Jackson Health System reverses course, decides not to outsource inmate healthcare

By John Dorschner

Jackson Health System announced Thursday it is reversing course and will not out-source inmate healthcare – ending two years of planning, hearings and appeals involving a plan once considered a major initiative to turn around the struggling hospital group.Executives last year were so convinced that out-sourcing would save money that they placed the estimated $8 million savings in the budget for this fiscal year, which ends Sept. 30.

When Jackson’s new chief executive, Carlos Migoya, arrived in May, he reviewed the program, which covers 6,000 Miami-Dade County inmates. After the final bids came in earlier this week – the second set of final bids — he decided the proposals were “notably higher” than what his team thought it would cost Jackson to perform the same service, he said Thursday.

“There was a big difference,” he said.

Chief Financial Officer Mark Knight said the lower of the two bids was $60.5 million. Executives now believe Jackson can provide the same services for no more than $58 million – and perhaps considerably less next year with reduced labor costs.

The decision-making was long and torturous because Jackson has been struggling to determine its exact costs of inmate care, as it had with many of its services at its three hospitals and four clinics, which lost $337 million the past two years and $71.7 million so far this year.

The out-sourcing quest began in the summer of 2009, when then-Chief Executive Eneida Roldan projected huge savings if Jackson made the change. She originally wanted the out-sourcing done within 90 days, but the county’s formal competitive bidding system stretched the process out, ending with a battle between two bitter rivals, Prison Health Services and Armor Correctional Health Services.

A selection committee spent months studying the bids. In January, the committee decided PHS, now known as Corizon, had submitted the best proposal and began negotiating final contract terms.

Lobbyists for Armor protested to county commissioners and Jackson board members that it was unfair to allow PHS to negotiate final terms without Armor being allowed to counter. Jackson executives agreed and reopened negotiations with both companies.

One major problem was that Jackson couldn’t determine if an outsider would save them money if it didn’t know its own costs.

In 2009, a Jackson executive told The Herald that inmate care cost $74 million a year. But Jackson financial statements over the next year said the cost was about $24 million.

The confusion came over what to include in costs: About 200 Jackson employees work in the jails, providing basic care, and in Ward D, the locked-down section of Jackson Memorial Hospital where inmates are treated for in-patient care. But some other prisoners, such as heart attack patients, were in other parts of the hospital.

In August 2010, The Herald filed a formal information request for the costs of inmate care. Jackson never responded.

Knight said Thursday that a just completed analysis showed Jackson is now spending about $50 million annually on inmate care. Next year, when mentally ill inmates are transferred from the jail to a new Jackson-run mental health facility, Jackson’s costs will increase by an estimated $7.8 million, for a total of $57.8 million, Knight said.

But current initiatives to make major cuts in labor costs could bring down these costs next year, Knight said, and new projections mean that, even with the new facility, Jackson could perform inmate services for about $50 million annually — $10 million less than the lowest outside proposal.

Inmate healthcare has long been a sensitive point for Jackson executives. In most places, law enforcement agencies, such as the Broward Sheriff’s Department in Broward County, pay for such care. But the Miami-Dade County Commission gave the “mission” to Jackson, and jail care is a major component of Jackson’s annual losses.

Last week, Donn Szaro, Jackson’s new chief strategy officer, complained at a board meeting that the present process of awarding a contract was so long that it was hard to turn around Jackson’s financial fortunes.

Jackson executives decided to stop the dithering on the two bidders.

“Earlier this week we basically told them come back tomorrow with your best and final offer,” Knight said.

They did. And on Thursday Jackson made its decision to reject both of them.

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