Thursday, December 18, 2014

Singing River pension disaster: No excuses.

The Singing River Health System pension fund scandal continues to worsen as it becomes clear the pension fund was ignored and allowed to fall apart since 2009.  Scenes of scared retirees dominate the news as politicians scramble for cover as these same retirees and reporters look for answers.  The Jackson County Board of Supervisors claim ignorance as a "reason" for allowing the financial disaster to take place.  However, the hospital system submitted an audit every year to the Jackson County Board of Supervisors.  JJ obtained copies of the audits from 2009 to 2013 through a public records request.  The auditors stated that Singing River had quit funding the pension but no one paid attention.  The auditors did not do anyone any favors as they buried the details deep in the audits and did not make a serious effort to warn the Supervisors and Chancery Clerk.  What emerges from reading the audits is a picture of a pension fund that was cut off and allowed to die by the Singing River health system administration. 

The 2009 audit covers the years 2009 and 2008.  2008 was the last good year for funding the pension system.  The audit states Singing River was required to contribute $2.65 million to the pension fund.  Singing River did so and everything was fine. Net pension liability at the end of the year was $1.325 million (see footnote 8 on p.39 of audit posted below.).  However, things began to go wrong for the pension system in 2009.

The auditor states Singing River was required to contribute $4.5 million to the pension fund.  However, Singing River only contributed $2 million.  The net pension liability more than doubled to $3.8 million.  There was no mention of his shortfall or increase in liability in the opening statement of the audit.  It was just buried back on page 39.   The plan assumed a rate of return of 9% (PERS assumes a rate of 8%.).   Thus, the system began to quake.  Keep in mind these audits were submitted to the Jackson County Board of Supervisors and Chancery Clerk every year.

The 2010 shows the problems in the pension fund just grew worse.  The plan required Singing River to contribute $4.4 million but the health care system provided no contributions.  The net pension liability skyrocketed from $3.83 million to $8.24 million.  The liability doubled each year for two straight years.  However, KPMG provided no significant warning to this problem in the beginning of the audit.  This stocking of coal was buried on page 41 in footnote 8. 

KPMG finally  provided a warning in the 2011 audit on page 7 in one sentence at the end of a paragraph: 

In fiscal year 2011, the net pension liability was $15.4 million, compared to $8.2 million in fiscal year 2010 as a result of a downtown in investment returns and a change in actuarial assumptions.
That statement is the only red flag raised by KPMG as it merely mentioned market returns and a change in the estimates. KPMG did not mention in that statement that Singing River had ceased making contributions to the pension fund.  The snowball of debt just grew larger as it rolled down the Singing River hill towards a collision with the future of the retirees.  The audit states on p.49 in footnote 9 that Singing River was supposed to contribute $7.28 million to the pension fund.  The hospital system provided zero contributions in 2011.  The net pension liability again doubled to $15.445 million.  It is a reasonable question so ask if the law of squares applies to this particular liability.    It is also important to note that Singing River entered into an information technology contract for approximately $14 million.  It paid $3.76 million towards the contract in 2011.

The 2012 audit was merely a repeat of what was written above about the 2011 audit.  KPMG didn't mention there was a problem with the pension fund but just said:

In fiscal year 2011, the net pension liability was $24.3 million, compared to $15.4 million in fiscal year 2011, as a result of a change in actuarial assumption.

There is no mention yet again that Singing River is not making contributions to the pension fund.  One has to dig plow through the weeds all the way to footnote 9 on page 42 to discover that no contribution was made and that the liability went from $15.445 million to $24.263 million.  The audit states Singing River should have made a contribution of $9 million but failed to do so- again.   The assumed rate of return was more reasonable: 8.5%.

Singing River switched auditors in 2013 and retained Horne CPA group.  However, Horne proved to be no better than KPMG in raising pension warnings as it didn't mention any pension problems in 2011 and only stated:

In fiscal year 2013, the net pension liability was $35.5 million.
 The pension weeds begin in footnote 11 on page 44 of the 2013 audit.   Singing River again contributed nothing to the pension fund even though the audit states it was required to provide $11.434 million.  Thus the records reveal a pension fund that was cut off from contributions for five years by hospital administrators and ignored by the supervisors.  It is also important to note that the Chancery Clerk is the treasurer and auditor of the county.  The Chancery Clerk apparently did not read these audits as they were submitted and if he did, he failed to warn the Supervisors of the impending disaster. 

Kingfish note: It is remarkable that MBMC has taken no action against CEO Chris Anderson as Mr. Anderson over saw much of this implosion as CEO of Singing River until earlier this year.

Net pension liability: 

2007: $1,285,670
2008: $1,325,098
2009: $3,837,219
2010: $8,237,219
2011: $15,445,331
2012: $24,263,831
2013: $35,461,399

Funding ratio:

2007: 100%
2008: 88.6%
2009: 86.7%
2010: 77.0%
2011: 70.6%
2012: 63.2%

2011 Singing River Health System audit
2012 Singing River Health System audit
2013 Singing River Health System audit


Anonymous said...

1). I thought Brandon Jones said this happened because Mississippi didn't expand Medicaid. Am I mistaken or was that not on the table in 2009, 2010, and 2011 when Singing River first began shirking their duty? Maybe it isn't really about Medicaid expansion at all?

2). JJ, is the 63.2% funding level based-upon the 9% projected rate of return? For all the hue & cry, the funding level isn't much off from PERS.

Kingfish said...

Keep in mind I don't have the 2013 funding level from the audits. am sure its much lower now. That level dropped nearly 40$ in five years.

Burke said...

The buck stops with Chris Anderson. The auditors will have their rationale that they did nothing contrary to GAAP, and it will likely hold up. The Supes got way too complacent, but they were not grossly negligent. Anderson had a clear duty, and he knowingly sat on his hands. Criminal behavior? It should be. It's Madoff on a smaller scale, but large enough when viewed through the eyes of the pensioners.

Cecil Brown said...

The failure to expand Medicaid has certainly had a negative effect on the system's cash flow. As the audit reports state, DSH payments have been reduced. Those reductions were supposed to be offset by additional Medicaid payments. Because we did not expand., there was no offset. In addition, uncollectible accounts increase as volumes increase for uninsured patients. You can play politics with this matter all you want. The fact is that virtually every hospital in the state is being negatively impacted by the failure to expand Medicaid.

Kingfish said...

Just one problem. They stopped contributing to pension before all of that took effect. There are notes that say it was having to spend a good bit of money on psychiatric cases referred by Chancery Court.

However, the supervisors and chancery clerk deserve some heat.

Anonymous said...

Hospitals need the money that is going to the insurance companies..

The outragious billing is to have a huge write off and so people will be scared of hospital bills and insist on getting insurance from their employer as a condition of employment. Huge scam.

We need a Truth In Billing law, the insurance companies would never allow it though. Everybody should get the bill that is expected to be paid. Medicare, Private Pay and Insurance Companies all see and pay the same bill. Stop letting the Charge Master scare the hell out of people.

Anonymous said...

Is the following statement made in a filing accurate and complete? If not, then who is responsible (probably a question for prosecutors if it is problematic)

Anonymous said...

"Pension Plan

The Health System maintains a pension plan, which is a single-employer plan that includes employees of the Health system. The pension plan is a single-employer, defined benefit pension plan covering all full-time employees with 10 years of service who work at least 36 to 40 hours a week. The benefits are based on years of service and the employee’s compensation during the last 10 years of employment. The plan is not subject to the employee Retirement Income Security Act of 1974.

The funding status of accumulated plan benefits reflects adequate funding of the retirement plan as of October 1, 2010.

Effective October 1, 2011, the Health System froze the defined benefit pension plan to new entrants and instituted a defined contribution plan for new hires."

Page 12

What does "The funding status of accumulated plan benefits reflects adequate funding of the retirement plan as of October 1, 2010." mean? Is it a legal or accounting term?

December 15, 2014 at 2:42 PM

Anonymous said...

Doctors, lawyers and insurance companies should be regulated. Regulate them all. The solution to all our woes is more regulation.

Anonymous said...

Singing River needs to bring in a real CEO like Donna Ladd to solve these problems.

Anonymous said...

This is literally the only statement Chris Anderson has made so far:

"I am aware of the media reports and concerns regarding the ongoing evaluation of the Singing River Health System defined benefit plan. I have not been privy to any other information concerning this issue. Therefore, it would not be appropriate for me to comment. I am sure officials are working hard to manage matters in a very difficult health care business environment."

Just absolutely pathetic.

Anonymous said...

The 2013 audit is upside down on scribd.

Cecil Points Fingers said...

Cecil talks about 'playing politics' while all he does is 'play semantics'. He actually believes there is a medicaid money tree somewhere up high on a hill and it sheds money on Mississippi when the wind picks up.

Oh, wait, Kingfish was gonna 'write an in depth column on PERS' as soon as he got around to it but got sidetracked by the Singing River funding issues.

Anonymous said...

Baptist mangement, truly the followers in faith. They spent and wasted all their foundations money under Slyter with ice skating rinks for all the poor and underserved kids in Madison, crazy contracts for certain doctors, and two big fiasco buildings. Now it looks like this new guy makes the wolf of wall street look good. The Baptist board needs to clean house with all of administration and hire a private consultant group to come in and repopulate the whole lot.

Tennessippi said...

I would like to mention that although the article mentioned Chris Anderson, I did not see where the author of the article explained who he is, therefore I would like to enlighten the Jackson area readers. Mr. Anderson was the CEO of Singing River Hospital Systems when all of these things took place. It was under his watchful eye, and executive guidance and approval that the system took out loans even though they could not support the system for 60 days as required. By the time he left it was less than that. He also stopped the system's 3% match into the employee pension fund (this began in 2009). Now the reason I think Jackson should know this information is because this Chris Anderson (who has been denying any involvement in the financial disaster and refuses to make any comments except his denial), is the same Chris Anderson who became the CEO of Baptist Health Systems in Jackson earlier this year. Employees of Baptist, please don't take it for granted that everything is rosey, just because he says it is. SRHS employees did and now some are facing the very real possibility of losing ALL of the retirement they put in, along with what the hospital should have contributed but didn't. It's disgusting that some of these people gave the system 30 years of their life; some for not much more than minimum wage, only to find that some day soon they may face foreclosure because the retirement the were entitled to and counted on, is not there. In the mean time Anderson is living the good life in Jackson.

Anonymous said...

“Chris [Anderson] has a proven track record of success in leading a multi-hospital, not-for-profit health system.

'Big Daddy' Kane Ditto
Baptist Health Systems Board of Trustees
March 17, 2014

Kingfish said...

Are we being subjected to another one of his screw-ups?

Anonymous said...

7:46 You're a little late to the party - all that you mention has been covered several times in previous posts on this blog.

I doubt he's been here long enough to do serious damage to any retirement plan Baptist operates but if I worked there - I'd want to see a special audit ASAP, and not by the group that has been auditing Singing River.

4:54 - stick your personal attacks on our host where the sun don't shine, or start your own blog and write your own posts about PERS. I agree with KF's priorities - this looks like a disaster for people on the coast, and everyone working for Baptist in central MS is right behind that first group in anxiety. PERS will always be there as a business school case study in bad management.

Anonymous said...

Might be very illuminating to find out what amount of Chris Anderson controlled political funding while @ SR was contributed to the Charles Busby and Brice Wiggins campaigns. Hmmmm.

Kingfish said...

PERS actually does a good job in operational management of the retirement system. My issues with PERS are not in the daily operations.

Singing River left PERS in 1983. This fiasco is a PERFECT example of why PERS took over the Municipal Retirement Accounts more than 20 years ago. The cities did a poor job of managing them.

I frankly hope the county does have to cover the pension payments as it will teach all of these county supervisors and chancery clerks to take their responsibilities much more seriously.

Anonymous said...

KF, Who dropped the ball? No where have you mentioned any requirement by law for these audits to be sent to the SAO, (I believe Auditor Pickering has been in office since 2008), for annual review. Also, how many other hospitals in MS are in the same condition because no one is doing their oversight responsibility?

Anonymous said...

11:27 - you must be the same person that constantly posts 'opinions' on here as fact. Please provide the basis for your statement that the law requires the audit of SRH to be sent to the SAO, and once done, the responsibility/authority of the SAO in relation to them.

Anonymous said...

Another interesting tidbit- Chris Anderson was employed by the auditor (KPMG) before coming to SRHS

Anonymous said...

@December 19, 2014 at 3:45 PM

Not at all but I do have a suspicion that law requires the SOA to receive these reports/audits and someone in the SOA to review them. I don't know if every County owned hospital is audited by the SOA or can use outside firm. Doesn't every tax dollar come under the purview of the SOA?

Kingfish said...

You have David Landrum and Kane Ditto on the MBMC board. That is just for starters.

Anonymous said...

Is KPMG still the auditor at MBHS?

They aren't the auditor at SRHS anymore.

Kingfish said...

The argument made by Representative Brown is interesting.

Singing River had problems before the hospital payments were reduced. The decision to cut pension contributions was made before Obamacare took effect.

However, the $30 million loss last year could have been caused in part by the loss of those funds.

Keep in mind that the system had to purchase a $13 million software package in 2010. Employees at Singing River tell me that purchase was made to the hospital could comply with the new ACA requirements for electronic record keeping.

Kingfish said...

Singing River was not required by law to submit annual audits to the State Auditor as are other government bodies.

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