CHCC owes vendors $11M

The Commonwealth Healthcare Corp. currently owes its different vendors approximately $11 million—an amount that has alarmed the board of trustees.

In fact, the board said there is an immediate need to look for a resolution to these mounting receivables or the corporation will be exposed to further liabilities in the future.

Interim chief financial officer Cora Ada disclosed during Thursday’s board meeting that CHCC has accumulated $11 million in payables, the bulk of which are owed the Commonwealth Utilities Corp. and NMI Retirement Fund contributions.

For the unremitted employer’s contribution alone, the corporation has a $2.9-million obligation that covers the years prior to the creation of the corporation or when the agency was still the Department of Public Health, Ada said.

She, however, emphasized that since the corporation was created, payments on the employer’s share have been performed except for the $53,000 it currently owes for fiscal year 2014. At present, there are five CHCC employees currently enrolled in the defined benefit plan and the rest are with the defined contribution plan.

The corporation also owes CUC $4.8 million as of Dec. 31, 2013. This amount, Ada said, is not up to date and do not include penalties and fees. It will be recalled that CUC has sued the CHCC for not paying its obligation for many years. CUC disclosed last week that CHCC has an outstanding $11.9 million in account receivables as of March 31, 2014.

Also included in the $11 million as “payables” in CHCC books are the approximately $800,000 owed dialysis supplies vendors. The rest is owed other vendors of the hospital.

Board trustee Anthony Raho disclosed that a close examination of the budget plan for the current and next fiscal years do not show both mounting obligations to CUC and the Fund. He also asked how the previous “budgets” for both are being utilized. It was later revealed to the board that due to other pressing priorities, some funds allocated for both CUC and the Fund had been diverted.

Last Thursday, board chair Joaquin Torres pointed out the need to immediately develop a “deficit reduction plan” to resolve the mounting payables of the agency. Vice chair Pete Dela Cruz was tasked to put together the plan for the board’s consideration at their next meetings.

Dela Cruz admitted that since it is impossible for CHCC to pay all vendors in one lump sum, the board can look at, for instance, a three-year repayment plan for CUC.

He also emphasized that, contrary to the claim that CHCC’s debt to the Fund has been zeroed out as a result of the settlement agreement, the corporation remains liable in paying for the $2.9 million it owes in past employer’s contribution to the government’s general fund. CHCC is a participant in the Fund settlement agreement.

Trustee Phillip Mendiola-Long, meantime, cautioned the board and management of potential legal issues it may face if the agency will continue not to put remit its employer share, specifically for DC members.

“The government can absorb any interest loss over the course of not putting the money in DB plan, but in DC plan, we can be looking at a class action suit,” he warned. He added that CHCC must also come up with a “realistic budget.”

CHCC, he added, should not pretend that the debts do not exist because these will bite CHCC severely in the long run.

For the deficit reduction plan to work, Dela Cruz cited the need to enforce internal austerity measures such as looking at current vacant positions inside the organization, among other approaches.

CHCC reportedly generates about $22 million in yearly revenues, the bulk of which are from reimbursement to Medicare and Medicaid. On the local appropriation side, only $2 million was allocated for the CHCC this fiscal year 2014.