Jackson Health System projects that it could run out of cash this summer

For the second consecutive year, Jackson Health System executives are projecting the system will run out of cash by summertime unless major steps are taken.

The report from Chief Financial Officer Mark Knight to Jackson’s board on Friday projects a dangerously low five days of cash in June and four days in July before the system goes completely broke in August.

The projection doesn’t include the possibility of Medicaid cuts, which could kick in July 1st if the Legislature slashes healthcare spending as expected.

“Here we go again,” said Marcos Lapciuc, chairman of the governing board. Last year, he warned that Jackson was headed toward a summer train wreck unless drastic measures were taken.

Calamity was averted last year when Gov. Rick Scott released $35 million to Jackson in a one-time only payment of state funds, while Jackson managers did a better job of collecting claims and reducing costs. Executives acknowledge that such measures can’t continue to be counted on to keep Jackson solvent.

Chief Executive Carlos Migoya told the board Friday that the projection was based on the assumption that executives did nothing. “Obviously we have to dramatically change the way we do things.” He said he was working on labor costs and bringing in more patients.

Board member Michael Bileca said it was crucial that Jackson reached a settlement with the unions to lower costs. He said furloughs, started in November, were “very hard” on employees and couldn’t be counted on as a long-term solution.

Bileca, who is also a state representative, told the board that preliminary budget plans of the House and Senate do not include Scott’s proposal to apply rate bands to hospitals. The Scott proposal might cost Jackson more than $200 million. Bileca said legislators are still looking at major cuts for healthcare.

Migoya said a rough calculation might show Jackson taking a $100 million hit during this legislative session, but he planned to fly to Tallahassee next week to talk to legislators about the public hospitals’ crucial need for funding.

The cash-flow projections followed Wednesday’s announcement that Jackson eked out a surplus of $348,000 in December, after six months of losses. Migoya said he was certain “turbulence and setbacks” still threatened in the future. Over the past three years, Jackson has lost $423 million, including $45 million since Migoya started in May.

On Friday, Migoya told The Herald that he wasn’t trying to frighten people with a doomsday scenario but to show how important it was for Jackson to make changes, including new union contracts and a new operating agreement with the University of Miami. Discussions on those agreements have dragged on for months.

UM executive William Donelan said Friday that UM has been working closely with Jackson to resolve issues. Martha Baker, president of SEIU Local 1991, said, “We’re trying to partner with them. We don’t think we’re the ones holding things up.”

Bileca, leader of a healthcare company, said he wished Jackson already had a contingency plan on what to do if agreements weren’t reached with labor or the Legislature enacts major cuts. “I believe it should already be in place. We can’t wait three or four months.” Lapciuc said he would like to see a contingency plan by February or March.

Migoya said, “It’s really hard to figure out” a contingency plan with so many potential worst-case scenarios in play and he was focusing his time on finding ways to improve Jackson’s finances.

Chief Strategy Officer Donn Szaro said he is working on developing $1.1 billion in revenue increases or cost reductions. “We know we’re not going to get all of them,” he said, but if Jackson achieved a third of the original figure, it would the success-rate of an all-star baseball player.

Szaro mentioned going after three grants of $30 million being offered by the Obama administration but noted that 3,000 other entities had expressed interest. He said he was also working on a major change in Jackson’s relationship with UM, which could result in considerable savings, but many of his listed projects lacked details.

Chairman Lapciuc urged specifics as soon as possible, starting with plans that would attract Medicare patients. “When can we start getting those numbers?” Lapciuc asked.

Soon, Migoya said.

 

Source:  Miami Herald