Operations Management

Solid written policy and agility are key to preparing for disaster

July 3, 2019 5:05 pm

Hospital leaders share lessons learned after living through major weather events.

When the eye of Hurricane Katrina passed over Hattiesburg, Miss., on Aug. 29, 2005, Forrest General Hospital CFO Ed Tucker had a disaster plan at the ready. But as it turned out, the agility and ability of administration and staff to change that plan were what kept the hospital in the black in the wake of the storm.

The city lost electricity and its generators failed, which meant there was no power to pump water to the hospital. As a temporary solution, staff at the 528-bed facility took water from the cooling tower and hauled it up the one working elevator in giant garbage cans. The internal phone system worked, but no one could call out or in; Tucker’s cell phone, because it didn’t have a local number, was the hospital’s only connection with the outside world. Transportation was difficult because of limited access to both vehicles and fuel, so a staff member whose church had buses got permission for the hospital to borrow them.

“It was a war zone,” says Tucker, an HFMA member who is now an independent consultant.

As of 2017, the Centers for Medicare & Medicaid Services requires that any healthcare organization participating in Medicare or Medicaid adhere to a set of disaster preparedness regulations.a But according to Tucker and others, any preparedness measures must be coupled with nimbleness during an event to ensure the hospital’s bottom line is secure.

3 elements required before a disaster

Having the following three elements in place prior to a disaster can mean the difference between a healthcare organization’s weathering a disaster or closing its doors, according to several healthcare leaders who have experience helping their organizations through major events:

  1. A business continuity plan in writing that has a solid budget in place
  2. A good documentation process to help the organization collect insurance payments and assistance from the Federal Emergency Management Agency (FEMA)
  3. Formal, written, collaborative partnerships with community agencies and other finance leaders at local healthcare organizations

Making disaster your business

The standard plan for natural and man-made disasters is an “all-hazards approach,” a disaster plan that sets into motion the deployment of all necessary measures during an event.b This comprehensive plan should include not only clinical but also financial information, according to Melissa Harvey, director of the National Healthcare Preparedness Program at the Office of the Assistant Secretary for Preparedness and Response (ASPR), which is part of the U.S. Department of Health & Human Services (HHS).

“You have to be able to pay your staff,” Harvey says. “You have to be able to make sure that, even if your CFO or any of their designees are not able to sign off on high-price purchase orders, there’s a business continuity program in place to make it possible to maintain operations both at the clinical level and the administrative level.”

After Katrina, Tucker decided to take the experience of Forrest General and develop a budget model specifically for disaster preparedness. Tucker’s full budget model is available on the Centers for Disease Control and Prevention website.Most of the Excel document reads just like any other budget because normal hospital operations must be continued as normal, Tucker says. The most important tab is the one labeled “cash burn,” because the items found there are incidentals such as temporary housing, repairs, generator rentals, childcare, communications and other expenses directly related to the event.

Before Katrina, Forrest General had about 155 days of cash on hand but that number dropped to 90 because of business interruptions on the payer side, Tucker says.

“We burned about $55 million of cash,” he says. “Our loss was $16 million, but we burned through $55 million in six weeks because the payers weren’t paying.”

The organization’s survival depended not only on its surplus of cash before the storm, but also on its ability to track – and get reimbursed for – storm-related expenses, Tucker says.

When Hurricane Florence blew through North Carolina in 2018, Novant Health’s facilities in Charlotte had minimal infrastructure damage. Yet the health system’s emergency preparedness manager, Matthew Merritt, still stresses the need for a business continuity plan, which can mean the difference between weathering a severe storm and closing the doors permanently.

At the center of the plan should be a designated finance chief, ideally a front-line finance person chosen by the CFO and properly trained for disaster preparedness, Merritt says. FEMA has online and live training available to healthcare organizations through the Center for Domestic Preparedness. It may be difficult to get a finance person, who lives by the budget calendar, to step out of his or her role, but doing so can be good practice for when a real disaster strikes, he says. In addition, the finance chief should have backups three deep to ensure no organization is left wondering who oversees the checkbook, he says.

After a deadly tornado struck Mercy Hospital (then St. John’s Regional Medical Center) in Joplin, Mo., in 2011, the hospital’s comprehensive plan allowed the organization to continue operations consistently, even though the building was a total loss. A triage center was set up immediately after the storm, with a tent hospital in operation a week later. The organization operated at various locations the next few years, making it necessary for administration and staff to be nimble. The new building opened in 2015.

“It was a long journey because we had various locations and various stages to get us to the new hospital,” Mercy’s Chief Nursing Officer Dennis Manley says.

Following the money

Like any line item on a budget, a disaster not only needs a well-written and well-executed plan, but also plenty of paperwork to back up every move the hospital made before and during the event. A good documentation process helps the organization quickly collect FEMA assistance and insurance payments and provide valuable information for future disaster planning.

After a major power failure at Greensboro, N.C.,-based Cone Health four years ago, emergency management director Scott Supernaw and the finance leaders at the organization created a cost center just for disaster response. Officially the cost center is a zero-budget item, but during an event, it serves as an efficient central point for all disaster-related costs.

Partnering up in the community

It is essential to work not only with community agencies, such as emergency management, but also with other healthcare organizations. Forging collaborative partnerships with finance leaders at other healthcare organizations can help everyone weather the storm, Merritt says. Getting the organizations’ attorneys involved and having written agreements can help mitigate any issues that stem from competition.

“We recognize that these [health systems] often belong to corporate entities, and they aren’t very likely to share their day-to-day or even hourly available beds with each other, or what kinds of supplies they might be short in or what gaps they have in preparedness, because those aren’t things that you would normally share with your competitors,” Harvey says. “But it’s only through sharing that information before an emergency and coming up with ways to mitigate those gaps that the entire region is going to be ready and withstand the impacts of any emergency that might occur.” (See also the sidebars, “The first five phone calls to make when disaster strikes” and “Shoring up for the next event.”


a. CMS.gov, “Emergency Preparedness Rule,” page last modified May 8, 2019.

b. More information about this approach is available at ready.gov/planning.

c. Centers for Disease Control and Prevention, “Disaster Preparedness Budget Model,” page last reviewed Oct. 15, 2018.


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