HFMA VIEWS

Mike Johns, Vice President of Finance
Baptist Hospital, Nashville, Tennessee

At an HFMA National Advisory Counsel meeting in Chicago in November there was discussion of ways for finance to collaborate with nursing and other operations departments. It was a concept in its early stages of discussion, but it struck a cord with me. The very next day I was back at my hospital in Nashville at our monthly leadership meeting, which includes all directors and managers. At the end of my financial presentation I announced that I was available for departments to invite me for a day, or part of a day, to their department. I borrowed the concept from the Chicago meeting and called it "Take your CFO to Work." Almost immediately I had more requests than I could meet.

The experience of working with these managers in their department setting has been valuable to both me and to the manager and their department. By working in their setting I can see the challenges they face, I can appreciate the pressures they work under and can appreciate their needs. Above all I have come to appreciate even more how these individuals see their work as a “calling” and have the care of their patients as their highest priority. It’s more than a job to most of these people… it is a part of their spiritual service.

One of the unanticipated benefits of this process is that employees of the departments appreciated the fact that the CFO would spend time learning about their department and expressed that appreciation to their directors and to administration. 

On March 5, the CBS broadcast "60 Minutes" was critical of hospitals' billing practices for uninsured patients. The program's producer has responded to an American Hospital Association letter to CBS expressing regret that the program did not pay more attention to the root cause of the problem: the number of uninsured Americans. The CBS producer defended the objectivity and facts of the broadcast, adding "we do not believe that it is appropriate for the media to advocate any 'solution' or policy regarding health care for the uninsured."

Click here to read the exchange.

Jeni Bell
Senior Editor, HFMA

A Colorado hospital is giving new meaning to the words “employee satisfaction” with a concierge program that provides services such as home repairs, babysitting referrals, grocery shopping, and pet walking.

Littleton Adventist Hospital in Littleton, Colo., implemented the program in November 2005 in an effort to increase employee satisfaction while enhancing its recruitment of talent for the hospital’s workforce. Today, nearly 50 employees a month participate in the program, and that number is growing.

“We view this as an investment in our people,” says Joseph Condon, director of human resources for Littleton Adventist Hospital in Littleton, Colo. “A lot of our associates work 12-hour shifts, and as a result, they face unique challenges in balancing the demands of work and home. This program eases the demands on our healthcare workers so that they are better able to focus on patients and not have to spend their lunch hours or time after work running errands.”

Littleton Adventist Hospital paid for the start-up costs of the program, which included space for concierge employees in an ancillary building across the street from the hospital and a contract of $115,000 a year with a professional concierge company. Employees pay for the cost of the services themselves, such as laundry services, house cleaning, and grocery delivery. So far, automotive services are the most popular, ranging from oil changes to car washes to tire swapping.

“I do rounds pretty regularly, and I enjoy hearing associates express their gratitude for implementing concierge services at the hospital,” Condon says.

What innovations have you implemented for employees?

MarieAnn North, MBA, FACMPE
Navigant Consulting

When I completed my MBA program twenty years ago, I was taught that from time to time I would lead organizations through change. Then there would be rather lengthy periods of stability before the next major change occurred.

In a recent Wharton class, the professor described the current business environment as “constant white water”--an appropriate and graphic description for health care these days. It made me realize that the skill set many of us were taught and have been using,  is unlikely to be the best match for today’s environment.

Below is my new and improved version of what every C-Suite executive must learn to love if they are to survive and even thrive in today’s environment.

(1) Competence--middle management has been cut, and support staff is minimal. Today’s executive must be equally comfortable at both global and detailed levels. More and more, executives are “doing their own work”. It’s amazing what you can discover when you get out of the office and get involved in your organization.

(2) Change--the old mentality was not to “fix” things that weren’t “broken.” The new mode of thinking is that everything can be improved on. Embracing change rather than resisting it allows one to develop a healthy sense of adventure.

(3) Challenge--the environment seems to get more complex each year. Just think of all the new acronyms we’ve had to learn! On the positive side, let’s face it, there are no moments of boredom.

(4) Creativity--the old solutions don’t work. Yes, lack of a data, analysis, debate, traditional approaches, and of course consensus, can by a scary thing. Be bold – create chaos – it can engender all sort of positive changes.

(5) Competition--we compete for physicians, patients, nurses, CEOs, payer contracts, profitable service lines, etc. It’s tough to compete when all of our energy is used up on internal issues. Today’s executive must have the courage (another C-word) to simplify their own organizational work environment (cancel some meetings), and focus on competing in the external environment.

(6) Closure--nothing is more demoralizing than never getting anything done. Focusing on closure is key--every meeting needs to result in a decision. Every decision must result in implementation. It re-energizes the work environment when things get done.

(7) Communication--white water environments require unambiguous leadership, clear direction, and plenty of additional communication. When we create uncertainly, people fear the worst. Clear communication at all levels is the key.

Scott MacStravic, Ph.D.

There is a revolution underway--one that promises significant, perhaps dramatic, even “disruptive innovation” kinds of changes to traditional health care and insurance. It involves first a shift of investments in the handling of disease, from reactive diagnosis and treatment of acute and chronic illness, to more proactive management of diseases to minimize their crises, complications, and worsening, once identified. And it also involves a significant shift in the definition of what sorts of things are going to be “managed,” from currently recognized diseases to a host of other conditions, and even unhealthy behaviors.

Disease management has been around for a decade or so, beginning with employer and insurer attempts to manage the care of chronic disease patients in order to save money, and providing a market for vendors who have helped make DM a $300 million/yr market. Payers and vendors have been joined by large numbers of hospitals, physician practices, and integrated delivery/health systems who have entered this market as well.

Originally, DM focused narrowly on selected diseases where the risks of high expenditures among many patients, as well as the probability of reducing such expenditures in a short time (preferably the same year in which DM investments were made) were great. This meant that only tiny minorities of employees or insured populations were targeted for DM interventions, while promoting high ROI ratios for DM investments, though not necessarily high ROI amounts.

Following are reactions to the study released yesterday showing a decline in the proportion of physicians providing charity care:

"This study provides additional evidence of the serious breakdown of the system of cost shifting that for years supported charity care. With government and private payers increasingly unwilling to pay the “hidden tax” for charity care, the ability and willingness of physicians and hospitals to provide this care is more limited. This study further demonstrates the critical need for this country to address the problem of covering the uninsured. Only a focused effort, similar to the Bush Administration’s approach to universal adoption of the electronic health record, will solve this problem."
--Richard L. Clarke, DHA, FHFMA, President and CEO, HFMA

"There are probably a variety of reasons why this trend is emerging, but one of the principal ones is likely the rapidly deteriorating economics of medical practice---rising operating costs, shrinking insurance payments and increased workloads all make it more difficult for physicians to provide charity care and still keep their practices afloat. Another possible factor is that more of the uninsured simply go to hospital emergency rooms, rather than physician offices. A third is that the growth of organizations like Community Health Centers means more charity care is being provided in fewer places, rather than the load being spread more uniformly across all physicians. The truth is that it's a bothersome change---but we don't really understand all the reasons why it's occurring."

--William F. Jessee, MD, FACMPE, president and CEO, Medical Group Management Association

“Physicians are committed to providing charity care and nearly 70 percent of physicians provide uncompensated care worth more than $2,000 every week, despite increasing time and financial pressures. Charity care is not the solution for the 46 million Americans who are uninsured. The AMA’s proposal provides health insurance solutions that put patients in the driver’s seat, along with their physicians."
--Edward Hill, M.D., President, American Medical Association

"Already, there are signs that uninsured Americans are having more problems getting care, and if the decline in physician charity care continues, those problems are probably going to get worse."
--Peter J. Cunningham, Ph.D., HSC Senior Researcher and coauthor of the study with HSC Health Research Analyst Jessica H. May.

HFMA Senior Editor Carole Bolster recently asked Fred Lee, author of If Disney Ran Your Hospital, this question:

If there were one thing you could tell hospital CFOs to do differently, what would it be and why?

Here is what he said:

It would be to elevate the priority status of courtesy relative to efficiency. Disney emphasizes that courtesy is more important than efficiency. If you can rally a culture around that idea, individual department heads and managers will be forced to focus on serving their internal customers instead of focusing on their own budget, because when they focus on their own budget, they get so focused on what is efficient for them that they often cause a lot of extra red tape, bureaucracy, unresponsiveness, and frustration for their internal customers. And if you focus on your own internal efficiency, communication breaks down because you’re not considering how to serve your internal customer better. You’re thinking only of ways of pushing some work off of your own department’s plate onto to your customer’s plate, causing even more frustration.

I wish there was a way in health care for this paradigm to shift somewhat between every department focusing on efficiency first and every department focusing on courtesy first. Of course, overall, we understand that safety is first, so I’m really talking about where we go once safety is assured.

Let us know whether you agree. Look for the full interview with Fred Lee in the April issue of hfm magazine. You can see Fred Lee speak at HFMA's ANI 2006.

Letter from HFMA's President and CEO, Richard L. Clarke, DHA, FHFMA, to The New York Times, March 23, 2006:

Robert Pear’s March 19 article “Nonprofit Hospitals Face Scrutiny over Practices” reports on the interest among some legislators and state attorneys general in mandating that hospitals increase the amount of care they provide to those without insurance. No one is more eager than hospitals are to solve the problem of the uninsured in this country. But such mandates could cripple hospitals financially, would not provide the necessary comprehensive health care, and would still leave us with the same root problem: an unacceptable number of uninsured people.

There is a better way to approach this problem--a way that uses a model the Bush Administration has successfully employed to encourage adoption of electronic health records: set an ambitious national goal with a deadline, appoint a senior official who is very competent and respected, identify the barriers, and encourage public/private partnerships to address them.

This sort of practical, focused effort is crucial if we are to solve the root problem of the uninsured.

Richard L. Clarke, DHA, FHFMA
President and CEO, Healthcare Financial Management Association
Click here to read the New York Times article.

Post your comments below.

Attend HFMA's conference "Serving the Uninsured: Managing Your Mission and Margin."

Updated 3/23/06

Scott MacStravic, Ph.D.

The idea of organizing, managing, and marketing traditional “reactive” diagnostic and treatment services by service lines is decades old and widely practiced. It works when and because it persuades customers that a given provider has better, preferably the best service in a particular category, such as heart disease, diabetes, maternity, neurosciences, orthopedics, etc. And it can add a “halo effect” advantage, when consumers conclude that a provider with excellence in one high-tech service must also be excellent in others.

For full-service hospitals and multi-specialty medical groups, service-line marketing can get pretty expensive. Each service, or at least a large number, must be separately advertised, multiplying the cost significantly. But with so much competition from single-specialty centers and practices, they must do so, while focusing particularly on service lines that are most profitable, since that is where competition is fiercest.

The service-line focus is potentially far more effective than “institutional” advertising that attempts to persuade prospects that they should choose the organization vs. the service – at least where everyone else is focused on service lines. But it has a built-in inefficiency – it must “win” patients over and over again, since the vast majority of them do not come repeatedly for the same service. Visits, stays, and episodes of care are usually so infrequent that there is only a modest carryover of satisfaction when the time comes to choose another time, and when it is a different service, that is likely to be even weaker.

Moreover, the marketing of services is operating in a different market today.

Robert Fromberg
Editor in Chief, HFMA

"Study Finds Widespread Lapses in Medical Quality for All Adults" ... "Hospital Quality Scores Improving"

How are we to reconcile these two news headlines? One reports on a study published this week in the New England Journal of Medicine that suggests half of Americans do not receive the care that is necessary according to their health status, and that this finding crosses sociodemographic boundaries. Predictably, this study got widespread media attention (although the finding about the percentage of Americans who do not receive necessary care had been published in 2003). The second headline refers to a study by the research firm Mathematica into the effect of Hospital Compare, CMS's tool for hospitals to report data on quality, which is shared with the public. The study showed that about 80% of hospitals included in the research reported significant improvement in at least one quality score since beginning to participate in the program.

The NEJM study was based on data collected in 1998-2000, while the Mathematica study was based on a 2005 survey.

It is tempting to say that these findings suggest that public reporting of quality data, as well as pay for performance, is showing signs of fixing the kind of quality lapses reported in the NEJM article. But is that true?

I asked the author of the Mathematica report, Mary Laschober, that question. She replied, “Our study was based on self-reports from hospital executives. They strongly are saying public reporting is having a positive effect on quality improvement efforts. There aren’t many studies available, but those that have been published also are showing a positive effect. These studies do, however, show hospitals still have room to improve quality.”

Do you believe that pay for performance will have an appreciable effect on healthcare quality?

--My staff knows who qualifies for discounted or free care.

--My staff can explain the patient’s options for handling any balance due to us.

--My organization knows (and has a clear description) of patients who qualify for each discount level.

How would you answer these and other questions about serving the uninsured and underinsured? Take HFMA's quiz and see how you rate. What do you think are the hallmarks of a successful program to serve the uninsured and underinsured?

Scott MacStravic, Ph.D.

The basic definition of “firms of endearment” (FoE) is that they endear themselves to all their stakeholders, not merely one or two categories thereof, such as shareholders. While the owners of the firm will always be one important stakeholder group, employees, customers, suppliers and society as a whole are equally important. Endearing the firm to each of them means addressing their needs and desires in recognition of their importance and value to the firm.

David Wolfe, the author of the book on Firms of Endearment (coming out in April from Wharton Business School) has written extensively about such firms in his blog. And he makes a strong business case for becoming one, noting that the examples he feels qualify for the designation significantly outperform their less endearing peers in terms of growth and profitability, not just service to the community.

He builds his case in contravention to the common maxim that the sole purpose of a corporation is to serve the interests of its owners by making profits. On the other hand, since FoEs tend to be more profitable, it can be argued that they do better in that regard as well by deliberately choosing to make doing so only one of their goals. By addressing the needs and desires of all stakeholders, FoEs enlist all as enthusiastic partners in promoting the success of the firm, rather then making their relationship with non-shareholders one of the “caveat emptor” variety. 

Casey Nolan
Managing Director, Navigant Consulting, Inc.

America has in the past been described as a melting pot, in which, over time, immigrants eventually acclimated to the customs and culture of the U.S. While this may have been true in the past, it is no longer an accurate picture of what is taking place in America. Rather than a melting pot, the U.S. might be more appropriately described as a fruit salad--distinctly different and readily distinguishable elements in a shared container. As a country, we are--and will only be more so in the future--more ethnically diverse than virtually any country in the world. And rather than melting in, the ethnic groups are retaining much of their culture.

Population projections indicate that minorities will comprise more than 33% of the U.S. population by 2015. Two states (California and Texas) are already “majority minority.” The implications of this diversity for health care are enormous and, I believe, largely overlooked. Failing to understand the cultural nuances in treating minority populations can lead to more than just awkward situations--it can result in inefficiency for the provider and inadequate care for the patient.  A recent article in the Washington Post cited the example of a health clinic with a puzzling high no-show rate among Central American immigrants for follow-up visits. What the clinic didn’t understand--but found out after months of frustration--was that these immigrants KNEW they couldn’t return on the dates given to them but were too polite or timid to say “no” to a medical authority. Another example cited in the article was of a hospital whose market area experienced an influx of Vietnamese families and subsequently noted a surge in women who were becoming dehydrated after giving birth. It turned out that in Asian cultures the period after childbirth is a time in which women are supposed to consume only warm fluids and foods--not the ice chips and cold water dutifully brought to their bedside by a well-meaning and traditionally trained nurse. 

I believe that understanding cultural differences and nuances and being “culturally sensitive” is more than a politically correct nicety for healthcare organizations--it is an essential component in their increasingly difficult quest to improve quality, manage costs, and achieve profitable growth.   

Robert Fromberg
Editor in Chief, HFMA

Price tags on bandages, syringes, and other hospital supplies—there for all to see. That’s what a British hospital is doing to raise awareness of supply costs, according to a story in the Daily Mirror. “Because we are trying to cut costs we are trying to get staff to ask, is this bandage really necessary?” the story quotes a spokesperson at Worthing Hospital as saying.

This is one example of the double-edged sword of healthcare costs. On the positive side, I remember the CEO at one organization where I worked giving all staff a statement of their true health insurance costs—not just the amount taken out of our paychecks, but also the amount the organization paid. This was a great way to raise awareness of the true costs of health insurance. And unlike the example above, it was not designed to get us to ask whether health insurance was “really necessary.” On the provider side, awareness of costs can help bring forth discussions efficiency and medical necessity.

However, when it’s our arm bleeding, we all want the nurse in question to respond to the question, “Is this bandage necessary?” with a rousing, “Yes!”

What examples are you seeing of efforts to raise awareness of costs? And how far is too far in this effort?

Scott MacStravic, Ph.D.

While marketing in the health care industry has a fairly long history, finally, it is nowhere near as long as that of other, indeed most other industries. The modern discipline of marketing, with market research, customer experience management and targeted advertising is roughly 60 years old, having emerged soon after WWII, while health care marketing is only 30 years old or so. As a result, we have long looked for models in other industries.

As a service industry, it has been natural for health care to look at other service industries for a model to follow, or at least to adapt. The financial services industry has been suggested by many, since it involves a valuable “life asset,” namely wealth, and services that are designed to help people manage that asset, as is somewhat true with another life asset, i.e. health.

Retail sales industries have been suggested as models, since “customer service” is an essential component of health care, in addition to clinical quality. Besides, many marketing gurus have recommended that health care organizations increase their revenue sources by engaging in retail sales of health-related products. And health care has increased its availability and access through “retail” convenience clinics that are located in popular shopping malls, supermarkets, drug stores and superstores.

But there is another possible model available to health care--the automotive industry.

Keith Pryor
Director, Leadership Advisory Services
Health Strategies & Solutions, Inc.

“Many Wal-Mart workers use Medicaid,” screamed the headline in the March 2, 2006 Philadelphia Inquirer. The article went on to explain that nearly 16% of Pennsylvania Wal-Mart employees are dependent upon Medicaid. 

I imagine that the newspaper’s editors might have expected this headline to be another embarrassment to Wal-Mart leadership in particular, and corporate leadership in general, for failing to provide health insurance to their employees. 

But my guess is that many business leaders saw that headline and thought, “so what?”

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

This weekend’s “60 Minutes” segment “Hospitals: Is the Price Right?” raised a subject that hospital leaders care deeply about: providing care to all members of their communities. Unfortunately, while the broad subject is the right one, the focus is misleading.

The broadcast led with an account of a middle-income family that, because of the high cost of health insurance, decided not to carry coverage. After a bad accident and resulting emergency and rehabilitative care, the family was hit with a very large hospital bill. K.B. Forbes, who runs a Latino group that focuses on hospital billing practices, responded to the situation this way: “Basically, hospitals charge uninsured people four or five times more than what they would accept as payment in full from an insurance company. Simply put, it’s price-gouging.”

Sen. Charles Grassley, R-Iowa, commented that hospitals have an institutional bias against uninsured people. He also said that if hospitals don’t make changes, “we’ll probably be doing some legislating in that area.”

Forbes, Grassley, and the Bush Administration all are circling around the problem, but not hitting its true cause: how do we, as the richest economy in the world, allow more than 45 million Americans to go without health insurance? Let’s deal head on with the problem of access to affordable health insurance. High-deductible health plans alone will not solve this problem. Hospitals do have a role to play. Hospitals can do a better job of pricing. They can develop effective methods of identifying the financial capabilities of uninsured or underinsured persons. They can renegotiate their managed care contracts to attempt to rebase their pricing. They can develop rational pricing philosophies that can stand public scrutiny. HFMA offers tools to support all these important actions.

But to address the root causes of this problem, we need broader action. We need a major public/private partnership dedicated to solving the problem of the uninsured. We need a national focus similar to the focus on universal adoption of electronic health records--an initiative led by a respected individual. We need stretch goals for this public/private initiative to work toward. Simply put, we need action that targets the real problem.

Last night, CBS's "60 Minutes" reported on hospital billing practices, highlighting the difference between what government and commercial payers pay for medical care and the amount charged to self-pay patients. How would you recommend hospitals respond to their communities?

Robert Fromberg
Editor-in-Chief, HFMA

Earlier this week, I posted an entry about the importance of research into healthcare issues that are emotional or difficult to quantify, using whimsical attempts to quantify Mona Lisa's expression as a jumping-off point.

The debate that has erupted over the past few days over quantifying the dimensions of the medical-debt problem trumps any attempt at a cute metaphor.

Briefly, here is the situation. A study by Dranove and Millenson found that 17% of bankruptcies are caused by medical debt, contradicting a study by Himmelstein et al. that produced the more dire (and often-cited) finding that up to 54% of bankruptcies are the result of medical debt. The Himmelstein et al. study said middle-class families were quite vulnerable. The Dranove-Millenson study says that those closer to poverty level are at greater risk.

Here is an excerpt of the contentious dialogue in Health Affairs between the two research teams (look under "Web Exclusives").

Himmelstein et al.: "David Dranove and Michael Millenson seem determined to deny that financial fallout from illness pushes middle-class families into bankruptcy....They dismiss families' explanations of their difficulties and blame those ruined by illness for their own problems. However, the data from the bankruptcy courts are undeniable. Bankruptcies affect mainly middle-class, privately insured families, and about half are triggered, at least in part, by illnesses."

Dranove and Millenson: "Our paper denies neither the presence of medical bankruptcies nor their serious impact on families. Rather, we carefully critique the methods [the authors] used to analyze those bankruptcies. They continue to offer only one direct causal measure: namely, that medical bills 'contribute' to 17 percent of personal bankruptcies. The remaining anecdotes and correlations they offer do not constitute systematic empirical research....Thus, it is impossible to determine from the study whether and by how much the expansion of health insurance coverage would reduce the personal bankruptcy rate."

Trinita C. Robinson
Technical Director, HFMA

According to a study conducted by the University of Michigan Health System, 80 percent of the bariatric surgeries studied were performed on females, and the greatest increase in bariatric surgery rates occurred among non-elderly adults or young females. The hospitals charged more than $2 billion, in 2002, for the surgery. Recently, CMS announced that it was expanding Medicare's national coverage of bariatric surgery for all Medicare beneficiaries, Most of the patients seeking this type of surgery had co-occurring/morbidity illnesses, such as diabetes and hypertension. Could promoting bariatric surgery be an effective way for hospitals to control their healthcare costs?

What do you think?

Ken Fisher
Director, Navigant Consulting

I have been in the healthcare finance field for more than 35 years. Over those years I have seen thousands of income statements or statements of operations or whatever you choose to call it. Every other industry uses an income statement that is materially different than the one used in health care. They have it correct; we have it wrong.

Other industries have learned to focus on the cost of production and the cost of overhead as two separate parts of the statement. By combining the statement into a single grouping of cost, we miss many of the uses of the statement. Other industries understand that the cost of production is the variable component of the business enterprise. By building the income statement that way, those industries build a management structure which focuses effort of management on ways to improve the variable margin. If the variable margin cannot support the overhead component of the enterprise, then there are two choices--reduce the overhead or close the business line.

Health care would be well served if we were to rethink the way that we present income statements to management teams, our governance, and investors.