Cook County Health System’s FY2011 Budget Deficit Likely to Exceed $90 Million

August 10, 2011

A recent mid-year report issued by Cook County provides more details on the budget difficulties facing the County’s public health system in the 2011 fiscal year that ends on November 30, 2011.

The required FY2011 county subsidy to the Cook County Health and Hospitals System is estimated at $371.2 million, according to data in the report. That compares with a budgeted subsidy for the year of $280.1 million. As a result, the Health System’s deficit—the gap between budgeted and actual financial assistance needed—is estimated at $91.1 million. The Health System relies on financial assistance from the County to make up the difference between its operating revenues and expenditures.

The table below shows that the deficit stems from an estimated $106.5 million shortfall in patient fee revenues.

As previously explained here, many of the Health System’s patients lack insurance of any kind and generally do not pay for medical services. The System’s patient fees come mainly from Medicaid, the federal-state healthcare program for certain categories of low-income people.

Health System officials have attributed the expected deficit to a revenue shortfall of roughly $120 million, offset by approximately $30 million of unexpected additional revenues. The revenue shortfall consists of $40 million in Medicaid applications pending with the State of Illinois and $80 million in unmet internal revenue goals relating to billing for patient services, charging for physician services and improvements in physician productivity, among other areas. Revenues attributable to the backlog of Medicaid applications at the State were not included in the FY2011 budget approved by the Health System’s Board of Directors; instead, the additional revenues were added to the budget by the Cook County Board of Commissioners.

It should be noted that the Civic Federation in its analysis of the County’s recommended FY2011 budget said that the Health System’s revenue projections were optimistic. The analysis noted that the Health System’s FY2011 budget showed a 27.3% increase in patient fee revenues, from an FY2010 preliminary figure of $252.4 million to $321.2 million in FY2011. Budgeted FY2011 fee revenues included a 33.5% increase in fees from Medicaid and a 74.2% increase from private insurers. The projections appeared to be aggressive, particularly in light of the fact that Medicaid fees in FY2010 were 22.0% below budget. The FY2011 recommended budget, proposed by Cook County Board President Toni Preckwinkle, did not include the Medicaid revenues added by Cook County Commissioners.

The County’s mid-year report also presented a preliminary budget for FY2012, which begins on December 1, 2011. The table below compares the Health System’s FY2012 preliminary budget proposal with the FY2012 preliminary budget for the System prepared by Cook County’s Department of Budget and Management Services.

The Health System’s preliminary budget proposal for FY2012 includes operating expenses of $963.7 million and a county subsidy of $438.4 million. In contrast, Cook County budget officials recommend Health System spending of $901.0 million and a subsidy of $375.7 million in FY2012.