Miami Herald: Audit slams Jackson Health System over money mess
Feb 26, 2010
The Miami Herald published this article on February 26, 2010
BY JOHN DORSCHNER
A much-anticipated audit of Jackson Health System released Thursday criticized management for a “significant deficiency” in its financial practices because it didn’t identify highly overstated revenue estimates “in a timely manner.”
That overstatement led to a loss of $244.6 million for fiscal 2009, higher than Jackson estimated earlier this month. The loss was originally thought to be $46.8 million.
Jackson’s financial people made such a mess of things that the auditors recommended that, from now on, the system’s governing board, the Public Health Trust, double-check Jackson’s own number crunchers on a quarterly basis by getting an “independent review of all sensitive accounting estimates.”
The highly technical 104-page report from Ernst & Young chastised Jackson executives for errors that they began to admit some weeks ago, as the auditors finished their work on fiscal 2009, which ended Sept. 30.
Jackson executives were not available Thursday night for comments. A spokesman said Chief Executive Eneida Roldan would answer audit questions on Friday.
The audit reported that management agreed about the need for “more accurate information on accounts receivable” — money that Jackson was owed.
“Management will seek direction from the PHT board about the need to have an independent review of accounts,” the audit stated.
The central issue was the monthly reports of accounts receivable. A new billing system installed in parts over the past year did not at first correctly estimate the percent of gross charges that were likely to be collected from insurers and patients, the audit stated.
What’s more, “a negative shift in payer mix” — more uninsured patients, more people with poor insurance that paid less — was not recognized by Jackson’s number crunchers for over a year, until they finally decided to write off $182 million as bad debt.
Earlier this month, when the huge revenue gap angered board members, an abrupt announcement stated Chief Financial Officer Frank Barrett had stepped down as a prelude to retirement.
Labeled “preliminary and tentative for discussion only,” the report reflects a bleak financial picture in which the system had an operating loss of $618.5 million. Jackson Memorial, Jackson South and Jackson North hospitals accounted for $552.5 million of that, with the primary centers losing $51.2 million and the two nursing homes losing $17.5 million.
Trying to stem losses, Roldan has closed two of the primary care centers and tried to sell off the nursing homes, although that effort apparently has stalled because the one bidder didn’t offer a high enough price.
The 2009 operating loss was a huge 44.7 percent higher than in fiscal 2008, the auditors noted — because of declining patient revenue and higher expenses, including salaries and other services.
Meanwhile, the nonoperating revenue — primarily sales and property tax money from the county — fell $79.1 million, or 17.5 percent, from $453.1 million in fiscal 2008 to $374 million in 2009. Those numbers reflected declining sales in the recession and falling housing values.
A major victim of Jackson’s problems is the University of Miami medical school. When the fiscal year ended Sept. 30, Jackson was $52.4 million behind in its payments to UM, the auditors noted.
The report also criticized Jackson’s handling of two government programs — Children’s Mental Health Community Support Services and Block Grants for Prevention and Treatment of Substance Abuse — by incorrectly calculating time sheets and over-stated billing.
In another development Thursday, Jackson announced that Roldan and SEIU Local 1991 President Martha Baker will hold a joint news conference to discuss “a plan to go to Washington, D.C., together to advocate for additional funds for the health system.”