[Final Survey Report on Selected Administrative Functions, St. Croix Interim Hospital, Government of the Virgin Islands]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 95-I-52

Title: Final Survey Report on Selected Administrative Functions,
       St. Croix Interim Hospital, Government of the Virgin Islands

Date: October 31, 1994

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United States Department of the Interior
     OFFICE OF INSPECTOR GENERAL
           Headquarters Audits
           1550 Wilson Boulevard
              Suite 401
                 Arlington, VA 22209
 
     LETTER SURVEY REPORT

Honorable Alexander A. Farrelly
Governor of the Virgin Islands
No. 21 Kongens Gade
Charlotte Amalie, Virgin Islands 00802

Dear Governor Farrelly:

Subject:  Final Survey Report on Selected Administrative Functions, St. Croix
Interim Hospital, Government of the Virgin Islands (No. 95-I-52)

INTRODUCTION

This report presents the results of our limited review of selected administrative
functions of the St. Croix Interim Hospital. The objective of the survey was to
determine whether the Interim Hospital was adequately staffed with qualified
personnel, used adequate procurement practices, and adequately controlled
equipment and medical supplies.
BACKGROUND

In February 1989, the Governor appointed a 9-member St. Croix Hospital Facilities
Board of Trustees. Title 19, Section 240(e), of the Virgin Islands Code gives the
Board the overall responsibility to "do any and all things necessary to carry out the
operation" of the Interim Hospital. This includes the establishment of rules and
regulations, the hiring of sufficient medical and administrative staff, and the oversight
of funds made available to the Hospital.
The Interim Hospital, the only hospital on the island of St. Croix, serves
approximately 60,000 residents. The original St. Croix Community Hospital, which
was built for an occupancy of 250 patients, was virtually destroyed by Hurricane
Hugo on September 17, 1989. Reconstruction of the hospital facility is nearing
completion, and the Hospital is expected to be dedicated on October 23, 1994. As
of June 1994, the Hospital was still located in a temporary facility consisting of
modular building units, which is known as the St. Croix Interim Hospital. The
Interim Hospital has a capacity of 85 inpatient beds.

 
The costs of operating the Interim Hospital for fiscal years 1992 and 1993 totaled
about $25.1 million and $27.4 million, respectively. These costs were funded by
receipts from medical service charges and allotments from the General Fund of the
Government of the Virgin Islands. At the time of the survey, the Interim Hospital
had 609 employees: 584 hired through the Government's personnel system and 25
hired through professional service contracts.

SCOPE OF SURVEY

The scope of the review included personnel management, procurement, and property
management activities at the Interim Hospital during fiscal years 1992 and 1993.
However, we limited the extent of testing because the Interim Hospital's imminent
return to its permanent facilities may result in the correction of many of these
conditions.  The survey was performed at the Interim Hospital and at the
Government's Division of Personnel, Department of Property and Procurement, and
Department of Finance.

Our review was made, as applicable, in accordance with the "Government Auditing
Standards," issued by the Comptroller General of the United States. Accordingly,
we included such tests of records and other auditing procedures that were considered
necessary under the circumstances.

As part of our review, we evaluated the Interim Hospital's system of internal controls
for hiring and managing staff, procuring goods and services, and controlling
equipment and medical supplies. Our review disclosed internal control weaknesses,
which are discussed in the Results of Survey section of this report.   Our
recommendations, if implemented, should improve the internal controls in these
areas.

PRIOR COVERAGE

In September 1990, the Office of Inspector General issued the report "Survey of
Billing and Collection Functions of the St. Croix Community Hospital, Government
of the Virgin Islands" (No. 90-103). The report concluded that the Hospital did not
(1) ensure that bills were accurate and were issued timely, (2) enforce collection of
overdue accounts, and (3) maintain adequate controls over cash collections. A major
factor in the Hospital's inability to effectively carry out its billing and collection
functions was the lack of adequate automated data processing support. Based on the
Hospital's plan of corrective action, submitted in response to the final report, we
considered the audit recommendations resolved and implemented.

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RESULTS OF SURVEY

The St. Croix Interim Hospital was not able to hire adequate numbers of medical
staff, procure supplies and equipment in a timely manner, or maintain adequate
control over equipment and medical supplies. Title 42, Part 482, of the Code of
Federal Regulations contains the basic standards for administration, staffing, medical
and support services, and physical plant required for hospitals certified to participate
in the Medicare program. The primary reasons for the Interim Hospital's inability
to recruit adequate staff and obtain necessary supplies and equipment were the lack
of timeliness of the personnel recruitment process and delays in the procurement
process, respectively. The inadequate control over equipment and medical supplies
was caused, at least in part, by the space limitations of the Interim Hospital's
temporary modular facilities. Also, because the Hospital was unable to hire staff to
provide certain types of medical care, during fiscal years 1992 and 1993, more than
400 patients were transferred to hospitals in Puerto Rico and the United States, at
a total cost of about $3.6 million.

Personnel Management

The Interim Hospital was not able to hire sufficient numbers of qualified medical
personnel, particularly nurses. In October 1992, a survey team contracted by the
Interim Hospital performed a mock certification survey of the Interim Hospital using
Health Care Financing Administration certification criteria. The mock survey team
found that nursing coverage was often limited in the delivery, pediatric, postpartum,
nursery, medical, surgical, emergency, hemodialysis, and psychiatric units. In some
cases no registered nurses were present, while in other cases the number of nurses
on duty was less than that required for the number of patients.

The Interim Hospital's annual report for fiscal year 1993 stated that during that time
period, the Interim Hospital hired 29 new employees but lost 32 employees, many
of them nurses. Although the Interim Hospital had established a goal of hiring 48
additional nursing staff during fiscal year 1994, it had been able to hire only 16 new
nurses by August 1994.

To test the degree to which delays in the processing of personnel actions hampered
the ability of the Interim Hospital to hire needed staff, we traced a sample of 15
recruitment actions through the system. Although sufficient information was not
maintained to enable us to trace the documents through every step in the
recruitment process, we found that on the average, it took almost 2 months from the
date the Interim Hospital processed the Notice of Personnel Action to hire a new
employee to the date the approved document was returned by the Personnel
Department to the Interim Hospital. Processing times ranged from 10 days to more
than 3 months.

 
Because it did not have medical staff with the necessary expertise to offer certain
types of sophisticated medical services, the Interim Hospital incurred additional
operating costs related to transferring patients off-island for such treatment. For
example, during fiscal years 1992 and 1993, the Interim Hospital transferred more
than 400 patients to hospitals in Puerto Rico and the United States, at a total cost
of about $3.6 million.  The transfers included 42 newborn infants requiring
specialized neonatal treatment.

Although Title 24, Sections 421, of the Virgin Islands Code defines the types of
documents that must be maintained in the personnel files of all Government
employees, the Interim Hospital did not have formal written requirements as to what
types of specialized documents should also be maintained for its health care
employees. As a result personnel files maintained by the Interim Hospital's
Personnel Department did not always contain documents such as employee
performance evaluations, annual health examination reports, educational certificates
and licenses, and evidence that background information on potential employees was
checked prior to employment.

Based on our review of 25 employee personnel files, we found that the files did not
contain (1) performance evaluations for six employees, (2) health examination
certificates for four employees, (3) educational certificates for two employees, (4)
evidence of background checks for three employees, and (5) evidence of a current
medical license for one physician. Additionally, one employee's personnel file was
completely empty. In its October 1992 mock survey of Interim Hospital operations,
the survey team noted that the completion of performance evaluations and health
examinations of all nursing staff were not documented.

We also found that employee personnel files were not adequately safeguarded by the
Personnel Department in that they were kept in cardboard boxes on tables in an
office accessible to unauthorized personnel.

Procurement

The Department of Property and Procurement is responsible for establishing an
economic and efficient centralized system for the procurement and supply of goods
and services needed by the Government's operating departments and agencies.
Within this centralized system, the Interim Hospital established internal procedures
for processing requisitions. However, the requisition processes within the Interim
Hospital and the Government's centralized procurement system took so long that the
Interim Hospital was not assured of receiving needed supplies, equipment, and
services within a reasonable time frame.

To test the degree to which delays in the processing of requisitions may have
contributed to the inability of the Interim Hospital to obtain needed supplies in a
timely manner, we traced a sample of 25 requisitions through the system. We found
that on the average, it took 3 months from the date a requisition was prepared to the

4

 
date the items were received by the Interim Hospital, with processing times through
the entire process ranging from 6 days to over 7 months.

Because requisitions were not processed timely, the Interim Hospital did not always
have an adequate supply of critical medical supplies and had to purchase medications
from local pharmacies at a higher cost.

We also found that during fiscal years 1992 and 1993, the Interim Hospital lost about
$10,4OO in discounts offered on nine invoices because the invoices were not paid
within the 30-day discount periods offered by the vendors.

The Interim Hospital had awarded three consecutive contracts at a total cost of $1.2
million for the development and implementation of an ongoing hospital equipment
preventive maintenance program. However, because the Interim Hospital had not
hired or trained a permanent Director of Maintenance and other maintenance
personnel to continue the preventive maintenance program established by the
contractor, it has not been able to continue the same level of preventive maintenance
provided by the contractor.

Property Management

The Department of Property and Procurement is responsible for controlling property
owned by the Government. Through its Property Manual, the Department delegated
some property control responsibilities to the Government's operating departments
and agencies, including the Interim Hospital. However, because of limited space in
its interim facilities, the Interim Hospital was not able to adequately control its
medical supplies and equipment. For example:

  - The Acting Chief Pharmacist told us that expired noncontrolled drugs had
not been exchanged or disposed of since 1990 but that she was inventorying the
expired drugs and identifying the vendors so that she could request that the expired
items be exchanged for fresh supplies.

   No inventory records existed for medical equipment and furniture that were
being stored in a warehouse until the Interim Hospital returns to its permanent
facilities. These items were stored because they could not be used in the Interim
Hospital. Additionally, Government property numbers had not been assigned for 257
items located in the Interim Hospital, which hampers the inventorying process.
Specifically, we were unable to identify 13 of 15 items, valued at about $147,000,
because Government property numbers had not been assigned to them.

 
Recommendations

We recommend that the Governor of the Virgin Islands:

  1. Ensure that the St. Croix Hospital is sufficiently staffed to the extent
needed to meet the minimum standards of the Health Care Financing Administration
necessary to maintain certification for participation in the Medicare and Medicaid
programs.

  2. Ensure that the St. Croix Hospital, the Office of Management and Budget,
and the Division of Personnel jointly review the procedures for processing personnel
actions, particularly recruitment actions, to identify areas where the process can be
streamlined to allow the Hospital to fill approved positions within the shortest time
frame possible.

  3. Ensure that the St. Croix Hospital implements formal policies and
procedures to ensure that all employee files are adequately safeguarded and contain
the types of documents required by Title 24, Section 421, of the Virgin Islands Code
and the additional documentation required by the Health Care Financing
Administration.

  4. Ensure that the St. Croix Hospital, the Department of Property and
Procurement, and the Department of Finance jointly review the procedures for
processing purchase orders and vendor payments to identify areas where the process
can be streamlined to allow the Hospital to acquire goods and services and pay
vendor invoices within the shortest time frame possible.

  5. Ensure that the St. Croix Community Hospital, upon moving into the
refurbished facility, completely updates its equipment inventory records by
conducting a physical inventory of all medical, office, and other equipment; affixing
Government property tags to all equipment without property numbers; submitting
the required survey reports to the Department of Property and Procurement for
equipment that is unusable or otherwise requires disposal; and updating the property
records accordingly.

  6. Ensure that the St. Croix Community Hospital, upon moving into the
refurbished facility, completely updates its perpetual inventory records for
pharmaceuticals and other supplies by conducting a physical inventory of such
supplies; taking action to either exchange or dispose of expired drugs; and updating
the perpetual inventory records accordingly.

6

 
Governor of the Virgin Islands Response

The October 7, 1994, response (Appendix 2) to the draft report from the Governor
of the Virgin Islands concurred with the six recommendations.

  Recommendation 1. The response stated that the St. Croix Hospital would be
staffed to meet the minimum standards needed to maintain certification to the extent
allowed by fiscal constraints.

  Recommendation 2. The response stated that the Chief Executive Officer of
the St. Croix Hospital had initiated contacts with the Office of Management and
Budget and the Division of Personnel to discuss streamlining the processing of
personnel recruitment actions.

  Recommendation 3. The response stated that the St. Croix Hospital has
implemented an Employee Health Service and a Performance Improvement
Committee to ensure that documents related to employee annual physical
examinations, performance evaluations, educational certificates, and medical licenses
are monitored and kept up to date.

  Recommendation 4. The response stated that Act No. 6012 has authorized the
St. Croix Hospital to perform its own procurement and that the Hospital plans to
establish its own procurement department by January 1995.

  Recommendation 5. The response stated that staff of the St. Croix Hospital
were conducting an inventory of all medical, office, and other equipment and
updating equipment records in preparation for moving back into the refurbished
permanent facilities. The response further stated that unusable or otherwise excess
equipment was being disposed of through the Department of Property and
Procurement in accordance with established procedures.

  Recommendation 6. The response stated that a complete inventory of medical
supplies will be performed when the Hospital moves back into the refurbished
permanent facilities. Further, the response stated that the St. Croix Hospital is
investigating the possibility of using a commercial service to process the return of
outdated medical supplies to vendors.

Office of Inspector General Comments

The Governor's response was sufficient for us to consider Recommendations 1, 2,
3, and 5 resolved and implemented and Recommendations 4 and 6 resolved but not
implemented. Accordingly, the unimplemented recommendations will be referred
to the Assistant Secretary - Policy, Management and Budget for tracking of
implementation, and no further response to this office is required (see Appendix 3).

7

 
The Inspector General Act, Public Law 95-452, Section 5(a)(3), as amended, requires
semiannual reporting to the U.S. Congress on all audit reports issued, the monetary
impact of audit findings (Appendix 1), actions taken to implement audit
recommendations, and identification of each significant recommendation on which
corrective action has not been taken.

Sincerely,

Marvin Pierce
Acting Assistant Inspector General
for Audits