BHB takes out bank overdraft as hospitals ‘survive from pay cheque to pay cheque’ – The Royal Gazette | Bermuda News, Business, Sports, Events, & Community

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BHB takes out bank overdraft as hospitals 'survive from pay cheque to pay cheque'

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King Edward VII Memorial Hospital (File photograph).
Cutting costs: Bill Shields, chief financial officer of the Bermuda Hospitals Board (Photograph supplied)

Bermuda’s hospitals are surviving from pay cheque to pay cheque, with no financial reserves to cover unexpected emergency costs.

The Bermuda Hospitals Board has even had to arrange a bank overdraft as a back-up should it need extra cash in an unforeseen crisis, The Royal Gazette has learned.

The grim financial picture was given by the BHB’s chief financial officer, Bill Shields, who said that funds for general running costs – including staff wages – were at perilously low levels.

Mr Shields spoke out after Kim Wilson, the health minister, presented the budget for the department last week.

Ms Wilson said she had “grave concerns” about the financial outlook for the health system as a result of the cost of containing Covid-19.

She revealed that the BHB had taken a $17 million hit as a result of the pandemic, and that its cash reserves currently stood at about $28 million.

According to Mr Shields, it costs the BHB close to $27 million a month to run the island’s health facilities.

Mr Shields told The Royal Gazette: “The cash reserve mentioned by the minister is actually our operating cash – often called cash on hand.

“These are not savings, but money that is needed for the day-to-day functioning of the hospitals and their services.

“BHB, like the minister, is concerned by its current level of operating cash which provides less than one month’s expenditure – $28 million.

“BHB is not paid in advance, but in arrears later in the month via a set grant by Government, much of which is, in turn, received from health insurers.

“Our operating cash is used to pay vendors and staff, to pay for equipment and drugs, in the event that bills and payroll are due before we are paid.”

Mr Shields said health organisations typically expect to have at least three months worth of operating costs in the bank.

“For BHB, that’s about $80 million, but having 213 days [seven months] cash would be seen as best practice for a hospital of our size,” he said.

“This is normal, and when operating cash is at a healthy level, everything runs smoothly. Should an unexpected failure of our facilities or major equipment occur, such as major storm damage, for example, this operating cash would also enable BHB to act quickly to sustain services.

“During the Covid-19 pandemic having some available cash on hand meant we could respond to urgent medication, supplies and personal protective equipment needs.

“Last year we had to use about $17 million of our cash on hand.”

Mr Shields said that the board had strived to cut costs in the past year – and that staff already overstretched by the coronavirus pandemic had agreed to take wage cuts in order to keep the hospital afloat.

He said: “We will have to continue the hard work to reduce costs, and with the agreement of Government have an overdraft facility agreed with a local financial institution to help us navigate through the financial situation.”

He said that the BHB had managed to save $30 million recently, without any reduction in services. More savings are in the pipeline.

Mr Shields said: “These savings, at the moment, are not related to service or staff cuts. We will continue to work with our partner, KPMG, who is supporting a number of projects that cover better scheduling of professional staff, more efficient processes, contracts and reducing overtime costs.

“Savings were also achieved due to an agreement with the BIU and non-unionised staff who agreed to temporary pension and social insurance holidays and no cost of living salary rise.

“BIU staff also agreed to a cut in overtime rates, and non-unionised staff agreed to a five per cent cut in salary as they do not get paid overtime. This saved a total of $6.3 million.

“These savings, however, are not recurrent. The agreements will run out in 2021.

“We are also having constructive dialogue with government over a longer term sustainable financial settlement.”

Mr Shields warned that the BHB faced further, non-operational expenses because of ageing infrastructure.

He said: “BHB does not have the luxury of stopping investments for a year.

“Our older facilities need upgrades and maintenance to remain safe, and due to the sun-setting of a major clinical system we must invest in an electronic medical record system.

“The benefit of projects such as the EMR, however, is that over time it will help us run more efficiently, reducing delays and duplications, and improve quality, safety and outcomes.

“We will continue to do all we can to manage our finances while ensuring quality and safe services for Bermuda.”

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Published March 25, 2021 at 1:59 pm (Updated March 25, 2021 at 1:59 pm)

BHB takes out bank overdraft as hospitals 'survive from pay cheque to pay cheque'

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