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Despite Challenging Payer Mix, Health System Grows

Rene Letourneau, for HealthLeaders Media, March 24, 2014

The chief financial officer at Montefiore Health System in the Bronx explains how the organization has managed to stay in the black, generate modest operating margins, and even reinvest in itself while serving a largely poor patient population.

Based in the Bronx, New York—one of the poorest and most densely populated areas in the country—Montefiore Health System has an unenviable payer mix. Over 80% of the organization's revenue comes from the government, and half of that is Medicaid.

"You can tell a lot about the fiscal strength of a system by its payer mix. The more government payments you have, the more challenged you are," says Joel Perlman, Montefiore's executive vice president and chief financial officer.

Surviving mostly on government reimbursements isn't getting any easier, particularly as CMS tries to rein in spending through its value-based purchasing and RAC programs and the two-midnights rule. Substantial cuts are also being made to CMS' Disproportionate Share Hospital program, which distributes payments to hospitals that provide care to a large number of uninsured patients.

"We are in the top of the country for DSH payments because of our poor patient population," Perlman says. "We are living in a system where there are spending caps, and healthcare providers have to manage with no or low increases in government payments. Overall, there has been a decrease in government payments over the last few years… We are never going to be in the ranks of the most profitable organizations, but that is not who we are, and it's not the community we serve."

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