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Cook County Health trims taxpayer subsidy

Thursday, June 20, 2013
Crain's Chicago Business
by Kristen Schorsch

Cook County Health and Hospitals System reduced its taxpayer subsidy in fiscal 2012 by nearly $23 million from the year before by reining in spending and treating fewer uninsured patients.

The subsidy totaled $362.9 million for the year ended Nov. 30. That's the lowest it's been since the 2010 fiscal year, when the money used to bridge the gap between operating revenue and expenses reached $411.2 million, according to new 2012 Cook County audited financials as well as figures from the Civic Federation, a Chicago-based watchdog group.

“I think we are on the right track,” Cook County Health CEO Dr. Ramanathan Raju said. “We are consistently showing an improvement.”

Still, the subsidy is nearly $76 million higher than was predicted only three months ago. Back then, Cook County Health officials confirmed a Crain's estimate that the annual subsidy would be $287 million, based on unaudited financial figures. Expenses at the end of the fiscal year came in higher than expected and the system collected less revenue than projected, audited figures show.

Cook County Health, one of the largest public health systems in the nation, typically accounts for a third of the county's $3 billion annual budget. Transforming the financially strapped system, often viewed as the health care provider of last resort and in years past as a bastion for political hiring, has been Dr. Raju's mission since taking over in October 2011.

He's cut consulting fees and isn't rushing to fill vacant positions. But the system also needs to find a way to increase revenue, experts say. That's particularly true once 1.2 million people in the Chicago area gain some form of health insurance under the Affordable Care Act come Jan. 1, enabling them to leave the county health system and shop for care elsewhere.

Health system officials and Cook County Board President Toni Preckwinkle say they'll be able to lock in new paying patients and bring in more dollars in part from a new Medicaid program called CountyCare that's slated to generate about $100 million in net annual revenue.

“The Medicaid expansion the county is undertaking will allow us to reduce this subsidy further while strengthening our public health system,” Ms. Preckwinkle said in a statement.

But that could prove difficult, some experts say.

“The biggest challenge facing the Cook County Health System is the full implementation of CountyCare,” Civic Federation President Laurence Msall said. “Because this is a new program for both the county and the state, we are cautious in our optimism in how fast they can implement it.”

Dr. Raju is emphasizing outpatient care and keeping patients healthy, as fewer insured patients seek treatment in the system's two hospitals, John H. Stroger Jr. and Provident. Total admissions have dropped nearly 18 percent since 2010, and the amount of money forgone to providing free care has shot up 58 percent from 2011 to 2012, to $306.5 million.

In 2012, the health system narrowed its net loss by 30.4 percent, to $109.1 million, in part by cutting expenses by 4.5 percent, to $983.5 million. Among the largest reductions was purchased services, reflecting a cutback in consultants.

Operating revenue climbed 1.5 percent, to $565.6 million, from $557.4 million in 2011, as the health system improved its billing collection.

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