, growing from $11,301,587 in FY2021 to $19,008,389 in FY2023.

This rise in AR suggests that the hospital is facing challenges in collecting payments from patients and third-party payers. High levels of AR can strain cash flow and indicate inefficiencies in billing and collection processes.

Accounts payable (AP) also rose, from $6,681,401 in FY2021 to $9,610,684 in FY2023.

The increase in AP reflects growing obligations that the hospital has yet to settle, which can negatively impact relationships with suppliers and service providers — something that is probably reflected in how long it takes to repair its diagnostic tools such as the CT scan. 

This trend is indicative of the broader financial struggles LBJ faces, as it balances rising costs with stagnant revenue.

Inventory levels at LBJ have fluctuated, with the hospital reporting $5,185,714 in inventory in FY2021, compared to $4,312,193 in FY2023.

The decrease in inventory could signal improved inventory management practices, but it also raises concerns about potential shortages, especially of critical supplies.

Overall, to secure the future of healthcare in American Samoa, LBJ must address these financial challenges head-on. This will likely require a combination of increased funding, better financial management, and strategic investments in areas that can generate sustainable revenue.

Without these changes, the hospital risks further deterioration in its financial health, which could ultimately impact the quality of care provided to the people of American Samoa.