MetroHealth expecting $20 million surplus this year in challenging revenue environment

CLEVELAND, Ohio — The MetroHealth System is expecting a $20 million surplus this year — which, though laudable in a tough revenue environment, is a “thimbleful in the ocean, in terms of what we really need if we’re going to be able to sustain the kind of growth and vitality that we want this system to represent,” trustee Donna Kelly Rego said during a late afternoon board meeting on Wednesday.

That surplus, though meager when compared to the estimated $250 million in uncompensated care the health system will provide patients this year, will be reinvested in the infrastructure of MetroHealth, owned by Cuyahoga County and considered the safety net hospital for many of the county’s residents.

MetroHealth has mixed a policy of reform with consistent cutbacks in the last two years — topped off most recently with a reorganization that trimmed 6 percent of the system’s workforce. Since Chief Executive Mark Moran took over at the hospital in March 2008, the system also has stopped providing free care to patients from outside of Cuyahoga County, which provides a subsidy for the system.

In addition, MetroHealth embraced the popular health care trend of pushing primary care-seeking patients out of the emergency room and into neighborhood clinics, readjusted its fee schedules for other patients, making a deal with the county to see more paying patients and working to sign up more poor patients for federal aid.

On the revenue-generating side, MetroHealth at the end of last year began offering a low-cost health care plan to Cuyahoga County employees.

The first of several expected reinvestment projects was announced Wednesday. MetroHealth will buy back a parking garage from the Cleveland-Cuyahoga County Port Authority, which has owned the garage and leased it back to the hospital for 10 years.

The ”synthetic lease” with the port is ending, Moran told trustees. So the hospital system plans to take advantage of low-interest bond financing from National City Bank in Cleveland, which would issue $8.65 million in bonds. MetroHealth would use the money to buy the garage, paying about 3.85 percent interest on the debt over five years. The hospital then would make a large payment, called a balloon, of about half the bond issue at the end of the financing term.

Unrelated to the budget, MetroHealth trustees approved a motion by the facilities committee, chaired by Terry Monnolly, to hire auditing firm KPMG, its external auditor, to review recent construction practice changes. MetroHealth’s outside counsel, Cleveland law firm Calfee Halter & Griswold, already has updated the hospital’s construction policies and procedures, as well as its standard construction contracts.

“Today, we’re asking the board to go one step further and authorize Calfee to engage KPMG to review our revised policies, procedures, forms and make recommendations as to any additional changes we can implement to further improve our construction project management, including fraud avoidance,” Monnolly said.

The construction policy changes are being made amidst fallout from the ongoing Cuyahoga County corruption probe in which former MetroHealth Vice President John Carroll admitted to steering contracts and accepting bribes related to heating and plumbing work done at the hospital. As a result, MetroHealth is suing the contractor, Reliance Mechanical LLC, to recover or avoid $28 million of work it did for the health system from 2003 through 2008.

Before the federal investigators launched their corruption probe last summer, MetroHealth fired Carroll from his job as vice president of facilities and construction. In early September, Carroll pleaded guilty to taking construction-related bribes that cost the health system more than half a million dollars. He could face up to 14 years in prison.

During Wednesday’s meeting, trustee Rego commended Monnolly for his work to avoid such fraud in the future. “You’ve done an incredible amount of work in the last six to nine months,” she said. “I’m very confident that what you are bringing to us is going to be state-of-the-art … and assures the board that we’re exercising good judgment, and our fiduciary responsibility, as well as legal responsibility, as we affirm the decisions that you recommend to us.”