Audit: $47M of GMH patient bills uncollectible in FY2019

UNCOLLECTED REVENUES: An audit of the Guam Memorial Hospital's fiscal 2019 finances shows $47 million in patient bills are uncollectible. GMH is shown on Monday June 29. David Castro/The Guam Daily Post

The Guam Memorial Hospital Authority incurred recurring losses and negative cash flows in fiscal year 2019 that have led auditors to bring up a previously stated concern they have "substantial doubt" about the government hospital's ability to continue to meet its obligations.

This doubt was lifted in the fiscal 2018 audit but was restated in its most recent audit because GMH's finances continue to be in a precarious situation.

The Office of Public Accountability on Monday released the audit, which was conducted by external auditors from Deloitte & Touche LLP.

The audit mirrors prior findings that GMH continues to carry the financial burden of patients who receive care but don't pay or don't have the means to make payments.

A total of $18.1 million was determined uncollectible from self-pay patients.

Overall, GMHA recorded $187.6 million in accumulated and unpaid patient bills in fiscal 2019. That's a $47.6 million increase from $140 million in fiscal 2018, the audit found. Of this amount, $145.5 million was determined uncollectible.

The government of Guam provided $13.3 million in subsidy to help keep the hospital afloat.

GMHA's financial challenges were also exacerbated by its failure to hold down expenses it could control. For example, GMH's operating expenses increased by $7.1 million "primarily due to increases in fringe benefits of $6.3 million from changes in pension expense, contractual services of $3.9 million, and supplies and materials of $3.5 million," the audit report states.

GMHA's retiree health care costs did decrease by $10 million.

"Despite increased collections, GMHA’s mandate to provide health care to all patients regardless of one’s coverage or ability to pay resulted in the continual growth of patient receivables. For the last five years, self-pay patients averaged $22.7 million of care per year and the likelihood of collecting is low. GMHA’s provision for bad debts averaged $16.5 million a year," the OPA states in a summary of the audit findings.

Withholding taxes retirement contributions

Without sufficient funds, GMHA did not meet its obligations to fully pay income taxes that had been withheld from employees' paychecks. The hospital also failed to remit all of the retirement fund contributions it was supposed to send to the Government of Guam Retirement Fund.

In the audit budget year, GMHA’s liabilities for delinquent and unpaid taxes with the Department of Revenue and Taxation was $5.3 million, and unremitted retirement contributions to the government of Guam Retirement Fund was $747,000.

Past withholding taxes primarily for 2018 were not remitted or not timely remitted due to poor cash flow, the report states.

In fiscal 2020, GMHA was committed to paying the principal amount for this obligation. Operational funds were used to pay these taxes and the principal balance was paid in full as of June. Also, the $747,000 GovGuam Retirement Fund retirement contributions were remitted as of October 2019.

In February, GMHA requested a waiver from the DRT director for the interest and penalties based on GMHA’s heavy reliance on government of Guam subsidies and the hospital's negative operating cash flows. The director approved the waiver in June, which will allow GMHA to direct this cash to pay critical medical supply vendors.

In January 2019, the Centers for Medicare and Medicaid Services rebased GMHA’s discharge rate retroactively to Oct. 1, 2013. In fiscal 2019, GMHA received $6.3 million for retroactive rate adjustments for fiscal 2014 to fiscal 2016. The rebasing narrowed the gap between actual cost per discharge and the total amount per discharge reimbursed.

Despite the rebasing, GMHA was still reimbursed less than the average cost of discharge. In fiscal 2019, the cost of discharge was $15,000 while the reimbursement was $11,000.

Net patient revenues increased by $12 million to $99.1 million during fiscal 2019 compared to fiscal 2018’s $87.1 million.

This increase was attributable to growth in both inpatient and outpatient census, the annual 5% rate increase, new fees, and higher Medicare reimbursements due to rebasing, the audit found.

Of $178.9 million in fiscal 2019 patient services, $61.7 million were contractual adjustments based on costs not reimbursed by Medicare, Medicaid and the Medically Indigent Program and health insurance companies.

Patients covered by the 3Ms incurred $97.2 million, or 55%, of GMHA’s gross patient revenues in fiscal 2019, but GMHA collected only $33.4 million, or 34%. An average of the last five years indicates GMHA collected reimbursements of only 44 cents for every $1 billed for 3M patients.

Underpayments from the 3Ms are due to reimbursement rates that are below the costs of care.

Patient services billed health insurance companies $51.3 million, or 29%, of GMHA’s grand total billings in fiscal 2019, but GMHA collected only $35.2 million, or 69%, the audit found. An average of the last five years indicated GMHA collected only 71 cents for every $1 billed to third-party payers.

Initially, GMHA bills the insurance companies for the whole patient visit.

The amounts not covered by insurance are then billed to the patient.

Self-pay patients

Patients who were underinsured or without health insurance coverage were billed $28.2 million of the hospital’s fiscal 2019 gross patient revenues, but GMHA collected $14.6 million. An average of the last five years indicates GMHA collected 41 cents for every $1 billed to self-pay patients. GMHA’s partnership with the Office of the Attorney General for collection referrals and DRT for garnishments resulted in self-pay accounts increasing by $7.3 million

GMHA's operating expenses exceeded its operating revenues by $30.5 million; operating activities resulted in negative cash flows of $28.7 million.

New hospital cost: $743M

In November 2019, the U.S. Army Corps of Engineers conducted a facility condition assessment of the hospital building. In its final report, the cost for immediate repairs was estimated at $21 million to support the reaccreditation of the facility and eliminate hazards to life, health, and safety.

These repairs consist of roof replacement, exterior building repairs, HVAC repairs, life safety repairs, and fire sprinkler repairs.

The report recommended GMHA to construct a new multistory hospital of equivalent size on a suitable site on the island, with an estimated cost of $743 million, including $21 million to support reaccreditation.

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