Diane Harden, CFO of non-profit health system DeKalb Medical in Decatur, Ga., has more than 30 years of experience with healthcare finance. She has been a CFO at for-profit and non-profit hospitals throughout the Southeast, including the University of Tennessee Medical Center in Knoxville. There are always major hurdles to clear at any financial post, but 2012 is looking more like a miniature mountain for those in healthcare. Here, she talks about the increase in uninsured patients, how to interpret net revenues and patient volumes and why investments are so important for hospitals these days.
Question: What are your biggest financial concerns for 2012?
Diane Harden: From what we're seeing, the biggest concern I have is the continuing increase in uninsured and underinsured patients. We continue to see growth in admissions coming through the emergency room, and we're also seeing a reduction in people electively seeking care. But the main business we're seeing is more people who need care and who are uninsured or underinsured. It's been a noticeable increase, which started dramatically about a year and a half ago, and it's continuing to increase.
In the Atlanta market, we use a lot of hospitalists to take care of patients. Physicians turn patients over to hospitalists, so we have had to increase our staffing on hospitalists significantly above what we had planned budget-wise. We employ about 26 full-time hospitalists just to take care of in-house patients, and a lot of the patients are without insurance.
Q: How much emphasis do you put on the management of CMS' Recovery Audit program?
DH: We actually were very early in the game to put a formal infrastructure in place, and I'm glad we did. We have a good process audit in order to deal with RACs, so we haven't had large issues with the RACs. We have hospital staff just to monitor the RAC issues, and we go in and audit ourselves for those issues. If we see any issues, we make those necessary changes in our process. We have a few people dedicated to this, and it's under our compliance department.
Q: What does the investment market look like for hospitals right now? Is there anything positive to report?
DH: We have definitely seen a real slowness in the [investment] returns, but we have seen a recent change in the markets. We're cautiously optimistic there is going to be positive movement. Our reserves are invested relatively conservatively. About 60 to 65 percent is fixed income, and the remaining is in equities. And we diversify our portfolios quite a bit. Since [the financial crisis of] 2008, everyone pays a whole lot more attention to them. Our cash reserves are probably one of our biggest things for stability to weather out the storm here. It's very important to us.
Q: What are some of the best things other hospital CFOs can do this year to manage their budget?
DH: The biggest thing we're doing is we're not making any positive assumptions on our net revenues. We've had increases in volumes but not a big increase in net returns on the volumes. Revenues may not always grow, so you may have to manage your costs accordingly, and that's how we are budgeting.
We go to our management meetings, and our volumes are good — but that doesn't mean our net revenue is growing. We've done a lot of cost management for the last six years since I've been here. This was a turnaround situation. There have been all kinds of efforts: productivity monitoring, looking at every line on the financial statement and making sure we're doing the best we can. One of the key issues is controlling resource utilization, and that's the hardest part.
Q: What are your thoughts as healthcare reform goes to the Supreme Court? What changes need to be made to the healthcare system to curb spending and promote fiscal growth?
DH: Reimbursement is going to continue to go down whether the Supreme Court ruling goes in either direction. We're still going to see declines in reimbursements. Therefore, that's going to put a lot more emphasis on investing in primary care, putting primary care in the community and following up on the patient. One of the things we're also going to have to focus on is reducing readmissions.
For our hospital, with our payor mix, the healthcare reform [law] could give access to a lot more patients in terms of coverage. We have a disproportionate Medicaid population, as well as a growing uninsured population. A lot of the uninsured could become Medicaid.
Previously, I worked in Tennessee under TennCare [the state's Medicaid program], and the state expanded coverage there. They reduced reimbursements to help pay for the expanded population covered, and it didn't work. The program could not sustain itself under this model. We're in for a big shift in healthcare and the way it's delivered. The whole payment system is clearly going to change. The consumer expectation is that they ought to be provided healthcare regardless of resources to pay for it, so that's going to change everything going forward.
Question: What are your biggest financial concerns for 2012?
Diane Harden: From what we're seeing, the biggest concern I have is the continuing increase in uninsured and underinsured patients. We continue to see growth in admissions coming through the emergency room, and we're also seeing a reduction in people electively seeking care. But the main business we're seeing is more people who need care and who are uninsured or underinsured. It's been a noticeable increase, which started dramatically about a year and a half ago, and it's continuing to increase.
In the Atlanta market, we use a lot of hospitalists to take care of patients. Physicians turn patients over to hospitalists, so we have had to increase our staffing on hospitalists significantly above what we had planned budget-wise. We employ about 26 full-time hospitalists just to take care of in-house patients, and a lot of the patients are without insurance.
Q: How much emphasis do you put on the management of CMS' Recovery Audit program?
DH: We actually were very early in the game to put a formal infrastructure in place, and I'm glad we did. We have a good process audit in order to deal with RACs, so we haven't had large issues with the RACs. We have hospital staff just to monitor the RAC issues, and we go in and audit ourselves for those issues. If we see any issues, we make those necessary changes in our process. We have a few people dedicated to this, and it's under our compliance department. Q: What does the investment market look like for hospitals right now? Is there anything positive to report?
DH: We have definitely seen a real slowness in the [investment] returns, but we have seen a recent change in the markets. We're cautiously optimistic there is going to be positive movement. Our reserves are invested relatively conservatively. About 60 to 65 percent is fixed income, and the remaining is in equities. And we diversify our portfolios quite a bit. Since [the financial crisis of] 2008, everyone pays a whole lot more attention to them. Our cash reserves are probably one of our biggest things for stability to weather out the storm here. It's very important to us.
Q: What are some of the best things other hospital CFOs can do this year to manage their budget?
DH: The biggest thing we're doing is we're not making any positive assumptions on our net revenues. We've had increases in volumes but not a big increase in net returns on the volumes. Revenues may not always grow, so you may have to manage your costs accordingly, and that's how we are budgeting.
We go to our management meetings, and our volumes are good — but that doesn't mean our net revenue is growing. We've done a lot of cost management for the last six years since I've been here. This was a turnaround situation. There have been all kinds of efforts: productivity monitoring, looking at every line on the financial statement and making sure we're doing the best we can. One of the key issues is controlling resource utilization, and that's the hardest part.
Q: What are your thoughts as healthcare reform goes to the Supreme Court? What changes need to be made to the healthcare system to curb spending and promote fiscal growth?
DH: Reimbursement is going to continue to go down whether the Supreme Court ruling goes in either direction. We're still going to see declines in reimbursements. Therefore, that's going to put a lot more emphasis on investing in primary care, putting primary care in the community and following up on the patient. One of the things we're also going to have to focus on is reducing readmissions.
For our hospital, with our payor mix, the healthcare reform [law] could give access to a lot more patients in terms of coverage. We have a disproportionate Medicaid population, as well as a growing uninsured population. A lot of the uninsured could become Medicaid.
Previously, I worked in Tennessee under TennCare [the state's Medicaid program], and the state expanded coverage there. They reduced reimbursements to help pay for the expanded population covered, and it didn't work. The program could not sustain itself under this model. We're in for a big shift in healthcare and the way it's delivered. The whole payment system is clearly going to change. The consumer expectation is that they ought to be provided healthcare regardless of resources to pay for it, so that's going to change everything going forward.
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