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Pressure on Jackson Mounts

Posted on: Tuesday, 4 October 2005, 18:00 CDT

By Noaki Schwartz, The Miami Herald

Oct. 4--First, one of Cardinal Health's employees was accused of billing Miami-Dade County's public hospital for strip-club outings, pricey dinners and chartered fishing trips under a contract for pharmacy services.

Later, after Jackson Memorial Hospital dumped that contract, Cardinal sued the hospital in federal court, claiming it was owed $16 million in various costs, including early termination.

Along the way, a Jackson audit reported that two Cardinal pharmacy management and supply contracts -- which were supposed to be saving money -- had actually cost the hospital $15.5 million. One issue: Jackson officials were getting advice on how much to pay Cardinal for drugs -- from another branch of Cardinal.

This summer, the board of trustees that runs Jackson recommended awarding a new contract for pharmaceutical supplies worth $119 million a year -- to Cardinal. But in mid-September, after The Herald began raising questions, the board of the Public Health Trust put negotiations on hold, citing concerns about the ongoing lawsuit as well as public perception.

Jim Mazzola, a spokesman for Cardinal, called the situation disheartening. He said he takes issue with the audit by Maxor National Pharmacy Services Corp. that claimed $15.5 million in costs. He said Cardinal would like to have an independent analysis of its services.

"The fact is we reluctantly filed our lawsuit with the hospital after exhausting other avenues," he said. "We were certainly disappointed to lose the pharmacy management contract and to have this dispute with Jackson Memorial, which has been a customer for 50 years."

Headquartered in Dublin, Ohio, Cardinal Health employs more than 55,000 people on six continents and produces annual revenues of more than $65 billion, according to its website. Because of its size, the company can offer very competitive pricing such as its bid to provide Jackson's pharmaceutical supplies, which is 3.3 percent below wholesale cost.

Still, given the troubles Jackson had with the company last year, at least one county official wants to know why trustees are even considering Cardinal again.

"We're playing with fire here, and I don't think the higher-ups at Jackson understand this," said County Commissioner Javier Souto, the vice chair of a county committee that oversees the health trust. "I see them on a collision course with the Board of County Commissioners."

Jackson officials had the power to reject a committee's recommendation to award the contract to Cardinal but didn't. Officials say they were hampered by an earlier decision they made to deal with each of Cardinal's more than 150 divisions as an independent company and to punish only the branch that handled the management contract. The lawsuit was filed by that division, Cardinal Health 109.

Unlike the rest of county government, which can ban companies from receiving county contracts for five years, Jackson has no rules allowing such "debarment." Hospital officials say they are working to change that and other purchasing policies.

"Even though they're giving us the best deal, I still don't like the idea of awarding anyone we're in litigation with," said Trustee Chairman Larry Handfield, who along with other trustees supported giving Cardinal the contract.

Still, Jackson executives said they notified Cardinal in September that they were going to suspend any contracts poised to go to various divisions of Cardinal. Then they headed back to the negotiating table to try and settle the lawsuit.

Cardinal, which says it provides pharmaceuticals to more than 60 hospitals in South Florida, including four in the North Broward hospital district, has five contracts with Jackson. Three of them had been up for renewal before Jackson stalled them.

The problems with the pharmaceutical management and supply contracts came to light last fall, after Jackson's then-associate pharmacy director began alerting his bosses about billing errors. The Miami-Dade Office of the Inspector General and the State Attorney's Office launched criminal investigations into the matter.

The investigation eventually resulted in fraud and grand theft charges against Cardinal project manager Kevin Reece, who pleaded not guilty and is awaiting trial. Reece is accused of submitting more than $6,300 in bogus expenses to Jackson, including a trip to Scarlett's Adult Cabaret in Pembroke Park titled "Lunch Appreciation for Pharmacy Week" and a fishing expedition at the Rainbow Trout resort in Salesville, Ark. called a "business retreat."

The scandal also contributed to the end of Andres Murai Jr.'s tenure as Jackson trustee treasurer. He resigned after the investigation revealed that he supported awarding the company a no-bid contract to manage Jackson's pharmacies even as his own company was selling a typhoid vaccine to Cardinal.

Jackson eventually dumped its $3 million no-bid management contract with Cardinal and returned oversight to its own employees. It kept the then-$75 million pharmaceutical supply contract, which did not come up for rebid until this year.

In the meantime, Cardinal filed a federal lawsuit in May saying it was mistreated by Jackson and that the hospital owed it millions in drug and early termination costs, and equipment.

The health trust's counterclaim said that Cardinal failed to deliver the savings it promised and had billed the trust for incorrect quantities and prices of drugs.

Handfield, who heads the trustees, said he hopes Jackson can resolve the lawsuit with Cardinal. He also talked about what might happen if they can't.

"One of the things we have a right to do is review the situation and make a decision we can defend," he said. "And then just explain [to the public] why we would be dealing with someone whose pricing would be far and above what Cardinal offered."

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Source: The Miami Herald

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