Singing River Health System tells county about $88 million shortfall

March 04--PASCAGOULA -- Officials with the Singing River Health System told the Jackson County Board of Supervisors on Monday morning the county hospital system has $88 million in projected revenue that it will not be able to collect.

A new audit firm for the hospital system turned up the shortfall -- $27 million from last year and $61 million from previous years.

According to Kevin Holland, the new CEO for the system, the money is an accumulation of unpaid patient bills over "five to seven years" that the hospital system had believed it could collect and now does not.

He blamed the situation on a poor economy and deteriorating insurance benefits for patients who use the system's hospitals and clinics. The hospital system is county-owned. The taxpayers of Jackson County co-sign the hospital's debt, but it is self-supporting and does not use tax dollars to operate.

Holland said he does not anticipate the hospital system having to borrow to make up for the budget shortfall.

In fact, he did not like using the term "shortfall" at all. He called it an accounting adjustment.

Still Holland said he felt the county needed to be told about the situation, and he and members of the Board of Trustees, the system's attorney and CFO Lee Bond met with county supervisors to explain.

They did it, however, in executive session, which means out of the public view. State law allows only a handful of reasons for the county board to meet behind closed doors. Jackson County leaders said the reason for this executive session item was "potential litigation." But when asked who would possibly be suing the hospital in this matter, Board Attorney Jessica Dupont said, "We don't know of a lawsuit right now."

However, County Administrator Brian Fulton said, "The hospital talked to us about their bond status. And there's potential litigation that relates to that."

Hospital spokesman Richard Lucas said Monday afternoon that the former audit firm signing off on the years the debt was accumulating could be a legal issue.

The firm that has been handling the hospital's annual financial audit for years was KPMG, which has 87 offices nationally and a global component. The firm coming in is Horne of Ridgeland that is a regional firm primarily in the Mississippi, Alabama and Tennessee area. Horne went back through the years.

After meeting with supervisors in executive session, the hospital system held a press conference.

Holland issued a one-page, single-space explanation of how the system changed auditors for its annual financial statement and how that in last year's audit, the hospital system's unfunded charity patient care was the highest ever at $92 million. That is money they could not collect from patients.

He said that failing to collect from patients is a problem that "every hospital in the country" has to deal with, a problem that is getting worse because of high insurance deductibles or no health insurance at all.

"The whole landscape is deteriorating," Bond said.

The hospital system includes Pascagoula'sSinging River Hospital, the Ocean Springs Hospital and various clinics. Holland said it continues to build and add to facilities, mostly focusing on improving outpatient services, because the hospital is now making more money off of outpatient services than inpatient services. However, both hospitals in the system are currently undergoing multi-million dollar renovations, some of it paid for with a FEMA grant.

Also during the past three years, the hospital system has had to eliminate 200 to 300 jobs, downsizing by attrition, so is can operate more efficiently, Holland said.

Still, Holland said there will be no major changes in the services the hospital is providing.

During the press conference, he said the System budgets on anticipated collections and now they can't count on $88 million that before, they had projected they would collect. The hospital system's budget is $370 million, he said.

Lucas said the hospital system informed directors and employees of the $88 million shortfall in a meeting and through emails Monday afternoon, and "that went well."

The county's comptroller Josh Eldridge, said the meeting between the Jackson County Supervisors and the hospital leaders was important.

"No, the hospital is not shutting down," Eldridge said. "But it's a large adjustment that needs to be publicized."

Supervisor Barry Cumbest, vice president of the board, was filling in Monday as board president.

He said he had "no comment" on the hospital system's revelations, but would let the single-page handout speak for itself.

Supervisor Mike Mangum said the news from the hospital, "came as a surprise," but he believes it's about accounting practices.

"The new accounting firm is more comfortable with a new way receivables are to be collected," Mangum said. He said he didn't believe it was a "serious problem. They're still paying their bills."

Holland said the annual audit that revealed the $88 million began in November, and annual audits usually take five months.

Holland took over the hospital system in early February as interim CEO when Chris Anderson left to lead Baptist Hospital in Jackson. Holland was selected by the Board of Trustees to remain in the position. Monday was Holland's first official day as the new CEO.

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