CFOs: What 2011 Holds for Hospitals

Karen Minich-Pourshadi, for HealthLeaders Media , September 13, 2010
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Healthcare Reform.
In addition to the reimbursement cuts, we are concerned about how healthcare reform will affect us. We are fortunate in this area, as there are not a large number of uninsured people in our area compared to other parts of the nation, but there's not much predictability in this legislation for an upside effect.

How are you offsetting negative influences?
There is no more low-hanging fruit to help with our budget reductions, and we already operate on slim margins. Still, we will continue to make the cuts year after year. We also have to see what will happen with our commercial payers—we are working toward increases. We are going to have to maximize our revenue while staying closely aligned with our quality indicators. We are also going to have to watch our market share. Now there are a lot of private surgery centers, and they are taking some of our profitable outpatient business. So we are continuing our marketing efforts as well as recruiting physicians so we can grow. But it's difficult for us to recruit physicians to this area, so we are currently undertaking a strategy to integrate more physicians into the hospital network.

Do you feel the economy is rebounding?
I feel like the economy is steady, but it's going to be slow and steady. I think that's the best that we can hope for now. Syracuse has gone through the challenges and changes that many smaller communities have, and now we are seeing more potential here for small business growth and technology jobs are replacing our blue-collar jobs—that's a positive step.

Richard Rothberger, executive vice president and CFO,
Scripps Health,
San Diego;
1,372 beds;
projected net revenue 2010: $2.27 billion;
net revenue 2009: $2.16 billion;
net revenue 2008: $1.95 billion

What are the key areas you believe will affect your hospital in 2011?
Medicare and Medicaid Reimbursement. We are like other hospitals, facing relatively flat Medicare
and Medicaid reimbursement for 2011, and typically that is 45% to 50% of our business.

Staying relatively flat means we are going to be stressed to keep reducing expenses to keep up the margins. We don't make money on Medicare anyway, and the uninsured who become insured [under the Patient Protection Act] will be paid at Medicaid rates and they pay less than Medicare. The annual update shows the inflator is going to be negative for the first time, and yet we have people working for us that are looking for at least a 2% to 3% increase in salary. Not to mention the RAC audits, which have started denying payments made in prior years and saying they aren't medically necessary. There are a lot of moving parts with these, so it's difficult to model.

Healthcare Reform.
We're going to continue to be pressured to reduce cost to prepare for healthcare reform and the anticipation of bundled payments and ACOs. That's going to force us to improve but put more stress on reducing supply costs—we'll have to work with our physicians to limit their choices.

We are putting in a significant investment to ramp up our foundation physicians when it comes to their EHRs and considering for the independent physicians up to the 85% allowed by federal law for their EHR software. We don't know when or how much we will be reimbursed by the government for these efforts.

How are you offsetting negative influences?
We have probably the longest list of performance improvements for 2011 that we've ever had because we've had to dig deep to try to figure out how we are going to reduce our costs per case. We are focusing on internal best practices and using benchmarking to improve quality and reduce our length of stay. We are also putting pressure on our physicians and our suppliers to try to standardize procedures and to cut prices—our ultimate goal is to reduce clinical variation. On the ambulatory and hospital side we are working on lab standardization projects, and we've had a lot of success recently redesigning the flow of patients through the ER to reduce wait times and throughput.

Do you feel the economy is rebounding?
It's been a tough ride, but I'm optimistic we won't go back to where we were—in San Diego for sure, as there's a strong base in our economy, a lot of healthcare and biotech. Then again, when you look at the stock market and the world market and see how volatile they still are, I think there's still a lot of uncertainty. One thing I think we've learned from the last few years is you cannot depend on investment performance as part of your operation—you have to be able to make it on your operations alone.

Karen Minich-Pourshadi is a Senior Editor with HealthLeaders Media.
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1 comments on "CFOs: What 2011 Holds for Hospitals"

Shelton McBride, RPh, Consultant (9/24/2010 at 2:00 PM)
This is excellent. Would like to see similar responses from CEOs, COOS, CNOs, CPOs, etc. A nice series would be great. We have so many challenges due to the unknowns we face. We are within 100 days of Bush tax cut extensions, not knowing what will happen. So much of healthcare reform has not been detailed so that we know true costs. This approach is helpful to share the thinking of our leadership. Once we know the issues, we can go after the details and the solutions. Good old days? Gone forever.




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