HCPro.com - Executive Leadership - DO NOT USE Top Stories

What's the Truth About Your Hospital's Financial Health?

Fri, 20 Nov 2009 17:20:00 GMT

Only you know the truth about your hospital's health.

Hospitals are struggling or just fine, depending on whose study or survey methodology you believe. Within the past week, two respected organizations—the American Hospital Association and Thomson Reuters—have come out with a survey and a study, respectively, that seem diametrically opposed to each other's conclusions.

The AHA said hospitals are continuing to struggle financially while the Thomson Reuters report said hospital financials have recovered to pre-recession levels. So who's right? Well, they both are, but the challenge in finding a true fiscal health snapshot of an entire industry lies in the methodology.

I'm prepared to give the Thomson Reuters report a little more credence. It's based on proprietary and public data about hospital financial metrics, and goes so far as to say "the recovery has been broad-based, with all classes of hospitals—small, medium and large community hospitals, teaching hospitals and major teaching hospitals—showing positive median margins."

However, the AHA survey indicates that 34% of hospitals expect to report losses in the first half of 2009, up from 29% for the same period last year. I think the key here is the word "expect." While the AHA report focuses on subjective opinions, the Thomson report bases its conclusions on actual statistics.

The AHA report is based on a survey completed by 768 hospital CEOs, and the data was collected in August.

That doesn't mean the survey isn't valid or useful.

One shortcoming of the Thomson Reuters study, for instance, doesn't appear to take into account the ways hospitals achieved margins comparable to pre-recessionary times. The AHA survey said some hospitals have taken drastic steps to contain costs, indicating to me that many hospitals have cut their way back to pre-recessionary margins. To wit:

A higher proportion of patients are unable to pay for care and many hospitals are seeing more patients covered by Medicaid and other public programs for low-income populations.
More than half of the hospitals surveyed have reduced staff.
Eight in 10 have cut administrative expenses.
One in five have reduced services that communities depend on, including behavioral health, post acute care, clinic, patient education, and other services that require subsidies.

I'm not one to denigrate surveys—HealthLeaders Media does one ourselves each year that we're very proud of—but under these circumstances, I think I'll trust the financial data contained in one report versus the best-guess data contained in the other. Let's not forget, as well, that the AHA's job is to advocate for its members. In these volatile times, as healthcare reform bills seesaw the future projections of revenues for hospitals, it helps to paint as negative a picture as possible, without skewing the data. Also, a survey is self-selective, and depends on the truthfulness of its respondents, not to mention the fact that without comprehensive data, it's difficult to draw broad conclusions.

Why Do Some Hospitals Successfully Implement EHRs and Others Fail?

Tue, 17 Nov 2009 17:39:00 GMT

There are pieces of advice I hear repeatedly when talking with technology executives about implementing electronic health records and why some organizations are successful whereas others struggle. Phrases like "get physician buy in," "allocate more resources for training," and "spend more time planning on the frontend" come to mind. Unfortunately, the advice doesn't always come with strategies on how accomplish it.

Recently, I spoke with Chuck Podesta, senior vice president and chief information officer for Fletcher Allen Health Care, about its conversion to an EHR from Verona, WI-based Epic Systems. He shared the governance structure that the Burlington, VT-based academic medical center established to implement its EHR, which he credits as one of the key factors to their success.

The organization also spent a good deal of time determining "what that project would look like, the resources needed, and the cost associated with it," says Podesta, adding that some organizations spend a lot of time on the RFP process, but not enough time planning how they want the project to unfold.

Prior to its conversion to the EHR, the medical center had a mishmash of systems, Podesta says. Fletcher Allen was a best of breed shop with boutique systems for finance, radiology, and labs. "We had our own home grown clinical data repository--called Maple--that was viewable on the units and it had some clinical information but not a lot and everything else was paper,” he says.

The 562-licensed-bed medical center went live with the first phase of its EHR conversion this past June, which included all of its inpatient clinical applications including the emergency department. Fletcher Allen is tracking metrics linked to clinicians' adoption of the EHR system.

For its computerized physician order entry system, for example, 95% of orders are currently being placed electronically. "We were at about 90% a week out of the gate and we keep moving forward," says Podesta, noting that the system will always have some telephone orders because "it's hard for a physician who is driving a car to access a computer and enter the order."

So what went right?

Podesta says the medical center had the right number of committees and each committee knew what its role was and, just as important, what its role was not. "It was set up in a way that it wasn't too bureaucratic, but had enough meat to it that people felt if they had issues they had a place to take them and they would be worked on and decided on quickly," he says.

Fletcher Allen established three committees: a patient care operations group that was a multidisciplinary group of nurses and physicians focused on workflows at the unit level, a physician advisory council that was instrumental in keeping the physician side of the project moving forward, and a clinical transformation group.

Hospital CEOs Question Whether There are Enough Clinicians if Reform Passes

Tue, 17 Nov 2009 12:41:00 GMT

A majority of hospital chief executive officers say they don't have enough physicians, nurses or allied health professionals to handle increased demand if health reform improves access, according to a survey released Monday by AMN Healthcare, a large provider of clinical staffing services.

The survey, completed by 285 hospital executives, found that although there are more applicants for jobs today because of the recession, significant gaps remain. And what's worse, many of the executives believe the situation will not improve.

"While the short-term economic environment may have temporarily eased the ability to recruit and retain clinical staff, the long-term dynamics of an aging population will drive the need for thousands of additional healthcare professionals," said Susan Nowakowski, president of AMN Healthcare.

"Any plan to expand access to care would intensify an already anticipated critical shortage of physicians. Healthcare reform should include robust efforts to train more doctors, nurses, and other clinicians," she said.

Among the survey's highlights:

Ninety-five percent of CEOs believe there is a shortage of physicians, 91% say there's a shortage of nurses, 79% say there is a shortage of allied health professionals, and 86% point to a shortage of pharmacists.

Ninety-five percent of CEOs said the physician shortage has worsened in the last six months or has not improved. Meanwhile, 27% perceived the supply of nurses has improved in the last six months.

Hospital CEOs continue to report clinical staff vacancies, reporting an 11% gap for physicians, 6% for nurses, 5% for allied professionals, and 5% for pharmacists.

Forty-six percent of CEOs said access to care in their service areas has been compromised by a physician shortage, 8% said access has been compromised by a nursing shortage, and 10% said it's been hurt by a lack of allied health professionals. Three percent said access has suffered because of a shortage of pharmacists.

Of the CEOs who responded to the survey, 81% rated reimbursement as an important strategy priority, 65% rated quality of care as important, and 50% said margin compression as the top priority.

Asked if their service areas had enough clinicians to handle increased demand if more patients have a source of healthcare payment, 21% said their regions had enough physicians, 33% said they had enough nurses, and 31% said they had enough pharmacists.

The AMN survey concluded that shortages persist though some hospital CEOs said the economic downturn has alleviated some of the difficulty of recruiting clinicians.

Star Wars Wisdom Applies to Charity Care

Mon, 16 Nov 2009 17:09:00 GMT

It struck me as odd to learn this week that in these economic times 67% of patients are unaware they may qualify for free or reduced healthcare expenses, according to a TransUnion survey released last week.

How on earth is that possible? We are in one of the worst economic recessions, and yet people don't know that a hospital can actually help them with more than stitches? I know money is tight for facilities, and number-crunchers have enacted the "charity begins at home" approach to savings, but this percentage should disturb any CFO.

Even a child, let's call him Luke, could easily argue that this stat reinforces why the government is justified in reviewing hospitals' not-for-profit statuses. I'd actually argue something different, Luke, and I'm coming to that. Stay with me for a moment as I switch gears to bill transparency. Since 2006, 30 states have laws requiring some sort of bill transparency, ranging from measures affecting disclosure to general transparency to the reporting and/or publication of healthcare and hospital charges. Interestingly, the TransUnion survey, which polled 654 Americans nationwide in October, notes that two-thirds of adults want to see more transparency in their bills.

Is it a coincidence that 67% of patients want more transparency and 67% didn't know about charity care? On the surface, this might give fuel to young Luke's case, but his logic would be skewed by the numbers and not by the realities that most hospitals are facing. Most facilities strongly believe in their missions to care for the insured, underinsured, uninsured, and the flat-out broke, but they are actually ill-equipped to estimate bills and discern who can pay them before the services are performed. So, hospitals are less vocal about the "free" option to patients, because frankly they aren't always sure who will qualify.

So, Luke, there likely isn't anything sinister afoot at hospitals. Many facilities don't see these losses as large enough to really focus on, so they are a tad behind on adding the technology necessary to correct this, but to quote the cinematic classic Return of the Jedi, hospitals may "pay the price for their lack of vision."

Use the Force: Technology
Sure 30 states enacted well-meaning bill transparency laws, but they are a tad inane. After all, how can you post the price of something that involves so many different components and is so individualized? Moreover, if you can't provide a fairly accurate estimate of your cost of services, a patient simply can't know whether they can afford the service, nor can the hospital know if they should categorize the individual as charity care candidate.

"To ensure hospitals don't watch the revenue leak out they need to collect from the patient at the point of service, but to do that you have to know how much the patient may owe and then determine if they can pay that bill," notes Jim Bohnsack, vice president of product development at TransUnion health group.

It's technology to the rescue, and just in time for what's predicted to be a difficult year for uncompensated debt; consider these stats:

Uncompensated care costs rose from $21.5 billion (2001) to $34 billion (2007) and hospitals are reporting an 8% increase through Q3 2008, according to the AHA.
Uninsured patient numbers grew from 39.8 million to 47 million from 2001-2007, the AHA notes, and that number is rising.
Unemployment hit 10.2% in October, the DOL estimates, and unemployment and COBRA healthcare benefits will expire for millions of unemployed Americans in the coming months.

These are numbers CFOs know all too well. However, when you put them together they make a strong case that uncompensated care will grow at your hospital in 2010, that is unless you change your approach to collection through bill estimation. Riverside Regional Medical Center, a 570-bed facility in Virginia recently added this type of technology to determine charity eligibility at the time of registration.

Hospital Recovery Appears V-shaped

Mon, 16 Nov 2009 15:46:00 GMT

Economists are debating whether the nation is enduring a U-shaped or a V-shaped recession. The U-shaped recession means a more gradual recovery—particularly one that sees limited if any job growth. The V-shaped recession tanks quickly and recovers quickly, too.

The overall economy appears to suffering from a bad case of U-shape. Record levels of unemployment are not expected to be alleviated until well into next year, if then.

For hospitals, however, a rich vein of raw data, reports, and surveys released over the last several weeks, give us a good idea of how difficult 2008 was, but also suggest that hospitals are now operating on the upward side of the V.

For starters, the American Hospital Association Hospital Statistics for 2010 guide reported that the nation's 5,010 nonfederal community hospitals saw profits fall to $17 billion in recession-wracked 2008, thanks in large part to investment losses that accounted for $4.4 billion in red ink. The losses, contrasting with the record $17 billion in investment income in 2007, means that hospitals saw a negative swing of $21.4 billion in investment income over two years, as overall net profits fell by about 60%, from $43.1 billion in 2007, to $17 billion in 2008.

A separate report from the Center for Healthcare Improvement at Thomson Reuters found that 80% of hospitals were back in black by the second quarter of 2009, with overall margins approaching levels not seen since the economy tanked. In 2008, the same report found that half of the nation's hospitals were bleeding red ink.

"If they had a 401(k) statement to look at, it'd be lower than it was two years ago. But in terms of the operational financial statistics like margins and liquidity, it looks like hospitals in large part have returned to prerecession conditions," Gary Pickens, the study's author, told HealthLeaders Media when the report was released. "The market conditions have improved. Investment income is back. Hospitals no longer have to take realized losses. From a liquidity perspective, we have seen cash on hand rebound pretty substantially."

Finally, monthly employment data issued by the Bureau of Labor Statistics found that the nation's hospitals reported a surge of 10,000 payroll additions in October, even as the overall unemployment rate hit a 26-year high of 10.2%. October represents the largest single month of hospital job growth since December 2008. In September, hospitals added 7,300 jobs, and the two months account for nearly half of the 37,500 hospital payroll additions reported so far 2009.

Have hospitals gotten their hiring mojo back?

David Bachman, a Cleveland-based independent healthcare analyst, believes they have. "There has been an improvement at the hospital level that has allowed them to ease up on the cost containments," he says. "To the extent that they can, hospitals do not want to get caught not operating at appropriate levels in terms of staffing because that is going to hurt them in the long run. Job growth may not come back to historical levels, but over the next 12 months it will definitely be up from what we have seen through much of this year."

Along with their recovering investment portfolios, Bachman says hospitals are also becoming less anxious with the idea of healthcare reform. "In the last couple of months, that picture is looking better than people had initially thought," he says.

There are icebergs bobbing out there, however. Bachman says a sustained recovery for hospitals will have to be accompanied by a sustained recovery for their investment income, and with the overall economy. "If we see the stock market take another dip, that is going to have a direct and indirect impact on hospitals," he says.

Broken Neck Reveals Hospital Management Problems

Fri, 13 Nov 2009 17:21:00 GMT

Dr. John Kenagy is a physician, healthcare executive, scholar, and advisor, who was once described by Forbes Magazine as "The Man Who Would Save Healthcare." He's written a book called Designed to Adapt: Leading Healthcare in Challenging Times. What's interesting about the book is that many of the lessons come from his personal experience surviving a critical hospital stay for a broken neck, where he came to the conclusion that most healthcare organizations can't manage the many small problems that affect each individual patient on a day-to-day basis, let alone the larger issues faced by the industry. I spoke with him recently and he's featured in this week's audio interview.

Swine Flu Vaccine Offers Lessons in Leadership

Fri, 13 Nov 2009 16:35:00 GMT

I was watching "CBS Sunday Morning" last weekend. Call me a fossil, (I'm only 38) but I love the music at the beginning, the sun motif, and Charles Osgood's voice and manner. Never mind that I usually watch it much later courtesy of the DVR.

Anyway, the stories are usually pretty soft—they had one on the 40th anniversary of Sesame Street, for example—and they're often pretty light on details, but a story this week on why people decline the swine flu vaccination was particularly interesting and alarming at the same time.

In the story, the reporter interviewed a couple of doctors who argued that getting a majority of people to get the vaccine is important to "herd immunity." This essentially means that it's more difficult for a disease to maintain a chain of infection when large numbers of a population are immune.

The doctors interviewed in the "Sunday Morning" piece said that irrational fear of the vaccine, thanks primarily to widespread speculation about the role of vaccinations in causing childhood autism (a link that has never been proven, by the way) is getting in the way of herd immunity across the globe.

Meanwhile, the spokesperson for a private group that counsels against getting the vaccine essentially said that people shouldn't be forced to get anything injected in their body. Never mind that no one's arguing that point—at least in this country.

But recent controversy about the safety of the vaccine has spread to people you'd think would know better, including healthcare workers themselves. These are people who are supposedly trained not only in treating patients for diseases and other maladies with which they're already afflicted, but who presumably have a working knowledge of how diseases are transmitted and how people can protect themselves.

Seeing something like this, it's no wonder we have such a problem with getting caregivers to consistently wash their hands. In fact, I'm only vaccinated against H1N1 myself because the initial 3,000 inoculations set aside for healthcare workers here in Nashville were so underutilized that you'd think they were giving away eye pokes and face slaps.

Only about 64 healthcare workers took advantage, so the local health department opened the remaining 2,936 doses to anyone who wanted one—my wife and I among them. One month later, and I'm still here. Not a sniffle.

I'm a big believer in vaccines. Why? My great-grandparents had a big family in rural Mississippi. By the time the so-called Spanish Flu pandemic finished its work between 1918-1920, they were both dead from it, as were three of their eight children. Between 50 million and 100 million people worldwide joined them in death from the disease. Do you think there would have been controversy about a vaccine that would prevent that disease if there had been one available at the time? Me neither.

Seven Health Leaders React to House's Health Reform Legislation

Tue, 10 Nov 2009 19:52:00 GMT

With its approval of HR 3962 Saturday night, the House of Representatives cleared a major hurdle, but there are still plenty of barriers in place before health reform becomes a reality.

Attention now switches to the Senate, which will soon debate its own health reform legislation.

Many Democratic leaders praised the House bill, though many liberals remain disappointed in the legislation. Republicans, meanwhile, largely panned the bill that they see as an avenue toward government-run health insurance without ways to control costs.
Healthcare leaders' opinions are as diverse as those on Capitol Hill. Here is what seven health leaders think of the House's reform plan:

Craig E. Samitt, MD, MBA
President and CEO
Dean Clinic and Dean Health System
"Admittedly, my feelings about recent passage of the House healthcare bill are mixed. On one hand, I applaud the fact that we're finally seeing progress toward significantly broadening access and reforming healthcare, particularly the insurance market. The U.S. healthcare system needs repair and true healthcare reform is long overdue.

"On the other hand, the healthcare bill that marginally passed in the House is not true reform, and frankly does not go far enough to address what is truly broken in our healthcare system. If we truly want to reform healthcare, this would involve four critical elements.

"First, solve the uninsured dilemma by assuring that healthcare for all Americans is an equal right, not a luxury. Second, significantly improve clinical quality, patient safety, customer service, and access. Third, solve the 'cost conundrum' that has resulted in our system being an unfathomable 50% more costly than any other country. Fourth, preserve and protect the strengths of the current system and create a combination of carrots and sticks to address what is truly wasteful, fraudulent or broken.

"While the House healthcare bill assures broader coverage for the uninsured, which is good, it does little to address concerns about quality, service, safety, access or cost. If we truly wish to reform our healthcare system into one that assures better care at a lower cost, we need to go further."

Rich Umbdenstock
President and CEO
American Hospital Association
"While the House bill makes important progress in expanding coverage, an important goal for hospitals, there are areas for improvement. In the days ahead, America's hospitals will work to improve upon the bill for patients and families.

"While the House bill using negotiated rates within parameters is an improvement, we remain concerned that the program would still, in part, be based on historically low Medicare rates. We also are concerned about expanding eligibility for Medicaid to 150% of the federal poverty level at a time when states are struggling with severe budget shortfalls.

"Lawmakers also should restore a provision that would expand the outpatient $340 billion drug discount program to inpatient services for all eligible hospitals. Lawmakers should revise the $20 billion medical device manufacturer tax so it cannot be passed on to hospitals, narrow the hospital readmissions policy to address only truly avoidable readmissions, and improve accountable care organizations to give hospitals the opportunity to play a leadership role."

Lori Heim, MD
President
American Academy of Family Physicians
"The House passage of the Affordable Health Care for America Act is an important step toward needed change in the healthcare system.

"This legislation will provide health insurance coverage for 96% of Americans. It will provide peace of mind for millions of people who cannot get health insurance due to cost or pre-existing conditions. It will provide health security for millions more who fear loss of coverage if they get sick.

"Family physicians appreciate the bill's provisions that would help re-establish primary medical care as the foundation of our healthcare system. Investment in primary care will yield not only better health for everyone, but also more efficiencies, less waste, and less duplication.

"By creating a pilot program that helps physicians provide patient-centered medical home services and eliminating out-of-pocket expenses for preventive services, the legislation will encourage Medicare beneficiaries to get the comprehensive, whole-person care that improves their health while helping control the cost of their care.

"HR 3962 also begins rectifying the growing payment disparity between primary care and subspecialty care physicians. The bill provides a Medicare-wide, 5% bonus (10% in underserved areas) for physicians whose Medicare practice is more than 50% primary care services. This bonus sends a signal that the nation does, in fact, recognize and value the medical expertise and comprehensive care provided by family physicians and their primary care colleagues."

Alan Morgan, MPA
Chief Executive Officer
National Rural Health Association
"For health reform to be effective for the quarter of the population that resides in rural America, the access to care crisis in rural areas must be resolved. To do that, health reform must address the workforce shortage crisis in rural areas and correct long-standing payment inequities.

"The House healthcare reform bill takes positives steps toward both of these goals, but falls short of truly ensuring that the access to care crisis will be significantly reduced."

J. James Rohack, MD
President
American Medical Association
"The AMA hails the passage of the House health reform bill, which will help improve the health system for patients and physicians and calls for swift passage of HR 3961 to secure the stability of the Medicare program. Passage of the House health reform bill is a big step forward as we work for comprehensive health reform this year. The AMA will continue its work with Congress and the administration to strengthen and improve health reform legislation as the process continues for patients and physicians.

"The bill will significantly expand health insurance coverage to Americans; empower patient and physician decision making; institute meaningful insurance market reforms; make substantial investments in quality; institute prevention and wellness initiatives; provide incentives to states that adopt certificate of merit and/or early offer liability reforms; and reduce administrative burdens.

"As Congress considers new coverage commitments to the American people through health reform, it must ensure that commitments already made are fulfilled through passage of the Medicare Physician Payment Reform Act of 2009 (HR 3961). This bill will permanently repeal the broken physician payment formula and preserve access to care for seniors, baby boomers and military families."

Raking In Rebound: 80% of Hospitals in the Black

Mon, 09 Nov 2009 16:12:00 GMT

This year, as I bagged seemingly thousands of pounds of multi-colored leaves, it occurred to me that this is only the precursor to the real work. After all my leaves are all cleared away, I have back-breaking snow shoveling to look forward to.

That's when it hit me, raking is what hospital CFOs have been doing the last two years to get their financial yards in order (and things are starting to look decent), but with a host of other challenges ahead, including healthcare reform, it looks like the forecast is calling for snow, so CFOs had better prepare to start shoveling.

I'll explain, but first there is some good financial news for hospitals I want to share. You see, hospitals have been diligently analyzing areas of overspending these many months and your efforts are paying off; 80% of all hospitals are back in the black, according to a research paper Hospitals Continue Financial Recovery released today from The Center for Healthcare Improvement(CHI), a division of Thomson Reuters.

There's more good news: large community hospitals which were hit hardest by the recession—in Q4 2008 nearly 60% of large hospitals reported negative total margins—improved drastically, and now only 8% of facilities are in the red as of Q2 2009, the CHI report notes.

"Many hospitals have recovered to prerecession levels [for total margins]," says Gary Pickens, PhD, CHI Chief Research Officer and coauthor of the paper, which surveyed over 500 hospitals of various size and orientation.

There are a variety of ways CFOs could've tackled their market losses, including reduced salaries or reduced staff per bed, but for the most part that isn't the direction they pursued. The survey shows that FTE salary expenses actually rose by 3%-4% and only a small number of nonclinical contract labor declined. Where did the cost savings come from then?

"[Hospitals] reduced labor expense per discharge by reducing the length of stay; quite simply they put more patients through," Pickens says.

Kudos to all the hospital number-crunchers; your efforts paid off.

Forecast Calls for Snow
Alas, while the CHI findings certainly are very positive news, as I said at the beginning of this column, it's only the first part of the "yard clean up." It's about to snow and there is a slippery sidewalk and driveway you'll have to shovel clear.

I don't like pointing out the unpleasant truth, but the fact remains that many hospitals are still dealing with some seriously bad credit, and let's not forget that healthcare reform, in whatever form, will have a serious impact on the bottom line.

But first, many hospitals have to get their credit back up to snuff. Standard and Poor's July 2009 Ratings Roundup: Criteria-Related Reviews Kept U.S. Public Finance Rating Actions On A Positive Trend In The Second Quarter shows the negative rating trend persisting in Q2 2009 with 22 downgrades and five upgrades.

"Downgrades were slightly more prevalent among higher-rated credits; 56% of these occurred in the medium-to-high investment-grade categories and the remaining 44% were in the low investment-grade or speculative-grade categories," the S&P states. That's not good, at all.

Survey: Half of Nonprofit Hospital Boards Don't Value Clinical Quality as Top Concern

Mon, 09 Nov 2009 13:31:00 GMT

Half of the board chairs of the nation's nonprofit hospitals said their boards don't rank clinical quality as one of their two highest priorities, according to results of a Harvard survey said to be the first of its kind.

However, chairs of boards that did prioritize quality oversaw hospitals that performed better on national Hospital Quality Alliance measurements than hospitals where boards didn't rank quality of highest importance.

"Most of them don't even prioritize it for evaluating their chief executive officers. They just don't think it's much of a priority," says Ashish K. Jha, associate professor in the Harvard School of Public Health.

The survey, conducted with co-author Arnold M. Epstein, chair of the Department of Health Policy and Management at the Harvard School of Public Health, is published in this week's journal Health Affairs.

The board chairs were asked to rank priorities from these six issues: quality, financial performance, operations, business strategy, patient satisfaction, and community benefit.

The authors see an association between these boards that are more engaged with the issue of quality at their hospital, and the likelihood that the hospital does well on quality measures. Likewise, they saw a link between hospitals where the boards didn't prioritize quality—and lower HQA scores.

"In high performing hospitals, boards are far more engaged, they know quality data, follow it closely, and think it's a high priority," Jha explains. "The boards ask 'how many patients did we harm last month? How many infections did we cause?' It may be that at high performing institutions, that sets the tone."

The authors concluded "this area represents a tempting target for intervention," however, added "the less than optimal focus on clinical quality . . . points to a difficult road ahead."

The researchers gathered 2007 national Hospital Quality Alliance scores for 3,410 nonprofit acute-care hospitals in three clinical conditions: acute myocardial infarction, congestive heart failure, and pneumonia. They then randomly selected 1,000 hospitals from this group, but oversampled those ranked in the top or bottom 10%, the high performing or low performing HAQ hospitals.

Board chairs of these 1,000 hospitals were asked to rank their top two priorities from those six issues. More than two-thirds, 722, responded.

Looking at the response rate for low-performing HAQ hospitals versus high-performing ones, there were significant differences, Jha says.

For example, among all hospital board chairs responding, only 44% said clinical quality was an issue considered in ranking a CEO's performance. But at low-performing hospitals, only 30% said it was a consideration while at high-performing HQA hospitals, 60% said it was considered.

Carlin Lockee, managing editor of the Governance Institute, which assists hospital boards, says she was surprised at the study's results. She says they differ from the Institute's similar surveys of nonprofit hospital CEOs.

"We have found more encouraging results," Lockee says. "And we believe that hospital boards still have a long way to go, but they have improved significantly over the last five years."

In fact, it's unclear whether the CEO in fact sets the tone, and not the board, and that those hospitals that perform better do so because they have better CEOs. It may not matter what the boards discuss on their agendas.

Red Flags Fly, Bad Debt Shrinks

Mon, 02 Nov 2009 15:59:00 GMT

When legislation occurs anyone on the receiving end of it can usually anticipate money going out, not coming in. And at first blush it seemed that the Red Flags Rule would be no different. But there's a sunny side to complying with this Rule, which was supposed to take effect Nov. 1 and was delayed until June 1: There's minimal cost to implementing this rule and the return on this investment could reduce your bad debt.

Nationally hospitals average 5% bad debt or charity, but in these economic times that number is likely growing. One reason that number may be on the upswing is medical identity theft. The Federal Trade Commission estimates that nearly 5% of the nine million Americans who are victims of identity theft will experience some form of medical identity theft, according to their 2007 survey.

That's where the Red Flags Rule comes in. The Rule requires certain businesses and organizations, including hospitals and other healthcare providers, to develop a written program to spot the warning signs — or "red flags" — of identity theft.

"Healthcare providers must develop and implement programs to detect, prevent, and mitigate identity theft and medical fraud," says Randy Berry, CPA, vice president of Columbus Healthcare & Safety Consultant, LLC and author of Red Flag Rule Compliance for Health Care Providers.

This may feel like a HIPAA déjà vu, but it's not.

First the cost of implementing the Red Flag Rules is generally well under $1,000 not $10,000 if training in-house, and depending on the size of the facility it may be in the hundreds, Berry says. That's chump change when you compare it to the hundreds of thousands of dollars it took for most hospitals to comply with HIPAA. Here's a quick look at the potential costs:

Training — If you delegate an in-house staff member to train your team, you'll lose a few hours of their time but won't add to the overall cost. Alternatively, you can hire a consultant to train your team and that will cost your facility a few thousand dollars.
Time — There is time lost for your staff to train, estimate 45 minutes or less for this mandatory training to take place.
Paper — First you need to write the policy and procedure (and get your board to sign off on it) then you'll need to make it available to your staff via hard or electronic copy.
Fines — If you fail to implement the Red Flags Rule you are subject to fines. There is a Federal fine of $2,500 per occurrence of identity theft, and in many states there is an additional $1,000 per occurrence. Also, be warned that while the FTC may not have the staff to verify compliance with this regulation at all facilities, there's speculation that the federal government my tack this on with other audits.
Bad Press — This is where the public relations team has an opportunity. Failing to comply with this regulation is a PR nightmare. Bad press about identity theft at a hospital doesn't endear your facility to the community. However, the reverse is also true and a good PR team should consider promoting your efforts to prevent identity theft as a huge benefit to the community.

Second, the two regulations target different areas of patient information. The Red Flags Rule is designed to protect the patients billing and personal information (e.g., social security number and health insurance identification) while the HIPAA regulation focuses on the privacy and security of patient medical records (e.g., diagnosis information and medical history).

But back to your bottom line, where the Red Flags Rule may help hospitals is with medical identity theft and fraud prevention. Medical identity theft is slightly different than Medicare fraud, though they do intertwine. One definition of medical identity theft is when a patient's Medicare/Medicaid insurance information is stolen and another individual uses this information for their treatment. When the victim of the theft goes to use their benefits, they find them exhausted.

Additionally the patient's medical records may be affected, as they may now contain information pertaining to the identity thief. This could result in incorrect treatment or diagnose. Medicare fraud can cover anything from falsifying bills to creating fake patients. For a more comprehensive look at the distinctions in these categories, read "Medical Identity Theft: The Information Crime that Can Kill You".

Aside from the cost both these crimes cause to your patients, the hospital is also left in the financial-lurch. When the insurance company catches the claim by the identity thief, they can refuse to reimburse the hospital. The hospital loses all the dollars associated with that visit and that increases bad debt. If taken seriously and implemented well, the Red Flags Rule should help healthcare organizations screen out more of these fraudulent activities.

Healthcare Unions Steam Ahead in 2009

Mon, 02 Nov 2009 15:44:00 GMT

Healthcare unions aren't initiating as many organizing elections now as they have in recent years, but a new study shows that when organized labor picks a target, they usually win.

The latest Semi-Annual Labor Activity in Health Care Report found that unions won 75% of representation elections held in healthcare in the first six months of 2009.

"That tells me the unions are getting more efficient and adept at organizing. They are laying the groundwork and making sure they have a winner," says James G. Trivisonno, president of IRI Consultants, which compiled the report for the American Society for Healthcare Human Resources Administration.

"Every day the union has people coming to their door saying they are upset about something at their employer. The union has to separate the wheat from the chaff," he says. "It's an investment of between $2,000 and $3,000 per worker to organize, so they look for vulnerabilities and they look for emotional issues. Oftentimes pay and benefits don't generate that emotion. It's things like management treatment, communication, engagement, some kind of triggering incident. Sometimes it's race, or a safety and security beef. All of that is full of emotion and they are tough to deal with once you get that monkey on your back."

Trivisonno's report finds that 10 states accounted for 84% of all organizing petition drives in the first six months of the year, with California, New York, Massachusetts, and Michigan in the vanguard, and all of those states have large concentrations of healthcare employees.

"Traditionally right-to-work states have had less to be worried about," he says. "Though in the past Texas and Florida had little to be worried about but if you look at the last few years they have become targets."

Unions' success is not relegated only to the healthcare sector. The prolonged and deep recession is being blamed—or credited—with union growth across a broad swath of industrial sectors, according to the IRI report.

Trivisonno notes that organized labor in all industrial sectors won 65% of their organizing elections in the first six months of 2009.

"Non-healthcare union elections typically hover at around 50% and now they're at 65%," Trivisonno says. "In fact, last year, as a percentage of the total workforce, union density increased. They've actually added net numbers. That hasn't happened since the 1950s."

Now, as the nation appears, at least on paper, to be emerging from the deepest recession since the 1930s, Trivisonno says history shows that unions are poised to make even greater gains.

"The thing that we have seen in recessions is that people are willing to bite the bullet on the way down, accept benefits changes, etc., but once the economy bottoms out and starts coming back employees say, 'I was with you on the way down. Now I want mine back,'" Trivisonno says.

"The problem is that most organizations will wait as they are coming back on the other side for sustained evidence of growth before they will provide pay increases or add benefits. When the economy bottoms out, and the recession ends is when the greatest amount of union organizing occurs."

Exclusive Interview: Lessons From Wayne Sensor's Fall at Alegent Health

Fri, 30 Oct 2009 16:08:00 GMT

I've gotten huge response from my column last week about the difficulty of large-scale culture change at hospitals and health systems, epitomized by the sudden resignation of Wayne Sensor as CEO of Omaha's Alegent Health after two physician confidence votes went against him. Much of that response has been in support of Sensor, some has been in support of the docs, and almost all has been off the record or otherwise anonymous. And let me tell you, I've heard all kinds of stuff. More on that later.

"There are probably not a lot of CEOs who would be comfortable talking about this," Wayne Sensor told me earlier this week. "But my greatest desire is to help others who wish to lead transformation."

Well, I can guarantee he's right about one thing: there aren't a lot of CEOs who would talk publicly about the physician revolt he oversaw or the circumstances surrounding his resignation. In fact, I don't know if I would be talking to me were I in his shoes. But Wayne Sensor has always been different, ever since I was working the finance beat back in 2005 and talked to him for the first time. And I appreciate his openness.

At the time I first talked with him, Sensor's hospital system was at the cutting edge of making patient cost in healthcare more transparent through Alegent's MyCost online tool, still alive and well on Alegent's Web site, despite the shift in public debate away from patient involvement and responsibility and toward government involvement and "public options."

At the time, the trend of hiring physicians directly to work for the hospital was well-established at some of the best known, highest quality institutions in the nation, but that was a select group. Since, employing physicians become much more of a trend, and it's produced some heated disagreements between hospital executive leadership and independent physicians who practice at and refer patients to such hospitals.

But what you want to hear about is the circumstances surrounding Sensor's dismissal, so let's get that out of the way. Here's what I know from my conversation with Sensor, as well as news reports:

A large portion of the independent physicians who refer to Alegent hospitals decided he hadn't been honest with them about a plan to gradually transform the system to an employed physician model. He tells me that he thought he had embarked on this plan thoughtfully, honestly, and with the support of both the board and key physicians who wielded power in the organization, although those physicians weren't employees. Turns out, more of them disagreed with his perception than agreed.

What's fact is that over the 5 ½ years Sensor led the organization, the employed physician contingent has grown steadily, and now numbers about 200 of the 1,200 physicians on the system's staff. Clearly, the relationship between Sensor and independent physicians soured badly evidenced by a large contingent of doctors who had stopped referring to Alegent facilities or who threatened to do so. Subsequently, the board requested his resignation and he complied. He didn't want to resign.

I've heard lots of other salacious stuff that is reported to have been a contributing factor in the resignation from well-placed sources who refused to go on the record either with me or with Cheryl Clark, one of my colleagues at HealthLeaders Media who did some early reporting on the story. So I take that information for what it's worth: not much.

Recession Slows Charitable Giving for Healthcare

Wed, 28 Oct 2009 17:26:00 GMT

Philanthropic giving for healthcare in the United States grew by a modest 2.9% to $8.6 billion in recession-wracked 2008, a rate of growth that was half that of 2007, according to the new Report on Giving issued this week by the Association for Healthcare Philanthropy.

Much of the slight gain in 2008—about $241 million—was attributable to bookkeeping dates. Most nonprofit hospitals and healthcare systems closed their books before the last quarter of 2008, when U.S. gross domestic product plunged more than 5%. Institutions that closed their books on Dec. 31, 2008, actually saw a 0.2% decline in annual giving, the AHP report states.

AHP President William C. McGinly says the tepid results should serve as a "wake up call" to President Obama and Congress, who are considering legislation to limit charitable deductions as tax write-offs.

"The hit that wealthy individuals have taken in the total worth of their portfolios and holdings during the recession takes huge assets off the table and out of the giving equation," McGinly says. "Compounding this scenario would be the Obama administration and Congress' attempts to limit the charitable deduction write off, thus dampening wealthy donors' incentive to give and further reducing charitable contributions to all philanthropic organizations."

McGinly says that while the recession may be technically over, AHP members fear their charitable organizations will continue to feel its negative repercussions throughout the recovery.

The 2.9% increase was about half the growth rate achieved in 2007, when donations totaled $8.3 billion. Total pledges for charity fell 6.2% in 2008, while planned gifts secured but not paid fell almost 13%.

More than eight of every 10 donations came from individuals who donated 60% of all philanthropic funds raised by nonprofit healthcare institutions in 2008. One in 10 donations were made by businesses, including business-sponsored foundations, representing 17.5% of all funds raised, down slightly from 2007. Non-corporate foundations accounted for less than 3% of donors, but almost 14% of revenues. Other giving sources, including hospital auxiliaries, public agencies, and civic groups, accounted for 8.6% of total funds raised in 2008, compared to 7.5% in 2007.

Could Three Bills Bury Your Hospital's Bottom Line?

Mon, 26 Oct 2009 15:06:00 GMT

What's happening in Washington with healthcare reform is laughable in the world of business. Well, laughable may not be apropos as so many people's livelihoods and well-being are at stake. Still, it would be preposterous for a company to inform its top employees that they are receiving a 21% pay cut, not because they are doing a lousy job, but because the bean counters used the wrong formula to calculate their salaries. It wouldn't happen. That company would be the laughing stock on Wall Street.

Instead the accountants would fix the formula that was used, perhaps explain the situation to the employees as a "loss" and find another way to make up the difference. Yet, it seems the government cannot follow the same basic guidelines that any first year accountant would apply: when your numbers don't work because the formula you're using is wrong and outdated, fix the formula, and then address how to correct the loss (and do it the first year, not seven years later).

This brings me to last week's episode of the Medicare saga, in which bill S. 1776 (Medicare Physician Fairness Act of 2009) was swiftly introduced by Sen. Debbie Stabenow (D-MI) in the hopes that it would waylay the 21% Medicare reimbursement cuts scheduled to take effect next year for physicians.

Everyone agrees that doctors are doing a great job getting people well, but they just don't all agree if it's fair to pay them the right amount to cover the cost of doing the work. In fact they think they should get paid less than they did last year. Nevertheless, the bill failed. Not to fret the reimbursement cuts are still in limbo. Why? S. 1776 was just the annual mad-dash to block the reimbursement cuts from taking place, but it's not the only bill in the works that could stop the cuts, and it was really just muddying the waters.

Look for politicians to spend the next couple of weeks debating three bills that will likely have a far greater impact on hospital bottom lines, and healthcare overall. I caution you not to get distracted by any of the other bills on this matter. At this stage many of them lack the teeth and clout to go far. For now the most pressing pieces that will impact hospital administrators and boards are:

S.1796—the Baucus Bill, formally called America's Healthy Future Act of 2009
H.R. 3200—the Tri-Committee Bill (sometimes called the Kennedy-Dodd Bill), formally called the Affordable Healthcare Choices Act
S. 1679—the Affordable Health Choices Act, which was approved by Senate Health, Education, Labor and Pensions Committee's (HELP) on July 15.

The Senate reconciliation process is ongoing among select members of the Finance and the Health, Education, Labor and Pensions Committees and they are reviewing these bills behind closed doors in an attempt to create what I like to call the "healthcare hybrid." Expect to see the fruits of their labor over the next couple of weeks. It's hard to say what intoxicating blend might result from this review, but historically speaking it's likely that a 21% reimbursement cut for next year won't take place (though that doesn't mean a smaller cut won't take effect). Plus you should anticipate a heady dose of health insurance coverage changes—translation, your payer contracts will be adjusted eventually and probably not in your favor.

Alegent CEO's Resignation Illustrates Difficulty of Culture Change

Fri, 23 Oct 2009 15:14:00 GMT

As I was preparing to lead the culture panel at HealthLeaders '09 last Friday in Chicago, I heard about the resignation of Wayne Sensor as CEO at Alegent Health in Omaha.

I've known Wayne for about four years, so the news came as a shock, especially since from every angle I've seen him over that time, it always seemed like he was committed to patient power as the key piece of cutting costs and improving quality in healthcare. He's always been a pioneer—from the drive to make healthcare prices transparent to the consumer to building a staff of employed physicians at the health system. Heck, three of the system's hospitals were recently named among the 100 "best value" hospitals. So what gives?

Well, so far, few are talking, including Sensor himself, but the writing on the wall is pretty obvious. Medical staff at two of Alegent's largest hospitals recently revealed a vote of no confidence against him, and that means dollars, ladies and gentlemen. Essentially, powerful physicians on the medical staff were saying with their no confidence votes that unless he was gone, they would henceforth be taking their business elsewhere. I'm told many of them already did that. Sensor offered his resignation, and the board, faced with a physician revolt that in the short term could have eviscerated the health system in favor of its competitors, accepted.

As I took the stage to moderate a panel on the difficulty of culture change in healthcare, the irony couldn't have been more stark. I talked with a good source on the drama the other day. He says the board insists that Sensor's resignation was not related to his drive to employ physicians at the expense of the affiliated medical staff, but let's be honest here: it couldn't have helped.

Everywhere you look, the old medical staff model of healthcare is breaking down. Hospitals, squeezed by reimbursement struggles, are hitting the financial shoals, and they need patients—especially the high-dollar kind whom specialists treat—to fulfill their mission. Employing physicians means their interests are much better aligned with those of the hospital or health system. But employing specialists is where it gets tricky. Independent physicians still wield tremendous power over patient referrals and most importantly, where they perform their high-margin services, not to mention power over the implants and surgical materials that hospitals must buy. No wonder CEOs feel squeezed at both ends.

When you start moving into specialists' space, you're stepping on toes when there's not a population increase to demand a general increase in the number of specialists in a market, my source says.

Why are More Hospital Executives Pursuing M-degrees?

Fri, 23 Oct 2009 12:53:00 GMT

It seems today that the C-suite of hospitals and medical facilities is filled with an alphabet soup of M-degrees: Master's of business administration (MBA), master's of medical management (MMM), master's of public health (MPH), and master's of health administration (MHA).

More physician executives are currently pursing post-graduate business degrees, according to a new report, 2009 Physician Executive Compensation Survey, from Cejka Search, a healthcare executive and physician search organization, and the American College of Physician Executives (ACPE).

"There is a marked differentiation of physician [executives] that have MBAs and those that don't," said Lois Dister, executive vice president and managing director of Cejka Search in St. Louis about this year's report based on 2008 data.

Currently, one-third of physician executives (33%) possess an MBA, MMM, MPH, or MHA, according to the report. Based on a survey of more than 2,000 members of the ACPE, researchers found the following data:

53% of physician executive respondents have an MBA

28% have an MMM

13% have an MPH

6% have an MHA

They most often fill the roles of medical director, chief medical officers, division chiefs and department chairs, and vice presidents of medical affairs.

Advanced career options
Why do physicians spend the extra time and money for advanced business and management degrees? For many, it's a pathway to advancing their career.

"More and more, I'm hearing that a master's or post-graduate business degree is required," said Dister.

Although a growing number of physicians are taking the helm as CEOs, it's rare that these physicians do it without formal financial education. The M-degree is becoming the prerequisite to becoming a CEO or another high level leader.

Some physicians ask themselves the question, "Is an MD enough these days?" Unlike the practice of medicine, which requires formal education and a diploma as the stamp of approval, there's no such degree requirement for physician executives—yet.

"I used to say that experience trumps an MBA. Now, it's changed. Now, for most of my clients that are true physician executives—a top leadership role in a healthcare organization, like a chief medical officer, chief medical information officer, CEO, or chief operating officer—it's a ticket to enter into the game. You can't even be interviewed without it. It's a qualification," said Dister.

The old model is dying. While physicians used to learn business skills on the job, doctors are today learning about practice management in the classroom.

"If you go back in time, [people] got this training through the school of hard knocks. People picked up these skills the hard way with on-the-job training, either teaching themselves or having a mentor," said Jonathan H. Burroughs, MD, MBA, FACPE, CMSL, senior consultant at the Greeley Company in Marblehead, MA.

"There's really a better way of doing it now because we can systemically get that education before we go into the board room or the C-suite," he said.

From HealthLeaders Media '09: Leadership During Disruptive Times

Mon, 19 Oct 2009 13:29:00 GMT

Any major transition between one major business or regulatory model and another is inherently disruptive, as the healthcare industry has learned during a healthcare reform process that has gone on for months and has been coming for years. But during disruptive times, leaders are able to see the future world and prepare for it, while trailers fight the changes and ultimately lag behind.

After a day-and-a-half of in-depth panels and discussions about improving outcomes, design, patient experience, culture, and talent in tomorrow's hospitals, the HealthLeaders Media '09: The Hospital of the Future Now concluded in Chicago on Friday with a leadership luncheon that focused on healthcare finances and the uncertain future of reform.

There was little optimism from the panel of CEOs about the final legislation expected to make it out of Congress. Patricia A. Gabow, MD, CEO of Denver Health, saw some positives in reform—including the potential reduction in uninsured patients, who make up 46% of Denver Health's patient population—but was worried that if the reform was insufficient politicians wouldn't have the stomach to continue the process and learn from mistakes.

Peter S. Fine, FACHE, president and CEO of Banner Health in Phoenix, AZ, echoed concerns that the reform process would be incomplete. Fine had recently met with Arizona Senator Jon Kyl, who told him that the current battle was as much about ideology as improving healthcare or health insurance.

The third panelist was Charlie Baker, Jr., former CEO of Harvard Pilgrim Health Care and current gubernatorial candidate in Massachusetts. Although Baker had a first-hand account of similar healthcare reform efforts in Massachusetts, he said the model couldn't be applied to the rest of the United States. "Massachusetts is really different than Colorado, Arizona, and basically all of the other 49 states," he said. What the healthcare industry could expect, he predicted, was a bigger role for the federal government as a researcher, investigator, and regulator in healthcare.

Healthcare has grown up around misaligned incentives, and Congress has so far missed an opportunity to tackle payment reform, panelists said. Baker offered as an example the gap between primary care physicians and some specialists. An hour with a primary care doctor reimburses about $250, but orthopedic surgeons get about $4,000 and cardiologists $5,000 for the same amount of time, he said. Although healthcare reform legislation includes bonuses and payment increases for primary care, none of the bills address the fundamental flaws of the reimbursement system.

Despite reservations about the future of healthcare, panelists are already preparing for the future world and demonstrating that success can come despite difficult challenges. Denver Health and Banner Health both began months ago and invested millions into physical plants to expand capacity, as well as needed IT projects, for instance.

Their recent financial success has given the systems breathing room to prepare for coming changes. Denver Health won this year's Top Leadership Teams award for large hospitals in part because it has used Lean management approaches to become one of most efficient and highly-integrated systems in the country.

Banner Health has also done well using what Fine called a "common sense" management approach and limiting overhead costs to 7% of revenue. "It's really an attitude within the organization: You've got to live within your means," he said.

From HealthLeaders Media '09: Five Ways to Build the Talent of the Future

Fri, 16 Oct 2009 15:12:00 GMT

It has been a challenging year for hospital leaders when it comes to managing talent. The economy has forced many to freeze hiring or lay off segments of the workforce, and the general pressures of a changing industry and strained budgets have tested the morale of many staffs.

Yet building the successful hospital of the future requires attracting the best physicians, nurses, and support staff, and creating a patient care environment that keeps them around. Hospital leaders face the divergent challenges of managing the workforce in today's economy while building the workforce to succeed in tomorrow's healthcare system.

Panelists at HealthLeaders Media '09: The Hospital of the Future Now conference in Chicago tackled this topic on Thursday, and offered five strategies for attracting the talent of the future:

1. Define your values. Healthcare leaders play a key role in defining the values that make their organization unique, but organizational values only take hold if they are internalized throughout the workforce. "Values are the foundation of everything else," said Joe Tye, CEO of Values Coach, which provides training and coaching on values-based leadership and cultural transformation for hospitals.

Even if an organization has a clear mission and list of priorities, defining values requires translating words into culture and action. That starts with hiring, panelists said. Debra A. Canales, executive vice president and chief human resource officer at Trinity Health, recently invited a potential CFO recruit to a three-hour dinner during the hiring process, in part to pick up clues about whether the candidate would be able to live the organization's values. "I expect [interviewees] to have technical expertise, but more importantly, I want to know how they will live our mission," she said.

2. Weld training to mission. Defining values doesn't end after the hiring process. Many people assume that certain personal values or qualities are inherent, but "values are skills, and attitudes are habits," said Tye. Like anything, they can be learned.

3. Bind recruiting and retention. Hospitals don't have to surrender to the mobility of today's workforce, panelists said. It is still possible to "recruit for life," but it takes some flexibility. Trinity Health encourages employees to be mobile within the organization, Canales said. If employees aren't entirely happy in their current position, they're encouraged to speak with leaders about different career paths and take new jobs, while staying within the health system.

4. Find true leaders. Chris Van Gorder, FACHE, president and CEO of Scripps Health, meets with top departmental managers at least once a month to talk about some of the decisions that take place behind the scenes in the system. He begins by talking about the patient experience before every management meeting, and said it has dramatically changed the culture of the organization and reminded managers about the importance of their jobs and developing skills they might need as future leaders.

5. Walk the talk. It's easy to lead during easy times; the true test comes when the going gets tough, the panelists agreed. Trust is a key part of the follow-through. Burns and McDonnell, an engineering firm that represented an outside-the-industry voice on the panel, doesn't use internal operating budgets, said Melissa Wood, vice president of human resources for the firm. Employees are owners of the company, and managers trust them to make the right financial decisions, even in a bad economy.