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Florida to Probe Hospital Districts

BRADENTON, Fla. — Government-owned hospitals in Florida will come under scrutiny by a panel appointed by Gov. Rick Scott to review whether they are in the best interest of taxpayers.

The commission will also review the structure of legislatively created health care districts, many of which issue bonds. There are 57 active districts providing some sort of health care that have bonding authority. Some 30 hospitals have various forms of county, district, or municipal ownership. Most of them can levy property taxes and some receive revenue from a local sales tax.

Scott said the commission will recommend a “cost-effective and efficient model for providing Florida with a health-care safety net,” referring to facilities that serve the poor and indigent.

The panel will primarily focus on providing access to care for the broadest population, compensating physicians, reviewing why there are significant variations in Medicare and Medicaid rates, and ensuring predictable costs to taxpayers.

The commission will also review the taxing authority of districts and determine if programs exist where tax funding follows the patient instead of the traditional model where tax revenues are given to certain hospitals. Its report is due by Jan. 1.

“I am confident this new commission will protect Florida taxpayers. At the same time, the commission’s guidance will help provide Floridians a high-quality health care system,” said Scott, a Republican who made his fortune in the for-profit health care business.

He is the founder of the urgent-care company Solantic Corp., which he is currently trying to sell.

Scott also founded Columbia Hospital Corp., which subsequently became Columbia/HCA, from which he resigned in 1997 after the start of a federal investigation into Medicare fraud. Columbia/HCA ultimately paid $1.7 billion in civil fines, restitution, and penalties, though Scott was never charged with any wrongdoing.

Standard & Poor’s analyst Martin Arrick, who concentrates on health care credits, said he has not seen a similar focus on hospital districts elsewhere in the country. “This commission seems to be a fairly significant move on the part of the state of Florida to look at this,” he said.

Many hospital districts get tax support across the country and there is a range of dependency on the funds. Some facilities use the revenue to subsidize operations and others use it subsidize capital needs. Others have the authority to assess a millage rate, but do not levy it. For some health care facilities, property taxes can represent a significant amount of funding.

“It’s certainly something we factor into a rating,” Arrick said. “If all this millage disappeared tomorrow, we’d have a set of serious questions we’d have to ask.”

Scott appointed eight members to the commission, but few represent any hospital districts.

Some of Florida’s oldest districts were created in the 1920s and have not received oversight in the years since, according to commission chairman Dominic Calabro, executive director of the nonprofit Florida TaxWatch, which describes itself as a taxpayers’ watchdog organization. In 2009, a TaxWatch review concluded that Florida’s hospital taxing district system was fragmented and needed to be examined.

Calabro said some districts were created before Medicaid, Medicare, and other state programs that pay for low-income care. The districts vary widely in their structures.

“It’s a mess,” he said. “I don’t think there’s any fear by the mere suggestion that they need to be reviewed that their existence is endangered. The bottom line is these districts have not been looked at for decades.”

Calabro did not know how much debt the districts or hospitals had outstanding. He said he “heard the amount was pretty substantial” and that the commission would consider that in the course of its studies.

“I cannot envision recommending anything that would leave our bond rating, and more importantly bondholders, on the short end of the stick,” he said, when asked if district investors should be concerned about the outcome of the commission’s study. “This can only be a healthy examination.”

The panel has a “daunting” task ahead but may come up with a better model that works for other communities, Calabro added.

The first meeting of the commission is expected to be held soon.

Hospital executives and health care organizations were contacted for comment. Most of them were unavailable, and were focused on the massive Medicare cuts being proposed by the Florida Legislature in budget negotiations.

Scott also appointed to the commission Dwight Chenette, who recently accepted a job at Blue Cross and Blue Shield of Florida and will be leaving the Palm Beach County Health Care District, and Paul Duncan, chairman of the health services research, management and policy department at the University of Florida.

Other members are Tallahassee health care consultant Marshall Kelley, Miami banker Scott McCleneghen, Panama City pharmacist Randall McElheney, Bradford Development president Brad Dinkins, and Pompano Beach attorney Jacob Jackson.

In other action related to Florida’s public hospitals, the Legislature is considering bills that would require the sale or lease of a public hospital be approved by a local referendum or a circuit court. The bills also set additional standards for hospital boards to negotiate sales at fair-market value and in arm’s-length transactions.

The legislation was filed, in part, because of the proposed acquisition of the publicly owned Bert Fish Medical Center in Volusia County by Adventist Health System Sunbelt Healthcare Corp. In February, a circuit court judge overturned the deal because it was privately negotiated in violation of Florida’s open-meeting laws.

Other sales are being considered include Florida’s largest public hospital — the financially distressed Jackson Health System in Miami.

Boston-based Steward Health Care System LLC expressed interest in buying Jackson earlier this year. But few details have been released about whether privately owned Steward expects to receive any of the $350 million in local property and sales taxes that support Jackson Health.

A portion of the sales tax Jackson receives is used to pay off some of the bonds sold for the hospital by Miami-Dade County.

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