Editorial: Med. Center finances even worse than reported
I regret to say that I have learned information conveyed in the Block Island Times last week was substantially incorrect.
Last week, I wrote an editorial focused on the financial situation at the Block Island Medical Center. I included some numbers that I have since learned greatly underestimated the center’s financial problems.
I relied on information that I received at a meeting with personnel and a board member of Block Island Health Services. I confirmed these numbers with the parties involved prior to publication. Nevertheless, they were wrong. I do not suggest that I was deliberately misled, but somewhere along the way things got muddled through miscommunication.
In any case, I think it’s important for the public to know the true financial situation of the Block Island Medical Center, which is of even more concern than I thought. My thanks to Mike Hickey, the head of BIHS’s investment committee, which manages the endowment. It was Hickey who drew my attention to the errors last week.
Last week, I stated that the amount budgeted to be drawn from the endowment for 2012 was $54,000, and that the actual amount that would be withdrawn, including a substantial second request from the board, would be $125,000.
I have now learned that in January of 2012, the investment committee recommended that the center could draw up to $75,000, representing a responsible and sustainable 5 percent draw on the endowment, which had swelled from the sale of the Thomas property.
At the time, the board thought it could get by with less, and the budgeted number was $56,412.
By May 31, the board had drawn $86,000 — more than the original budget forecast, but not a worryingly big increase over the suggested maximum. But more recently, the board requested an additional $125,000, bringing the total to $211,000 — slightly more than 16 percent of the endowment, spent in a single year.
Of the additional $125,000, $85,000 has been drawn already this year, so as I write, the board has so far drawn a total $171,000. An additional $40,000 is anticipated to be taken shortly.
It is important to understand that the draw of funds from the endowment account provides cash to pay bills. It acts as a line of credit. Often some of the funds are replenished when there is a cash infusion on a seasonal basis.
Most years, the draw may temporarily exceed the budgeted amount during the year, but by year-end it has normally netted out close to what was budgeted.
In sum: the budgeted amount for endowment draw in 2012 was $56,412; the investment committee had recommended that it not exceed $75,000; and by the end of 2012, it’s currently forecasted that the draw will be $211,000, some of which might be paid back if the cash situation improves.
This serious situation is apparently the result of a combination of income shortfalls and expenses that exceeded budget.
If I wrote last week that this situation is worrying, that goes doubly now. It’s hard to see how the center can survive long if things go on in this manner. That’s why it’s all the more important to get the facts out there, so we can try to figure out what to do next.
The board will meet next Monday and has indicated that the finances are a prime topic on the agenda. The board reports that they have been struggling for months to get a handle on the financial situation and that work remains to be done. We look forward to a candid and reasonably complete report next week.