Financial Condition of Maryland Hospitals

In preparation for how the Health Services Cost Review Commission is going to handle Sequestration cuts for Maryland hospitals, the Maryland Hospital Association asked for a report about hospital financial conditions to be done.  The results are telling.  The aggregate operating margin for Maryland hospitals is 0.8%, meaning hospitals are barely breaking even in the care that is provided.  Forty-two percent of Maryland hospitals have negative operating margins, resulting from four years of hospital rate increases (2010 - 1.49%; 2011 - 1.41%; 2012 - 1.56% and 2013 - .30%) which were below the inflation rates that exceeded 2% each year.  Hopefully, the HSCRC will take into consideration the seriously declining financial condition of Maryland hospitals at their meeting tomorrow as they are deliberating Sequestration cuts, as well as at their meeting in June about rate increases for FY 2014.

Physician Recognition & Awards

On Friday evening, WMHS celebrated the medical staff and our advanced practice professionals at a wonderful event.  The evening culminated with the awards presentation for Physician of the Year, Lifetime Achievement and Mane Ictum or quick impact.  Dr. Chris Haas, medical director for Cardiology, received the Mane Ictum award.  That award is presented to one of our newer physicians who has made a dramatic impact on the organization in a very short period of time.  There were excellent nominees and Dr. Haas was a great choice.  Next, was the Lifetime Achievement Award and it was presented to Dr. Narayan Saheta, staff Cardiologist, who has served his patients and this health system for 37 years.  He, too, was among some wonderful nominees for this well-deserved award.  Lastly, was the presentation for Physician of the Year.  Many wonderful physicians were nominated by staff with a very speechless Dr. Murtaza Amir, a staff Neurologist, being selected.  Again, so very well deserved. 

The evening is a great time with wonderful food and great conversation.  Dr. George Garrow served as Master of Ceremonies, and he would have made any professionally trained MC jealous.  It always turns out to be a late night for me, but it is well worth it.  Spending quality time with a room filled with special people doing very special work is time very well spent.

That Critical Dual Role for Hospitals in Maryland

So, in addition to caring for sick (the obvious role for hospitals), we are also economic engines across the State and in our communities.  We are one of the largest private sector employers in the State by employing around 100,000 employees.  There is then the ripple effect for every one hospital job, an additional two jobs are created outside of the hospital.  We generate a Statewide economic impact of $26 billion; at WMHS, our economic impact on the region is $300 million.  As an industry, we have to be very careful through spending cuts, zero rate increases, inflation and changes in how we do business, that the financial condition of hospitals in Maryland is at one of the lowest points in our history. 

WMHS is doing somewhat better than most Maryland hospitals this year, but that wasn't the case last year.  We had a very challenging year last fiscal year.  While insurers are asking for and in many cases receiving double digit increases, many Maryland hospitals are at a barely break even point.  To date, we have been able to sustain the cuts and the well below inflation rate increases through focusing on the greatest portions of our operating budgets which is "staff and stuff."  We have eliminated vacant positions, renegotiated supply costs and sought new sources of revenue, but you can go only so far. 

The current and continued weakening of hospital finances will likely lead to program and service cutbacks and an increase in layoff activity Statewide.  At WMHS, we are pulling out all stops to ensure that we are managing our financial situation through careful planning as was the case this time last year as we planned for the current year's budget.  Hopefully, the rate setting commission will get the message and allow hospitals to continue to act as the State's economic buoy during these challenging financial times.

Free Phones, Now Free Internet

Yesterday, I heard on the Stuart Varney radio show that the Lifeline Program put in place by the federal government in 1984 to provide landlines for the rural poor will be expanded to include the Internet and possibly the 11 million "undocumented workers" who are now seeking a path to citizenship.  The program has grown to include cell phones - actually 300,000 of them at a cost to the taxpayer of $2.2 billion.  Not that long ago, the cost of the Lifeline program was $143 million per year until cell phones were added in 2008.   According to Mr. Varney, the program is riddled with fraud and now the government wants to add broadband access.  I can't fathom why anyone has to have internet access for emergency purposes.   The "good news" is that there will be limits as there are with cell phone minutes which are limited to 250 minutes per month.  The only problem is that of those 300,000 cell phones, many are duplicate phones owned by one person; one would assume that's where the fraud comes in.  In a time of sequestration, I can't understand how we are furloughing air traffic controllers and potentially putting our air traveling public in jeopardy, but continuing to provide cell phones and now internet access to the "poor".  Both commonsense and leadership seem to be limited these days in certain sectors of our government.

Impact on Sequestration at WMHS

On May 1, the Health Services Cost Review Commission, the group that sets rates for Maryland hospitals, will decide how to handle the Federal Sequestration cuts for Maryland hospitals.  The HSCRC staff recommended that hospitals absorb the 2% cuts and actually the cuts became effective April 1st.  Hospitals have received nominal increases in rates for several years while insurers have enjoyed in some cases double digit increases.  The hospital industry has asked that the 2% be put in rates as has been the case in the past with previous sequestration cuts. The impact of the 2% cut on WMHS for the last quarter of the fiscal year will be $1 million.  The impact on all Maryland hospitals annually will be over $108 million.  This will directly result in the loss of health care jobs and services across Maryland.  At WMHS, if we were to follow the federal government's approach to sequestration, we would immediately and dramatically reduce the hours of patient care, cut back on our trauma and heart programs, reduce cancer services and layoff essential personnel.  Fortunately, we took a proactive approach with our spending in preparation for things like sequestration and the Affordable Care Act last year while preparing this year's budget.  We eliminated over 100 positions and reduced supply costs by several million dollars; in total we reduced spending by almost $8 million.  So, we should not have to impact the organization, our employees or our patients with this cut.  As an aside, we would make every effort not to directly impact employees (although that is becoming more and more challenging) and essential services if we did have to cut expenses in order to absorb sequestration, unlike our Federal Government.  They make cuts based on how much media attention that they can garner and how much blame can be heaped upon whatever political party is in control of the House or Senate.  I will let you know how the decision comes out next week.

Making Money From Surgical Errors (Really?)

Last week, there was an article in the Journal of the American Medical Association based on a study that hospitals are benefiting by earning money due to surgical complications.  The article and its subsequent editorial by a renowned health care economist were also carried by the New York Times. Well, for the record, not in Maryland and not at WMHS.  In Maryland, now in place for several years, we have been penalized for potentially preventable complications or PPCs, certainly not rewarded.  We apply such reporting to all payors.  In addition, as a TPR hospital, such an approach would be contrary to our two- year-old new payment methodology.  Apparently, government payors through Medicare and Medicaid are extremely conscientious while private payors aren't as restrictive.  The bottom line is that I can't believe that in 2013 with all of the scrutiny of the health care industry that benefitting from surgical or medical errors is occurring.  It's time for everyone to wake up and reverse this perverse payment system.

Mastering Disruptive Innovation

It is nice to know that we have arrived as a health care industry leader at WMHS.  The other day, I received a solicitation for a seminar, "Disruptive Innovation: Creating the Healthcare Systems of the Future." The purpose of the seminar is to get the health care industry to change how they do business, but at an accelerated pace.  We have been well aware at WMHS that organizations can't succeed in a fee-for-service environment going forward and they must ensure that value-based care becomes their immediate focus.

Forward thinking organizations such as WMHS have already disrupted the status quo in a very dramatic way.  Actually, we did it two and a half years ago when we became a part of the Maryland Total Patient Revenue demonstration project.  It took a great deal of work to get everyone on board with such a dramatic change.  We have changed the way that we care for our patients with a focus on the triple aim of healthcare reform: reducing cost; enhancing quality and improving the health of our patients as well as the population in general.  We have educated our employees, our board members and our medical staff.  We are now in the process of educating our community as part of our campaign, "Meeting the Challenge of Health Care Change."   It is very cool to go to meetings and talk about what we have done at WMHS related to disrupting the status quo through innovative processes and new technologies.