As Grady Health System entered the 21st century, it faced a colossal crisis.
Atlanta-based Grady is one of the largest public health systems in the United States and is a vital safety net within the metropolitan area. However, it was hemorrhaging money at a pace unfit for growth — or survivability.
In 2011, the Grady board brought in John Haupert to run the show as CEO and to turn the tides for the organization. Mr. Haupert sat down with Georgia Health News last year about his goals for Grady, and it's safe to say the health system is at least on the upswing.
As part of Mr. Haupert's redesign of Grady, he brought in Mark Meyer as CFO in April 2012. Mr. Meyer and Mr. Haupert worked together for eight years at Dallas-based Methodist Health System, and the two have made it their mission to bring the struggling system back to its feet.
Here, Mr. Meyer explains how Grady is doing financially right now (spoiler: far better than what was projected last year), how his previous CFO experience prepared him for Grady, his thoughts on Georgia reauthorizing the provider fee and why hospital consolidation could be problematic.
Question: Grady Health System is one of the oldest hospital systems in Atlanta and is one of the biggest safety-net institutions in Georgia. Can you talk a little bit more about the system's makeup and how it's doing financially right now?
Mark Meyer: I just looked back at the first 12 years of the 21st century for Grady, from 2000 to 2011. Grady had a net loss of $360 million, or $30 million per year. That is the the net loss after all sources of revenues and expenses are accounted for, which is a pretty extraordinary number.
I started in April 2012 and realized there were some revenue cycle opportunities. In 2010 and prior, our uninsured payor mix was 40 to 45 percent. In 2011, we were able to get additional patients qualified for Medicaid and other coverage, and that number declined to 34 or 35 percent. Now in 2012, our uninsured mix is down to 30 percent, and in the fourth quarter of 2012, it was 28 percent. We are applying much more rigor and discipline to the eligibility process to ensure any eligible patient has the support to get qualified. That's important because it gives patients access to continued care, and, of course, we also get paid.
Our overall case mix index, or financial measure of acuity, was less than 1.4 in prior years, and in 2012, it was up to 1.55. In the fourth quarter, it was up to 1.65. We accomplished this by improving our coding accuracy and working with our physicians on their documentation. As a Level 1 trauma hospital, we still have room for improvement, but with all that said, we're projecting a $25 million net income for 2012. We still have a lot more opportunities on the revenue cycle side to improve on, but 2012 was about getting patients qualified for insurance and making our coding and documentation better. In addition, we had more than 120 days in accounts receivable, and now we are down to 85 and are working our way down to 60.
And the good thing is we're a true not-for-profit, so every dollar we make here gets reinvested into Grady and the community. Grady does not have shareholders, we don't pay dividends and we have little debt.
Q: You served as CFO at some fairly large organizations prior to Grady, including Presbyterian Hospital Dallas — the 898-bed flagship hospital of Texas Health Resources — as well as the 269-bed Methodist Charlton Medical Center. How have your previous posts and experiences prepared you for this CFO role, and what brought you to Grady in the first place?
MM: John Haupert is Grady's new CEO, having started in October 2011. He and I worked together for eight years at Methodist Health System in Dallas, and we continued to be friends. I had worked with John directly for four years and have had great mentors over the years, but John is the best boss I've ever worked for. He lets me do my job, provides excellent guidance and of course corrects me when it's needed. But first and foremost we are friends, and we both have a great deal of respect for each other.
As you mentioned, I spent a lot of time in Texas, which is not a [certificate of need] state, so it is incredibly competitive. Dallas is the apex of competition. I had spent the last 12 years focused on primarily revenue cycle but also a lot of work around the management of costs, staffing appropriateness, contracts and all the cost sides of the equation. We also worked on joint ventures with physicians so we could compete with Baylor and HCA. It's a totally different environment [in Texas]. Here at Grady, the focus is less about competing with other systems and less about competing for [physicians]. It's more about improving healthcare and the patient experience for our community. I feel better about what I'm doing now than ever before because the benefits from what I do stay with Grady and the community.
Q: To shift gears a bit, Georgia Gov. Nathan Deal signed into a law a bill that will reinstate the provider fee. This will especially help organizations like Grady that treat higher numbers of indigent patients. Can you talk about this provider fee and what it means to Grady? What would've happened if the provider fee were left to expire?
MM: In terms of how Grady communicates at the state and federal level, Mr. Haupert, our CEO, has met on several occasions with [HHS Secretary Kathleen] Sebelius expressing how important healthcare reform is for Grady and other safety-net hospitals. Our government relations vice president also works with John on that. The bottom line impact on the benefit we get from the provider fee is about $11 million.
All told, Grady alone would have lost more than $40 million if the state government had not supported healthcare reform and the matching programs. It would have decimated Grady, and we would have had to have looked at closing down certain services. The worst impact would have been to 15 to 25 rural hospitals [in Georgia]. They wouldn't have survived if the state government didn't figure how to bring that to a successful resolution. Luckily, for all of us, that was politically unpalatable.
Q: I know you have only been at Grady for less than a year, but what are some of your biggest concerns as the CFO of a large safety-net institution? I'm assuming governmental payors and commercial insurers top the list? What about beyond payors?
MM: There are still a number of issues the state is dealing with from a Medicaid standpoint. Right now, there is a plan effective in July 2013 to reprice the way Medicaid pays for outpatient services. There's a very significant number we calculated we could lose — in the millions — if that plan came to fruition. What the state agreed to do is basically make hospitals more or less whole. They will redo calculations but subsidize the loss. The risk is that subsidies can go away at any time.
Another significant issue we deal with every year is the subsidies we receive from Fulton and DeKalb counties to offset losses for covering their uninsured. We have sustained at a similar level of income from those two counties associated with this agreement, but in times of lower tax revenues, it's a difficult decision politically on where to cut back.
On the cost side, our large group purchasing organization contract expires this October, so we will be using a consultant to help us make an objective, data-driven decision about who we will contract with going forward. That is probably the biggest cost decision to make this year.
Q: Hospital consolidation has been occurring at a feverish pace across the country. In your old Texas stomping grounds, Scott & White and Baylor Health Care System announced a merger. Beaumont-Henry Ford, Catholic Health East-Trinity, the list of mega-mergers goes on. What do you make of all of this? Will this be a good thing for healthcare? And how do you see healthcare consolidation affecting the Atlanta and Georgia markets in the future?
MM: Generally speaking, we know this with most industries — be it airlines or healthcare or pharmaceuticals — consolidation always has a promise of savings, but rarely do the savings make it back to consumers. The few [providers] that are left have more control over the market, and there is less competition to allow demand to control pricing because there are fewer competitors in the market.
Is it going to improve healthcare? I'd be skeptical. There are enough initiatives under way that will improve the quality of healthcare and focus on the patient experience without consolidation. Piedmont and WellStar are [partnering on a health plan]. Are these moves going to bring about better quality or patient satisfaction or more of a focus on employee engagement? Some might say that, but I have my doubts.
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