Roundtables

Hospitals Feeling the Squeeze: 4 CFOs on Today's Most Pressing Financial Issues We try to maximize the government reimbursements that are out there. DN: Our service area is primarily in the northwest section of Wisconsin. e closest metro area is Minneapolis. It's kind of a far drive but still doable. Employment is really driven by a lot of smaller employers in our markets. Our largest employers are school districts and county governments. Because of that, there really isn't strength of a strong managed care product or man- aged care in our market. Our market mix is about 35 percent commercial fee-for-service, 53 percent Medicare and the rest falls to self-pay and Med- icaid. e commercial business is such that we are able to negotiate good con- tracts, and that helps drive consistent margins at this time. But I will say this: We know the markets are changing. ere's more pressure coming from Minneapolis, just to the west of us, and east of us are Aurora Health Care and Ministry Health Care expansions. As that happens, narrow networks and managed care will be coming into this market. When we look at the future, we have to get costs down. We've done a lot of education with our staff on how the markets are changing. If you're a high-performing hospital with high margins, people may ask, "If we're doing so well, why do we need to reduce costs and staffing?" To get this challenge to be understood, you have to spend time educating and working with staff so they understand not just what we are doing to reduce costs, but why. RR: You have to look at your business lines and really drill down and see if it's something you want to [offer] long term. Get rid of business lines that aren't throwing anything to bottom line, especially if someone else in community has it. Home health was an example. We were going to sell our home health because it was in a nega- tive position, but we actually improved it and made it better. Q: You all have mentioned labor in some fashion. Layoffs are undeniably on the rise in healthcare. Do you view this as an essential strategy? Do you foresee more layoffs in the future as hospitals are no longer defined by four walls? Are you being forced to rely on third-party contractors more as a result? GE: I think we're all under the un- derstanding and expectation that the acute-care side of the healthcare equation is going to be shrinking, and we need to adapt to that. ere may be significant closures of hospitals, and people need to be prepared for that. But we all need to shi our resources out of the more expensive inpatient side to the less expensive outpatient side. I don't know if layoffs are the answer, but reallocation of resources to outpatient areas is the best option. ere is a lot of competition on inpa- tient, and that's why being strategic is so important. DM: We utilize the Premier produc- tivity system. We've been on that for six to seven years. e management team looks at productivity every two weeks, which runs with pay periods. We can pull in staff, and we try to work part-time people up before we give overtime to full-time people to limit overtime expenditures. We don't use agency staffing anywhere, which is obviously a nice cost saving. We have the message out there: We don't want to get to the point where layoffs are necessary. We want to stay effi- cient. We have a good drive and good attitude, and we are improving patient satisfaction scores as much as possible. DN: Layoffs is one of the things none of us want to do. at's why part of it is education for our staff. Productivity is about what's the allowable labor rate (hours per unit of service), and how do you maintain that rate no matter what the census may be? If you are right-staffed and maintain high quali- ty, it will help your business grow, and you won't have to worry about layoffs. e highly fluctuating census has forced a lot of our staff to take a lot of flex time, probably more so than ever before. But, in most cases, they also understand the importance of flexing and why it is important. It's feast or famine when the census comes in. We staff 280 beds at Sacred Heart, we had a census of 175 for the last two days, but today we're down to 104. When you have these wild swings, that's part of the challenge of how to staff right. RR: at's a good question. at's hos- pital-dependent. Some hospitals have no-layoff policies because they are so big. If you're in an area of no growth and you have your costs under control, I can't see any other way [of maintain- ing profitability] than by reducing ser- vices, which may include layoffs. We happen to be in a small growth market — at least we're not shrinking. So for- tunately we haven't had to do that. But if we were shrinking, and you asked me that, it's something we'd have to consider. It's never a popular thing as "Payers are always adept at finding ways of not paying." George Eighmy, CFO of Bristol (Conn.) Hospital

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