Cook County Health System Expects FY2011 Deficit to Exceed $80 Million
June 29, 2011 - 2:56pm
Since Cook County passed its FY2011 budget in February 2011, it has been evident that the County’s public health system would face major hurdles in achieving the budget goals. The size of those hurdles became clearer on June 24, 2011 at a meeting of the Board of Directors of the Cook County Health and Hospitals System.
The Health System is expected to be slightly under budget on expenses for FY2011, which ends on November 30, 2011. However, net revenues are currently projected at $80 million to $90 million below the budgeted level, according to comments at the June 24 meeting by Director David Carvalho, Chairman of the Board’s Finance Committee. A total revenue shortfall of $120 million will be offset by approximately $30 million to $40 million of unanticipated revenues. Roughly $40 million of the revenue shortfall stems from Medicaid applications backlogged at the State of Illinois. The remaining shortfall stems from an inability to meet internal performance-improvement targets related to revenues, Mr. Carvalho said.
The Health System’s General Funds budget for FY2011 totals $911.9 million, down $62.0 million or 6.4% from $973.9 million in FY2010. (In addition to General Funds appropriations, the Health System’s total budget also includes $10.0 million in Special Purpose Funds relating to lead poisoning and the tuberculosis sanitarium district.)
Most of the Health System’s patients lack insurance of any kind and generally do not pay for medical services. The System’s operating revenues come mainly from Medicaid, the federal-state healthcare program for certain categories of low-income people. The System also receives an annual subsidy from the County that is used to bridge the gap between expenditures and operating revenues.
As shown in the table below, the budgeted subsidy for FY2011 is $276.3 million, nearly 33% below the FY2010 subsidy of $411.5 million. The Health System’s recommended budget for FY2011 included a higher subsidy of $316.1 million. However, the Cook County Board of Commissioners amended the budget to increase Health System revenues to account for the backlogged Medicaid applications. The budgeted subsidy was reduced by the same amount, thus freeing those revenues to be used for general county expenses outside of the Health System.
Although the Cook County Board approved an agreement with the State that allows the Health System to pay for extra state workers to handle the backlog of Medicaid applications, the backlog is not expected to be cleared up by the end of FY2011. The number of applications from Health System patients pending at the State totaled 11,911 at the end of May 2011, up from 6,562 a year earlier.
Health System revenues are projected to be another $80 million to $90 million below budget because the System’s consultant, PricewaterhouseCoopers, is not expected to be able to meet goals for performance improvement. The consulting firm was stymied by the System’s insufficient capital equipment budget, its inability to attract skilled managers and bureaucratic delays, System officials said at the June 24 meeting.
System officials said County rules do not allow them to pay competitive salaries for qualified managers. The need is particularly great in the area of patient billing and collections, where the System has identified 25 positions to be filled and was able to hire only six qualified applicants. The System’s clinics have not been able to hire managers to fix major problems with the scheduling of patient visits—a key component of the System’s plan to increase outpatient services. The System is behind schedule in implementing billing for physician services because of delays in vendor selection and contracting.
It is not clear how the County and Health System will deal with the expected revenue shortfall. System officials have been meeting with County finance experts to work on the problem. Meanwhile, the System must begin to develop its FY2012 budget, which is required to be presented to the County Board before being included in the Board President’s Executive Budget Recommendation. Board President Toni Preckwinkle is aiming to have the FY2012 budget approved before the start of the next fiscal year on December 1, 2011, System officials said.
This blog post was edited on July 5, 2011 to reflect new information.
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