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MIAMI – The Jackson Health System stands on the brink of financial collapse, but those in charge of the six-hospital public network aren’t sure that going private is the answer.
Members of the Miami-Dade County Commission have reacted coolly to overtures from the Massachusetts-based Steward Health Care System to acquire Jackson for roughly $1.1 billion, rejecting Steward’s request for a 60-day window of exclusivity to look at the health system’s books and fashion a bid. They have instead organized a new panel that will look at various options of governance, including conversion to a non-government, non-profit model.
But time is running out. Jackson Health lost $244 million in fiscal 2009 and almost $93 million in fiscal 2010 and stands to lose $150 million to $240 million this year in reduced Medicaid funding. Some have estimated that the system could run out of cash this July.
To make matters worse, the health system’s chief executive, Eneida Roldan, is stepping down when her contract ends on June 1. And state legislators are questioning whether Jackson, which has been plagued by management mistakes, political interference and a lack of capital, can survive.
“This year it’s really serious,” said Mike Abrams, a former state representative who now lobbies for Jackson, during a recent meeting in which Jackson begged local legislators to fight a proposed state budget that would cut funding for the system. “The very existence of (Jackson Health) is at stake.”
Jackson Health employs more than 12,000 people and includes the flagship Jackson Memorial Hospital, the primary teaching hospital of the University of Miami, as well as a children’s hospital, rehabilitation hospital, mental health hospital and two community hospitals. It’s one of 14 health systems in the Safety Net Hospital Alliance of Florida.
Steward Health Care – whose chief executive, Boston heart surgeon Ralph de la Torre, visited Miami in February to discuss his company’s interest in Jackson – was created by the New York private equity firm Cerberus Capital Management following Cerberus’ November 2010 acquisition of the six-hospital Caritas Christi healthcare chain in Boston for an estimated $895 million.
Shortly afterward the company bought Merrimack Valley Hospital in Haverhill and Nashoba Valley Medical Center in Ayer, and has made no secret of plans to expand outside Massachusetts.
Reports indicate Steward may offer $500 million to cover debt and spend another $600 million over time on infrastructure improvements at Jackson, though Steward officials have asked to look at Jackson’s books before making a formal offer.
The Jackson Health System has attracted interest from at least one other investor, and analysts have said that whoever takes over the struggling system will have to work hard to turn things around. Any deal would have to be approved by the Miami-Dade County Commission, which is taking over negotiations from the Public Health Trust, which oversees the system.
“This is a much more challenging situation than Caritas Christi,” said Paul B. Ginsburg, president of the Washington, D.C.-based Center for Studying Health System Change, in an interview with the Boston Globe. “Jackson is starting from the bottom.”
A letter sent to Jackson officials by de la Torre indicated Steward would “assume all responsibility for the operations of JHS by acquiring all of the property, plant and equipment and operations,” and would help fund an organization chosen by the county to “explore the feasibility of JHS remaining an independent organization and still being able to fulfill its mission.”
The letter also pledged “at least $600 million over an agreed upon timeframe in capital for infrastructure, information technology, equipment and new programs.”
Public Health Trust member Joe Martinez, who is also chairman of the Miami-Dade County Commission, said it would be “totally, totally premature” to enter into an agreement with Steward, and that selling the health network to a for-profit entity like Steward should be a “very, very, very last resort.”
Martha Baker, president of the Service Employees International Union Healthcare Florida Local 1991, which represents 5,000 registered nurses, attending physicians and healthcare professionals in Jackson, criticized officials for considering a sale of the health system. She said the bid underscores the problems plaguing the health system and urged officials to find a way to keep the publicly run system afloat.