United Medical Center has imminent and long-term financial problems as a result of Monday’s bombshell revelation that the District has been distributing too much federal aid to the city-owned facility.
For now, the Southeast D.C. hospital must find an estimated additional $4 million to keep paying workers and vendors for the last four months of the fiscal year — and give back $2.8 million in already-received Medicaid funds by Sept. 30, officials said at a hastily convened board meeting.
In addition to seeking subsidies from the government, hospital officials are weighing cuts that can help close the gap.
Furthermore, planning for the hospital's 2013 budget has been thrown into turmoil, and in 2014 UMC will likely have to return more than $8.2 million in overpayments from 2011.
In navigating the crisis, hospital board members will have the support of Mayor Vincent Gray, who relayed through two surrogates his pledge to keep the hospital operating. The board agreed to meet soon to hash out a detailed request for funds and a proposal to cut costs.
“The mayor is very much committed to keeping the hospital open,” said Deputy Mayor Beatriz “B.B” Otero.
Board Chairman Bishop Charles Matthew Hudson relayed similar sentiments. “I did have the mayor say to me again that he is committed to keeping our hospital open east of the river,” Hudson said.
One tangible indication of that support has already come. As Gray promised in February after a request by the hospital board, he has transferred $4 million from the city’s contingency fund to UMC coffers to help provide a cash flow cushion.
That sum, technically a loan, begins to close the budget gap created when Gray’s Health Care Finance Department discovered that a flawed reporting survey had caused D.C. to give United Medical Center much more aid than it could justify from a pot of money meant for hospitals with lots of unpaid bills.
Because of the discovery, the city has canceled two payments to UMC — one scheduled for June 15 and another for September 15 — that were expected to total $6.3 million. That works out to a projected $5.7 million deficit for the fiscal year, said Steve Lyons, the hospital board member appointed by D.C. Chief Financial Officer Natwar Gandhi.
After the $4 million contingency fund loan, the hospital still needs $1.7 million just to keep its doors open, Lyons said, and about double that in other expenses likely to emerge.
Meanwhile, there is still the matter of overpayments that have already occurred.The $2.8 million segment for this fiscal year must be paid back before Sept. 30 so it can be redistributed to other hospitals this fiscal year, said Ganayswaran Nathan, deputy director of Medicaid finance. The balance of the overpayments identified by the Health Care Finance Department, $8.2 million in fiscal 2011, won’t have to be paid back until a federal audit scheduled for 2014.
Hospital officials did not discuss that payback at length, but it will remain on the books as a liability and could plague efforts to sell the facility to a private buyer.
Much of the money UMC was counting on will now be rerouted to Howard University Hospital, said Health Care Finance Director Wayne Turnage, who conducted the new review.
Under a new survey instrument adopted this year by the District, Howard reports that it provides nearly two-thirds of all uncompensated hospital care in the city. United Medical’s results plummeted with the new method, the subject of intense questioning of Turnage, who defended the surveys as more sophisticated and accurate than previous versions. Under the old survey, Howard and UMC reported giving roughly equal amounts of "uncompensated care."
United Medical Center officials wondered how the results could change so dramatically based on a single survey and carefully raised questions about Howard’s results. Turnage noted that Howard complained in 2010 when the District changed the formula for distributing the Medicaid funds for hospitals with lots of unpaid bills in a fashion that benefited United Medical.
“I’m not questioning their integrity, I’m just trying to understand,” CEO Frank DeLisi said. “These numbers were first presented to us over the weekend, just a day or two ago, and it’s such a dramatic swing up and down, and it’s a limited pot of money, and it’s all proportional.”
The D.C. Hospital Association will convene a meeting of the city’s hospital CEOs on Tuesday, when they will discuss a collective reaction.
Turnage emphasized that D.C. merely changed the way it collects data on unpaid hospital bills, not the distribution formula.
“If Howard’s numbers are incorrect, there will be a day of reckoning,” Turnage said.Howard officials declined comment.