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  • By Mar-Vic Cagurangan

GMH in crisis: Is it a funding issue or management failure?

PeterJohn Camacho and Vince Duenas

Guam senators have always been skeptical of the Guam Memorial Hospital’s real fiscal predicament. Facts and figures are tossed around at every public hearing that tackles the hospital’s incessant pleas for rescue funds. However, the picture of GMH is like a jigsaw puzzle that no one is able to solve. Lawmakers shake their heads. Invoking public health and medical care to plead for more funds is nothing short of blackmail. But when patients are at stake, the folks who hold the purse strings — despite doubts — acquiesce just the same. And the taxpayers are compelled to chip in.

Unless the legislature passes Sen. Michael San Nicolas’ Bill 262-34 to scrap the 2 percent sales tax that would cover GMH’s $30 million shortfall, the consumers will start shouldering this new tax burden by Oct. 1. The sales tax bill, introduced by Sen. Joe San Agustin, narrowly passed by a vote of 8-7 on March 15. With San Agustin having backpedaled, the balance could tip in favor of the eventual repeal of sales tax before it goes into effect. The legislature is most likely to get enough number to override the governor’s anticipated veto of this election-year bill.

PeterJohn Camacho, the hospital’s CEO, is worried. “If you are a self-pay patient, we will take care of you, but who will pay for the bill? The insured group shouldn’t absorb that cost,” Camacho said at a media conference.

Without the supplemental subsidy, Camacho asked, “How are we going to retain our nurses? How are we going to recruit physicians to come to the island?”

GMH is also relying on the sales tax revenue to fund a corrective action plan for facility and equipment maintenance in response to one of the many citations by the Centers for Medicare and Medicare Services (CMS). Amid its struggle to convince senators not to scrap the sales tax, GMH is now facing the risk of losing Medicare and Medicaid funds by Oct. 3 unless it fixes its deficient facilities in compliance with federal requirements. The documented deficiencies, CMS said, “substantially limit the hospital's capacity to render adequate care or adversely affect patient health and safety."

Jerome Landstrom

Camacho said GMH is counting on the sales tax revenue “to be able to have things turned around.” As long as additional funding rolls into GMH, Camacho said, “It would be up to us to best manage that so we can address our issues; at least it gives us the ability to plan better.”

But is it really a funding issue or management failure? Decision-makers have been dealing with this conundrum.

According to Office of Public Accountability’s 2017 audit, GMH continues to incur operating losses due in major part to patient payer mix. In fiscal year 2016, GMH had an operating loss of $29.2 million, a 13.2 percent increase from 25.8 million the previous year. While operating revenues increased by $14.7 million, from $84.2 million in 2015 to $98 million in 2016, expenses went up by $18 million— from $110 million to $128 million— due to increased supplies and contractual services.

The June 15 public hearing on the sales tax repeal legislation has uncovered a can of worms, revealing a host of intricate problems that throw light on why the hospital is a funding black hole. Some are caused by a serious bureaucratic dysfunction, others by institutionalized policy allegedly put in place to accommodate political favors. “Throwing more money into GMH does not assure its fiscal viability without also addressing areas that need fiscally sound management and efficiency,” said Dr. Jerome Landstrom, who gave senators a long powerpoint presentation billed, “Shadow Politics, Shadow Agenda, Obscured Finances.”

Dr Larry Lizama

There are too many holes in the GMH fiscal bucket due to operational deficiencies, Landstrom said. “And like pouring more water into a bucket with a lot of holes, the bucket will continue to be empty, followed by more requests to the taxpayers of Guam to fund the hospital.”

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Dr. Kozue Shimabukuro, the hospital’s assistant medical director, gave an impassioned testimony, telling senators that GMH is bleeding millions of dollars due to a failure of leadership. She said when she came on board, she was “astonished” to learn that GMH does not have a Utilization Review committee. “It plays a crucial role in the hospitals, monitoring cost-effective utilization of resources,” she said. “I have never seen a hospital that does not monitor the entire revenue management cycle from hospitalization all the way to collection.”

Shimabokuro described GMH’s budgeting system as “strange and not even based on facts.” She mentioned specifically the dietary division that runs the cafeteria, where no one has a clue as to the cost of materials and food purchased. “The ordering of food was done by another department. As a result, we could not estimate the revenue and loss at the cafeteria,” she said. “As a result of investigating and collaboration, we found out GMH was losing money every day we open the cafeteria doors.”

She also questioned $22 million worth of delinquent medical records that “are just sitting there” because physicians are not completing their medical charts, thus impeding the hospital’s ability to bill patients. “Aged charts equal lost revenue,” she said.

PeterJohn Camacho dismissed Shimabukuro's testimony as “materially false and a misrepresentation of the facts,” expressing concerns that “her allegations have hurt the hospital and raised a lot of doubts about what we do here and that we are not doing things correctly.”

At a press conference the day after the public hearing, hospital officials responded to the doctor’s claims. CFO Benita Manglona said only $2 million remained unbilled as of June. “There will always be a period when a procedure is not billed because the patient is still at GMH,” she said. “Dr. Kozue is not privy to a lot of information. We go through the billings and coding. We have updated fee schedules. We implemented online service and we have the biggest garnishment programs.”

Associate Medical Director Vince Duenas explained, “There is separation between completion of medical chart and billing. You can still bill without completion of medical records.”

The damning testimony at the public hearing was preceded by whistle blowing from Ted Lewis, former CEO of the hospital, who had questioned the dysfunctional billing and coding at GMH. He also disclosed double-dipping by some physicians who, while receiving fulltime salaries from GMH, are allowed to collect professional fees from patients treated at the hospital. This claim was corroborated by Shimabokuro and Landstrom.

Shimabokuro said she was told by Medical Director Dr. Larry Lizama to “’just keep the professional fee; that’s what everybody does.’ I never knew of such practice and I thought it strange.” She also noted that “the way GMH offered contracts had several discrepancies and disparities depending on each physician under contract.”


“The established care-free attitude of spending someone else’s money is highlighted by awarding millions of dollars annually for physician service contracts behind closed doors. These contracts are apparently based upon chenchule’ politics and personal bias.” — Dr. Jerome Landstrom


GMH confirmed that physicians, depending on the terms of their agreement, may be entitled to their professional fees. “The GMH still charges and keep the facility and other fees. The hospital-physician arrangement is not unusual, particularly for a hospital trying to attract physicians,” GMH said in a statement.

Lizama said when community doctors are called to serve at GMH, they respond accordingly, without giving up their private practice, to address the shortage of medical professionals at the public hospital.

Landstrom said the arbitrary contracts are sanctioned by a GMH Board-approved policy that exempts physicians from the government’s central procurement law. “This is a fertile tool for political favors, nepotism, greater expense for the taxpayers of Guam and can be a foundation to erode quality of care,” Landstrom said. “The established care-free attitude of spending someone else’s money is highlighted by awarding millions of dollars annually for physician service contracts behind closed doors. These contracts are apparently based upon chenchule’ politics and personal bias while bypassing the (Department of Administration’s) contract law by creating their own policy outside oversight by the government of Guam and the GMH HR department.”

As for its own verdict, CMS determined that the hospital failed to establish “an effective governing body,” potentially contributing to "ineffective leadership and management within the facility and can potentially lead to negative patient health care outcomes and high readmission rates.”

Camacho acknowledged, “We make mistakes; we own the mistakes.” But he maintains that “there are issues related to compensations, funding for infrastructure, adequate supply of machines and medication. So this whole journey of the last several years is trying to get that dedicated funding source.”


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