In fiscal year 2011, relatively large community hospitals, academic medical centers and other system hospitals with 400 or more beds recorded stable revenue numbers compared with FY 2010. However, what is the status of the smaller local hospitals, especially those who are still able to remain independent?
Ben Dunford is the CFO of Texas Regional Medical Center at Sunnyvale, a 70-bed acute-care hospital that also happens to be physician-owned. Mr. Dunford has been in his role since August 2011, and previously, he used to work at Bain & Company as a consultant for healthcare, technology and other clients, as well as Goldman Sachs as a banking associate.
Here, Mr. Dunford explains how his hospital CFO role compares to his previous work experience, what challenges physician-owned hospitals face and what healthcare reform means for small hospitals like TRMC at Sunnyvale.
Question: You've been at TRMC at Sunnyvale for roughly one year now, and this is your first role as a CFO of a hospital. What are some of the most important things you've learned thus far?
Ben Dunford: I think I've learned how important it is to understand the clinical, as well as the financial, elements of any situation or problem. Sometimes, finance people see things as black and white or with numbers and decimal places. Being in the role that I'm in, you're given an opportunity to understand there's a quantitative side, but there's also a broader, clinical side to things. But I really love my job. We have a terrific hospital, physicians and staff members.
Q: How does this current CFO position compare with your other experiences at Bain & Company and Goldman Sachs? What are the similarities and differences between them in terms of healthcare and private equity?
BD: I've been fortunate to have a lot of different positions that have given me good experience for the seat I'm in now. In banking, you have to understand how the capital markets work and how investors think about how they are putting money into certain opportunities. Now more than ever, you have to understand what the return on investment is on different approaches, both near and long term, especially considering the Patient Protection and Affordable Care Act.
Consulting [at Bain & Company] was helpful. Consulting gives you a framework to understand what analysis you need to get to fact-based or evidence-based solutions. That brings me to what I really love about my job — being part of a team to make change happen. As a banker or consultant, you can provide a recommendation, but you don't have the chance to implement the changes for the solution.
When it comes to private equity, investors of healthcare may not understand all the nuances. Sitting in the seat I am in now, I understand why [hospital executives] have to make one decision versus another. For example, one of the toughest things we've had to do so far is we're in the process of refinancing our debt. We're a small hospital, not part of a system, and helping lenders understand the great things we're doing takes some effort. At big systems, they have 300 days cash on hand, so going out to the debt markets is no problem. Managing capital structure and the balance sheet is a continual process here.
Q: Do you find there are specific or unique financial challenges to overcome at TRMC at Sunnyvale since it is a physician-owned hospital?
BD: I think there are a lot more stakeholders because it is physician-owned. That's a good thing because more folks can add input to a decision and can help improve that decision.
I think our physicians have a unique perspective. They've put some of their capital at risk to build the hospital, but they are also really strong contributors to the community. We're also a full-service acute-care hospital, so we provide care through our emergency room, our women's center — we just delivered 125 babies last month, a record since we've opened three years ago — and that's what is great about physician-owned hospitals. A local physician-owned hospital has a lot more invested in the community than a corporate-owned hospital, for example.
Q: If you had to describe the biggest fiscal obstacle right now, what would it be and why?
BD: The certainty around Medicare and Medicaid funding is a fiscal obstacle because there is not as much certainty as you would like. On the acute-care hospital side, all the healthcare reform that is occurring is focused on taking costs out of the acute-care setting. We obviously want to participate in that, but time will tell how well that works or how effectively we can do that. Readmission penalties are something that is a concern on the horizon, but I'm also positive about the future. I think we're going to figure it out across the industry. People are dedicated to providing good care with reasonable economics.
Q: You mentioned Medicaid. Texas Gov. Rick Perry has publicly said he wants no part of the Medicaid expansion. What are your thoughts? Wouldn't an expansion of Medicaid help out your hospital and others throughout the state?
BD: Politically, this is tricky. There is a desire to create reform, and there needs to be reform. I think it's tricky for the different parties to get aligned on what the right path forward is, and both parties have their merits. Gov. Perry understands the state does not want to be beholden to this [expansion], but there is a lot of federal funding that is available that could be used for patient care. Despite ideologies, it's about what are we going to do to provide great care at reasonable prices? That's why I'm doing what I'm doing, and others are, too.
Q: What is the hospital's payor mix like, and how do you help with the managed care contracting?
BD: We are 45 percent Medicare, 40 percent commercial/BlueCross BlueShield and the rest is Medicaid. Our contracting approach is challenging because we don't have a lot of market share or pull to negotiate with payors, and we're not large enough that we want to be in-network with all the payors. We can only handle so much volume. We have to be strategic with the payors we go in-network with and which we decide not to.
An element that's a big consideration is how we administer those contracts, given their complexity. We need to make sure we can intelligently understand what we are getting reimbursed for and how. Once we enter into contract, we can understand where we are. That's tricky because a lot of payors come with complicated structures to organize reimbursement. We don't have a managed care contracting department internally, so it's me, my finance team and the billing office team that deals with this.
Q: Where do you see the hospital financially in the long term, especially as healthcare reform starts to unfold?
BD: I think financially we're in a great position because we have a great organization. We have a great facility, and we were just voted as the best hospital by Mesquite News, our local community newspaper. I think in the future, it will be important for us to align with the right partners. I don't know what that looks like necessarily, but I do know there are tons of advantages to have partners that you can rely on and manage that transition. I think of partners euphemistically — other hospitals, other systems, accountable care organizations. That's one of the benefits of being a small hospital. We have a lot of autonomy in terms of what path we choose.
Ben Dunford is the CFO of Texas Regional Medical Center at Sunnyvale, a 70-bed acute-care hospital that also happens to be physician-owned. Mr. Dunford has been in his role since August 2011, and previously, he used to work at Bain & Company as a consultant for healthcare, technology and other clients, as well as Goldman Sachs as a banking associate.
Here, Mr. Dunford explains how his hospital CFO role compares to his previous work experience, what challenges physician-owned hospitals face and what healthcare reform means for small hospitals like TRMC at Sunnyvale.
Question: You've been at TRMC at Sunnyvale for roughly one year now, and this is your first role as a CFO of a hospital. What are some of the most important things you've learned thus far?
Ben Dunford: I think I've learned how important it is to understand the clinical, as well as the financial, elements of any situation or problem. Sometimes, finance people see things as black and white or with numbers and decimal places. Being in the role that I'm in, you're given an opportunity to understand there's a quantitative side, but there's also a broader, clinical side to things. But I really love my job. We have a terrific hospital, physicians and staff members.
Q: How does this current CFO position compare with your other experiences at Bain & Company and Goldman Sachs? What are the similarities and differences between them in terms of healthcare and private equity?
BD: I've been fortunate to have a lot of different positions that have given me good experience for the seat I'm in now. In banking, you have to understand how the capital markets work and how investors think about how they are putting money into certain opportunities. Now more than ever, you have to understand what the return on investment is on different approaches, both near and long term, especially considering the Patient Protection and Affordable Care Act. Consulting [at Bain & Company] was helpful. Consulting gives you a framework to understand what analysis you need to get to fact-based or evidence-based solutions. That brings me to what I really love about my job — being part of a team to make change happen. As a banker or consultant, you can provide a recommendation, but you don't have the chance to implement the changes for the solution.
When it comes to private equity, investors of healthcare may not understand all the nuances. Sitting in the seat I am in now, I understand why [hospital executives] have to make one decision versus another. For example, one of the toughest things we've had to do so far is we're in the process of refinancing our debt. We're a small hospital, not part of a system, and helping lenders understand the great things we're doing takes some effort. At big systems, they have 300 days cash on hand, so going out to the debt markets is no problem. Managing capital structure and the balance sheet is a continual process here.
Q: Do you find there are specific or unique financial challenges to overcome at TRMC at Sunnyvale since it is a physician-owned hospital?
BD: I think there are a lot more stakeholders because it is physician-owned. That's a good thing because more folks can add input to a decision and can help improve that decision.
I think our physicians have a unique perspective. They've put some of their capital at risk to build the hospital, but they are also really strong contributors to the community. We're also a full-service acute-care hospital, so we provide care through our emergency room, our women's center — we just delivered 125 babies last month, a record since we've opened three years ago — and that's what is great about physician-owned hospitals. A local physician-owned hospital has a lot more invested in the community than a corporate-owned hospital, for example.
Q: If you had to describe the biggest fiscal obstacle right now, what would it be and why?
BD: The certainty around Medicare and Medicaid funding is a fiscal obstacle because there is not as much certainty as you would like. On the acute-care hospital side, all the healthcare reform that is occurring is focused on taking costs out of the acute-care setting. We obviously want to participate in that, but time will tell how well that works or how effectively we can do that. Readmission penalties are something that is a concern on the horizon, but I'm also positive about the future. I think we're going to figure it out across the industry. People are dedicated to providing good care with reasonable economics.
Q: You mentioned Medicaid. Texas Gov. Rick Perry has publicly said he wants no part of the Medicaid expansion. What are your thoughts? Wouldn't an expansion of Medicaid help out your hospital and others throughout the state?
BD: Politically, this is tricky. There is a desire to create reform, and there needs to be reform. I think it's tricky for the different parties to get aligned on what the right path forward is, and both parties have their merits. Gov. Perry understands the state does not want to be beholden to this [expansion], but there is a lot of federal funding that is available that could be used for patient care. Despite ideologies, it's about what are we going to do to provide great care at reasonable prices? That's why I'm doing what I'm doing, and others are, too.
Q: What is the hospital's payor mix like, and how do you help with the managed care contracting?
BD: We are 45 percent Medicare, 40 percent commercial/BlueCross BlueShield and the rest is Medicaid. Our contracting approach is challenging because we don't have a lot of market share or pull to negotiate with payors, and we're not large enough that we want to be in-network with all the payors. We can only handle so much volume. We have to be strategic with the payors we go in-network with and which we decide not to.
An element that's a big consideration is how we administer those contracts, given their complexity. We need to make sure we can intelligently understand what we are getting reimbursed for and how. Once we enter into contract, we can understand where we are. That's tricky because a lot of payors come with complicated structures to organize reimbursement. We don't have a managed care contracting department internally, so it's me, my finance team and the billing office team that deals with this.
Q: Where do you see the hospital financially in the long term, especially as healthcare reform starts to unfold?
BD: I think financially we're in a great position because we have a great organization. We have a great facility, and we were just voted as the best hospital by Mesquite News, our local community newspaper. I think in the future, it will be important for us to align with the right partners. I don't know what that looks like necessarily, but I do know there are tons of advantages to have partners that you can rely on and manage that transition. I think of partners euphemistically — other hospitals, other systems, accountable care organizations. That's one of the benefits of being a small hospital. We have a lot of autonomy in terms of what path we choose.
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