The chief financial officer at Montefiore Health System in the Bronx explains how the organization has managed to stay in the black, generate modest operating margins, and even reinvest in itself while serving a largely poor patient population.
Based in the Bronx, New York—one of the poorest and most densely populated areas in the country—Montefiore Health System has an unenviable payer mix. Over 80% of the organization's revenue comes from the government, and half of that is Medicaid.
"You can tell a lot about the fiscal strength of a system by its payer mix. The more government payments you have, the more challenged you are," says Joel Perlman, Montefiore's executive vice president and chief financial officer.
Surviving mostly on government reimbursements isn't getting any easier, particularly as CMS tries to rein in spending through its value-based purchasing and RAC programs and the two-midnights rule. Substantial cuts are also being made to CMS' Disproportionate Share Hospital program, which distributes payments to hospitals that provide care to a large number of uninsured patients.
"We are in the top of the country for DSH payments because of our poor patient population," Perlman says. "We are living in a system where there are spending caps, and healthcare providers have to manage with no or low increases in government payments. Overall, there has been a decrease in government payments over the last few years… We are never going to be in the ranks of the most profitable organizations, but that is not who we are, and it's not the community we serve."
Yet, even with the tight reimbursement reality, Montefiore is not only holding its own, it is finding ways to grow.
"We've nonetheless managed to stay in the black and generate modest operating margins and do well enough that we can continue to reinvest in ourselves," Perlman says.
Executing a Growth Strategy
Part of that investment strategy has involved the acquisition of three regional hospitals over the past few years, which has helped Montefiore grow into a $4 billion system with 2,000 beds throughout six hospital campuses.
"We also have an ambulatory network that is one of the largest in the country," Perlman says. "Between primary care, specialty care, home health and related activities, we have about 100,000 admissions a year and 3.5 million patient visits a year."
Additionally, the acquisitions have broadened the system's service area to include the more affluent Westchester County, Perlman adds. "We are still Bronx-centric with about 80% of our business in the Bronx, but we are becoming increasingly relevant to healthcare in Westchester County just north of the Bronx."
The acquisitions are not only good for Montefiore—which is the university hospital for the Albert Einstein College of Medicine—but for its community, as well, Perlman says.
"We believe in a regional model of care with an academic medical center as the anchor. This allows us to hopefully do good and do well. We preserved many thousands of jobs in areas that suffer from high unemployment, and, as importantly, we preserved access to good healthcare in communities that because of low income levels, high unemployment, and high disease burden struggle with access."
Emphasizing Population Health Management
Perlman says Montefiore has been focused on population health management for many years and believes this strategy is critical to the future of healthcare delivery, especially for providers caring for poor communities with complex health issues.
Montefiore is one of CMS's Pioneer ACOs, but its roots in accountable care precede the program, Perlman says. "We were an accountable care organization before accountable care organizations were defined. We go back to the mid-90s in terms of accountable care and a model based on alignment and engagement."
Montefiore's School Health Program is one example of the work it does to engage the community and promote good health.
"It's the largest school-based healthcare program in the country, encompassing 21 schools in the Bronx," Perlman says. He notes that through this program, Montefiore provides school kids with access to an array of healthcare professionals, including nurses, pediatricians, internists, nutritionists, health educators, and dentists.
"We are working with the chancellor of education in our home borough, where, unfortunately, a large percentage of children live in poverty," he says. "They go to schools that have no gymnasium, and they have no physical activity. Many don't have a healthcare provider other than an ER or a hospital bed. They don't access the system in a regular way, which is how you ultimately promote good health over a lifetime."
Montefiore also identifies high-risk patients so it can maintain communication with them in an effort to provide better, more-efficient care and keep them out of the hospital.
"Through technology and our care management system and workflows, which are increasingly automated and electronic, we are staying in touch with patients, particularly those that have high needs that can be addressed most successfully in the community," Perlman says. "You have to stay in regular contact with patients, and in some cases, their significant others for elderly patients and children, in order to ensure they are actively engaged in trying to manage whatever medical burdens they have."
Working Smarter to Create Efficiencies
In addition to achieving top line growth through its recent acquisitions, Montefiore is also continually seeking to cut supply chain costs and improve its revenue cycle through the use of automated workflows and process improvement initiatives.
"It's a perpetual effort to work smarter," Perlman says. "We've been doing this for decades because even to get a modest margin with this payer mix you have to be operating efficiently… We work on alignment with our medical staff to develop standardization, particularly around physician preference items, and we have probably done a reasonably good to very good job."
"We've worked very hard to manage cost, but it is always a work in process," he adds. "You can never have enough of that because it is a complex work environment… We are working on all frontiers from the back office, administration, procurement, our very large ambulatory network, and also within the four walls of the organization to improve efficiencies and workflows."
Making It Work
Perlman credits the commitment of Montefiore's medical team and administrative staff for the organization's success in the face of so many financial challenges.
"It takes thoughtful leadership, an aligned medical staff, a board that understands the limitations of what you can do financially but that wants to do the right thing," he says. "When most of the patients you serve are in one of the poorest urban areas in the country, you have to do things differently, but people in the Bronx deserve healthcare as much as any other citizen … deserves access to good care."