HAGÅTÑA (The Guam Daily Post) — Deteriorating infrastructure isn’t the only problem the Guam Memorial Hospital faces as an audit report for fiscal year 2022 showed that the hospital’s finances are flatlining.
Auditors Ernst & Young also found several deficiencies in the management of GMHA finances, specifically discrepancies in subsidiary ledger balances as compared to the general ledger balances, errors in recordation of purchases and accounts payable, and inventory issuances from the pharmacy department not being recorded in the perpetual system.
According to the Office of the Public Accountability, the island’s only public hospital suffered a net loss of $1.8 million, decreasing the net position at the end of the year from negative $255.6 million in fiscal 2021 to negative $257.5 million in fiscal 2022.
The report of the audit conducted by Ernst and Young emphasized that GMHA incurred recurring losses and negative cash flows from operations, which heightens the hospital’s dependence on the government of Guam to support its operations.
For fiscal 2022, GMHA incurred losses from operations amounting to $61.2 million and negative cash flows from operations of $57.8 million.
“However, GMHA generated a net change in cash of $298,000, which increased fiscal 2022 cash balance to $3.5 million from $3.2 million in fiscal 2021,” the auditors said in their report.
In fiscal 2022, the hospital saw an increase in the number of patients, resulting in an increase in patient accounts receivable, however, because the hospital has a duty to provide care to all regardless of insurance coverage or ability to pay, an increase in uncollectible accounts also occurred.
“Gross patient AR increased by $46.4 million (or 18%), going from $255.9 million in fiscal 2021 to $302.3 million in fiscal 2022. However, the allowance for uncollectible accounts of $252.8 million in fiscal 2022 also increased by $36.6 million (or 17%) from fiscal 2021’s total allowance of $216.2 million. This resulted in a net patient AR of $49.5 million or an increase of $9.8 million (or 25%),” the auditors said in the report. “For the last five years, self-pay patients received an average of $25.6 million of care per year, of which GMHA collects an average of 31 cents per dollar billed to self-pay patients. The likelihood of collecting these self-pay accounts, which have an outstanding gross receivable of $74.3 million as of fiscal 2022, is low.”
Fiscal 2022 also resulted in increased liability of $7.9 million from $360.9 million in fiscal 2021, as a result of “Other Post Employment Benefit which accounted for $21.3 million, accounts payable by trade at $8.6 million, and GovGuam at $4.8 million.
“However, these major increases were offset greatly by decreases in net pension liability by $22.2 million due to the US Federal Government by $1.2 million and due to Medicare by $2.5 million,” the audit report said.
An increase in patients, their length of stay and acuity, the hospital’s annual 5% rate increase, an improved charge capture process and implementation of new fees increased gross patient service revenues by $43 million, ending fiscal 2022 with $246.5 million.
“Of the $246.5 million in total gross patient service revenues, $75.3 million (or 31%) was attributed to Medicare patients; $67.5 million (or 27.4%) to Medicaid patients; $67.1 million (or 27.2%) to third-party insurance payers and other patients; $33.2 million (or 14%) to self-pay patients; and $3.3 million (or 1%) to (Medically Indigent Program) patients. Gross patient service revenues from all of these payors increased, ranging from $6 million to $20.2 million, except for MIP patients, which decreased by $9.9 million (or 75%),” the audit report said.
The audit report noted that the $33.2 million in gross patient service revenues from self-pay patients were provided with a provision for bad debts of $52.2 million.
“Which is significantly higher than the gross patient service revenues by $18.9 million in fiscal 2022. The provision resulted in a net patient service revenue of negative $18.9 million in fiscal 2022, a decrease of $21.2 million (or 945%) from fiscal 2021’s net patient service revenue of $2.2 million. This decrease correspondingly decreased the total net patient service revenue to $131.2 million in fiscal 2022,” the audit report said.
The bad debts, according to the hospital, were a result of $10.1 million in Medicare accounts being transferred to self-pay.
The hospital also saw an increase in unbilled patient receivables by $7.6 million and an increased $1.2 million in accounts receivable suspense accounts.
“EY and prior auditors’ findings relative to patient receivables have remained uncorrected since fiscal 2015. As of fiscal 2022, GMHA’s unbilled patient receivables amounted to $15.1 million, which is a $7.6 million (or 102%) increase from fiscal 2021’s unbilled receivables of $7.5 million. Additionally, its AR suspense accounts increased by $1.2 million (or 129%) from $0.96 million in fiscal 2021 to $2.2 million in fiscal 2022. Consequently, these conditions will result in the accumulation of uncollectible and/or disputed receivables, and potential inadequate cash flows to meet GMHA’s current obligations,” the audit report said.
In fiscal 2022, the hospital received $66.6 million in COVID-19-related federal assistance, but the hospital also saw a $7.3 million reduction in GovGuam appropriations and an increase in operating expenses due to COVID-19.
“Contractual services for administrative support, fiscal services, and medical staff collectively increased by $13.4 million (or 79%) in fiscal 2022. Fiscal services had the highest increase of $3.9 million (or 457%) due to the revenue cycle management consultancy; followed by administrative support by $2.7 million (or 99%) due to electronic health record implementation, repairs, and demolitions; and medical staff by $6.7 million (or 51%) due to more physician hiring and increase in salaries,” the auditors said in the report.
EY also noted four material weaknesses in internal controls over financial reporting related to patient receivables, liabilities, nonoperating revenues-federal grants and unearned revenues.
Specifically, the hospital made overstatements in liabilities due to GovGuam and expenditures in the amount of $5 million, nonoperating revenues in federal grants were overstated by $5.2 million and unearned revenues were overstated by $12.8 million in the books.
EY recommended that GMHA improve its financial statement closing process with closer coordination and enhance its accrual process by timely providing documents and implement procedures to timely record, analyze and monitor pharmacy inventory movement and balances.
Guam Memorial Hospital is seen Monday, Sept. 25, 2023, in Tamuning.
