Jackson Health System auditors: System had surplus of $8.2 million in fiscal 2012

The outside auditors of the Jackson Health System report that the hospitals finished 2011-2012 with a surplus of $8.2 million — well above the earlier estimate of $1.5 million and a huge swing from the $81.4 million loss the previous year.

Chief Executive Carlos Migoya said Friday the system has made a major turn-around, but still has large capital needs to remodel and build facilities to attract more patients. Jackson is also preparing for large revenue reductions that might be coming with state and federal healthcare reforms.

“It is important not to overstate the significance of these results,” Migoya said in prepared statement “Yet clearly the bright future we all envisioned for Jackson when this process began in 2011 is taking shape.”

The audit, done by the KPMG accounting firm and released by Jackson on Friday, reflected more positive numbers than the earlier estimates because actuaries found that Jackson had more reserves than needed for malpractice and workers’ compensation claims, said Chief Financial Officer Mark Knight.

Migoya said he prefers that early financial estimates be on the conservative side to prevent taxpayers and political leaders being shocked by unexpected losses as happened in fiscal 2009, when Jackson executives projected a $47 million loss that became a stunning $244.6 million deficit by the time auditors were done.

Much of the turn-around last year was due to decreased costs and improved claims collection that more than made up for decreased revenue, Knight said.

While net patient revenue dropped by $64.6 million, the costs of contractual and purchased services dropped $162 million — much of that due to stemming huge losses in the Jackson insurance plans that had been serving Medicaid patients and system employees.

Another $43.1 million was saved in salaries and related costs — savings sparked by layoffs last spring and a restructuring to create more part-time and flexible work schedules to meet changing patient populations.

Migoya said the performance was especially noteworthy because Jackson saw its state-federal funding for the poor drop by about $100 million last year due to reductions in Medicaid rates and Lower Income Pool funds.

The system was hurt, too, by a drop of 4,800 admissions from 2011 to 2012, but was boosted by a $13.2 million increase in funds from the half-penny sales tax.

Jackson’s fiscal year runs from Oct. 1 through Sept. 30. Knight noted that this audit marks the first time in four years that auditors found no material weaknesses, meaning major financial procedures or controls that needed to be corrected.

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