“In this environment, firing people is not a very good idea but we probably are going to if we have to,” Babauta said.
“We also cannot continue to provide services for free. We will try our best that no one will walk out of the hospital for free anymore. We need to charge for all the services for us to turn around and provide upgraded services. All services at the hospital have value, and I intend to collect the value,” he said.
Mixed Numbers
When it came down to the numbers, however, CHC executives and board members presented different amounts.
“We are in a big financial strait. The hospital has over $52 million in collectibles and only a very small portion of that amount is considered collectible,” Babauta said.
He said that about $6 million in collectibles are already outdated and can’t be collected anymore because it has passed the statute of limitations.
During a Senate Health and Welfare Committee session yesterday, however, the Commonwealth Health Corporation’s new board members and executive director told senators they may not be able to recover $104 million in collections.
CHC’s current account receivables, they said, are totaling $131 million accumulated over the last 30 years.
Of that total amount, Executive Director James Phillips, stated “CHC’s conservative estimate of a doubtful amount” – meaning the account is too old to collect on – stands at about 80 percent or $104,000,000 that has little chance of being recouped.
A large portion of that massive $100 million may have resulted from Freely Associated States citizens, the officials said, receiving healthcare during the last 20 years and either left island or never paid.
For the budget, Babauta said that in 2005, CHC was allotted an annual budget of over $44 million, but the hospital is operating on $5 million seed money for 2012.
Phillips and board members said that the CHC current year revenue projection of $25 million would most likely fall short of the needed $38 million projected operating budget.
The Department of Public Health’s 2011 expenditures topped $50 million but Phillips is confident they can continue to find cost savings and implement more efficient care delivery to shave off the $12 million difference of the year-on-year budgets.
Phillips emphasized, “The numbers are changing every day” and would depend upon two factors: collection of receivables and a near term adjustment of hospital charges currently being programmed into CHC’s automated billing system.
The department has only one encoder and two other staffers.
Babauta said that the CHC is barely collecting from 10 to 20 cents for every dollar that it spends.
“If anyone of the private clinics is collecting the same, it will be shut down the next day, like any other business,” Babauta said.
Phillips also indicated CHC’s exploration of additional funding sources including foundation and government grants as well as bridge loans to help during the transition when cash flow is tight.
Phillips explained CHC’s billing cycle was currently generating statements from the month of July, however, progress was noticeable in closing the lag-time and soon patients would receive a bill at discharge before leaving the hospital.
CHC also now has its own bank account for direct revenue deposits and plans a complete accounting separation from the Department of Finance in January 2012.
Babauta said they are looking at catching up with their billings and collections in six months to one year at the most.
No more free services
Babauta said that about 50 percent of the services provided at the CHC are free.
At some point, he said the CHC has to put its foot down and start charging for its services.
“People get services for free, and it’s not the fault of people but the fault of the hospital for not making the initiative to make charges for the services that it provides, for the last 30 years so that it has become institutionalized,” Babauta said.
Raising the fees at the hospital is a temporary solution that would not solve the problem, he said.
Bills and expenses
Babauta said that CHC’s power bill runs around $400,000 a month, or $4.18 million a year. He said the hospital just got a notice from a collection agency notifying them of their obligations to pay their bills at the Commonwealth Utilities Corporation.
He said that CHC’s bills for linen cleaning in August 2011 amounted to $21,000, which means an average of about $700 a day for the hospital to have fresh linens.
Babauta said that all soiled linens are just piled in a basket, brought to the cleaners, dried, packed and weighed, and the cleaner just bills the hospital without even identifying how many linens were cleaned.
“Nobody knows the actual numbers and there’s no way to account how many linens were sent to the cleaners,” Babauta said. In addition to this, he said that linens and other equipment “just walk out of the hospital” without accountability.
“There is no quality control in the hospital supplies such as linens, wheelchairs, canes and other equipment. We don’t know who to blame and all of this is because of the lack of control and accountability,” he said.
He cited that the bio-hazard chemicals from clinics all over the island are also dumped at the for free and CHC foots the bill for disposal.
Babauta said that Medicaid owes CHC nearly $1 million for services rendered to indigent patients who come to the hospital for services they need and cannot pay.
For the inter-island medical responsibility, Rota and Tinian is averaging about 25 referrals in any given month.
CHC pays for the airfare, lodging, transportation, two FTEs to handle the referrals, and three meals a day.
CHC has paid $2.5 million in the last four and a half years, for housekeeping, averaging about $500,000 a month to keep the hospital clean.
The hospital spends $4 million a year for supplies at the Dialysis Center, $3 million a year for laboratory supplies, and pays about $800,000 every two weeks, or $1.6 million a month, or $19.2 million a year for about 600 employees.
Another challenge that the hospital faces is repair and maintenance of its facilities which has not been done for the past 30 years.
Babauta said the CHC has 16 patients at the dialysis center with End Stage Renal Disease which is costing the hospitals and the taxpayers $5,000 a month for each individual. This means the hospital is subsidizing $1.2 million a year.
“Somebody has to pay these services, unless you taxpayers are willing to keep footing the bill,” Babauta said.
Privatization
Babauta said that the corporation is considering privatizing some departments in the hospital such as the dental department, the cafeteria and kitchen.
“The only clients that use the dental clinic are children from the Public School System for free,” he said.
But Babauta clarified after the meeting that they will not privatize departments at the CHC that has potential for revenue generation.
“It would be irresponsible on my part to do that. If we provide services at the hospital and improved it, we will realize the return of the investment,” he said.
Babauta is optimistic that good things are ahead for the hospital which he described as a ‘gold mine’ as long as it is furnished in the right way.
“What lies ahead for the CNMI is not to repair the CHC and fix the old system but chart a new course in corporate discipline, accountability and innovation in what we do,” he said.
He is urging the legislature and the governor to have the political will to lead the corporation to financial solvency.
The HealthCare Corp. Act was signed in January 2009 but was implemented only on October 1, 2011.
