Miami-Dade County’s Jackson Memorial Hospital is Adrift in a Sea of Incompetent Executive Management
The utter contempt that Jackson Memorial Hospital’s managing board, the Public Health Trust, and the Miami-Dade County Commission, have displayed for the residents of Miami-Dade County and the Jackson health system has reached a new high.
The Miami Herald reports, here, that the treasurer of Jackson Health System’s governing board noted this week that cash is getting “dangerously low” and that major cost cuts may be needed. Currently, Jackson will likely end the month of January with only 16.7 days of cash on hand. Hospital’s median day’s cash on hand is closer to 90 days cash, making Jackson’s days cash on hand ratio abysmal, and a true operating emergency.
Additionally, Jackson experienced a 7 percent drop in patient revenue, a material and significant decrease to any business entity. The impact on Jackson, though, is pronounced, given its already weakened financial condition and its primary mission of serving the uninsured.
Jackson’s real problems are the result of institutional ignorance and complacency. This author was briefly involved in the nomination process to sit on the Public Health Trust, and met with a panel of Miami-Dade County commissioners, Florida legislators, Public Health Trust members, and other important local politicians.
A 3 hour panel discussion ensued regarding Jackson’s status, and it became painfully obvious that the current Public Health Trust Board and the Miami-Dade County Commission are truly ignorant of the financial status of the hospital. This author reviewed over 1000 pages of material in preparation for the discussion, much of it dense financial data. It quickly became apparent that most of the people sitting on that panel had little knowledge of the contents.
The questions posed to this author were mostly superficial and chosen to deflect attention from the institutional incompetency that has seized Jackson for much of the last 2 decades. The issues being confronted by Jackson were merely magnified by the current economic crisis, but were certainly not caused by it.
The author reviewed a “stop-gap” financial proposal to immediately enhance revenues and reduce costs at the hospital, and noted that the nearly 100 planned initiatives should be vetted for reasonableness and predictability. Institutional initiatives aimed at closing financial shortfalls frequently fail due overeager management’s failure to account for the many inherent pitfalls.
Regrettably, the Herald notes that many of the 94 initiatives, worth $200 million in reduced costs or increased revenue, are already behind schedule. Is it any wonder, though, that the board and county commission, largely comprised of non-financial laypeople, are sufficiently competent to make complex business decisions in a vacuum? This author noted that at least 4 prospective Public Health Trust candidates had significant financial statement and business modeling experience. Of those 4 highly qualified candidates, how many were chosen: Zero.
Past boards and county commissions have largely applied super-sized Band-Aid’s when dealing with Jackson’s problems, including accounting gimmickry, financial speculation with new revenue streams, and other one-time financial gambits designed to kick the deep, structural problems to new generations, including Jackson’s onerous labor costs. Unfortunately, that day of reckoning has begun arriving. Like the leading edge of a large hurricane, the gail force winds of this impending crisis have already swamped management’s coping ability. The resulting financial hurricane could cause the residents of Miami-Dade County to feel unimaginable pain, as care will likely have to be significantly reduced to uninsured residents.
Jackson’s institutional incompetence not only impacts Miami-Dade County’s bottom line, but very difficult and highly controversial quality of care decisions are forthcoming, and none of them will likely enhance care provided to the most impoverished of this community. How such an important institution has been allowed to decay into this abyss is criminal, how no one has noticed the contempt demonstrated by its leaders is frightening.

Post-Industrial Japan’s Developing Caste and Generational Inequality are Strangling Younger Workers
In an ominous warning to other, post-industrial developed economies, Japan seems mired in an economic straitjacket decades in the making. A majority of its younger workers are unable to find permanent, regular jobs, and feel increasingly marginalized. Instead, Japan’s corporate structure is geared towards protecting its aging population and bloated pension systems.
A recent article in the New York Times, here, highlights the individual distress felt by its young workers. Amazingly, this has resulted in a “brain-drain” of highly educated Japanese to other countries and threatens to stunt economic growth for generations. This generational inequality is partly to blame for Standard & Poors recent downgrade of Japan’s sovereign debt.
Last year, nearly 45% of young workers held “irregular” jobs, akin to contract labor in the United States. These jobs offer low pay, no benefits, and no pension. Only 56.7% of university seniors received job offers in 2010, an all-time low.
The graying of Japan and its reluctance to undertake the structural changes necessary to include young adults in its economy is producing a new, “lost generation” of disenfranchised youth. These second-class citizens will endure a rapidly-declining standard of living and a widening gulf between the “castes”.
The cultural ethos prevalent in Japan encourages conformity and obedience. Japan’s economic engine thrived on this ethos and their ability to mold university graduates to the firm’s culture. This allegiance to the firm produced a robotic, nearly mechanical worker whose primary goal was the maximization of firm profits and revenue growth.
Unfortunately, this ethos is obsolete, and Japan’s near absolute reliance on this standard has stunted the growth of individualism and entrepreneurship. Japan has few initial public offerings, and Japanese entrepreneurs primarily skew older.
Japan has faced a stagnant economy for the last 20 years, which shows no sign of abating. As workers age and consume even greater resources, the failure by Japan to nourish its newest workers will eventually condemn the country to a permanent, downward spiral.
The United States and the rest of the post-industrial world should view Japan as a cautionary tale. Although the United States and Japan are dissimilar in many respects, both have aging populations that are consuming greater resources with every passing year.
The United States faces a similar pension, municipal and state crisis that has only recently begun to manifest itself. The great boom of 2002-2008 merely masked the dire conditions of municipalities and the staggering amount of unfunded pension liability throughout both the public and private retirement systems. Similar conditions exist throughout many other post-industrial societies and economies, some better, and some worse.
Ignoring these problems will only produce much greater and more intense pain at some point in our near future.  In Japan, the need to reduce deficits will ensure that younger Japanese will never receive the level of retirement benefits currently enjoyed by retirees today. The same is true in the United States. Already, much of the private pension system in this country has been dismantled; the destruction of the public retirement system has just begun.
As a result of its booming growth throughout the 1970’s and 80’s, Japan began confronting these issues much sooner than the rest of the post-industrial world. Japan’s free-fall began in the 1990’s, a period of positive growth in the United States. That Japan has been unable to halt this economic decline throughout the last 2 decades is a chilling reminder of what may confront other post-industrial economies.
A thoughtful study and analysis of Japan’s “lost decade” might illuminate the path forward for our country, and prevent the aggressive stagnation that has taken root, like wild grass, in our own economy. A failure to understand the similarities and differences, and learn from them, would be a grave mistake indeed.

Our national, economic betrayal is merely a symptom of much larger, personal betrayal
As the current year fades and the new year begins, a trend continues to emerge in our society that is every bit as damaging as the economic fraud that has nearly plunged our country into another depression.
This fraud, which I’ve dubbed emotional deceit, is the constant betrayal of mutual trust and respect that has seeped into nearly every corner of our personal lives. The resulting emotional upheaval leaves a trail of destruction so bitter and permanent that it threatens our social and moral fabric.
What are some of the signs and symptoms of emotional deceit in society? The betrayal by Wall Street of any sense of decency, the lack of moral courage, and the demise of corporate values are all examples, and continue to shred our economy.
What occurred on Wall Street didn’t merely shock the economy into near-depression, but it ripped the veneer from the socially accepted notion that some level of decency and good-will existed between the participants in this free-market experiment. It doesn’t, and it never will, again.
Everyone’s on their own, adrift within their own, tiny life-boat. Our grand economic experiment now shifts from one of growth for all to a relentless search for economic survival and subsistence.
On a much deeper level, though, emotional deceit has seeped into the very fabric and essence of our personal relationships. The deep mistrust and cynicism that characterizes the economy and its participants now also pervades our personal relationships.
We’ve grown accustomed to, indeed, even accepting of personal betrayal, especially in our romantic and professional relationships. The gut-wrenching body blows that follow personal betrayal leave an indelible, yet permanent scar on the soul and psyche of both the perpetrator and the victim.
Perpetrators ultimately rationalize the betrayal as a byproduct of their insecurities and neuroses, but fail to acknowledge its real source: their overwhelming narcissism and unchecked self-absorption.
The reckless disregard, even contempt, for the broken, littered path of destruction that lies in the wake of betrayal merely reflects the emptiness of our lives. Our individual and collective inability to attach meaning to events and people that entered our lives, that were placed there to assist us through our journey through life, represents a betrayal of the soul and a repudiation of our humanity.
Having recently lived through just such an episode, I am witness to the fact that these events ultimately define the character of the participants, both the perpetrator and the victim. Each is left scarred, broken and wounded, adrift to reconstruct their lives as meaningfully as possible.
The victim will ultimately recover, mourn and seek some meaning from the experience. The perpetrator, though, becomes hardened, thickened, and more insular. The deceit further detaches them from those inner constructs that humanize them, and they become unable to identify good from bad, lover from abuser, savior from manipulator. The fraud changes the filter and prism through which they view life and others, and ultimately collapses their soul.
What occurred on Wall Street was a systemic moral failure by collections of individuals, the same failures that occur in our personal lives. As a society, our moral compass has run adrift, guided by little more than narcissistic absorption and self-preoccupation. Is it any surprise those institutions, which are, after all, merely embodiments of our personal consciousness, should behave any differently?
Individually and collectively, we should be cognizant of the emotional wreckage that we’ve accepted in our society and into our personal relationships, and the ripples and unintended consequences occasioned by our deception, which will last very deep into our future.  Be very careful of your impact on others, but especially on those you love. The impact will last a lifetime.  Actions, once taken, can never be undone, only forgiven.

Current financial reporting practices often produce fictional and sometimes aberrant statements that are misleading if not outright fraudulent.  For example, consolidated financial statements are traps for the unwary, hiding and masking transactions through Byzantine group structures and idiosyncratic consolidating techniques.
Consolidation procedures require that inter-group transactions be eliminated when the financial statements of the group are consolidated, on the theory that this procedure eliminates transactions between the group that are not at arm’s length and which may in fact be shams. But consolidation accounting has another, less obvious yet insidious result – it purposely conceals and buries subsidiary information within the group’s consolidation, hiding both the enlightening and damaging aspects of subsidiary performance within the whole.
Consolidation accounting purports to represent the economic activity of a group of legally separate and unique entities under the fictional mantra of the group, relying on economic form over legal form and financial substance. They conceal data that might normally be available to users of financial statements, and may serve to hide data from shareholders and creditors that is damaging or otherwise disparaging.
Data not found in unconsolidated financial reports mysteriously appear in consolidated statements under the guise of economic substance, yet bear little relation to real-world substance and the individual, disaggregated accounts of the subsidiary. This theory of aggregation is contrary to the norms found in GAAP – that of full disclosure and careful consideration of an entity’s viability as a going concern.
Prevailing consolidation techniques ignore the legal and financial implications that the aggregated assets and liabilities are neither owned nor made available to the group. This group mentality encourages users and readers of financial statements to view the entities of the consolidated group as virtual branches of the parent, again creating a dangerous fiction rendering the financial statements less meaningful. The grandest of these fictions, though, is the assumption engendered by consolidation accounting that profits and losses of the subsidiary entities will pass through to the parent entity through dividend payments.
Current financial reporting compliance efforts have also failed to prevent audit and accounting failures. A decade-old study of corporate failures in Australia by professors F.L. Clarke, G.W. Dean and K.G. Oliver, Corporate Collapse, Regulatory, Accounting, and Ethical Failure, explored the notion that greater compliance with prescribed standards and zealous enforcement of those standards would achieve serviceable financial standards that were informative and models of comparability, the SEC’s over-arching concern for many decades.
The authors concluded that even meticulous compliance with approved accounting standards and strict enforcement by the regulatory bodies may not produce useful financial statements: “compliance with standards then in vogue was as likely to have contributed to creative accounting as deviation from them. Perversely, corporate regulators and the accounting profession are calling for even more accounting and auditing standards.”
By explicitly imposing detailed standards on the financial statements, auditors can essentially shield themselves from liability through strict adherence to GAAP’s “cookbook” in defense of their accounting judgments, and avoid being held directly responsible for making those judgments. By strictly adhering to accounting standards, auditors also reduce the tendency to opinion-shop by stressing the unyielding nature and detail inherent in the standards in defense of the positions taken.
The study principally focused on the end-product of the accounting process, the financial statements, and their ability to convey data accurately, without misrepresentation and lack of comparability, as opposed to singularly focusing on the process of accounting and its methodology. “Accounting standards have failed to match the admirable claims of the leaders of the profession – namely, that compliance with them would reduce the diversity of accounting practices and thereby provide data relevant to the making of informed financial assessments,” the authors add. “Defying financial common sense, complying with certain practices endorsed by the accounting profession itself, producing the standard nonsensical, fictional financial outcomes, are not regarded by either the regulators or (so it seems) the accounting profession to be a willful indulgence in creative accounting.”
Control of the process by which standards are developed and applied and zealous enforcement of those standards through strenuous regulatory activity appears to be the principal mechanism to ensure the stability of the financial reporting model worldwide. These feeble attempts to eliminate judgment from financial statements, a position strikingly similar to that held by the SEC and Arthur Levitt, its former chairmen, ultimately obviates the need for serious discussion regarding the quality of the output.
Current accounting compliance efforts focus on individual misdeeds and the need for greater regulatory efforts, rather than on the serviceability of the financial reporting model as presently structured. Efforts to identify crooked individuals and their “cult of personality” have in fact diverted attention away from fundamental restructuring towards individual scapegoats and single instances of ethics failure, bad management, and inadequate educational resources.
While the trend towards increased vigilance of earnings management and zealous enforcement may sometimes deter the brazen and unscrupulous, it will not, however, prevent strict application of accounting standards to financial data, often leading to bizarre and unintended results. Thus, the failure of accounting is often the result of poorly constructed standards that have no legal or economic basis.
For instance, the constant drumbeat of substance over form fails to reveal and clarify the arcane ambiguities of consolidation accounting and historical, cost-based financial reporting. Substantial modification of the financial reporting model would involve reform of financial consolidation principles to reflect the legal and economic reality of the corporate structure. A shift to fair value accounting would also prevent the gross miscalculations of value that continue to plague analysis of corporate stability and liquidity. Indeed, fixed asset depreciation models and real property accounting are little more than cookbook applications having little economic substance.
The real issues that have created these accounting fictions have yet to be addressed by any private or governmental regulatory agency. The captains of industry, board members of the regulatory agencies, and members of the national accounting firms share the common goal of avoiding disruptive change.
The accounting industry seeks, most importantly, to avoid liability, and the cookbook standards pervasive today well accomplish that goal. Captains of industry seek to manipulate accounting data to create financial reports that present their organization in a favorable light. Regulatory agency members are often products of private industry, as many are tapped directly from the boardrooms of corporate America and the accounting industry; hence, they too have no incentive to seek substantive reform of our financial reporting system. Given the entrenched and unyielding regulatory and economic structures currently in place, it is difficult to see how any effective change will soon occur.