OPA audit: Guam Memorial Hospital's operating loss pegged at $83.7M; personnel costs increased by $8M

By Jayvee Vallejera

Guam Memorial Hospital’s fiscal predicament continued its usual pattern of operational loss, increased receivables and salary increases, the Office of Public Accountability's audit shows.

In fiscal 2024, GMH reported an operating loss of $83.7 million; gross patient receivables increased by $6.6 million; and personnel salaries increased by $8 million.

GMH’s report on its compliance with major federal programs received a “qualified opinion," though, after the auditors found two material weaknesses in how GMH spent its Covid-19 funds, as well as questioned costs totaling $1.1 million.

In particular, the auditors cited GMH’s failure to adhere to the rules and regulations that govern eligibility for federal contracts and financial assistance.

Also, Ernst and Young identified three deficiencies in internal controls over financial reporting and four deficiencies in internal controls related to information technology, OPA said.

Ernst and Young’s report, which OPA released on Oct. 8, covered the entire breadth of GMH’s financial standing and, despite a spot or two of good news, the picture is often grim.

The report said GMH ended fiscal year 2024 with a net loss of $10.3 million and a $66.1 million negative cash flow from operations. GMH also reported an operating loss of $83.7 million for that fiscal year and its survival depended on local government subsidy after the federal pandemic funds ended.

GMH’s operating revenues increased significantly in fiscal year 2024, going up from $97.8 million in fiscal year 2023 to $139.8 million in fiscal year 2024.

The $1 million GMH got from its insurance in the wake of Typhoon Mawar also went to the plus column.

The $71.3 million the Guam government gave GMH in fiscal year 2024 also boosted its financial standing. That amount is a $38.8 million increase over the $32.5 million GovGuam gave the hospital in fiscal year 2023.

This amount partially offset the federal money the hospital lost once the Covid-19 pandemic ended. The loss was estimated at $19.9 million.

Other sources of hospital revenue are reimbursements from Medicare and Medicaid claims, patient services, insurance payers, self-payers, and income from inpatient, skilled nursing and outpatient services.

Outpatient revenues reached $53.7 million in fiscal year 2024 due to a 33.5 percent increase in outpatient volume.

GMH’s collections also increased, from $107.6 million in fiscal year 2023 to $118.5 million in fiscal year 2024—a $10.9 million increase.

Running the hospital remains expensive, though. The report said GMH’s operating expenses rose from $195.7 million in fiscal year 2023 to $223.5 million in fiscal year 2024. That’s a $27.9-million increase.

Overall personnel costs totaled $127.4 million, making up 57 percent of the total operating expenses, and a $13.7-million increase from $113.7 million in fiscal year 2023.

Salaries increased by $8 million that fiscal year with the implementation of required pay adjustments.

Benefits such as pensions and retirement contributions also increased by $8.7 million in fiscal year 2024.

The cost to hire physicians and travel nurses also went up. GMH’s contractual services cost rose from $41.4 million in fiscal year 2023 to $47.5 million in fiscal year 2024.

“GMH continues to experience staffing shortages in nursing and allied health professions, risking bed closures and lengthy emergency room holdings. To fill the gap in critical healthcare staffing, GMH continues to rely on costly contract travel nurses,” OPA said.

In fiscal year 2024, GMH hired 31 travel nurses. GMH had 1,180 full-time employees that fiscal year.

Supplies and materials also increased due to the rising cost of medical supplies.

Since GMH is Guam’s only public hospital, it is mandated to provide healthcare to all patients regardless of insurance coverage or one’s ability to pay. This has resulted in patient receivables that just continue to grow.

In fiscal year 2024, gross patient receivables totaled $364.7 million, an increase of $6.6 million from the $358.1 million in fiscal year 2023.

OPA did try to put to rest any fears the public might have about the Guam hospital’s future.

“As the only civilian public acute care hospital in Guam, GMH will continue to exist despite negative operating losses and negative cash from operating activities,” it said.

OPA said the GMH management has already taken actions and measures to address these losses from operations and negative cash flows by exploring subsidy and assistance from GovGuam and Medicare.

There is also talk about rebasing and designating the Guam Memorial Hospital as a critical access hospital. That will increase GMH’s rate as a Tax Equity and Fiscal Responsibility Act of 1982 hospital. TEFRA facilities are reimbursed based on their Medicare treatment costs.

In examining GMH’s internal control over compliance with major federal programs, the auditors identified two material weaknesses and questioned costs totaling $1.1 million.

Of the seven procurements the auditors tested, they found that GMH did not properly verify if the person or entity selected for a specific transaction is eligible to participate in federal assistance programs or activities or is not restricted from federal awards and contracts.

“This resulted in questioned costs of $900,000,” OPA said.

In the case of two purchase orders, OPA said GMH’s procurement method did not comply with local procurement regulations. Instead of using the small purchase procurement method, it should have used competitive sealed bidding. This resulted in questioned costs of $151,000.

Ernst and Young auditors also identified three deficiencies in internal control over financial reporting.

One was how GMH manages its patient receivables, amounting to a total of $15.2 million ($5.3 million in “discharge not final billed” receivables and $9.9 million “suspense accounts”).

The auditors acknowledge that this situation arises from GMH's mandate to provide medical services to all individuals, regardless of patient condition or financial ability to pay, combined with the complexity of billing and collection processes amid limited resources.

Still, these receivables that just keep piling up pose a risk to cash flow, the auditors said.

In two of the samples tested, the auditors noted that some expenses related to the prior year were not accrued in the appropriate fiscal year.

Also, balances related to the Department of Administration were not being reconciled regularly, the auditors noted. 

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