Fed up with the slowness of negotiations with the University of Miami over a new operating agreement, the board of the Jackson Health System voted unanimously Thursday to start putting $3.6 million — or 30 percent — of its monthly payments to the medical school into an escrow account until a deal is reached.
“I’m very frustrated by this whole experience,” board chairman Marcos Lapciuc said. “Unless we move, we’re in deep crap.”
Jackson had sought to negotiate a dramatically new — and cheaper — agreement with UM by May 31, but as that deadline approached without a deal, UM insisted on a temporary arrangement that included a monthly “transition payment” of $3.6 million if its doctors were to keep practicing at Jackson Memorial, where they provide more than 90 percent of medical services. Jackson now pays $11.9 million monthly to UM for doctors’ and other services.
Jackson’s board balked for a day, then agreed to a temporary “memorandum of understanding” after Jackson’s executives promised to come up with a permanent operating agreement by the end of July. Under the temporary agreement, Jackson pays UM $27.6 million more on an annualized basis. Previously, Jackson had paid UM a lump sum of about $130 million a year.
Chief Strategy Officer Jeffrey Crudele told the board Thursday that Jackson was making good progress on the “complex” negotiations. Jackson wants to “lease” or hire UM doctors in certain specialties to bolster “centers of excellence” at Jackson Memorial Hospital.
Several board members wondered what UM’s incentive was to reach a permanent deal that would mean getting less money, especially since the medical school has been struggling with its own financial problems.
Board member Joe Arriola, a former UM trustee, supported the escrow move as “just putting an incentive on the table.”
UM spokeswoman Christine Morris said the medical school had no comment.
Two hours after the meeting, Jackson Chief Executive Carlo Migoya issued a prepared statement saying that “Jackson and UM have made incredible progress over the last few weeks’’ and he hopes to finalize an agreement by Aug. 1. The agreement would then go to the board for approval.
Assistant County Attorney Valda Christian said that the escrow vote was technically done during a board strategy committee meeting so it won’t take effect until the board votes at its next formal meeting on Aug. 27. That means the July transition payment of $3.6 million will be made to UM.
During the meeting, Lapciuc’s listed the UM relationship as one of four “very serious systemic issues” that he says Jackson is facing. The others were bureaucratic slowness in procurement and contracts, delays in hiring doctors who might replace UM physicians and a need for more independence from county government.
The backdrop for Lapciuc’s comments was that Jackson, despite four months of surpluses, still has huge financial troubles. Net patient revenue so far this fiscal year is $84 million below last year.
Part of the reason is that payments for Medicare patients has dropped because the federal insurer is insisting more patients be held temporarily for observation rather than admitted to the hospital. Another reason is that there have been 8.1 percent fewer surgeries this year than last.
Jackson Chief Executive Carlos Migoya said his team was trying to find out what types of surgery were down and why. Board members wondered whether UM doctors were seeing patients at Jackson, then arranging them to later have surgeries at the University of Miami Hospital.
Board member Michael Bileca pointed out that, despite major cost-cutting, other factors were crucial to Jackson’s financial improvement this year. Executives are projecting that the system will lose $18 million this fiscal year, which ends Sept. 30, compared to $71 million last year.
Of that $53 million swing, Bileca said, $30 million was caused by stemming the losses of the system’s health plan and another $10 million came from increased tax revenue, meaning that only $13 million was due to operational savings.