Reacting to the Reform

Last week the leading names in Healthcare Finance met in Miami to discuss the causes and effects of the new healthcare reform.

Since the Reform proposal back in the spring there have been endless and conflicting statements outlining the potential pitfalls of the proposal, and the effect it will have on the American healthcare system. However those in attendance last week only deal with the facts and how they will implement a variety of systems to deal with the changes.

The government believes that by insuring everyone, the cost of healthcare-per-person will decrease significantly; at the moment those who can afford their insurance usually cover the costs of those who cannot. The problem has now been faced head-on and the CFO Healthcare committee believe that without the reform the problem would have continued to deteriorate.

The meeting began by discussing the critical strategies in preparing the healthcare for the decade ahead, Marc Holland – CEO and MD for Systems Research Services outlined the need for capital budgeting, the new healthcare reform legislation, and strategic IT decision making. Bill Donato – Executive Director Supply Chain Management and Carol Harding – Senior Director Supplychain management at the Cleveland Clinic also discussed how to compete within the ‘Age of Reform.’

“The Healthcare Supply Chain, from manufacturer to provider and ultimately the patient, can no longer be ignored or counted on to contribute small incremental savings through price over price and/or inventory reductions.”

The Cleveland Clinic itself has already committed to spending $100 Million in costs for strategic initiatives to continue over the next two years to excel clinically while driving operational excellence. They understand that in an era of declining revenues and spiralling costs, engineering supply chains and implementing new systems is the only way to keep up with the competition.

“In order to reduce the organizations cost basis the Supply Chain must be reengineered utilizing business practices that industry has been using for the last decade to respond to their provider customer's financial concerns. Expanding service lines, streamlining operations and reducing waste and errors will be critical to success.”

Also joining the committee were representatives from Catholic Health East, Jenny Barnett – Corporate CFO, Baylor Health Care System, Michael Taylor – SVO Operations, BJC Healthcare, John Katsianis – CFO North Region and Spectrum Health Systems, Jeff Lemon – President.

The new reform will inevitably cost more money. It would be almost impossible to provide an equal service to everyone at the current price. To cover more people, costs must be controlled and some cuts will be necessary. The Affordable Care Act will save Medicare an estimated $8 billion in the next two years and almost $418 billion by 2019. Affordable care will drive down the costs for everyone, and save the Medicare system, from fraud and inefficiency. The Congressional Budget Office found that health insurance reform will reduce the deficit by over $100 billion in this decade and by more than $1 trillion over the following 10 years. It is up to the industry to carry this out now the government has settled on a decision.

The Health of US Healthcare

With Healthcare reform driving national attention to record levels of uninsured patients, the role of the CFO is becoming more difficult and crucial to the success of a hospital or healthcare service center. Due to the public eye scrutinizing this level of a corporation, CFOs across the healthcare industry are meeting in Miami for the CFO Healthcare Summit 2010 this October. The driving focus from attendees is to understand the right revenue cycle implementation and what is the most cost effective Supply Chain Management (SCM) procedures that can give their respective organizations a competitive edge.

Raising issues of this caliber needs to be relevant for a private insurance environment as well as an increasingly socialized medical environment. For this reason representation from private institutions like Catholic Health East or the Baylor Health Care System, as well as leadership from uniquely positioned public systems like Cleveland Clinic or the NYU Langone Medical Center will be present at the Fairmont Turnberry.

One of the unifying topics, Revenue Cycle Solutions, stands as a key talking point due to the need for financial departments to lower the number of days a payment stays in the receivables account. What was seen as the back end for dropping a bill has the ability of becoming a more comprehensive service between the patients calling in to determining eligibility.

PNC Bank is taking the time to explain that revenue cycle management is a great solution for developing this area but they also take a relationship component and add it to the model. What PNC are looking to propose is unity across both the insurance side as well as the healthcare provider side. This could allow healthcare institutions to receive quicker confirmations on eligibility from the insurance side as well as having sufficient processing systems internally.

Looking at revenue cycle management solutions is great, but what interested executives like Janice Ridling,VP of Revenue Cycle at Baptist Health System, is developing questions of efficiently training staff about the increased capabilities these solutions can provide and how internal policies regarding patient financial responsibility can streamline the process.

Financial departments in healthcare institutions need to juggle more than one system on a daily basis and another focus area that looks at saving money through Supply Chain Management. Steve Huckabee the Corporate Vice President of Supply Chain Management at Kettering Health Network has deployed targeted tactics as a way to enhance the network's position for increasing revenue and growing market share.

Those tactics include creating a sourcing environment allowing physicians product choices while achieving cost savings; creating a research environment for physician-scientists to engage in the science side of healthcare to complement their expertise; and creating a full continuum-of-care model that is an alternative source of revenue which engenders a strong referral relationship.

Healthcare in the US is constantly in a state of movement, but there are certain undeniable constants in the market place that hold true whether or not new policies are adopted. For this reason revenue cycle management and supply chain management solutions are at the forefront of the topics being discussed in Miami. Standing as a testament to the health of the healthcare industry is the ability for competitors and colleagues alike to openly discuss the mutual obstacles that occur on a yearly basis, so the market itself can maintain stability whether change takes place or not.

Healthcare Reform - Curse or Cure

Last month some of the leading names in the healthcare finance industry announced an urgent meeting in the wake of the new Healthcare Reform in Arizona at the CFO Healthcare summit (hosted by GDS International) . So what happened and how will this affect the industries Future?

Nearly two-thirds of the US CFO’s believe that it is of utmost importance for congress to address the cost of healthcare over security issues. Very few times has the American Government become so involved in private business? Executives at the CFO Healthcare Summit on the whole in agreement with the reform but openly discussed their concerns over the rising cost of healthcare.

"I can certainly see the benefits of making health-care more readily available to everyone, but as of yet we are still to see the real issue being addressed, a continued increase in healthcare costs”.

If we look at the performance of healthcare stocks over the year and the consensus of the CFO Healthcare committee, the chance that the reform will cut into profits is still regarded as “very possible”.

“to lower costs requires a combination of both fewer treatments or lower cost per treatment, neither of these solutions offer the same profit margins we have become accustomed to”……….

The committee was not all doom and gloom, they discussed in detail the indirect effects of the reform which could lead to increased cost savings. One such discussion looked at how hospitals will see less ‘bad debt’ from the services provided to those people who are not insured, they could see their rates fall from anywhere from 5% to 20%. Not to mention the reconciliation bill which was mentioned several times by the CFO committee, this allows for a greater variation in premiums for people who refuse to take part in ‘wellness programs’ and ultimately lead to a healthier population.

Hospitals have promised to cut more than $150 billion in costs over the next decade, and the implication is that they will need to pressure suppliers to lower costs to do so. Drug manufacturers have agreed to contribute $80 billion over the same time period to helping fund Medicare benefits. This was backed by representatives from such as Vince Schmidt SVP and CFO of Multicare Health System, Mark Spafford CFO and VP of Health Management Associates, Robert Booth CFO of Summit Medical Group, and Larry Dupper CFO of Valley View Hospital.

Can costs be managed or is the diagnosis terminal?