|By John Dorschner
After losing more than $400 million in the past three years, Jackson Health System’s leadership is again proposing a balanced budget — this time hoping for huge concessions from unions and the University of Miami.
Executives said the budget, scheduled to be presented to the Miami-Dade County Commission Thursday, is built on hopes that Jackson will be able to find about $170 million in salary and benefits savings from labor and a possible $52 million reduction for the UM medical school, which was expecting to net of about $110 million.
Since he started in May, Chief Executive Carlos Migoya has said Jackson’s financial problems will require major cuts in labor costs, but his recent proposal to slash payments to UM has left the school’s leadership stunned. “I’m sure [UM President] Donna Shalala is dying right now,” said Joe Arriola, who was a UM trustee until shortly before being appointed to the Jackson governing board in May.
Migoya told the board, “We have a lot of irons in the fire and they’re all burning really hot right now.”
Jackson has lost $337 million over the last two fiscal years. Chief Financial Officer Mark Knight projects a loss of about $90 million for this fiscal year, which ends Sept. 30.
Migoya said his goal is for Jackson to break even for the fiscal year starting Oct. 1 without laying off any of the 11,000 employees or cutting services. Commissioners will consider Jackson’s proposal along with the rest of the county budget and make a final decision before the end of the month.
“This is basically a last-ditch effort to save Jackson,” board Chairman Marcos Lapciuc said at last week’s board meeting. He said 10 days of cash on hand, which is where Jackson’s finances stood in August, would mean “in the banking business, you’re not a solvent concern.”
On Wednesday, Lapciuc said the proposed budget “has to work because there is no plan B.” If it fails, he said, Jackson would be “very different” next year, meaning major layoffs and reductions in services.
Miami physician-entrepreneur Stephen Dresnick called the budget “unachievable” and compared it to last year’s budget, presented by then-CEO Eneida Roldan, who projected dozens of initiatives that did little. He called this year’s proposal “déjà vu,” noting that net patient revenue continues to drop and saying the JMH Health Plan is “still a disaster.”
Migoya said Wednesday his budget is “achievable. Does a lot of work have to be done? Absolutely.”
Several board members have expressed concerns that the $1.75 billion budget relies on $250 million in initiatives to cut costs or boost revenues. “We’re all nervous about the assumptions,” said board member Michael Bileca. “If we hit on all cylinders, we’ll have less than 20 days of cash on hand,” at the end of fiscal 2012, while most solvent public hospitals average 160 days of cash to pay bills.
Pascal Goldschmidt, dean of the UM medical school, said the $52 million cut amounts to a 48 percent reduction in the school’s net payment of about $110 million a year. He told the board that the cut would be “extremely difficult” for UM.
Jackson pays UM about $130 million for services, including $20 million for providing indigent care, $10 million for overseeing medical education of residents and interns and $4.6 million for indirect support of the dean’s office, according to a Jackson analysis. UM pays Jackson about $20 million a year for renting facilities and other services.
At a budget workshop in mid-August, the board agreed to cut $52 million from UM’s payments, but when the formal budget was presented to the board last week, executives asked for only $18 million in trims, with a plan to work with UM leaders to get another $34 million in “efficiencies.”
Board members called the plan vague, and Migoya said details would be provided later this month.
UM spokeswoman Lisa Worley said Wednesday that she couldn’t comment “because we’re negotiating.”
Arriola, the former UM trustee, said the budget raised three “red flags” for him: counting on a union deal that was not yet done, assuming that the Jackson can stem losses in a health plan that has already amounted to more than $30 million this year and working out a deal with UM.
“I think we should spend a little money and hire an outside consulting firm to tell us what we should be paying UM,” Arriola suggested.
Migoya said Jackson is planning to do just that in the months ahead. He said he had budgeted conservatively, “only on promises we can keep. … There won’t be any nasty surprises at the end of the year.”
Board member Darryl Sharpton said he was puzzled by the “no surprises” statement when the UM deal had yet to be worked out. “I just want to be clear that I understand what this assumption means.”
Migoya agreed there was “some degree of a jump” but that details would be coming later in the month.