Hospital Addresses Retirement Fund Problems

Administrators at cash-strapped Santa Paula Memorial Hospital met Tuesday with dozens of worried workers to apologize for past delays in payments to an employee retirement plan--and later announced that the hospital would hire an independent auditor to review its books.

Meanwhile, government investigative agencies tried to sort out jurisdiction for a formal inquiry into the hospital’s past practice of keeping employee annuity deductions in the hospital’s bank account for weeks after payday, where it did not draw interest for the workers.

William M. Greene, the hospital’s chief executive, said a preliminary internal audit found that an $8,000 biweekly annuity payment on behalf of about 65 employees was delayed for at least two weeks six times over the last year.

Greene said he is also investigating whether payments to employees’ bank and credit union accounts were also delayed.

But in a move to regain employee trust, Greene talked with about one-quarter of the small community hospital’s 220 employees in two staff meetings Tuesday and was scheduled to host two more in the evening.

“They didn’t throw chairs,” said Greene, who runs the hospital for a national management firm, Quorum Health Group Inc. “Some of them said, ‘Are you going to make it right?’ And we are. Some said, ‘Are you going to fix the system so it won’t happen again?’ And we have. It was generally positive, but a few people were upset and frustrated.”

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Emergency room nurse Nikki Diaz, who had complained that deductions to her credit union were posted late, said Tuesday that she was feeling better about the situation, despite continuing confusion among employees.

“It’s disconcerting for something like this to happen,” she said. “But I think the problem is going to be taken care of. I hope so. We’re like a family here.”

The frustration began to build last Wednesday, when employees complained that contributions to their annuity plan had not shown up on their monthly statements. Greene quickly removed the hospital’s chief financial officer, Dennis Good, after determining that employee deductions had been held in the hospital’s bank account for too long.

Good was reacting to an ongoing cash-flow crunch at the hospital, Greene said.

“It was a matter of making a choice of which obligations to pay first,” Greene said. “I’m sure he thought he was acting within a reasonable time period. . . . I think it was just poor judgment. You can’t treat people’s payroll checks that way, and we won’t.”

Good, who is awaiting reassignment within the national management group, could not be reached at his Santa Paula home.

The hospital had a net operating loss of $75,000 on a budget of $13 million for the year ending March 31, Greene said. Of the hospital’s 60 beds, only 45 are in use. And average occupancy for just those beds is 45%, the lowest among Ventura County’s general hospitals.

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But the hospital had a $1.2-million annual surplus overall because of extra revenue from investments, including $500,000 the hospital netted from community fund-raisers in 1993.

Besides damage control with employees, Greene said, he spent Tuesday trying to figure out which federal or state agency is going to investigate his hospital’s problems.

“I’m sure that’s the next step,” he said. “They’re digging through their regulations right now. They’re not even sure who has jurisdiction.”

If the federal Labor Department has jurisdiction--as is the case with most annuity and retirement plans--then the hospital could have violated regulations requiring that employee contributions be shifted to annuity plans within a reasonable period, which is usually a few days. The maximum time allowed for such a shift is 15 business days.

If the jurisdiction is with the IRS, as one Labor Department official speculated, then the rules are different. A state Department of Insurance spokesman said his agency does not have jurisdiction.

Greene said he is not sure of the extent of the problem, which begins with the tardy payments to the Lincoln National Tax-Sheltered Annuity Program. There also have been complaints about the handling of other deductions, he said.

“We are auditing the entire thing,” Greene said. “The other deductions are all part of the investigation. This is one of those little Pandora’s boxes: You get into one area and somebody says, ‘But what about this?’ So we just have to stand back and take a look at it all.”

Emergency-room supervisor Carol Askren said that hospital administrators were apparently unaware of the delayed payments until last Wednesday, when employees came to see her.

“They’d noticed a problem and they brought it to my attention. I took it right to the administration,” she said. “They were surprised.”

Askren said administrators acted quickly, and she does not think there will be lasting damage.

“It was corrected and the staff knows that,” she said. “The important thing is that we’ve all been here so many years, and we’re all so loyal. Something like this does make us concerned, but the administration dealt with it right away.”

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If government investigators find wrongdoing at Santa Paula Memorial, they can force repayment of funds, reimbursement for lost interest or investment returns, and they can levy a civil fine against the hospital, said officials from various agencies.

Virginia Smith, director of the Office of Enforcement for the Labor Department’s Pension and Welfare Benefits Administration, said that, in general, “What we would do at a minimum is have all the money put into the employees’ accounts, including all lost interest. There is a civil money penalty that can be imposed.”

Despite the current problem, Greene insists that his hospital’s future is brightening.

“The hospital would like to stress that it is under no more financial duress than any other hospital is at this time, considering the general health-care climate which must deal with delayed payments from laggard HMOs, budget crises in state government and a large indigent population that must be treated for free with no funding at all,” Greene said in a written statement.

“The major problem we’re dealing with is the continued restrictive payments we receive from managed care parties,” he said.

But the hospital has added a number of services that are bringing in more business--kidney dialysis, eye surgery, a health clinic and a rehabilitation program.

In addition, the number of general surgeries at the hospital is up, he said.

Surgeon Gus Iwasiuk, fresh from the operating room, said it was business as usual on Tuesday, except for chatter about the annuity plan.

“Some people were upset, and some think it’s just an accounting error,” he said. “I don’t think it’s a real big deal from what I see.”