Bill gives up to $10M line of credit to Healthcare Corp.

House Ways and Means Committee chair Ray Basa (Cov-Saipan) pre-filed on Friday a bill that essentially provides an up to $10 million line of credit to the Commonwealth Health Corp., a measure that CHC chief executive officer Juan N. Babauta said yesterday will “tremendously help the corporation” which used to have nearly $25 million in general fund appropriation to only $5 million in fiscal year 2012.

House Bill 17-258, which Basa co-authored with Rep. Sylvester Iguel (Cov-Saipan), authorizes the Marianas Public Land Trust to retain net annual distributable interest income for fiscal years 2014 to 2020 to offset a $10 million advance to the general fund, and that amount will be made available to CHC.

Babauta said this “line of credit will get us hopefully over the bump in terms of paying vendors and provide for services.”

“This is a revolving credit line. It’s a loan but it’s not an entire loan upfront. We would draw down whatever amount we need, and pay the interest on that amount we drew down so we don’t have to pay the interest on the entire $10 million,” Babauta told Saipan Tribune.

Basa, in a separate interview, said his bill aims to infuse badly needed capital into CHC so that the corporation can better serve patients.

In an interview on Capital Hill, Basa said the bill was worked on for about a week after a meeting between him, Gov. Benigno R. Fitial and Babauta.

He said he hopes that the bill will pass the House and Senate.

“It’s a very urgent bill… This is not a grant or a charity. It’s like a line of credit,” Basa said.

Money from this line of credit will be used by the hospital only for capital improvements such as purchase of hospital equipment and repairs.

Since the Department of Public Health became a corporation in October 2011, it has achieved significant strides, said Basa in his bill.

For example, collections that reached nearly $1 million in November represent nearly double the amount the hospital usually collects every month.

Improvements in the areas of coding, billing, and collection are also underway.

But while the corporation has made drastic improvements in terms of financial stability in a short time, there is still plenty of room for further improvement.

The bill says initial assessment shows that the hospital’s uncollected bills amount to some $52 million, of which only over $20 million can be potentially collected because the statute of limitations has already run out.

The $1 million collected in November 2011 was used primarily for personnel costs associated with CHC’s more than 600 employees.

Basa’s bill says CHC still owes its vendors more than $1 million in unpaid obligations. It also says despite the creation of the corporation as an independent agency, CHC still functions as a semi-government entity because it still heavily relies on the general fund for operations.

“Because of this, the instant legislation is of critical importance to the future sustainability of CHC,” the bill says.

Rep. Froilan Tenorio (Cov-Saipan), one of the supporters of the bill, said it’s possible that the bill will get enough votes to pass the House.

But Tenorio said before he votes on the bill, he would want to call on CHC’s Babauta, along with Finance Secretary Larrisa Larson and management and budget director Vicky Villagomez, to update the House about the government’s revenue collections.

He also said he wants to ensure that MPLT will be repaid.

Under HB 17-258, MPLT funds will be deposited into the general fund in full compliance with the CNMI Constitution and Article XI section 6 except that rather than making this mandated distribution on an annual basis spread out over several years, this distribution will be made all at once, as an advance of projected revenues for FYs 2014 through 2020 or as needed.

This was similarly done when PL 16-7 made $3.4 million available to the Commonwealth Utilities Corp. from MPLT through an advance of future interest income distributions.

Babauta, meanwhile, thanked Basa, Iguel, Speaker Eli Cabrera, and MPLT chair Alvaro Santos for coming up with the bill.