HFMA VIEWS

Trinita C. Robinson
Technical Director, HFMA

On January 27, the Securities and Exchange Commission (SEC) posted its 370-page proposed rule amending some of the disclosure requirements for executive and director compensation, related party transactions, director independence and other corporate governance matters, and security ownership of officers and directors. There is a 60-day comment period once the rules have been published in the Federal Register.

So, what does this mean for not-for-profit organizations? Is there any chance this proposed rule would have any impact on what we do as not-for-profit organizations? Should we even read it? I say yes--because not-for-profit organizations could find themselves under similar requirements at some point. In addition, the proposed rule includes quite a few proposed amendments to the original rule. Click here for an article summarizing the major proposed changes to the current requirements.

Scott MacStravic, Ph.D.

The growing support for and impetus in developing and implementing electronic health records that can serve multiple providers serving patients throughout local markets, regions, states, and the US, even overseas, speaks well for the future. While there are huge hurdles yet to overcome, in terms of agreements on interoperability, essential content and sharing – on their financing, privacy protection and security, etc., there is also a major potential often overlooked in most discussions of EHRs, their prospective or proactive uses.

In the main, medical records have been initiated and maintained in reaction to the arrival of a patient seeking care from some symptoms, signs or concerns about existing disease or injury. The idea of a “problem-oriented” medical record, for example, championed the idea of such perceived problems being the focus of the record and the basis for patient care management. But in addition to existing problems, there are three other patient concerns that may warrant inclusion in providers efforts to meet their needs, and in EHRs, as well.

Richard L. Clarke, DHA, FHFMA
President and CEO, HFMA

Is universal adoption of electronic health records possible in less than 10 years? What are the barriers? What is the role of government?

These are important questions facing healthcare financial executives as the year 2006 begins.

To help answer these questions, HFMA facilitated two roundtable discussions on universal adoption of EHRs by hospitals and health systems with Health and Human Services IT coordinator Dr. David Brailer. The purpose of these roundtables was to open a dialog between Brailer and financial executives on barriers and enablers to acquisition and implementation of these systems.

As I listened to the financial executives discuss the challenges they face related to these systems, the following issues struck me.

Robert Fromberg
Editor-in-Chief, HFMA

For years I taught writing classes at a university--adults going for their degrees in the evening. For each paper I received,  I typed comments that I returned to the student. The comments had a formula. I started by saying what worked well in the paper, with examples. Then I said what needed improvement, with examples.

Regularly, I received an odd reaction to these comments. Students would approach me with the comments in hand and say something like, "You didn't really mean this, did you?"

"Mean what?"

"These nice things you said about my paper. You're putting me on, right?"

Scott MacStravic, Ph.D.

I have long wondered at the persistence in the use of the term “reimbursement” to describe the moneys that payers dispense to providers in health care. One rarely hears of consumers “reimbursing” providers – there the older, simpler and more accurate term “payment” is usually applied.  But how long has it been since commercial health insurance plans, CMS and other third-parties have “paid back” providers for the expenses they incur in delivering care?

Dictionaries may still use the traditional definition of “reimbursement,” meaning the paying back for expenses incurred, as when employers pay employees for travel expenses, or insurers pay back insured clients for rebuilding, repair or other covered expenses.  And certainly third parties paid payers based on their costs for a long time, though that practice has hardly or barely survived as the general mode for deciding how much to disburse.

Tony Chen
Director, Product Innovation, HFMA

Recently, I read Jim Collins' newly published monograph Good to Great for the Social Sectors. After reading through his examples of how an orchestra, a high school science department, and the girl scouts went from good to great, I couldn't help but think: how many great hospitals are there? And what are the two or three things right now that are stopping a lot of good hospitals from becoming great?

I would venture to guess that most people would say "it depends."  It depends on the particular issues facing your particular hospital within your particular working environment. Alternatively, we could also say that by and large, aren't our hands tied anyway?  Don't we work in an industry where systemic problems, industry-wide inefficiencies, and policy matters are at the root of the biggest healthcare problems?

Scott MacStravic, Ph.D.

When I began my career in health care marketing forty years ago, nobody referred to “customers,” only “patients,” though hospitals knew that physicians were also keys to their success. And nobody treated patients like customers, either, focusing almost entirely on patients’ clinical needs and ignoring their personal preferences or “customer experience.”  Long waits for busy providers, bad food in hospitals, and other indignities or annoyances were the rule, not the exception. Patient satisfaction surveys were unheard of.

I’d like to think that the many books and articles, as well as my teaching a course in health care marketing for twenty years, and spending fifteen as a health care marketing executive played some role in the dramatic changes in dealings with patients since then.  The term “customer” is commonly used now, and “customer experience management,” though usually labeled as “patient experience” is a major focus for hospital capital and operational investments.  And almost all hospitals at least survey their “customers’” satisfaction.

But there are signs that some providers may be going too far.

Trinita C. Robinson
Technical Director, HFMA

The American College of Emergency Physicians published a report card on the state of emergency medicine in the nation and gave a grade of a C-minus overall. Some states received grades as low as D-plus and D-minus. What does this say about the care that is rendered when we enter an emergency department for care? Are our emergency rooms in trouble?

Richard L. Gundling, FHFMA
Vice President, Product Development, HFMA

During President Bush’s State of the Union address, expect to see health care take a front seat in his domestic agenda for the country. Being in his second term, he will be more willing to take the political difficulties of “reforming” health care. Recent reports have cited that health care now represents 16 percent of the economy and growing faster than personal incomes, and the number of uninsured is growing as well. He’ll use this as a call to action. President Bush is expected to call for a market-based approach to reform. These will include pushing the principles of consumer-directed health care with increased pricing transparency, mechanisms to make patients and providers more cost conscious, and public disclosure of quality measures. The adoption of the electronic health record is also a key initiative. These are all important components of reform. However, he can’t leave out the government’s role—meaning Medicare, Medicaid, and efforts to extend healthcare coverage. Though ideologically, President Bush may want to believe government won’t be heavily involved. The government already pays for more than half the nations’ health care and can’t be left out of the equation for reform. Reform efforts will doomed if he does.

Update: See HFMA News for a preview of how the President plans to address healthcare costs in the State of the Union address.

Tony Chen
Director, Product Innovation, HFMA

No, I'm not talking about HFMA starting a blog, but this past week, the winners of the second annual "2005 Best of the Medical Blogosphere" were announced over at Medgadget. This year, there were five categories: best medical blog, best new medical blog (created in 2005), best clinical sciences blog, best literary blog, best health policies/ethics blog, and best healthcare IT blog.  In a few categories, voter turnout was fierce (at least, for the nascent healthcare blogosphere), with more than 2,000 people casting their votes - 3-5 times more than last year.

Personally, I was pleasantly surprised at the variety, quality, and depth of blogs that were nominated.  Just by scrolling through the top blogs in each category, you can read about topics such as: how one hospital CEO implemented Planetree, how to sign up for the healthcare blogger/reader meet-up at HIMSS, how an EMT in London handled two Nigerian patients with the measles, how to interpret a chest CT, and how one consultant is thinking through the GE/IDX merger. Happy surfing!

Jim Alexander
Technical Director, HFMA

When the conference report of the Deficit Reduction Act of 2005 was modified slightly by the Senate and passed 51 to 50 (the VP casting the tie-breaking vote), it had to be sent back to the House for another vote. You’ve heard a lot about that, as well as the assumption that the Republican majority will prevail again. Well, it was a narrow vote in the House that sent it to the Senate (212 to 206). Recall, too, the opposition to the legislation by the AARP and others (AARP for the Medicaid copayment and asset transfer provisions’ impact on the elderly, advocates for the poor concerned about the discrimination and hardship the poor will experience). The latters’ concerns include the requirement there be proof of citizenship to support eligibility claims, documentary evidence to include birth certificates, and it has been reported that a segment of the African-American population born in pre-boomer years were excluded from the birth recording. 

What happens if just a few votes shift? The highest profile item, the physician 0 percent update, goes away and physicians have to contend with the 4+ percent reduction CMS had to put in place January 1. And then there are the numerous provider provisions, some actually positive, like the IRF transition to the 75 percent rule. But if votes shift enough, it’s continuation of current law. And we’re probably talking gridlock ad nau·se·am.

Bottom line--don’t bank on the DRA just yet.

Casey Nolan
Navigant Consulting Inc.

In a recent meeting with a group of COOs and CFOs, I asked the following question: “If you had to cut 10% out of your operating budget tomorrow, what would you cut?”  The group very quickly began making suggestions, and in a matter of minutes they had generated a list of more than thirty specific cost reduction ideas. I then asked them another question: “If you had to grow your top line profitably by 10% in the next year, what would you grow and how would you grow it?” The group struggled to come up with even a modest list of suggestions. This brief exercise demonstrated the fact that most healthcare organizations have a far better understanding of—and clearer accountabilities for—the cost side of their business than they do for profitable growth. In today’s healthcare environment, however, achieving profitable growth represents a critical success factor for virtually every organization. Yet very few healthcare providers have developed the capabilities and competencies necessary to drive profitable growth. And even fewer have structured their organizations to create the same degree of accountability and discipline around growth as they have around cost management. So as you head home tonight, I suspect you know very well who is in charge of your cost management agenda. But I also suspect that there isn’t a counterpart for profitable growth, which is a problem, because very few organizations can shrink their way to success. 

Robert Fromberg
Editor-in-Chief, HFMA

I found myself sitting next to the CIO of a large for-profit healthcare system at some event a few years ago, and I asked him the question you'd expect an editor of a healthcare finance publication to ask a CIO: "How do you demonstrate ROI for new clinical IT?" He looked at me with some surprise in his expression and said, "Oh, I don't have to demonstrate ROI. No one asks. They know it's for better quality...it's just the right thing to do."

Monday on this blog we posted a piece about roundtable discussions among CFOs about implementing clinical IT. Before the event, many of us at HFMA spent time talking about financial barriers to clinical IT. One thing we talked about was whining...that is, we didn't want to address this topic in a "woe is me, IT is too expensive, the industry is suffering, and the government needs to save us" sort of way. In the midst of the discussion an article in CFO magazine told of widespread resignation that IT just would not deliver promised value--more woe-is-me.

Well, it turned out that the executives in the discussion (and the ones we surveyed) were more like the CIO I had met. Sure, they were concerned about how they would pay for EHRs, but neither financing nor ROI was viewed as an absolute barrier. What was most striking in the discussion, according to HFMA President and CEO Dick Clarke, was the "dogged determination" to implement these systems.

Not a whine was heard.

Scott MacStravic, Ph.D.

Health care organizations (HCOs), particularly hospitals, have engaged in screening or early diagnosis programs for decades. This can have at least two different kinds of benefits to their sponsors, in addition to the benefits for patients whose diseases are identified and addressed earlier. When screening services are offered at no cost to patients, or at a loss, they can add to the “community benefit” efforts that promote good PR, fulfill missions, and protect tax exemption for not-for-profit organizations. When they are offered as revenue-generating/profitable services, or improve the organization’s marketing success by increasing its share of patients identified as needing care for the conditions identified, they offer marketing and financial advantages.

Government can best facilitate adoption of electronic health records with grant funding, development of national standards, and payment incentives.

These findings are the result of research by HFMA, amplified by two roundtable discussions with senior financial executives that were conducted by HFMA in collaboration with David Brailer, MD, PhD, National Health Information Coordinator for the U.S. Department of Health and Human Services. Brailer has been charged with realizing the Bush administration’s plans for fully realized electronic health records by 2014.

Fifteen healthcare executives from across the country participated in the roundtable discussions in Arlington, Va. The roundtables were facilitated by HFMA to initiate dialogue between Brailer and providers on the challenges that providers face in acquiring and implementing EHR systems, as well as ways in which government can facilitate the universal adoption of EHRs. 

Laura E. Noble
Manager, Resource Center, HFMA

Health Affairs published a new study this week that piqued media interest: “Nursing Staffing in Hospitals: Is There a Business Case for Quality?” The study examines the financial implications of increasing nursing hours to improve patient care quality. Researchers estimated that hospitals could improve care and save some money by hiring more RNs while keeping the total number of nursing hours the same (since the costs of changing the RN/LPN mix are relatively low). Options to raise the total number of nursing hours or to increase both the proportion of RNs and total hours would lead to even better patient care, but the increased labor costs would outstrip associated savings by approximately 1.5 percent of average annual hospital expenditures.

Studies like this tend to strike a deep chord among people outside the finance community, and it’s rarely positive. For example, a Health Affairs reader posted this comment in response to the study: “Minimum [nursing] ratios save lives. Patients deserve no less. The hospital industry needs to recognize the facts and stop fighting minimum ratios. That looks very bad, and that is a bad case for business.”

Robert Fromberg
Editor-in-Chief, HFMA

I pulled over to the side of the road and grabbed a pen and scrap of paper. I wrote, “A cut-to-the chase, interview-driven hour covering today’s most resonant stories.”

Huh?

This is one sentence from a series of radio spots advertising a cable news network. I have been hearing these ads for a couple of weeks now, and this morning I just couldn’t take it anymore. I wanted to write it down so I could explain why this sentence was so annoying…and what it has to do with healthcare finance.

Scott MacStravic, Ph.D.

The idea of demonstrating the benefits of marketing in dollar terms--added revenue and contribution to margin compared to costs--includes a major challenge of attribution. On some occasions, a new marketing investment is made with nothing else changed, so that any added revenue and profit linked to the marketing effort can logically be attributed entirely to that effort. But more often, other efforts involved, and other functions, who will want to claim some of the credit.

Unlike medical science, where interventions are controlled to a single “treatment,” and placebo groups are monitored to be sure any change is attributable to the treatment, marketing rarely can prove its effects. One possibility, in common practice with marketing communications is to employ control “untreated” samples of the population and compare their actions to the sample that is “treated,” e.g. recipients of direct mail or e-mail communications. 

Richard L. Gundling, FHFMA
Vice President, Product Development, HFMA

As is highlighted in this month's hfm magazine, communicating or "telling your story" of community benefit is a growing requirement. Congressional committees and regulatory agencies have focused on nonprofit healthcare organizations. One area of particular scrutiny has been the role of charity care and community benefit in justifying tax-exempt status. Nonprofit hospitals are an important part of the healthcare delivery network and provide a wide variety of community services that fall within the IRS definition of "charitable" under Revenue Ruling 69-545. Because of this wide range of services, HFMA has encouraged Congress to use great caution when they view quantitative research that compares amounts of charity care provided by individual hospitals. Some hospitals that provide smaller amounts of charity care may instead devote their exempt resources to other important community services, such as trauma centers, health clinics, neonatal intensive care units, and other important needs not served by governments or for-profit businesses. HFMA asked Congress to realize that healthcare needs, including charity care needs, differ greatly by community, and so solutions, whether legislated or voluntary, must be flexible to best serve the needs of the patients and communities they serve.

Tom Atchison, Ed.D.
Atchison Consulting, LLC

A physician leader and good friend recently asked why I spend so much time on the importance of the alignment of corporate values and personal values. He suggested that, while values alignment is am interesting concept and may work in non-healthcare businesses, it is impractical in the complex, ever-changing world of healthcare. I responded that values alignment is not only a practical concept, it is the critical, differentiating factor the separates high performance from less than high performance.

HFMA members are trained to create systems, processes and metrics that produce the best economic value, i.e., to get the greatest return on financial capital. Healthcare leaders are trained to create an organization that provides the best quality, safety and service for the community, i.e., to get the best return on human capital.  Value from Values is the special blend of the dynamics of return on financial capital and return on human capital.

Scott MacStravic, Ph.D.

For marketing to be accountable, it must maintain and report an account of its benefits vs. costs to the organization. The easiest way to design such an account is to think of and treat the marketing function as if it were outsourced, and paid for its performance. This can also pave the way for a gainsharing system in which the marketing staff, to the extent agreeable to the organization, receives bonuses based on its net margin contribution.

This means counting its total costs, including its entire operating budget and share of overhead, as well as its expenditures for research, advertising, etc. Some expenditures, such as staff time, research and advertising expenditures aimed at specific objectives, may be charged to campaign accounts, as well as the overall functional account, to track their particular ROI, though on a multi-year basis, since these tend to pay off gradually rather than in the same year as their costs.

David W. Young, DBA
Professor of management, Healthcare Management Program, Boston University School of Management, Boston, and principal in The Crimson Group, Inc.

The real problem with pharmaceuticals—the substantial cost difference between generic and brand name drugs—is reflected only minimally, if at all, in most co-payment schemes. Co-payments also force low-income patients to choose between filling (or refilling) a prescription and spending their limited resources on food, clothing or shelter.

The solution. Eliminate co-payments for pharmaceuticals. Instead, when there is a generic equivalent for a brand-name drug, require patients who want the brand-name drug to pay the full amount of the incremental cost (rather than just a co-payment). When a Fortune 10 company instituted a plan like this a few years ago, the number of its employees using generic drugs rose from 50% to 99%. The resulting cost savings were substantial, and there was no reduction in the quality of drug treatment.

Richard L. Clarke, DHA, FHFMA

President and CEO, HFMA

An HFMA blog? What is the world coming to? (I just ended a sentence with a preposition--so things are changing.) And why would HFMA jump into this fray?

I must admit I’m new to this blogging stuff. So, to come up to speed, I searched the web and found a blog on the history and perspective of “weblogs” (web-logs), or the more common blogs.

According to that blog, Rebecca’s Pocket, the phrase was coined by Jorn Barger in December 1977 (ancient history from a web standpoint). Barger and several others maintained and shared logs on the web of their personal and professional perspectives, concerns, and beliefs--often linking to web sites that discussed a topic in which they were interested. Over time, a community developed of people publishing their own blogs--then listings, portals, blogging tools, and so on--emerged. Now there are...well, there are a lot of blogs out there.

Starting this month, the HFMA blog will begin to operate. Called HFMA Views, the blog will have a strategic focus, presenting news and commentary regarding the major forces affecting the business of health care. We also will provide thought leadership on key issues in health care and link to white papers, articles, and books by leading thinkers. Anecdotal comments will be presented to round out the hard news and high-level thinking on issues with gut reactions--this will be a place to capture some of those insightful hallway and water cooler conversations.

The HFMA blog will have several entries per day of about 100-250 words each, so it will be a quick and easy read. We’ll use HFMA staff, subject matter experts, and others to contribute content. Visitors will be able to post comments on this content.

I’m excited about this new service, and plan to contribute to it. This technique is yet another way in which HFMA is working to become your indispensable resource on healthcare finance.

Scott MacStravic, Ph.D.

When I began my career in health care marketing, I was often the first to introduce the notion that there were two different ways the organization could balance its budget each year: 1) cutting costs to match expected revenue; or 2) increasing revenue to match expected costs. Naturally, this was a self-serving as well as organization-serving notion, since it pointed out the way that marketing could be of greatest benefit to the organization, and how it could be accountable for its benefit.

Of course, by “selling” the idea of marketing in this way, I found that my services – as consultant, then as marketing executive – tended to be judged entirely on their financial ROI. The best I could do was to argue that in many cases, the “return” should be gauged over more than one year, even though the “investment” was usually the combination of the marketing department’s total costs in overhead, and the “marginal” costs of particular campaigns, in only the years that the investment was made. 

Trinita C. Robinson

Technical Director, HFMA

Reminder: The prescription drug benefit act was effective on January 1, 2006. Dual-eligibles--meaning Medicare beneficiaries who are also enrolled in Medicaid--will now shift primarily to Medicare Part D and qualify for Medicare prescription drug coverage with low or no premiums. Co-payments under this arrangement will cost the beneficiary only a few dollars. Get full information here and here.