Guam Memorial Hospital is allowing a vendor with close ties to the governor to make commission on tens of millions of dollars GMH already was collecting on its own.
According to a 2021 contract with MedHealth, the hospital’s vendor assisting with the collection of outstanding revenue, MedHealth receives a 12 percent commission on every dollar GMH collects above a threshold of $7.2 million, or $86.4 million a year. Translated: After GMH collects $7.2 million in a given month, MedHealth collects 12 cents on every dollar after that. For example, if GMH collects $8.2 million in October ($1 million more than the $7.2 million threshold), then MedHealth will be paid $120,000.
But according to GMH’s audited financials for Fiscal Year 2020 (the year before the MedHealth contract), the hospital on its own collected $104 million in revenue, or an average of $8.67 million per month.
The increase in collections came mainly from Medicare and Medicaid, and can be tied directly to a rebasing of rates under the federal Tax Equity and Fiscal Responsibility Act, or what’s commonly called TEFRA rebasing. The government of Guam for years had sought TEFRA rebasing, which would increase the amounts the Medicare program would reimburse to Guam for hospital care to Medicare and Medicaid patients. And for years, GovGuam was denied its requests until former hospital CFO Benita Manglona secured the feat shortly before the Leon Guerrero administration released her from her services to GMH. Ms. Manglona was a holdover from the Calvo administration, and had fought for and secured TEFRA rebasing under the direction of former Gov. Eddie Calvo, whose term ended in January 2019.
GMH is paying MedHealth commission on revenue the GMH staff already has demonstrated its ability to collect. The next question is whether MedHealth is helping GMH to collect even more. According to the 11 months invoiced for Fiscal Year 2022, the year the MedHealth contract was in full effect, GMH collected north of $107 million. However, more than $3.4 million of that went to pay MedHealth’s commission. GMH has yet to disclose to Kandit the amount of revenue collected for the final month of FY2022, September.
Kandit also has asked GMH why it set a contractual threshold about $20 million below the FY 2020 collection rate, and whether hospital management continues to believe the MedHealth contract benefits the hospital’s financial position.
Neither GMH spokeswoman Cindy Hanson, nor legal counsel Jeremiah Luther have responded yet to the inquiry.
Sources close to the matter, however, have said MedHealth’s services may have uncovered a scheme involving insurance companies. According to the well-placed source, insurance companies have denied claims then banked on the hospital’s slow process of reconciliation on those claims in order to run out the clock on the claims and thereby avoid making millions in payments. According to GMH’s audited financials, year after year, GMH bills insurance companies for tens of millions in services, but writes off a significant chunk of that as bad and uncollectible debt.
The GMH audited financials for Fiscal Year 2022 will not be released until next year, so Kandit does not have a way of verifying whether this source’s claims are true.