Health Care's Burning Platform

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May 27, 2009

An oil-drilling platform in the North Sea bursts into flame. A worker leaps off the platform, plunging into the ice-cold waters below amid burning debris. A passing boat pulls him from the water just in time. When asked why he decided to jump, the worker says, "I would rather risk probable death than face certain death."

This story of the burning platform is the basis of an article by HFMA President and CEO Richard L. Clarke, DHA, FHFMA, featured as a new resource on HFMA's Healthcare Financial Pulse web site. As financial challenges and the prospect of national healthcare reform reshape the way healthcare organizations do business, we preview some of the latest Healthcare Financial Pulse resources that demonstrate how industry leaders are responding to health care's burning platform.

A New Approach to Cost Management
Beth Israel Deaconess Medical Center in Boston, Mass., was facing challenges familiar to many healthcare organizations: reduced payments, decreased research funding, falling patient volumes, and shorter lengths of stay.

What was different? Beth Israel's response to these challenges.

President and CEO Paul Levy began by crafting a candid and remarkably detailed e-mail to the entire Beth Israel community. It explained the scope of the problem and sought input and ideas for reducing personnel-related costs.

Levy's e-mail was backed up by meetings with departments and employee groups, as well as the use of online forums, to encourage staff to contribute ideas for solving the budget shortfall. Staff-suggested changes have contributed to more than $16 million in savings so far, and reduced a potential staff layoff of 600 employees to 150.

Beth Israel's staff-based approach to cost management is a featured new article on the Healthcare Financial Pulse site. It will also be the focus of an audio teleconference on June 9, 2009. Thanks to our Healthcare Financial Pulse sponsors, McKesson Corporation and RelayHealth, this teleconference will be a free, exclusive benefit for HFMA members. Register today.

A Newfound Financing Option
Have high capital costs left you feeling like you're treading water instead of moving forward? In the midst of a collapsed bond market, investor caution, and increased credit enhancement prices, three hospitals profiled in a new Healthcare Financial Pulse article used federal mortgage insurance to obtain affordable financing for replacement facilities.

The Section 242 program has been around since 1968, but it's a newfound resource for investment-grade healthcare systems and unrated rural hospitals alike. The Federal Housing Administration has already seen as many hospitals seeking mortgage insurance as it saw in all of FY08.

In response to this new demand, the FHA has reinstituted an effort to develop a "lean" system to streamline the federal mortgage insurance application and closing processes for hospitals and bring the timing more in line with that of traditional credit enhancements. The possibility of allowing the Section 242 program to be used for pure refinances has also been suggested. As it stands, the program can be used to refinance hospital debt if 20 percent of the funds are used for new projects.

Create a Value Analysis Team
Trying to get a handle on your non-labor costs? A first step is the creation of a value analysis team (VAT). By focusing daily on keeping non-labor costs in check, a VAT can be highly effective in realizing significant cost savings and optimizing margins.

A new resource on the Healthcare Financial Pulse site offers step-by-step guidance in creating a VAT. It also identifies ways to improve your contract management process for supply cost savings and offers tips for vendor contract reviews that can help bring down your purchased services costs. A special tip sheet for pharmacy savings is an added bonus.

Expense reduction is also the topic of a three-part executive webinar co-sponsored by HFMA and the Institute for Healthcare Improvement. The sessions begin on June 17, 2009. Learn more about "Strategies for Reducing Expenses Without Compromising Care" today.

Also new on the Healthcare Financial Pulse site this month are:

You'll also find a new cluster of case studies on "Business-Smart Strategies for Helping the Uninsured" under the Preserving Cash heading on the Healthcare Financial Pulse home page.

Be sure to watch next month for a Healthcare Financial Pulse special report, How Hospitals Are Responding to Current Economic Challenges. The report, which will be released at this year's ANI: The Healthcare Finance Conference in Seattle, will also be featured in an ANI address on the state of the healthcare industry by HFMA President and CEO Richard L. Clarke on Tuesday, June 16, immediately preceding the keynote address by former Vice President Al Gore.

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