Posted on Sat, Feb. 18, 2012

Things are changing at Jackson Memorial Hospital, even if not fast enough to suit everyone.Some board members are skeptical that CEO Carlos Migoya can pull this trick off — cutting costs and increasing revenues without damaging the quality of the vital healthcare services the public hospital provides to this community. But Mr. Migoya has a plan, he makes a reasonable case that it can produce results, and he deserves a chance to prove it.

A former banker with a strong record in the private sector, Mr. Migoya arrived at his post less than a year ago. He found a hospital that despite his predecessor’s best efforts was bleeding red ink, stuck with a business model desperately in need of an update — to say the least — and obliged to work in partnership with the University of Miami that effectively yoked the hospital to a competitor.

The challenge remains formidable, but the need to fix the hospital’s finances is undeniable. It has lost $423 million in the past three years, an unacceptable amount, particularly when there are so many demands on the public purse strings. With a new management team in place, Mr. Migoya told The Miami Herald’s editorial board, he has started to implement the sort of “cultural change” necessary to put Jackson on a path to financial recovery.

A new performance model, for example, requires managers to know how much money they’re spending and be able to justify it. That’s common practice in most businesses, but a whole new world in the public realm. Other plans include reductions in patients’ length of stay — a savings Mr. Migoya says is being accomplished without hurting patient care.

An alteration in the relationship between Jackson and doctors at UM may be the most significant change so far.

UM doctors are 97 percent of the physician workforce at Jackson, but because UM owns another hospital, the two are in competition for patients with private insurance. Under a new working agreement — a letter of understanding is expected this week — Jackson’s leaders hope to attract more community doctors, reducing UM’s participation to 50 percent and leading to more revenue for Jackson. The trick is to make this a win-win arrangement for both sides. And for patients.

Ordering fewer (unnecessary) tests for patients, particularly those on Medicare or Medicaid. Procurement reform (a claimed savings of $30 million). Reductions in “unmanaged overtime,” and a significant reduction (from 90 days to 50-55 days) in outstanding receipts. All these are part of the plan that Mr. Migoya is laying out in a sort of progress report to the community.

There has also been demonstrable progress in union contracts, due to be scrutinized this week by the County Commission. The new deal maintains base salaries but calls for a 3 percent cut to fund pensions, shaved benefits, and loss of leave days and merit or cost-of-living increases for the next three years.

Jackson board members Stephen S. Nuell and Michael Bileca, both accountants, weren’t persuaded over the size of the projected savings. The contract was approved by a vote of 4-2. Nevertheless, this is a turn in the right direction. The board’s skeptics should keep at it, however. The level of scrutiny they’re now providing was scandalously lacking before.

The changes at Jackson are a work in progress. Mr. Migoya and his team are not miracle workers. But after years of grim news, the prognosis for Jackson offers reasons for encouragement.

Leaders of the Jackson Health System and the University of Miami are developing a plan that will dramatically alter their sometimes testy relationship by creating a clear dividing line between UM doctors who work at Jackson and those who work for UM’s own health enterprise.Under the plan, Jackson would “lease” some faculty doctors, paying the medical school for their salaries. Those doctors would work exclusively for Jackson, and Jackson would get any insurance payments made for their work.

“We can build a new Jackson with physicians for our needs,” said Donn Szaro, Jackson’s chief strategy officer. The plan will create a “completely revised, new relationship” that “will get us away from arguing.”

William Donelan, chief operating officer of the medical school, said it was too early to say how the specialties and doctors will be split between the two large institutions, but he acknowledged “we’re going to have to do this in a different way” from what’s been done in the past.

Szaro, who outlined the plan at a Friday Jackson board meeting, said the new arrangement was intended to untangle the complex relationship between two of South Florida’s largest institutions. At present, Jackson pays UM a lump sum of $115 million annually. That pays for UM doctors treating uninsured patients, although UM collects from insurers for treating Jackson patients who have coverage. UM doctors also supervise Jackson clinical departments and oversee residents training at the public hospital.

Since 2007, when UM bought Cedars Medical Center, across the street from Jackson Memorial, Jackson leaders have been concerned about losing paying patients to the university facility.

With the proposed new agreement, “we would come to a very clear understanding,” said Marcos Lapciuc, chairman of Jackson’s board, “so that doctors don’t have a conflict of interest or divided loyalties. It will shift the control of the doctors to Jackson.”

Lapciuc said the change would also mean that “the exclusivity of UM” at Jackson Memorial “is going to start going way,” opening a path for Florida International University’s new medical faculty to provide services. At present, more than 90 percent of the doctors at Jackson Memorial are UM faculty.

Szaro said that under the new plan, some UM doctors would be compensated the same way FIU faculty members are at Jackson North, where the system pays their salaries and receives all income generated by their care.

Jackson Chief Executive Carlos Migoya said the change guarantees some UM doctors “will be 100 percent Jackson” and would “stop those conversations” about insured patients being sent to the University of Miami Hospital. UM would be paid for each specific service rendered by a faculty physician, rather than with a lump sum.

Don Steigman, Jackson’s chief operating officer, said the change would also help Jackson sign up managed care plans, which has sometimes been difficult in the past because the fees of the hospital doctors were not under Jackson’s control.

Donelan, the UM executive, said he was working with Jackson to start the new relationship on June 1, the beginning of UM’s fiscal year. In the past, UM officials have complained that Jackson executives tried to impose changes in the middle of UM’s year, when it was hard for the medical school to adjust its budget.

The new direction comes after months of negotiations without reaching a formal contract for the annual operating agreement for Jackson’s fiscal year that started Oct. 1.

For the previous fiscal year, which ended Sept. 30, Jackson had paid UM $130 million for all services the medical school provided. In August, Migoya said he needed to slash those payments by $52 million if Jackson were to break even. UM balked. Migoya offered a compromise—$16.5 million in reduced payments, plus $36 million in savings from more efficient UM doctor practices at Jackson Memorial.

UM voluntarily accepted the reduced payments starting Oct. 1, but the efficiencies have not yet been finalized. “We have literally 100 line items that we are working on collaboratively,” Szaro said. Last fall, UM’s Donelan said UM was happy to discuss efficiencies but couldn’t guarantee them, because “Jackson’s management really has to execute.”

Szaro said the efficiency meetings were continuing, but after at least nine drafts of an operating agreement for this year, he though it better to focus on creating a completely new concept for UM’s June 1 start date. Donelan said negotiators were “shooting for late March” to have a proposal ready.

In recent months, UM has been expanding its service locations, to compensate for reduced payments from Jackson and for its own financial needs. UM pediatricians, who used to work only at Jackson Memorial, now provide services at Broward General. UM obstetricians, who once were exclusively at Jackson, may soon be delivering babies at Mount Sinai.

Under a new relationship, Donelan said it was possible that some UM pediatricians and obstetricians would work exclusively at Jackson while others in those specialties worked exclusively elsewhere.

Jackson meanwhile would bring more community doctors and expand its relationship with FIU.

Fernando J. Valverde, chief executive of FIU Healthcare Network, the clinical enterprise wing of the medical school, said the university is negotiating to offer certain services at Jackson Memorial, a move that would give FIU “a foot in the door” in a hospital that had been exclusively UM’s. He said he expected an agreement signed within 90 days.