“We are close, if not already in, a health care death spiral. ” These were words of Chief operating officer of public health trust, David Small as he was describing the situation Jackson memorial hospital is in right now. It is the Miami city’s major hospital and is running out of finance (Armario, 2010). The hospital is $229. 4 million in debt and it has been predicted that it will run out of finances to purchase medical supplies and pay its workers by April this year (Velez, 2010). It has become an illustration of what other hospitals in the country are facing thus presenting a grim picture of American health systems.
Public health trust’s treasurer, Marcos Lapciuc predicted that by the end of March 2010, the hospital would not be having any money in its accounts and thus he called the county to assist the hospital by giving it an advance of $67 million. A warning was given that the hospital would have to be shut down any time if nothing happens to revamp its financial status (Armario, 2010). One would wonder how one of the best hospitals in America found itself in such a predicament and this is what this essay seeks to analyze. Jackson health system announced that it had incurred more losses than what had been previously reported.
According to an audit report that was released this year, the system had suffered loss amounting to $244. 6 million by the end of last year. Preliminary audit report had indicated a loss of US $203. 8, understating the figure by US $46. 8. This has triggered the organization to consider laying off some of its employees. The report did not give much information let alone predicting what would happen this year but the CEO of Jackson Health system, Eneida Ronald believes that the situation would be really worse and the losses will continue to grow if nothing happens (Bandell, 2010).
So, what really happened? Reasons for the Bankruptcy It is believed that the hospital has been incurring losses without anyone noticing or due to miscalculation of bad debts/ uncollected bills and this has led to adjustments in finances that have resulted to the financial problems (Bandell, 2010). The report that was released indicated that $ 50 million reflected uncollected bills, and this was a 6% increase of non payments in the hospital. Another reason that could have led them to this financial crisis is because the hospital spends more than what it earns.
The report revealed the shocking news that the hospital’s revenue had gone down by $130 million to reach $1. 25 billion and its expenses had increased by $60 million to reach $1. 87 billion. This does not stop there. The revenue gotten from other sources for example, property and sales taxes went down by $79 million to $374 million. All these losses conspired and led to the hospital’s bankruptcy (Bandell, 2010). There are no indications of the situation getting better any time soon and thus the hospital seems it will continue to be on the losing trend. Recently, the hospital had reported a decrease in the volume of its patients by 6. % despite cutting costs. The hospital is faced with another loss of $88 million this year.
Jackson Health system which owns the memorial hospital has less cash in hand to pay the hospital bills and this has been described by Marcos Lapciuc, a public health trust member as “a cash hemorrhage. ” For a very long time, the hospital has been incurring losses and the prediction is that the trend will continue since the hospitals poor patients’ funding comes from Tallahassee, whose legislature has promised to cut the funding as it is also in a financial crisis (Dorschner, 2010).
Some people have blamed the computer systems for discrepancies in the accounts that may have made the hospital to find itself in such a problem. For years now, the accounts showed uncollected or bad debts to be have been received or paid for (Dorschner, 2010). The faulty computer system has been on the receiving end for a very long time since they have been categorizing bad debts as accounts receivable without anyone’s knowledge. This resulted to wrong estimation where gross charges which were estimated to be 29% were actually between 24% and 26%.
This is not the first time this has happened. In 2007, there was another miscalculation of accounts that led the hospital to court. They had been sued by international portfolio Inc. , a collector who claimed that accounts receivable it had bought was not near $1. 9 billion figure the hospital had claimed (Zieger, 2010). The practitioners have admitted that the whole system at the hospital is flawed not just the computer one. For a very long time, the system has not been addressed properly and thus the problems start the moment the patients step into the hospital.
How they are registered and how their information is filed cannot be trusted. The financial information in one way or another will get lost due the system problem. The hospital employs the best practitioners in the country, but the problem comes in when it comes to billing (Defede, 2010). Since last year, when the recession was in its height, the hospital admitted less patients but the CEO explained this by saying that all the hospitals had been recording the same. This has been blamed on the recession as more people seemed to avoid expenses in health care (Dorschner, 2010).
The recession came with so many problems for the hospital. The number of the uninsured increased and those who were covered by private insurance companies, Medicaid and Medicare went down. This was coupled by the increase of the operational costs while at the same time receiving less money from the state government for charity care. This led to a budget deficit of $47 million in 2008 to another one of $229. 4 million in 2010 (Velez, 2010). It seems this deficit has been there for years but the one in 2010 is a jaw dropping one since it has increased unexpectedly four times (Sohn, 2010).
The system had also incurred losses in its venture in profit building and cost cuttings (Litz, 2010). The hospital administration has also tried to make some changes in the hospital and this has cost millions of dollars, thus worsening its already fragile financial status. For example, the hospital installed a new system recently but it ended up costing 1 million US dollars (Defede, 2010). The money spent on labor costs were also discovered to be very high. The chief operating officer said that they pay the hospital’s nurses 20% more than other nurses in other hospitals (Dorschner, 2010).
The nurses in the institution are paid an estimated $39. 72 per hour excluding the benefits and this amount to 54% of all the expenses in the system (Service Employee International Union, 2010). Its payroll has been partly blamed and so far the hospital is regarded as the highest paying public hospital (Litz, 2010). These high labor costs coupled with inefficiencies in debt collection amounted to the current financial crisis. Many people are not at home with how the hospital collects its debts since the hospital has been reported to be collecting below 10% of all the money it is owed by patients who are not insured (Staiti, ea al).
A revelation was also made by a board member that sometimes the hospital failed to send a bill to insurance companies just because the person responsible for signing them was not around. The radiology department was also found to have a part to play in this crisis since it was not billing properly for a long time. However, this is a problem many hospitals are facing, especially in following up payments to be made by insurance companies. Currently, the hospital takes 89 days to collect its bills and this shows how bad the accounts receivable is.
This has been attributed to the situation where the hospital serves more patients who are on Medicaid, which has a tendency to be slow when it comes to payments and also due to the fact that, most of its clients are uninsured (Service Employee International Union, 2010). Moreover, the practitioners at the hospital have admitted that the hospital loses money every day since insurance companies do not approve payments in time or because the hospital does not release the bills in time (Defede, 2010).
Another major reason that may be responsible is that, the two Jackson hospitals in the South and North of Florida, which were meant to be profit making hospitals in order to support the memorial one, also started making losses thus affecting the latter in a negative way. Jackson south which is a facility with 199 beds and Jackson north, a 382-bed facility are proving to be a burden to the heath system (Service Employee International Union, 2010). The two hospitals have been making losses to the point of their administrative expenses becoming the memorial hospital expenses.
Report indicates that the number of patients attending the Jackson south hospital has doubled. The law requires that those patients who are uninsured must be attended to in the emergency department but there are fears that, these kinds of people have taken advantage of this to the point of turning to public hospitals any time they are in need of health care. This explains why the memorial hospital treats many patients of this nature (Service Employee International Union, 2010).
Thus for a very long time, the hospital has been at pains in treating the uninsured people whose number seems to be doubling every day. Most of these do not pay their bills amidst the institution’s decrease in sales tax revenue (Dorschner, 2010). However, some people have argued that it is the hospitals inefficiency and lack of funding from the government that is to blame for the problems the hospital is currently facing (Service Employee International Union, 2010). The state government owes the hospital $90 million in Medicare payments.
The federal government has also been blamed since most of those uninsured people are immigrants and thus it is its responsibility (Velez, 2010). Moreover, the revenue that the hospital gets cannot sustain its charity care. In 2008, most of the hospital’s revenue came from commercial insurance and this amounted to $569 million, another $336 was gotten from Medicaid and another $187 million from Miami-Dade County. However, in the same year the cost of running the hospital added up to $2 billion (Litz, 2010).
Charity care makes 23 % of all the operating costs in the hospital, bad debts amount to 2% and this reveals the burden charity care has on the hospital. Despite the assistance from the government, research shows that, charity care is a burden to the hospital especially since it is not a profit making institution (Dade County, nd). Despite its financial problems, the hospital continued to offer the best services in health care for example, after the earth quake in Haiti, it was among the first hospitals to have its personnel on the ground. This strains its finances.
Lapciuc explains this by saying that the hospital’s main objective is to offer treatment and thus financial crisis will not compromise that (Litz, 2010). Recently, a study was carried out on Miami’s health system by the center for studying health system change (HSC) and it emerged that high operating costs coupled with low insurance coverage of patients and the environment of medical malpractice insurance are responsible for straining health systems in Miami. The uninsured make 1/3 of the population in the area thus becoming a burden to the emergency departments.
The number of these people continues to grow, making it difficult for hospitals to take care of them. This increase has been attributed to immigration and the fact that many people have not enrolled for insurance coverage. This is what has really affected the memorial hospital. To worsen the hospitals situation, it usually incurs $30 million in deficit every year (Mays et al, 2005). So far, there is no light at the end of the tunnel since it has been predicted that, the situation will grow worse and will continue even into next year.
Although some initiatives have been taken to curb the losses, they will do very little (Doschner, 2009). These initiatives include; closing two satellite nursing homes, two primary clinics and one healthcare facility that cares for prisoners. The CEO of the institution has also directed the employees to come up with other methods of making profit and some of the suggestions include; catering for international patients, establishing new shopping malls in the hospital compound and lastly, expanding practices carried out by physicians.
However, these initiatives are said to be developing at a very slow pace. The hospital has gone to lending institutions but it seems like most of them are reluctant in assisting it for they request to be given more time to consider the request (Doschner, 2009). In conclusion, so much has happened and it is very difficult to pinpoint the exact cause of the bankruptcy.
It seems that many things conspired to lead to the financial woes in the hospital and these include; computer errors, increased number of the uninsured people, poor collection methods of debts, increased bad debts, high operating costs, low levels of revenue and lack of assistance from the government among others. More initiatives have been taken to salvage what has remained of the hospital but more is yet to be done. This calls for more analysis of the situation to be done in order to apply effective measures to prevent another occurrence of the same in future.