The Miami Herald: Jackson Gets Through July

The Miami Herald

By John Dorschner
jdorschner@MiamiHerald.com

The financially beleaguered Jackson Health System managed to limp through July, losing about $4 million in a month that leaders earlier this year worried would bring financial catastrophe.“We’re still in a very tight state,” Chief Executive Carlos Migoya said Wednesday. “But we’re focusing on improvements in the month ahead.”

The public health system — called a “colossal mess” by a Miami-Dade grand jury last year — lost $337 million the past two years and is down about $75.4 million so far this fiscal year, which ends Sept. 30. Jackson is the safety net hospital for the 650,000 uninsured in Miami-Dade County, for which it gets $350 million a year in sales and property tax revenue.

And though Migoya is touting the changes he’s making to cut costs, he also must focus on problems. Cash on hand is expected to fall to 9.8 days’ worth in August, a situation that will mean Jackson will delay paying some of its bills.

He said his new executive team, in place for less than three months, is dealing with a growing list of “surprises” as well.

On the top of the list: the JMH Health Plan, which has ever-increasing losses — partly because many of Jackson’s own employees are choosing to be treated at the University of Miami Hospital, across the street from their own Jackson Memorial.

The good news, executives told Jackson’s governing board at a committee meeting Wednesday, is that the system finished July with 15.9 days’ worth of cash on hand, thanks largely to a $38 million payment that the state sent after months of delay. Earlier in the year, some projections had Jackson running completely out of cash in July.

Chief Financial Officer Mark Knight said improved bill collecting and cost-cutting helped to improve the financial picture — so much that Jackson has not followed through with an earlier request for a $30 million-plus advance from the county.

Much of the board’s time was devoted to the main problem of the moment: the health plan. Knight said the plan’s losses now have mounted to $17.3 million this calendar year through July and the plan will need another $11 million by the end of August to keep it solvent under state insurance requirements.

The plan covers 120,000 members in commercial, Medicare and Medicaid plans, including 10,000 Jackson employees and family members. Since January, the plan has been the only choice for employees, but they are free to seek treatment at other hospitals. Chief Strategy Officer Donn Szaro said he was mystified that the plan in recent months had been hiring employees while outsourcing many services.

On Wednesday, Migoya said Fernando Salgado, Jackson’s chief transformation officer, will have an added role as the plan’s interim executive director. Gone without explanation was Mike Brady, the old executive director. Migoya later said Brady “may have resigned.” Salgado said the plan’s operations suffered from problems including overpaying providers for services, poor payment of claims and bad management of those with chronic diseases.

He told the board he planned to quickly renegotiate contracts with the UM Hospital, Baptist and the Memorial system in South Broward County because the plan had been paying higher than market rates for their services. If the hospitals don’t agree to cut rates, he’ll drop them from the plan, he said.

“There are no sacred cows,” Salgado said.

Migoya noted that the plan was paying more money to the UM hospital than to its own Jackson Memorial, a situation that board member Joe Arriola called “insane.”

“We have employees that say we don’t pay them enough money, and they’re the same ones who are going elsewhere and taking money away from us,” Arriola said.

Chief Operating Officer Don Steigman said the plan “was not designed with built-in incentives to bring employees to us.”

Arriola urged quick action on fixing the plan. “If this is going to break even at best or be losing, you’re going to have a tough time convincing me to continue with this plan,” he said.

Several board members agreed. Migoya said Jackson might ultimately decide to sell the plan but first it had to be fixed in order to make it worth anything. And, as Szaro noted: “All our employees are in the plan, so we have a responsibility” to make sure it’s run right.

In Jackson’s overall financial picture, the word “conservative” kept popping up Wednesday.

An analysis by Ernest & Young of Jackson’s bill collecting found an $85 million reserve without sufficient explanations on why it was needed. Knight said it was there because in 2009, projected losses of about $50 million ballooned to $244 million. Jackson executives have said they want to be protected from similar miscalculations.

Knight said Jackson is also being “ultra-conservative” in planning its budget for next year, which starts Oct. 1.

For the past several years, Jackson has presented to the county commission a balanced budget, outlining new revenue from dozens of initiatives. But new losses started to mount as the initiatives failed to live up to expectations.

For fiscal 2011-2012, Knight said Jackson was working on a budget that would meet county requirements by being positive in cash flow but result in an overall loss of between $50 million and $60 million.

Migoya said that proposed budget included getting labor to agree to management’s proposals for a new collective bargaining agreement.


© 2011 Miami Herald Media Company. All Rights Reserved.
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