The Island’s hospitals are facing a cash crisis that could see the Bermuda Hospitals Board go into debt within the year, according to health chiefs.And while an increased “utilisation” of health services is partially to blame for the Island’s skyrocketing health bill, the crisis has been compounded by poor management of King Edward VII Memorial (KEMH) which could force administrators to “reshape” services.The facility is operating under increasing financial strain and faces “a serious shortfall of cash over the coming five years” according to Bermuda Hospitals Board (BHB) chairman Jonathan Brewin.And Health Minister Patricia Gordon-Pamplin, in written answers tabled in the House of Assembly last week, has acknowledged that the BHB faces “challenging financial difficulties due to poor governance and poor policy decisions over the past seven years”.A new hospitals board was appointed by the Government in February. In open letters to Ms Gordon-Pamplin and the community, Mr Brewin listed a catalogue of poor management decisions at the hospital in recent years, including a lack of oversight and focus, and a failure to control costs.And he also questioned the former Government for imposing revenue caps on the hospital last year, limiting the amount it could charge for services.“The Board has to balance BHB’s financial situation with the unsustainable escalation in healthcare costs in Bermuda,” Mr Brewin wrote in his letter to the Minister.“It is not just a BHB issue. BHB forms a significant part (43 percent) — but if only BHB cuts costs, business will just transfer to the private sector with no net benefit to Bermuda. The current situation is already unsustainable and unaffordable. The issue is bigger than BHB and requires an approach that considers the healthcare system in its entirety.”In an open letter to the community printed in today’s Gazette (see pages 10 and 11), Mr Brewin added: “We believe there was not enough focus on cost control at BHB, as its strategy over the last seven years had been to grow its revenue and increase the number of services available on island. This contributed to the increasing use of services (utilisation), further driving healthcare costs up.“We are concerned, however, that revenue caps imposed on BHB essentially cut the hospitals’ ability to charge for the services used. A KPMG report has highlighted that more work should have been undertaken at the Ministry to understand the impact of these caps. This has left BHB in an extremely challenged position, with an expected serious shortfall of cash over the coming five years.”Although the BHB has been operating at a surplus, it could go into debt within the year according to its Chief Financial Officer David Thompson.“Since 2009, the hospital has had an agenda where it has been expanding services to increase revenue,” Mr Thompson said.“Revenue has gone up by $100 million, so that’s been quite a success story. But operating expenses have been increasing slightly more over the same period, so the hospital is having to run ever faster just to stand still.”As a result, Mr Thompson said, the hospital’s gross margin had “deteriorated” from $9 million in 2009 to $4 million in the last financial year.Mr Brewin said the new board was now working to establish what services the hospital needs to provide and what it can afford to provide.“This will enable it to reshape services,” Mr Brewin said.“Additionally, a funding strategy is required and work around this is already underway to clearly identify the financial needs for BHB to sustain services and how this should be achieved. We will communicate findings in about six months.“We are doubling our efforts to work collaboratively with other stakeholders, the Ministry and the Bermuda Health Council to ensure effective strategies are implemented to control healthcare costs. We have also met with the SAGE Commission to discuss where they could assist.”A hospital spokeswoman added: “The pressure is on BHB to reduce its bill to work within the cap and do this by controlling utilisation — which can be positive for healthcare costs overall, or reshaping services. For example our MRI opening hours were reduced to normal operating hours — no evenings or Saturdays.“Emergencies will always get in fast, but there ends up being a longer wait time for non-emergency tests.“We have some of the highest utilisation rates for diagnostic testing in the developed world. More utilisation does not equate to higher quality care, nor improved outcomes. Unnecessary over-testing can be stressful and, for tests such as CT and radiology, there are small risks. Clinically appropriate testing will not change the outcomes.“The cost of delivering those added services at BHB, however, was not properly controlled, and with the limitations on BHB’s ability to raise revenue now, this has meant BHB is expecting financial pressures to increase significantly in the coming years if it does not act.Last month The Royal Gazette reported that insurance premiums were being ratcheted up by as much as 20 percent because more and more Bermudians were seeking medical treatment.Yesterday John Wight, president and chief executive officer of insurer BF&M, explained: “We have an ageing population in Bermuda and based on estimates that I have seen, between 4,000 and 5,000 fewer guest workers than five years ago who would otherwise be paying into Bermuda's healthcare system today. These individuals who left were roughly in the 25 to 55 year age group. As a result, we are left with an older resident base paying double digit health insurance increases year after year for higher utilisation and costing of more services, when cost of living and salary increases are likely to be low single digit. This may reach a point when it will be very difficult for the average resident to pay their monthly health insurance premium and enjoy a standard of living in Bermuda that they expect.“Looking at current trends we should expect to see a greater proportion of our residents unable to afford to pay for appropriate major medical health coverage that may be required for overseas expensive cancer and heart treatments and the like.”According to the Health Minister, diminishing profit margins will not impact the construction of a new hospital wing, which is scheduled to open next year at a cost of $260 million.In her written answers to questions submitted in the House of Assembly last Friday, Mrs Gordon-Pamplin said that a $40 million bill for the new facility will have to be paid “on substantial completion” at the end of March 2014.She said that the Bermuda Hospitals Charitable Trust had so far raised $27.5 million and that Government and the BHB will “assume responsibility for any shortfall between the funds raised and the commencement payment due”.