- The Washington Times - Friday, December 30, 2005

Howard University Hospital is coming off its worst financial year in a decade as it negotiates a deal with the District to build a $400 million medical complex in Southeast, according to documents obtained by The Washington Times.

The hospital lost about $17.3 million in fiscal 2005 largely because of increasing operating costs and bad debt, according to records filed with D.C. Medicaid regulators. The filings were obtained through the Freedom of Information Act.

Howard financial administrators said the loss was the hospital’s first since the mid-1990s. However, they expressed confidence that the hospital would return to profitability through restructuring and layoffs.

“There is a budget-reduction plan that has been implemented by the management of the hospital,” said Sidney H. Evans Jr., the university’s chief financial officer. “We expect the completion of that recovery plan to result in reduced expenses and lower physician costs. We’re hoping that based on these efforts, … we will return to profitability.”

Administrators said the loss will not hurt the joint venture to build the proposed National Capital Medical Center in Southeast.

The two-year-old proposal calls for Howard and the District to split construction costs of a 250-bed hospital on the grounds of D.C. General Hospital in Southeast, which the District closed in 2001, leaving open only urgent-care services.

An exclusive rights agreement between Howard and the city is expected to go before the D.C. Council next month.

Howard officials said the 2005 loss was caused by a “perfect storm” of factors, including increased labor costs and new rules that limit the number of hours physician residents can work. Howard and three other hospitals reported losses last year, according to a recent D.C. Hospital Association report.

In fiscal 2004, Howard originally reported a loss of nearly $150 million in filings. But last week, officials revised the figure to a roughly $1.2 million profit.

Mr. Evans and Derrick Hollings, the hospital’s chief financial officer, blamed the original report of a $149.3 million loss on a computer glitch that failed to record a $169 million revenue line item.

The revised statement came after questions last week about the 2004 figures. The hospital this week gave The Times a copy of an updated filing that showed a $1.2 million profit.

D.C. City Administrator Robert C. Bobb said yesterday that the recent loss will not hurt the city’s venture with Howard.

“None of this creates any great alarm for us,” he said. “The good news is that Howard has had positive operating [margins] for the past nine years. Like any good business … they’re implementing good business practices to bring the hospital into positive cash flow.”

Earlier this month, Howard officials confirmed plans to lay off about 125 employees because of financial pressures.

Mr. Bobb said he was encouraged by Howard’s resubmitting its 2004 financial information.

“I’m confident they’ve been very transparent,” he said. “They recognized a mistake, and they moved to correct it. They didn’t try to hide it.”

Howard officials said the mistake did not affect the hospital’s Medicaid reimbursement. D.C. Medicaid officials were unavailable for comment yesterday.

Samuel Jordan, executive director of the District-based advocacy group Health Care Now!, said the latest financial figures raise questions about Howard’s ability to operate a new hospital.

“The numbers are just not strong enough,” he said. “The $17 million loss is off the cliff after years of marginal profits. The project should be tabled, and it should not be funded by the city.”

But Vanessa Dixon, founding member of the D.C. Health Care Coalition, said the latest figures should not derail the project.

“I’m willing to take Howard at their word that they can handle this,” she said. “It does not diminish my confidence.”

The hospital recorded losses in 2005, despite receiving a $30 million annual federal subsidy that is not available to other D.C. hospitals, financial records show.

The documents also show the hospital reported less than $8 million in cash on hand and in temporary investments, putting it short of the recommended 60 to 90 days’ worth of cash recommended by financial experts to meet expenses.

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