Cook County Watchdog Alleges Shady Financials At Health System

Patients wait in the emergency room at Stroger Hospital of Cook County. A new study says Cook County lags behind much of the state in terms of resident health.
Patients wait in the emergency room at Stroger Hospital of Cook County. AP Photo/Paul Beaty
Patients wait in the emergency room at Stroger Hospital of Cook County. A new study says Cook County lags behind much of the state in terms of resident health.
Patients wait in the emergency room at Stroger Hospital of Cook County. AP Photo/Paul Beaty

Cook County Watchdog Alleges Shady Financials At Health System

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Updated: 5:09 p.m.

Cook County’s Medicaid health insurance plan is so behind on paying vendors that there’s a shortage of pacemakers and anesthesia for surgeries – and some doctors even refuse to treat patients covered by the plan, according to a watchdog report released Friday.

The explosive investigation from Inspector General Patrick Blanchard found the county’s health care plan for low-income patients, called CountyCare, owes nearly $701 million to providers. That total is nearly 15 times higher than in 2013, when the health plan began and was much smaller.

The report also raises questions about the hospital system’s bookkeeping, and found officials shift money around in order to make it appear financially healthier than it actually is.

Blanchard has been digging into the county health system’s financial losses for more than a year.

Among Blanchard’s other findings in Friday’s report:

* The Cook County health system and CountyCare have an agreement that allows them to shift financial losses between them. This isn’t fully disclosed and explained to the health system’s independent board or to the Cook County Board of Commissioners.

* The health system “routinely changes revenue and expense figures” between CountyCare and the health system’s flagship medical center, John H. Stroger, Jr. Hospital “to reach desired financial goals” for both the hospital and health insurance plan. This happens in monthly and annual financial reports.

* In 2018, health system officials amended the agreement with CountyCare to retroactively change reimbursement rates for 2017 due to a “state imposed revenue reduction.” That had a “significant negative effect” on Stroger Hospital and made CountyCare look more profitable than it would have been.

Caryn Stancik, a health system spokeswoman, said health system leaders are transparent and fully cooperated with Blanchard’s office.

“No audit has ever resulted in questions related to the financial operations or the integrity of the health plan,” she said in the statement. “We are absolutely confident in the integrity of the program and will respond in a comprehensive manner in time.”

Blanchard office interviewed several people at the health system about its finances. One senior official said CountyCare “uses new money to pay old bills.” The unpaid bills owed to vendors are only growing and the health system must use money from the 2019 budget year to pay 2018 bills. The official said this happens every year, that no entity could carry growing debt year after year.

The health system “keeps kicking the can down the road,” the official said.

CountyCare has a state Medicaid contract, which means it’s supposed to get reimbursed for providing health care to low-income patients. Cook County chief financial officer Ammar Rizki said his understanding of CountyCare’s inability to pay its bills was because the health plan was waiting for money from the state.

But Blanchard found that’s not the case. His office confirmed that CountyCare received $1.8 billion from the state in 2018, for example. The health system “has previously consumed its entire fiscal year budgeted revenue within the first quarter due to prior period bills,” the report said.

The report also found Stroger Hospital is suffering financially because CountyCare cut the hospital’s reimbursement rate from 75 percent to 26 percent in 2017. When asked if decreasing the rate would have shifted expenses from CountyCare to the health system, allowing CountyCare to look more profitable, health system CFO Ekerete Akpan made an analogy.

An independent audit views the County “as a family and one would not ask why one child performed better than the other. Rather, (the health system) CFO said he is concerned with the family as a whole,” according to the report.

An external auditor who reviewed the health system’s books told Blanchard’s office he was not aware of the retroactive reimbursement rate change.

Also in 2017, CountyCare refused to pay its own health system back in some instances. It denied $62 million in claims from the health system, and $50 million in claims in 2018.

In light of his findings, Blanchard recommended the health system more clearly state its finances, be more transparent, and that its independent board take a deep look at the $701 million in bills owed.

The health system also should be required to disclose transactions like the agreement to shift funds between the health system and CountyCare.

What’s more, only 15 percent of CountyCare members get medical care within the county health system. The rest see other providers in the CountyCare network of doctors and hospitals. This means that money CountyCare gets from the state goes out the door.

Blanchard’s advice: Boost referrals within the county health system.

Besides Stroger on the Near West Side, the county health system includes Provident Hospital on the South Side and a network of clinics throughout the suburbs. The system treats patients who are largely poor and people of color, and provides far more free medical care to people who are uninsured or can’t afford to pay their bills compared to other hospitals in the county.

The health system has worked hard to shake itself of its reputation as the provider of last resort, especially after more people became insured under the Affordable Care Act and could get medical care elsewhere.

CountyCare was born out of the ACA, which allowed states to expand Medicaid health insurance for people who are low-income or disabled.

This week, Preckwinkle revealed that CountyCare is struggling to enroll members. That’s important because CountyCare makes money by getting paid a fixed rate for each person it enrolls.

The health plan had about 317,000 members in May, around 3 percent less than in January, state records show. Preckwinkle blamed the dwindling membership on former Republican Gov. Bruce Rauner processing Medicaid applications too slowly.

The health system plans to end the 2019 budget year with a $103.1 million deficit because it banked on having about 345,000 members a month to generate revenue. That translated to a $184 million loss in revenue.

Akpan, the health system’s CFO, said this week that leaders planned to fill the big gap with state money, by not filling jobs like care coordinators for CountyCare enrollees, and by shrinking contracts with vendors that work on CountyCare.

Kristen Schorsch covers Cook County politics for WBEZ. Follow her @kschorsch.