OPA raises doubt about GMH's ability to meet obligations and continue operating
Despite the $10 million in Covid-19 federal relief assistance, the Guam Memorial Hospital's predicament worsened last year, incurring losses and negative cash flows that raise substantial doubt about its ability to meet its obligations and continue operating, according to the Office of Public Accountability.
While its operating revenues went down by $6 million due to a $7.8 million drop in net patient revenue and increases in allowances for uncollectible accounts, the hospital's operating expenses increased 11 percent or $14.7 million as a result of the Covid-19 pandemic.
OPA said salaries combined for nursing and medical staff including physicians increased by $4 million and $3.6 million, respectively.
"This was due to the Covid-19 differential pay and additional hiring to care for Covid-19 patients or persons under investigation. Retiree healthcare costs and other pension benefits increased by 73.6 percent or $4.6 million due to increased retiree OPEB expenses," OPA said.
GMH hit full capacity at the height of the Covid-19 pandemic last year. The nonstop arrival of Covid-19 patients prompted GMH to bring travel nurses and hire more staff.
OPA said GMH increased its overall FY 2020 staffing by 82 full-time equivalents to 1,107 primarily to increase resources to support the Covid-19 response in the nursing, administrative support, and professional support staffing.
"Personnel costs increased by $10.4 million due to the $5.1 million for additional staff hiring and $5.6 million in other pay," OPA said. "Other pay includes certification pay for GMH’s certified allied health professionals and incentive pay for nurses."
Also contributing to the surge in personnel cost was the implementation of Covid-19 response differential pays for essential GMH employees authorized by the public health emergency declaration.
"The Covid-19 pandemic dramatically changed GMH’s landscape and established a new normal for GMH that continues to require a tremendous amount of resources," OPA said.
OPA predicts Covid-19 will continue to challenge GMH’s finances, particularly with declines in-patient census and the reliance on the government of Guam subsidies funded by business privilege taxes and the general fund.
"As GMH recovers from disrupted revenue streams, GMH will seek federal assistance afforded to healthcare providers to recover lost revenues," OPA said.
The audit showed the recurrence of its collection problem.
"There was an accumulation of uncollectible receivables and the potential for inadequate cash flows to meet current obligations," OPA said. "This included the untimely analysis of receivables and the collections in the receivable suspense accounts were not recorded against specific receivable balances."
GMH’s mandate to provide healthcare to all patients regardless of one’s coverage or ability to pay has resulted in the continual growth of patient receivables. For the last five years, self-pay patients received an average of $21.9 million of care per year.
Collections increased by $20.7 million from $83.7 million in FY 2019 to $104.4 million in FY 2020. The 3M’s collections significantly increased to $59.2 million in FY 2020 compared to $33.4 million in FY 2019.
Third-party payers collections increased by $3.9 million, while self-pay collections decreased by $9.2 million to $5.4 million in FY 2020 from $14.6 million in FY 2019.
Improved collections are attributed to aggressive billing, increased Medicare and Medicaid reimbursements, and GMH’s continued partnerships with the Office of the Attorney General for collection referrals and the Department of Revenue and Taxation for garnishments.
The likelihood of collecting self-pay accounts is low and GMH’s provision for bad debts averaged $14.8 million a year. This means that GMH expects to collect an average of 32 cents per dollar billed to self-pay patients.
Other highlights of the OPA audit are as follows:
MOA with TakeCare From March to September 2020, GMHA patients subscribed as TakeCare members were considered self-pay due to TakeCare’s non-payment of accounts. As a result, self-pay revenues absorbed $3 million of insurance payers’ revenues.
In September 2020, an MOA was signed to have a third party reconcile disputed claims and GMHA resumed accepting insurance coverage under TakeCare. Upon signing the MOA, TakeCare made good faith payments of $3.2M in September 2020 for claims with dates of service from January 1, 2018, to March 11, 2020, subject to reconciliation. As of March 2021, the reconciliation is ongoing.
Covid-19 Relief Funds and Assistance To provide financial relief caused by COVID-19 difficulties, the CARES Act included provisions for immediate cash relief to U.S. hospitals. As of FY 2020, GMH received $7.8M in direct CARES Act funding from the U.S. Department of Health and Human Services through the Provider Relief Fund. Subsequent distribution of $2 million was received in December 2020. In April 2020, GMHA received $4.5 million from CMS under the Expanded Accelerated and Advance Payment Program.
The CARES Act expanded the CMS program to provide immediate cash flow to providers impacted by the Covid-19 pandemic. CMS will recoup the advanced payments from GMH in April 2021 by offsetting remittances for claims. In May 2020, GMH received a budget allocation of $11.9 million from the GovGuam’s $118 million Coronavirus Relief Fund distribution to states, territories, local and tribal governments.
The funds were budgeted for GMH projected expenses for physicians, supplies, payroll, and projects. These include expanding the patient monitoring system and an upgraded capacity for negative pressure and hemodialysis. GMHA expended $5.3 million of the $11.9 million as of FY 2020.
Covid-19 Response Led to Decrease in Outpatient and Skilled Nursing Gross Revenues
Overall gross patient revenues decreased slightly by $1.2 million, from $178.9 million in FY 2019 to $177.7 million in FY 2020. Gross outpatient revenues decreased by $4.1 million and skilled nursing care gross revenues decreased by $900,000. The decrease was attributable to limiting elective surgeries and outpatient services and decompressing the Skilled Nursing Facility to prepare it as the Covid isolation facility. The decrease in gross outpatient revenues and gross skilled nursing were offset by gross in-patient revenue increases of $3.8 million.
Gross in-patient revenue growth was most notable in pharmaceutical charges and an early indicator of the benefits of the new Pyxis Medstation. This medication dispensing system would improve documentation, billing, and controls while reducing medication errors. GMH’s annual 5 percent rate increase and implementation of new fees are also factors in the gross patient revenue growth.