Pay raises led to $7.6 million increase in personnel cost
By Pacific Island Times News Staff
Despite a revenue increase courtesy of federal aid, Guam Memorial Hospital continued to incur operating losses amounting to $69.7 million and negative cash flows from operations of $57.7 million last year, the Office of Public Accountability said in a report released today.
Raising doubts about the hospital’s ability to survive, OPA also found that GMH’s total liabilities increased by $16.8 million— from $344.1 million in 2020 to $360.9 million in 2021.
“The increase was due largely to increases in other post-employment benefits of $7.7 million, net pension liability of $7.1 million, and accounts payable–trade of $4.2 million,” OPA said.
“For three consecutive years (FY2019, FY 2020, and FY 2021), the auditors reiterated the FY 2017’s emphasis that GMH incurred recurring losses and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern,” Public Auditor Benjamin Cruz said.
Amid its fragile financial position, the hospital raised employees' salaries, which constituted its biggest operating expense.
"Personnel costs, the biggest operating expense, increased overall by $7.6 million due to increased costs for salaries ($3.1 million), benefits ($3.8 million), and certification pay for certified allied health professionals and incentive pays for nurses ($0.9 million)," OPA said.
The audit found GMH incurred $3.3 million in differential pay for essential GMH employees who worked under the public health emergency status.
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Operating expenses likewise increased by $35.1 million due to increases in expenses to prevent, prepare for, and respond to Covid-19.
These expenses were for contract travel nurses, physicians, and medical supplies.
Nursing expenses increased significantly by $23.9 million, or 55 percent, mainly due to the costs to hire contract travel nurses urgently needed to help provide medical care to Covid-19 patients.
An increase in Professional Support division expenses by $5.1 million was due to increases in supplies and materials including pharmaceutical purchases. Likewise, retiree healthcare costs and other pension benefits increased by $2.4 million.
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Non-operating revenues increased by $21.2 million due to federal grants totaling $27.6 million, which increased by $19.9 million.
"This mainly includes $10.3 million in federal public assistance for contract travel nurses, $7.3 million in American Rescue Plan funds, and $1.6 million in GovGuam Coronavirus Relief Funds. GMH’s subsidy transfers increased by $1.3 million from the prior year," OPA said.
The audit found that gross patient accounts receivable increased from $209.7 million in 2020 to $255.9 million in 2021.
“GMH grants credit without collateral to its patients, many of whom are Guam residents and are insured under third-party payer agreements,” OPA said.
The allowance for uncollectible accounts also increased by $38.9 million, resulting in net patient accounts receivable of $39.7 million.
“Of the $39.7 million, more than 50 percent or $22.5 million was owed by three payers namely: 1) Payer A- $9.2 million; 2) Payer B - $7.1 million; 3) Payer C - $6.2 million,” OPA said.
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Overall, gross patient revenues increased by $25.8 million, from $177.7 million in 2020 to $203.5 million in 2021.
“The increase was attributable to inpatients’ increased length of stay due to increased acuity,” OPA said. “Similarly, net patient revenues increased by $16.6 million (or 18 percent) to $107.8 million due to favorable adjustments of $14.4 million in allowances for uncollectible accounts for third payers due to improved collections.”
However, OPA noted that the allowance for GMH’s patient/payer mix—Medicaid, Medicare and Medically Indigent Program, also known as “3M”—and self-pay patients increased.
“Collections decreased by $5.8 million, from $104.4 million in FY 2020 to $98.6 million in FY 2021. The 3M collections significantly decreased by $16.3 million (or 28 percent) and a slight decrease of $650,000 in Government-Department of corrections and other.”
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