$11.58M line of credit bill to avert CHC crisis

The House of Representatives suspended their rules yesterday to pass a newly revised bill seeking an $11.58 million line of credit for the Commonwealth Healthcare Corp. after CHC chief executive officer Juan N. Babauta announced during the session that non-essential hospital employees were not paid on Friday because of financial shortfall as well as rumblings about possible employee walkout if salary delays are prolonged.

Only doctors, nurses, and other so-called essential CHC employees got their salaries on Friday, Babauta told House members.

Administrative and all other employees, along with nurses on Rota, have yet to be paid, he added. This was not the first time for this to happen at the hospital.

He told lawmakers that CHC faces the risk of having its doctors, nurses, and other employees walk out of their jobs because of the corporation’s financial problems.

CHC spends some $800,000 biweekly or some $1.6 million a month for the payroll of its estimated 600 employees on Saipan, Tinian, and Rota.

Babauta, in an interview after the session, said CHC was only able to pay essential employees worth almost $500,000. This means they were short some $300,000 to pay non-essential employees.

After a lengthy discussion, question-and-answer with CHC officials and two floor amendments, Rep. Ray Basa’s (R-Saipan) bill authorizing the Marianas Public Land Trust to provide up to $11.58 million line of credit to CHC passed the House.

House Bill 17-258, House Draft 2 passed the House by a vote of 16-2. It now goes to the Senate.

Of the $11.58 million, the $10 million “line of credit” is for operational needs, while $1.58 million is for a loan for an electronic health information technology initiative.

The interest and terms and conditions will be negotiated by CHC and MPLT.

The term of availability of this credit facility will not exceed five years.

Babauta thanked Basa, House Speaker Eli Cabrera (R-Saipan) and the whole House for passing the bill and hopes that the Senate will also pass the bill, to be immediately sent to the governor for action.

“I will be available to them [Senate] to answer any questions they might have and to emphasize the fact that we are facing a serious financial situation at CHC and this is going to involve ultimately the patients that we [serve] at the hospital and we need this financial support immediately. We look forward to going to the Senate for this,” Babauta said in an interview.

Vice Speaker Felicidad Ogumoro (R-Saipan) and Rep. Ray Yumul (Ind-Saipan) offered floor amendments that the members adopted to put more “safeguards” in case of payment default, among other things.

‘Unconstitutional’

The two “no” votes in the House came from Rep. Froilan Tenorio (Cov-Saipan) and Rep. Janet Maratita (Ind-Saipan) mainly because of what they believe as possible unconstitutional provisions in the bill, although they support the intent to help CHC get back on its feet.

Tenorio said the Legislature has no authority under the Constitution to tell MPLT what to do with its money, and MPLT could just directly loan money to CHC. Moreover, he said MPLT money is supposed to be for Northern Marianas Descent programs and not for any other programs such as CHC whose clientele, he said, are mostly non-NMDs.

He also said the Constitution grants the governor to declare a state of emergency to address the crisis at CHC.

“The governor can declare a state of emergency [for CHC].He can take money from MPLT or the Retirement Fund, though the Retirement Fund will be bankrupt unless we approve the [Saipan] casino bill,” Tenorio said, drawing reaction from some in the House chamber on the mention of the casino bill.

Tenorio, a former governor and speaker, said if the bill is passed into law in its current form, it could be “challenged because of its potential unconstitutional provisions.” Maratita echoed Tenorio’s concerns.

Two other House members were absent: Rep. Trenton Conner (R-Tinian) and Rep. Sylvester Iguel (R-Saipan).

‘Short-term’ solution

In his appeal to House members, Babauta said timely payment of all hospital employees hinges on the immediate passage and enactment of the line-of-credit bill, which he described as a “temporary, short-term” solution until CHC gets its finances on track.

Babauta, a former governor, said CHC expects that it will be able to turn around its financial situation in the next few months.

Basa withdrew his original $10 million loan bill, House Bill 17-258, and introduced a revised version, HB 17-278.

HB 17-278 combines HB 17-258 and another bill that also tries to source $1.58 million from MPLT for CHC’s electronic health information initiative.

The measure pledges as security the interest income distributions from MPLT pursuant to the NMI Constitution and authorizes MPLT to withhold and retain net annual distributable interest income starting fiscal year 2014 and beyond as necessary, as part of its investment conditions with CHC.

Basa, in his bill, said this approach to pledge and withhold interest income due for future fiscal years from MPLT to secure a debt by CHC is “practical and justified.”

MPLT chair Pedro Guerrero separately said yesterday that MPLT is in support of the revised loan bill.

He said CHC has the flexibility to pay back MPLT.

Babauta told House members that signing of the bill into law will allow CHC to make timely payment of salaries to all CHC employees on Saipan, Tinian and Rota, among other things.

“Everybody knows that when you go from a $38 million budget to a $5 million, you know you are going to be in some difficult financial situation,” he said.

He said the line-of-credit measure is a “temporary” solution but to help CHC pay its obligations to its employees, primarily payroll.

“This is not a permanent resolution. What we’re going to do, as I indicated before, we will beef up our system , we’re going to make the system work at the hospital so that we are able to collect more and we pay our loan back. That’s all there is to that. Right now, our immediate concern is patient care,” he said.

This is different from a typical loan, because CHC will only draw down what it needs from the total amount. This way, CHC will not have to pay for the full interest of an $11.58 million loan but only the interest on what it will actually draw down.

He also said he would have wanted all government nurses to be directly under CHC and not sourced through manpower. Rota nurses also didn’t get paid on time.

“The reason why they’ve been caught in this non-payment situation is we had to take them off the manpower and we had to apply for their CW status for them. We waited for that for over a month before they were officially given status and now we’re caught in this deep financial situation and I just regret, very sorry that they haven’t been paid. I know that’s not going to put food on the table but I’ll make up for it,” he added.

CHC took over the Department of Public Health on Oct. 1, or three years since the enactment of a law creating the corporation.

Basa said CHC has made drastic improvements in a short time but there is plenty of room for further improvement.

Based on initial assessment, CHC’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.

Moreover, the $1 million collected in November 2011 was used mainly for personnel costs. CHC still owes its vendors more than $1 million in unpaid obligations.

“Clearly, 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,” Basa said.