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CFOs: What 2011 Holds for Hospitals

Karen Minich-Pourshadi, for HealthLeaders Media, September 13, 2010
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Where there is optimism, it is notably cautious.
Where there is uncertainty, it centers on the unknowns
of healthcare reform implementation. All told, healthcare
finance leaders are pretty sure that 2011 will not
represent a return to the good old days.

For the past few years, CFOs have been slashing costs to save their bottom lines from the economic recession. And with economists split over whether the recession will double-dip or maintain a slow recovery, hospital finance leaders are making their own educated guesses for their 2011 strategic plans. 

We asked six hospital CFOs to offer their insights on areas of concern and how they propose to handle them. 

James Connelly, senior vice president, CFO, and treasurer,
Henry Ford Health System
Detroit;
2,245 beds;
projected net revenue 2010: N/A;
net revenue 2009: $3.97 billion;
net revenue 2008: $3.70 billion

What are the key areas you believe will affect your hospital in 2011?
The Overall Economy. The recovery has been very slow and that's creating a lot of economic pressure. We have an integrated delivery system, so we have an insurance division, medical research, and patient care and we've seen this impact us on all.

Not only from the employers who use us—they are adjusting their plans to high-deductible plans—but also in the number of people who have jobs and have insurance for healthcare. Also, our state and many others are facing state deficits, and that is expected to put more pressure on the Medicaid program and cause lower reimbursements—we are definitely watching that.

Movement Toward Growth.
We've been fortunate and have been able to grow at our health system [through the recession]—we continue to increase market share. One of our key strategies is our movement toward becoming an accountable care organization. That's something we've been working on for a while and we will continue to put into action. Also, to help us grow, we've been working with our physicians to expand our physician network. We want a strong referral network. 

How are you offsetting negative influences?
Managing the business end of what we do doesn't really change—it has always been important to effectively manage cost. That's a lesson we learned earlier than some hospitals because the auto industry had its downturn before the rest of the country. Basically, what it comes down to is when you have less, you have to figure out how to get things done for less. We are working on basic service, improving quality, better integration, and managing costs. Plus, we are paying close attention to all our revenue sources to make sure we are maximizing those. The other component that's key is we are making sure we take care of our people, trying to keep them motivated and engaged.

Do you feel the economy is rebounding?
I think we are still in tough times. There is very slow growth, and that's obviously positive economic development. But there are still large numbers of unemployed and we are concerned about not seeing much employment or housing-market growth. Our planning assumption is that the economy will continue to be difficult for a long time.

David O'Connor, CFO,
CaroMont Health
Charlotte, NC;
436 beds;
net revenue 2010: $482 million;
net revenue 2009: $458 million;
net revenue 2008: $423 million

What are the key areas you believe will affect your hospital in 2011?
Local Unemployment. Unemployment is a big issue here; it's around 15%. But it's had a negative impact on our charity care and bad debt expenditures. This year we're around $41 million in charity care and $43 million in bad debt; combined they were 7.6% gross of our budget this year, and we're budgeting it at the 7.6% to 7.7% range for 2011. We did see a drop in unemployment recently and we anticipate it should continue to reduce with the economy improving.

Healthcare Reform.
Reform will definitely affect us. We are gearing up to participate in a demonstration project for accountable care organizations in 2011, and we are already looking for ways to improve care and quality. It's going to be a big part of our future over the next year.

How are you offsetting negative influences?
We could see some increases in bad debt and charity care as more people move on to consumer-directed health plans and more patients are paying out of pocket. Even with unemployment reaching a peak in our area we were able to maintain positive operating margins by flexing our staff accordingly. We are also using our productivity tools to manage costs closely so we don't miss anything when volumes go up and down.

Do you feel the economy is rebounding?
It's difficult to tell, but you can't keep getting out of things with stimulus money. Eventually there has to be true growth. So is the recession over? It's tough to determine. I know some feel there may be a double-dip recession, but how deep will that go, and will unemployment rise again? I'm not sure.

 

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1 comments on "CFOs: What 2011 Holds for Hospitals"


Shelton McBride, RPh, Consultant (9/24/2010 at 2:00 PM)
This is excellent. Would like to see similar responses from CEOs, COOS, CNOs, CPOs, etc. A nice series would be great. We have so many challenges due to the unknowns we face. We are within 100 days of Bush tax cut extensions, not knowing what will happen. So much of healthcare reform has not been detailed so that we know true costs. This approach is helpful to share the thinking of our leadership. Once we know the issues, we can go after the details and the solutions. Good old days? Gone forever.