Link: Pacific Islands Report
Pacific Islands Development Program, East-West Center

With Support From Center for Pacific Islands Studies, University of Hawai‘i

CNMI Hospital In Need Of Subsidy To Cover Finances
CHC facing issues addressing deficits, loan repayments

By Alexie Villegas Zotomayor

SAIPAN, CNMI (Marianas Variety, Dec. 14, 2012) – Without a subsidy, the Northern Mariana Islands’ Commonwealth Healthcare Center (CHC) will not be able to retire its projected $8 million deficit for fiscal year 2013 or even pay its $3 million debt to the Marianas Public Land Trust (MPLT).

This was the assessment of the hospital’s former chief financial officer Alvaro A. Santos.

Santos told Variety that the hospital is having difficulty paying the $3 million loan.

He said CHC pays about $17,500 a month in interest alone on the loan which will mature on March 20, 2013.

By that time, CHC has to pay the principal and the interest for that month or $3,017,500.

This $3 million was consumed by the hospital long ago.

He said he suggested to MPLT Board Chairman Pedro R. Deleon Guerrero that the only way for the hospital to pay this loan is to give them "breathing space" — give it another two years to pay the loan.

The hospital is bleeding financially.

Santos said that on a monthly basis, the hospital pays $500,000 for medical supplies; $450,000 for utilities; and $1.3 million for salaries.

As to the operations of the dialysis center, Santos said the hospital covers $1.7 million in costs incurred by 17 indigents a year.

He said the cost of operating the hospital annually is about $19 million or 10 times the current appropriation.

More than half of this $19 million, he said, goes to salaries of clinicians whose salaries range from $130,000 to $250,000 a year.

He added that, as these clinicians are on call, they are also paid overtime.

Given the expenses that the hospital incurs, Santos said they have begun implementing cost-cutting measures.

He said they need serious streamlining in terms of personnel cost.

However, Santos said, they can not cut personnel costs too much, not to the level that they would be violating standards.

He said when he was still working with the hospital, he had been advocating at least a $10 million subsidy for CHC.

This, he said, he and the hospital management had communicated to lawmakers; however, the hospital still ended up with about $1.9 million in appropriation under the fiscal 2013 budget.

As CHC knocks on MPLT’s door to get the $7 million supplemental loan, it has to satisfy the issue of debt service.

MPLT, for its part, has been engaging the hospital in a dialogue to satisfy the requirements of the $3 million loan.

Santos believes that the hospital does not have the money to pay the loan.

If it were to get the $7 million in supplemental loan, the $17,500 in monthly payment for interest alone would increase to $58,000.

In a discussion with lawmakers, asked how CHC is going to pay the loan, Santos said admitted that they don’t have the money. "Even if we maximized revenues, we cannot."

This is the reason, he said, that he is calling for a subsidy.

He said $10 million a year would be a good cushion for the hospital to cover their projected shortfall.

"We are the only public hospital among the territories with no subsidy," said Santos.

He said in other jurisdictions, like Guam and Hawaii, public hospitals are subsidized.

Guam Memorial Hospital, he said, gets around $12 million in subsidies.

In Hawaii, the four public hospitals are also subsidized by about $75 million a year.

The said subsidy, he said, goes to indigents who don’t have insurance and no capacity to pay their bills.

"This hospital is absorbing $5 million to $7 million a year for the medical costs of the indigents," he said.

Retirement benefits

Santos also admitted to Variety that when he worked with the hospital as an independent contractor, he discovered to his surprise that what CHC deducted from the employees was not remitted to the Fund.

‘That is illegal. This has to stop," said Santos.

He said during the time he worked for CHC as an independent contractor — CHC labeled him as chief financial officer — he was able to make current the employee’s share of the contributions to the Retirement Fund "when we got that $3 million from MPLT."

At the time, he said, they owed the Fund a little over $2 million.

But the employer contribution was not settled even after he left.

He also said, "We were so deep in debt. There is no money."

The Fund has filed a third-party complaint against CHC, PSS and NMC for deficient employer and employee contributions.

CHC owes the Fund about $8 million in deficient contributions and $1.4 million in statutory penalties.

Marianas Variety:
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