September 4, 2019
Mr. Patrick Blanchard, Inspector General
69 West Washington Street
Suite 1160
Chicago, Illinois 60602
Mr. Blanchard,
In accordance with the Code of Ordinances, Cook County, Illinois, ch.2, art. IV, sec 2-285 (e)
(2018), Cook County Health (“CCH”) submits our response to the report “CountyCare Health
Care Expenses” (June 21, 2019, OIIG 18-0100) as outlined below. While Cook County Health
respects the role of the Office of the Independent Inspector General (“OIIG”) in detecting and
preventing waste or mismanagement in the operations of Cook County government, we
respectfully disagree with the report’s conclusions.
While a detailed response to the OIIG recommendations and concerns follows, it is imperative
to the reputation and integrity of the health system and the health plan that we briefly address
several matters up front.
1. CountyCare Financial Health: There can be no question that CountyCare has been beneficial
to the hundreds of thousands of members it has served since 2013, to the Cook County
taxpayers, to the safety net healthcare community, and to the broader patient population
that Cook County Health serves. For the past three years, CountyCare has generated more
revenues than expenses. In addition to serving as a critical source of coverage for
previously uninsured patients, without the reimbursements from CountyCare, several nonCCH hospitals and other providers may have closed and Cook County Health’s historic
mission to serve all county residents without regard to their ability to pay would have been
seriously compromised.
2. Mis-Interpretation of Health System Financials: We believe that there is a
misunderstanding about the financial reports of CCH generally and CountyCare in particular.
As an enterprise fund of Cook County government, Cook County Health is required to use
accrual accounting while Cook County government uses modified cash for budgeting and
modified accrual accounting for financial reporting. We believe that this is at the core of the
report’s improper comparison of payables to receivables without considering cash and
other current assets that are available to cover those payables. The report also reflects a
misunderstanding of assets and liabilities, which led to the inaccurate conclusion that the
health plan has $701M in “unpaid healthcare expenses” from 2018, but lacks the assets to
pay for it; such a conclusion is incorrect.

 3. Transparency: CCH and CountyCare report regularly to the Cook County Health Board of
Directors and the Cook County Board of Commissioners. There are two regular public
meetings where financial information is presented to the Cook County Health Board of
Directors: the monthly board meeting and the monthly finance committee meeting.
Additionally, financial reports are provided to the Cook County Board of Commissioners and
are discussed at the Finance Committee meeting, which is a committee of the whole. All
Cook County Health board documents can be found at
https://cookcountyhealth.org/about/board-of-directors/ . It is a rare month when County
Board Commissioners do not ask questions of CCH’s finance team, about the finances of
both the system as a whole and our health plan. Managed Care metrics and finances are
also reviewed in the Quarterly Managed Care Committee and forwarded to the County
Board.
4. External Review: CCH’s finances are audited by a nationally recognized independent public
accounting firm as part of the overall Cook County audit. None of the assertions in the OIIG
report have been the subject of any concern from the external auditor since the plan
started in 2013. Additionally, the health plan is required to follow state and federal rules
and regulations.
The detailed response that follows is provided to fully reflect the financial health of the
CountyCare program. This response is divided into three sections, the first addresses the OIIG’s
five recommendations made “to assist in improving financial and operational transparency and
accountability related to CountyCare’s unpaid healthcare expenses,” the second to detail
additional Cook County Health initiatives to increase clarity and reduce risk associated with
CountyCare finances and operations, and the third to respond to the OIIG’s “primary concerns
related to the growing unpaid debt.” Additionally, the Cook County Health Board of Directors
retained Deloitte Financial Advisory Services LLP (“Deloitte FAS”) to perform an independent
assessment, which is attached to this response. Cook County Health believes that this response
will restore confidence in a program that has become a pillar of support for vulnerable
populations and the providers who serve them in Cook County.

2

 Section I -- COOK COUNTY HEALTH’S RESPONSES TO THE OIIG’S FIVE RECOMMENDATIONS
At the conclusion of its report, the OIIG proposed five recommendations to address its
perceived concerns. We respond to these recommendations as follows:


OIIG Recommendation #1: CountyCare’s cash balance, capitation revenue due from the
state, and outstanding Claims Payable should be clearly stated in comparison form in a
report so that the CCH Board and the Cook County Board of Commissioners can timely
monitor these financial conditions on a regular basis.
CCH Response: This information is currently provided as part of the Cook County Health
audited financial statements, which are publicly available and provided to the Cook County
Health Board and the Cook County Board of Commissioners. Furthermore, the CCH Board’s
Managed Care Committee is provided information that shows the percentage of claims that
are paid within 30 days, the industry standard metric. There is also a wealth of other
financial information shared with both the CCH Board and the Cook County Board, including
monthly CCH income statements, financial analysis of expenditures, revenue cycle metrics,
payor mix metrics, managed care metrics, and managed care market data. In addition to all
of this data and to avoid misinterpretation in the future, Cook County Health intends to
incorporate and highlight information into existing quarterly reports that will show
estimated claims payable, capitation payments due from the State of Illinois (“State”), and
Cook County Health resources/assets (cash and deposits) available, to be shared with its
Board of Directors and the Cook County Board of Commissioners.



OIIG Recommendation #2: The CCH Board of Directors should mandate an in-depth analysis
of the unpaid healthcare expenses and create a plan to reverse the established trend. CCH
should also provide timely and accurate Claims Payable aging reports. These expenses are
steadily growing and could become too voluminous to manage without an extraordinary
contribution from another funding source in the future. Additionally, to the extent possible,
future PMPM revenues should be matched with future healthcare expenses.
CCH Response: CCH disagrees with the characterization of the unpaid healthcare expenses
in this recommendation, the assertion that Per Member Per Month (PMPM) revenues have
not kept pace with healthcare expenses of plan members, as well as the OIIG report’s
premises that underlie the recommendation. There is simply no legitimate basis for the
conclusion that CountyCare had $701 million in unpaid healthcare liabilities as of November
30, 2018 for which it could not pay. This $701 million figure includes $199 million arising
from services rendered by Stroger Hospital to CountyCare members.
Per Medicaid rules and guidelines, providers have up to 180 days from the date of service to
submit a bill for reimbursement to CountyCare. Once CountyCare receives a claim,
CountyCare determines whether the claim is billed appropriately, and if so, the claim is
deemed payable and payment is issued to the provider. If the provider has not submitted
its claim in accordance with required guidelines, then CountyCare denies the claim, and the
provider has 60 days to appeal the claim or submit a corrected claim to CountyCare. Upon
3

 receipt of an appeal or corrected claim, CountyCare re-evaluates whether the claim is
appropriately billed and payable.
Separately and in addition, an actuarial firm conducts an annual review of claims trends and
determines an estimate for claims and bills to be received in the future (Incurred But Not
Reported1 or “IBNR”). The chart below tracks unpaid bills, cash on hand and IBNR for fiscal
years 2016 through 2018. Significantly, at the end of the 2018 fiscal year, the cash on hand
was $370 million, greater than the actual amount of unpaid bills of $277 million. This also
proved true for each of the prior years.
Year

Claims Payable per
CCH Audited
Financial
Statements
(Column 3+4)
$212,778,304*
$372,936,988
$501,560,288

2016
2017
2018

Incurred But Not
Reported as of
11/30/2018

Unpaid Claims as
of Year-End 11/30

Cash on Hand per CCH
Audited Financial
Statements

$91,925,633
$121,592,863
$224,603,006

$117,888,603
$251,344,126
$276,957,282

$355,869,039
$324,282,164
$370,685,572

*Of the $212,778,304 in the Claims Payable amount in the audited financial statements, $209,814,236 is attributed to CountyCare

The Cook County Health financial statements already capture CountyCare PMPM revenues
and the related medical claims expenses in the CCH income statement, which is provided to
the Cook County Health Board and Cook County Board of Commissioners each month. The
Cook County Health audited financial statements are prepared using the accrual basis of
accounting, which is required for an enterprise fund of government and provides the most
meaningful view of financial results. Accrual accounting recognizes revenues and expenses
that have been earned and incurred during the specific fiscal period in which they are
earned or incurred, regardless of whether they are received or paid in a different period.
The Cook County Budget, which is developed on a modified cash basis of accounting,
includes revenues when received and most expenses when paid, a fundamentally different
basis of accounting. It is challenging to interpret healthcare expenses and PMPM revenues
within a fiscal year on the modified cash basis of accounting when providers have up to 180
days to bill a claim to the health plan per Medicaid rules and guidelines. Cook County
Health will continue to partner with the Cook County Department of Budget and
Management Services to evaluate whether any additional budget mechanism may be
available that would allow for greater clarity of revenue and expenses despite these
fundamentally distinct accounting requirements. Working with the Cook County Health
Board and the County’s CFO, CCH will explore clarifying existing disclosures as part of the
audited financials that may be helpful in achieving a shared understanding of the finances of
the health plan and health system specifically around IBNR calculations and Claims Payable.

1

These are claims not yet received by CountyCare.

4

 

OIIG Recommendation #3: CCH should be required to provide more transparency in
connection with related party transactions. There should be disclosures that highlight the
key terms in the MOU between CCH and CountyCare such as the reimbursement rate and
any adjustments. The reimbursement rate provides critical information for the CCH Board of
Directors and County Board of Commissioners when making decisions related to budgetary
and policy matters. These matters include understanding what factors are driving CCH
losses and understanding the trend reflecting increased Claims Payable liabilities.
CCH Response: Since 2014, Cook County Health has continuously refined its financial
reporting responsive to the emerging Governmental Accounting Standards, Generally
Accepted Accounting Principles (“GAAP”), requests of the Cook County Health Board and
the office of the Cook County Chief Financial Officer, to provide additional recurring
information and added transparency. For example, the supplemental schedules included in
the Cook County Health financial statements that appear to have been used by the OIIG are
one of many examples of how Cook County Health has taken steps to provide detailed
reporting to its various stakeholders.
Cook County Health disagrees with the OIIG’s characterization of the Memorandum of
Understanding (“MOU”) between CCH and CountyCare. Although there is no legal
requirement for an MOU between CCH and CountyCare to document the reimbursement
rate, CCH developed the MOU for the express purpose of providing transparency and clear
documentation of the reimbursement terms for financial reporting and audit support
purposes. As noted above, CCH is committed to fiscal transparency and we will continue to
work with the Cook County Health Board and the County’s CFO to explore providing
additional information that may be helpful in achieving a shared understanding of the
finances of the health plan and health system.



OIIG Recommendation #4: The CCH Financials should reflect the actual figures generated in
each respective department. Managerial discretion should be eliminated when determining
which operating units should encounter a gain or loss. This is separate and apart from the
adjustments in reimbursement rates documented in the MOU between CCH and CountyCare.
When senior management subsequently adjusts revenues and expenses, the CCH Board and
Cook County Board of Commissioners are not provided an opportunity to develop a factually
sound assessments of CCH’s operations for planning purposes. While the consolidated
numbers reflected in the CAFR remain a major focus, the financial data supporting the
consolidated numbers tells an equally important story of the condition of the critical
operating units within CCH and are relevant for the determination of policy.
CCH Response: Though there were no specific details or examples included in the OIIG
report in connection with Recommendation #4, CCH currently does cost allocation across
departments. The various major departments have been reported on separately in the
monthly CCH Financial Statements since April, 2017. Furthermore, the Audited Financial
Statements prepared by the outside accounting firm of the County has also shown major
5

 department components in their reports routinely. These reports have all been available to
the County Board shortly after presentation to the CCH Board.
As part of the budget process in a large integrated system such as CCH, accounts such as
pharmaceuticals and information technology (“IT”) expenses are estimated by departments
and periodically adjusted once actual expenses are incurred by appropriately transferring
expenses between budgetary units. This is done to improve the accuracy of actual expenses
by budgetary unit/department and is a standard accounting practice. CCH is continuously
reviewing allocation efforts and resources used to apportion costs accurately. For example,
for IT costs, usage is monitored in the Electronic Medical Record to distribute the IT costs
across different budget units. In sum, CCH cost accounting is driven by the actual costs
incurred per department.


OIIG Recommendation #5: As outlined above, 15% of CountyCare Members obtain their
healthcare from CCH and 85% seek care from external healthcare providers. This results in
the vast majority of CountyCare’s revenues from the State of Illinois going directly to
external healthcare providers. We received statements that CountyCare could retain more
patients if its primary care physicians made internal referrals and encouraged their patients
to use services within CCH. Perhaps, CCH senior management could advise department
heads to coordinate interdepartmental presentations with a goal of increasing internal
referrals. To be sure, however, this is just one glaring possibility to assist in changing the
current imbalance between internal and external providers of CountyCare members. We
recognize that other more complex realities exist that also drive this imbalance. CCH should
aggressively move towards addressing this issue at every level possible across all
departments.
CCH Response: It is important to recognize that since the inception of CountyCare as a
waiver program under the oversight of the Centers for Medicare and Medicaid Services
(CMS), Cook County Health was required to develop a county-wide, geographically
accessible provider network and is prohibited from requiring the utilization of CCH services
by its health plan members. Subsequently, the Illinois Department of Healthcare and Family
Services also has required a wide provider network in order to ensure adequate choice and
access for health plan members throughout Cook County. Members choose the providers
they wish to visit from within the network. Becoming the provider of choice for CountyCare
members has been an explicitly stated strategy of Cook County Health since CountyCare
was established. IMPACT 2020, CCH’s FY2017-19 Strategic Plan, articulated an explicit
strategy to “Capture more CountyCare members as referrals by increasing internal referrals
for CCHHS specialty and inpatient care.” Significant internal education has occurred to
encourage providers to refer internally when possible, and multiple strategies have been
deployed to improve services to CountyCare members and streamline referrals to CCH by
network primary care providers. This continues to be a critical strategy and is identified in
CCH’s recently adopted Strategic Plan, IMPACT 2023, for ongoing focus.

6

 The OIIG report did not acknowledge that Cook County Health is the single largest provider
recipient of CountyCare revenue in the CountyCare network, earning $199 million from
CountyCare revenue in 2018, as shown in the supplemental schedules in the audited
financials.

7

 Section II -- ADDITIONAL COOK COUNTY HEALTH INITIATIVES
In addition to the actions and practices summarized above, Cook County Health is also working
on the following items that it believes will help provide greater clarity during the Cook County
budget process, and further mitigate potential risk associated with operating a managed care
organization.


CountyCare Reimbursement to Cook County Health – Previously, the annual appropriation
approved by the Cook County Board of Commissioners included only external healthcare
expenses related to CountyCare and did not include CountyCare’s reimbursement of Cook
County Health as a provider of services to its members. While this funding was available to
Cook County Health to utilize and offset its budgeted expenses through the annual
appropriation bill, the proposed FY2020 budget anticipates a budgeted amount of internal
reimbursement from CountyCare to Cook County Health. This would be reflected in the
budget as an expense to CountyCare and as an offsetting revenue to Cook County Health as
a provider of care. If approved, this change would provide additional clarity on how the
internal reimbursement is structured, as well as provide a mechanism to account for the
internal reimbursement each year.



While not a State requirement, but given the growth, size and scale of CountyCare, Cook
County Health, with the support of the Cook County Bureau of Finance, proposes
establishing a cash reserve account as a prudent long-term strategy. In order for this
approach to be effective, it is essential that these funds be restricted for the sole purpose
and use of CCH and CountyCare.

8

 Section III -- CCH’S RESPONSE TO THE OIIG’S FIVE “PRIMARY CONCERNS RELATED TO THE
GROWING UNPAID DEBT”
In addition to the OIIG’s five recommendations, the report identified five areas of concern
related to its conclusion that the amount of CountyCare unpaid debt was increasing. Although
there is some overlap between these issues and the OIIG’s recommendations addressed above,
CCH responds to each such concern in the interest of providing a full response to the OIIG’s
report. As a preliminary statement, it bears repeating that there is no “growing unpaid debt.”


OIIG Summarized Concern #1: CountyCare's "due from state" tracks delayed payments or
backlogs owed to CountyCare. The comparatively small amounts the State tends to owe
CountyCare at year-end is dwarfed by the substantial amounts of Claims Payable
outstanding at the end of each year. Essentially, the PMPM due from the State in 2018 ($14
million) can only pay 2% of the outstanding liabilities ($701 million) for the 2018 fiscal yearend. Even when excluding the amount internally owed to CCH ($199 million), CountyCare
owes external healthcare creditors $502 million. Most of the unpaid debt is owed to vendors
because 85% of CountyCare Members obtain their healthcare from external providers.
CCH Response: The comparison of “Due from State” to “Claims Payable” is made five times
throughout the OIIG report, as is the point that the “PMPM due from the State can only pay
2% of the outstanding liabilities.” This is an incomplete and misleading comparison from
which to draw conclusions about CountyCare’s ability to pay medical claims because it does
not acknowledge the existing resources available to pay liabilities, such as cash on hand and
other assets.2 In addition, the amount represented in the OIIG report as due from the State
as of November 30, 2018 was misleading because CCH had received payments totaling $269
million in state PMPM revenues earlier in November, as validated by the document the OIIG
included in the appendix of the report (“Attachment D”).
The conclusion that at the end of fiscal year 2018 CountyCare had outstanding liabilities of
$701 million, without the ability to pay, is simply not accurate. This $701 million is
comprised of three parts:
o $199 million of internal reimbursements for services provided at Cook County
Health;
o $224.6 million of IBNR for estimates of claims that had not yet been received as of
November 30th; and
o $277 million of claims that had been received but had not yet been paid as of
November 30, 2018. As shown in the OIIG report, CountyCare received $269 million
in revenue from the State in November 2018. The timing of these payments was
just prior to the end of the fiscal year, making it unreasonable to be able to process

2

By way of example, this comparison equates to evaluating an individual’s ability to pay their household bills by
comparing how much the person is owed by their employer to how much they have in bills, while not accounting
for the amount of money in the individual’s bank account. Further, these amounts will fluctuate significantly
depending on timing - an individual who has just received their paycheck will have very little owed to them by their
employer, will have more funds in their bank account, but may not pay their bills until the following day.

9

 bills prior to the end of November. By not accounting for the cash on hand and
referencing only “Due from State” and “Claims Payable,” the OIIG report made a
flawed and incomplete comparison, which led to a flawed conclusion.
A more complete comparison would show the following, which identifies the actual Claims
Payable figure after incorporating the accounting entry to reflect CountyCare’s reimbursement
to Cook County Health, as well as identified reserve amounts, unpaid bills, revenue due from
the State, cash on hand, and other assets available.
Year

Claims Payable per
CCH Audited
Financial
Statements
(Column 3+4)
$212,778,304*
$372,936,988
$501,560,288

2016
2017
2018

Incurred But Not
Reported as of
11/30/2018

Unpaid Claims as
of Year-End 11/30

Cash on Hand per CCH
Audited Financial
Statements

$91,925,633
$121,592,863
$224,603,006

$117,888,603
$251,344,126
$276,957,282

$355,869,039
$324,282,164
$370,685,572

*Of the $212,778,304 in the Claims Payable amount in the audited financial statements, $209,814,236 is attributed to CountyCare

The growth in year-end liabilities ($372.9 million to $501.6 million) from 2017 to 2018 is driven
by an increase in IBNR due to the large increase in CountyCare membership from 2017 to 2018,
and not due to an increase in claims received that are not being paid, as the OIIG report
suggests. A more complete comparison of assets available to pay unpaid claims at year end
would include both cash on hand and additional revenue due from the State.
Year
2016
2017
2018

Unpaid Claims as of
Year End
$117,888,603
$251,344,126
$276,957,282

Cash on Hand

Additional Revenue
Due from State
$45,786,270
$40,081,223
$13,805,400

$355,869,039
$324,282,164
$370,685,572

In fact, as demonstrated in the next table showing the unpaid claims as a percentage of
premium and the number of months of expenses outstanding, CountyCare’s 2018 performance
was significantly better than 2017. This is also substantiated by the average turnaround time of
CountyCare to pay a claim, which decreased from 2017 to 2018, at 56 days to 38 days,
respectively.
Year

Unpaid Claims
as of Year End

Total Premium
Revenue

2016
2017
2018

$117,888,603
$251,344,126
$276,957,282

$924,829,566
$836,537,764
$1,822,414,772

Unpaid
Claims as a
% of
Premium
13%
30%
15%

*Months of total expenses outstanding

10

Months of
Claims
Outstanding*

Average
Monthly
Membership

1.6
3.8
1.8

156,102
154,450
333,714

 

OIIG Summarized Concern #2: The established trend demonstrates that CountyCare does
not generate enough revenue to pay all the outstanding healthcare expenses each fiscal
year-end. CCH has developed a practice of using subsequent period budgetary funds to pay
prior period bills. In effect, CountyCare is forced to pay substantial prior period and new
period healthcare expenses during each fiscal period. Consequently, CountyCare's unpaid
healthcare expenses are steadily growing and could become too large to pay without an
extraordinary contribution from another funding source in the future.
CCH Response: For the past three years, CountyCare has generated more revenues than
expenses. See table below. Cook County Health disagrees with the underlying premise of
the analysis used in the OIIG report. It is common for health plans to still have liabilities at
year end, as there is always a significant number of claims being processed or that
providers have not yet reported to the health plan. In a cash-based budget such as the
County’s budget, the expenses are budgeted when the actual payment is anticipated to
occur, rather than when claims are generated. It is typical to budget claims expenses
based on monthly payments trends, rather than when the claim is generated. As noted in
the OIIG report, a GAAP basis financial statement reports revenues when they are earned
and liabilities when they are incurred. Reviewing the GAAP basis income statement is the
best way to evaluate if an entity is earning sufficient revenue to cover all of its expenses.
As documented in the OIIG report, CountyCare’s revenue exceeded liabilities by $3.5
million in FY2018, based on the audited financial statements.
Year
2016
2017
2018

Revenue
$924,829,566
$836,537,764
$1,822,414,772

Expense
$911,620,486
$791,796,674
$1,818,912,621

Gain/(Loss)
$13,209,080
$44,741,090
$3,502,151

Source: Cook County Health Audited Financial Statements

The OIIG report then appears to shift from accrual accounting to the County Budget (modified
cash basis), in order to assert that due to insufficient revenue to cover expenses, CountyCare
has a growing amount of unpaid healthcare expenses that are paid the following budget period.
As the table above demonstrates, CountyCare’s revenues exceeded expenses on a GAAP basis.
It is critical not to mix the two accounting methodologies when doing comparative analysis to
avoid misleading results.
A review of the modified cash basis of accounting used in the County Budget also shows
CountyCare revenues exceeded expenses, as outlined in the table below. On this basis,
CountyCare has had revenue in excess of expenses by $200 million per year for patient care for
the past five years and has provided more than $1.1 billion to Cook County Health from its
inception. This generation of cash by CountyCare has reimbursed the system for care it
provided CountyCare members, and assisted in offsetting fixed costs for CCH’s provision of care
to the uninsured, as well as reductions to CCH’s tax allocation over the past 5 years.

11

 Year

2014
2015
2016
2017
2018
Total

Premium
Revenue
Received
$636,539,740
$859,295,613
$868,162,903
$816,435,746
$1,817,910,849
$4,998,344,851

Claims Expense
Paid (Excludes
CCH)
$489,401,621
$568,550,947
$658,915,079
$569,644,886
$1,583,880,034
$3,870,392,567

Net Cash

$147,138,119
$290,744,666
$209,247,824
$246,790,860
$234,030,815
$1,127,952,284

Source: Cook County Bureau of Finance Preliminary Unaudited Revenues and Expense Reports

Cook County Health agrees with the OIIG that significant amounts of prior period claims are
paid from current period revenue. Given the modified cash basis of accounting utilized for the
County budget process, claims received in a subsequent budget period for prior periods (IBNR),
which are reflected as liabilities on the Cook County Health financial statements, would be
expected to be paid from subsequent budgetary periods.
Cash flow and the timing of bill payment is managed centrally for Cook County, which
incorporates all revenues and all expenses from all departments and units of Cook County
government, including Cook County Health (which includes CountyCare) and all other General
Fund departments. An analysis of bills outstanding at any given point in time for a single
program, including at the end of the fiscal year, could be influenced by a number of factors, and
is not an appropriate indicator to use in determining whether an individual program generates
enough revenue to cover expenses. The timing of when the expenses are paid is impacted by
overall cash flow management for Cook County government. The historic unpredictability of
the timing of State payments of various types has placed significant additional stress on cash
flow management for the County. CountyCare received $269 million of State payments in
November 2018 shortly before the end of the County fiscal year as referenced in OIIG
Attachment D. Throughout the course of FY2018, the State was generally behind on its
payments by at least two months, or over $200 million, prior to catch-up payments right before
the end of November. As a result, it would be expected that CountyCare would have a
corresponding amount of unpaid bills as of November 30, 2018.
In order to evaluate whether a program is generating sufficient revenue to cover expenses,
another analysis is to look at a program’s cash received and expenses paid (i.e., cash basis of
accounting), rather than its receivables and payables at any given point in time. As
demonstrated in the tables above, regardless of which method of accounting is used,
CountyCare revenues have exceeded expenses.


OIIG Summarized Concern #3: CCH management fails to disclose to the CCH Board and Cook
County Board of Commissioners important terms associated with related-party transactions
that result in significant financial impacts between CCH and CountyCare. For example, there
is a Memorandum of Understanding (MOU) between CCH and CountyCare with key
provisions that shift losses between the two related entities. These methods and associated

12

 outcomes set forth in CCH Financials are not fully disclosed and explained to the CCH Board
and Cook County Board of Commissioners.


OIIG Summarized Concern #4: In 2018, CCH senior officials amended the MOU between CCH
and CountyCare to retroactively change reimbursement rates for 2017 due to a stateimposed revenue reduction. This retroactive change had a significant negative effect on
Stroger Hospital and presented CountyCare as more profitable than it would have been
without the change in reimbursement rates from CountyCare to CCH. These events were not
fully and clearly disclosed to the CCH Board and Cook County Board of Commissioners.
CCH Response to Summarized Concerns #3 and #4: The Cook County Health Board of
Directors and the Cook County Board of Commissioners receive monthly reports relative to
the finances of both the health system and the health plan. These reports are also discussed
at several meetings every month and posted to the Cook County Health website. As noted
above, Cook County Health created the MOU to provide formal documentation of the
reimbursement from CountyCare to Cook County Health. The MOU has typically been
updated after the end of the year for purposes of documenting the applicable
reimbursement rate. The reimbursement rate, however, is established well in advance of
the end of the fiscal year and is not changed after the close of the fiscal year (as the OIIG
report asserts), nor has Cook County Health changed the reimbursement rate after the
close of the fiscal year.
In 2017, the State notified CountyCare that it was reducing its PMPM and would require the
system to repay what turned out to be approximately $84.9 million (“The Clawback”).
Accordingly, CCH started the year at a reimbursement rate of 70% of charges for services
provided by CCH to CountyCare members, but due to the Clawback, we determined CCH
would receive reimbursement rate of 26% of charges, with that change retroactive to the
beginning of the fiscal year.3 Beginning with the July 2017 CountyCare financials presented
to the CCH Finance Committee, the reports show the reimbursement rate of 26% of
charges of CountyCare to CCH, as well as the significant variance versus the budget, which
reflects the impact of the internal reimbursement rate change, and the revenues earned by
CCH remained at that level on each monthly financial statement presented to the CCH
Board and Board of Commissioners and publicly posted through the end of the 2017 fiscal
year. No changes were made to this established rate or calculation methodology after the
end of the fiscal year in order to change the presentation of gains or losses between units
within the CCH financial statements. On September 15, 2017, CountyCare discussed with
the CCH Board, in a regularly scheduled and posted public meeting, the retroactive State
reduction to CountyCare revenue. Below is the attached link which shows the board
meeting minutes (publicly available/posted on CCH website)
https://cookcountyhealth.org/wp-content/uploads/09-15-17-Finance-Agenda-2.pdf . The
only thing that was “changed” after the end of the fiscal year was amending the MOU to

3

The 26% rate is in keeping with the reimbursement rates for other providers and typical of Medicaid rates in
general.

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 reflect this earlier reduction in the reimbursement percentage, as per our historical
practice.
As another example, the reimbursement rate for FY2018 was established at 70% of charges
and remained at that level throughout all of 2018; however, the MOU documentation was
not updated to reflect that rate until after the close of the 2018 fiscal year. In addition, it is
important context that the historical reimbursement rates set between CountyCare and
CCH have been at above-market reimbursement rates. So, while the rate was reduced midyear in FY2017, this reimbursement rate was still reasonable in comparison to market rates
at which other hospitals are reimbursed under Medicaid. Continuing to provide abovemarket reimbursement to Cook County Health in light of such a significant revenue change
in 2017 would have misrepresented the financial health of CountyCare.


OIIG Summarized Concern #5: Despite the existence of the MOU, CCH routinely changes
revenue and expense figures between CCH's operating units (e.g., Stroger, CountyCare, etc.)
to reach desired financial goals for CountyCare and Stroger Hospital in CCH's monthly and
annual financial reports. As a result, these practices make it difficult for the CCH Board and
Cook County Board of Commissioners to have a sound baseline to evaluate the performance
of the individual operating units that make-up CCH.
CCH Response: CCH disagrees with the OIIG statement and sees no evidence or examples in
the OIIG report that “CCH routinely changes revenue and expense figures between CCH's
operating units (e.g., Stroger, CountyCare, etc.) to reach desired financial goals” between
operating units in CCH's monthly and annual financial reports. In order to follow best
practices in allocating expense to appropriate departments, expense may be reallocated
from time to time. These allocations are intended to reflect with greater clarity the costs of
operating the various departments.
It is important to explain the context and process by which financial reports come together.
Guided by CCH Board requests, CCH monthly financial reports are a combination of financial
statements, key operational data, key revenue cycle, and other financial metrics. The
financial reports are primarily generated in the financial reporting function but are
combined and made more meaningful with supporting operational data. This process of
“monthly closes” by definition and industry practice, starts from sub-ledger closings and
roll-up into the general ledger and may involve entries from multiple sources including the
Inventory, Revenue Cycle/Billing Systems, County/Central office payroll entries, etc. This
process involves multiple versions and reviews by progressively higher levels of finance
leadership and could result in reconciliations with multiple data sources, clarifications,
changes or refinements until final “unaudited financial statements” are presented to CCH
board at the regular meetings. This is standard industry practice.

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 In conclusion, CountyCare generates sufficient revenues to maintain its operations and CCH has
been open and transparent in reporting the financial status of the health plan. The conclusion
in the OIIG report that CountyCare’s unpaid debts at the end of fiscal 2018 were in excess of
$701 million without adequate assets to pay them is incorrect and failed to include financial
data normally considered in determining the financial health of an entity.
Further, although containing findings of important public interest, the OIIG report was
publically distributed before providing CCH and CountyCare an opportunity to review and
respond accordingly. The OIIG conclusions questioned the financial health of CCH and the
credibility of CountyCare, Cook County Health and its management and Board. With this
response and attached independent assessment by Deloitte FAS, we hope that the record is
corrected, that the ongoing fiscal health of CountyCare and the transparency of CCH is
acknowledged, and that any reputational harm incurred has been rectified.
Sincerely,

John Jay Shannon, MD
Chief Executive Officer, Cook County Health
Attachment: Deloitte FAS Independent Report
Via Electronic Mail Delivery
cc:
The Honorable Toni Preckwinkle, President, Cook County Board
The Honorable Members of the Cook County Board of Commissioners
Mr. M. Hill Hammock, Chairman, Board of Directors, Cook County Health
Board of Directors, Cook County Health
Ms. Lanetta Haynes Turner, Chief of Staff, Office of the President, Cook County Government
Mr. James Kiamos, Chief Executive Officer of Managed Care, Cook County Health
Ms. Laura Lechowicz Felicione, Special Counsel to the President, Cook County Government
Mr. Ammar Rizki, Cook County Chief Financial Officer, Cook County Government
Ms. Deborah J. Fortier, Associate General Counsel, Cook County Health
Mr. Ekerete Akpan, Chief Financial Officer, Cook County Health

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