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CFOs: What 2011 Holds for Hospitals

Karen Minich-Pourshadi, for HealthLeaders Media, September 13, 2010
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What are the key areas you believe will affect your hospital in 2011?
Healthcare Reform. Depending on how they apply it and treat the physician, it could really affect us all. We already put in place incentives for our physicians and the hospital is working with them to eliminate a lot of redundancy. The HITECH Act will certainly be a positive, so we are working with our physicians to offer an electronic medical record on an ASP [application service provider] to get this going. We will host the software, and that will qualify them for reimbursement and the data is then available. That's a huge piece.

Medicare and Medicaid Reimbursements.
This is a big one for us in Maryland; we are seeing some quality measures tied to reimbursement, and now they are reducing the rates. Since this recession began we have had very minimal rate increase anyway. This year our rate increase in fiscal year 2011 is less than 1.5%, which continues to challenge our bottom line. We continue to work on initiatives to counteract that.

Outpatient Competition.
We see our affiliated doctors doing more in their own labs or surgery centers. The medical staff is going into competition with us in areas that typically had been hospital service areas. Then there's always the concern about outside competition coming into the area, such as a for-profit or other health system. Our concern is that our hospital can be stripped of its outpatient business, and that's the easy, profitable business.

How are you offsetting negative influences?
We put our merit program on hold. We increased salary 0% to 1% for staff, yet it's our biggest expense—so that's been a conundrum. We're not getting the same number of dollars as before, and most of our dollars go into labor. So we worked hard to cut our costs instead of labor; actually we just completed a large supply chain reduction project. And we are always looking at how we can improve our market share. We also look at our quality, our customer service scores, and our finances and we are using key measures to compare our hospital against A-rated hospitals.

Do you feel the economy is rebounding?
I don't know if we are through the worst of it. I don't think there's a quick fix, and the background reasons for the recession are so pervasive that I think they will still drag us down. Although there has been some profitability at larger companies ? some of the biggest companies are still not reemploying folks. I think we might have hit bottom, but I don't think it is going to be a quick rebound—it will be more like 2012 before we are back in the swing of things.

Kimberly Boynton, CFO,
Crouse Health Hospital, Inc.,
Syracuse, NY;
506 beds;
projected net revenue 2010: $343 million;
net revenue 2009: $331 million;
net revenue 2008: $313 million

What are the key areas you believe will affect your hospital in 2011?
Medicare and Medicaid Reimbursements. We are trying to determine how greatly the federal government reimbursement cuts and the ones that New York state is still working on for its budget are going to affect us. Our Medicare makes up 21% and Medicaid is 28% and we operate a $20 million EBITA. The New York State Medicaid changes alone could cost us between $1 million to $3 million annually. That's significant when you have such a small margin.

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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.