Sept. 01--Every month, Jackson Health System gives a Pennsylvania company $10.4 million in uninsured patients' bills for which the public hospital has not tried to collect a penny.
And it's not allowed to. Under a court-ordered arbitration agreement, International Portfolio of West Conshohocken, Pa., is getting $310 million in billings that Jackson has never asked the patients to pay. Whatever money the company collects, it keeps. Jackson gets nothing.
The arbitration agreement -- revealed recently to The Miami Herald -- settled a lawsuit filed by International Portfolio that alleged Jackson had reneged on a 2006 contract. Under the contract, the company paid Jackson $5.7 million to get $1.8 billion in billings that the health system had tried but been unable to collect on.
Coming on the heels of a grand jury report earlier this month that called Jackson "a colossal mess," Sal Barbera, a former hospital administrator who teaches at Florida International University, found the new revelation "unacceptable . . . an example of mismanagement on the part of Jackson. . . . I can only hope the taxpayers of Miami-Dade County are not paying for this due to the incompetence of Jackson."
Barbera noted some uninsured patients could be extremely lucrative. Besides the poor who have no coverage, "Jackson also attracts wealthy, self-pay international patients that are more than capable of paying their healthcare bills. . . . What about patients that come to Jackson for cosmetic surgery that is not covered by insurance?"
Ted Shaw, Jackson's interim chief financial officer since March, said hospitals frequently sell off old, uncollected bills, but giving away billings that a hospital has never tried to collect on was highly unusual. He said this was a bad deal that Jackson was stuck with because of actions before his time.
Carmen Pla, director of the Jackson department that handles claims and billing, said she makes sure that valuable uninsured patients, such as international ones, are not included in the accounts handed over to International Portfolio.
From Jan. 1, 2009, through July of this year, Pla said International Portfolio had collected $2.5 million on the Jackson accounts. Pla, who has been in the job for six months, said she did not know how much the company had gotten from $360 million in billings it acquired in December 2008 to satisfy the arbitration agreement, noting that these billings might have included high-value accounts.
International Portfolio did not return a phone call seeking comment. The company's Miami attorney, Joel Hirschhorn, told about criticism that the deal was bad for Jackson, responded: "That means I did a good job."
Shaw said the billings given to International Portfolio are listed as bad debt on Jackson's balance sheets and that Jackson generally collects only 1.5 percent of uninsured billings.
Rick Gundling of the Healthcare Financial Management Association, a national group, said hospitals usually collect five to seven percent of charges from the uninsured.
The International Portfolio contract was executed when Marvin O'Quinn was Jackson's chief executive. In December 2006, then-chief financial officer Frank Barrett signed a contract with the company handing over $1,873,818,932 in old billings from 1998 through 2005.
According to documents filed in the lawsuit, the company estimated it would collect 5.8 percent of the bills -- about $104 million -- within 16 months.
But problems developed that revealed how confused Jackson executives were about their own billings. According to the lawsuit, within three months Jackson found that $984 million of the billings needed to be recalled because they didn't qualify for the deal: Some patients were dead or bankrupt. Other accounts were erroneous because "the patient did not owe money."
At one point, Jackson asked International Portfolio to stop collections so that the system could see if patients really owed the money. At another point, Jackson sent many of these patients a letter "apologizing for IPI's collection efforts and informing the patient that he/she had a zero balance."
This confusion over accounts receivable -- and flip-flops over what was owed -- would eventually lead to the stunning restatement of fiscal 2009 earnings, in which a loss projected to be $46 million mushroomed to $244 million when the auditors were finished.
In 2007, a year after the contract was signed, International Portfolio filed a complaint in federal court that the health system had not lived up to its promises. Jackson denied the allegations, but later agreed to arbitration.
In December 2008, arbitrator Edward B. Davis gave International Portfolio the right to collect on $300 million in billings from 2005 through 2007 that Jackson already tried to collect on and failed.
The company also was to get $60 million for bills to uninsured patients that Jackson had not tried to collect. Then, starting in January 2009, Jackson was to give the company $10.4 million in uninsured patients' bills every month through the end of this year.
On Monday, when contacted by The Miami Herald, Miami-Dade Commissioner Carlos Gimenez asked, "My first question would be how did Jackson get into this situation into the first place? Why didn't it fulfill the contract? It sounds like the present administration is struck between a rock and a hard place."
O'Quinn, now a California hospital executive, has previously stated through an assistant that his present employer forbids him to discuss his previous employers. Barrett did not respond to a request for comment, but in the past he has said that conversion to a new computer billing system caused considerable confusion.
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