David Burda: Hello everyone. My name is Dave Burda. Im the editor of Modern Healthcare Magazine. Welcome to our spring CEO roundtable. Although I use the word spring looselyits March 10 and we had snow flurries this morning. Joining me from Modern Healthcares editorial staff are reporters Melanie Evans and Jessica Zigmond. Melanie covers not-for-profit hospital systems and Jessica covers outpatient care and post-acute care.
Our topic today is healthcare finance. And joining us as guest panelists are Robin Brown, CEO of Scripps Green Hospital in San Diego; Hank Hernandez, CEO of Las Palmas Medical Center in El Paso, Texas; Juanita Romans, CEO of Memorial Hermann-Texas Medical Center in Houston; and Gene Woods, CEO of the St. Joseph Health System in Lexington, Ky. Welcome everyone.
Why dont we start with Robin? If you could tell us
just give us a brief description of your hospital, your hospital system and well start there.
Robin Brown: Im part of a four-hospital system thats called Scripps Health located in San Diego. Two of our hospitals are trauma hospitals. We have another hospital in the north county that is a community hospital and then the hospital that Im at is called Scripps Green Hospital and thats located in La Jolla. Its kind of a unique hospital in our system. I know a lot of people talk about them being unique but it is unique in this regard: that it doesnt have an emergency room. It actually has an urgent-care center attached to it. Were primarily geared toward adult medicine. We have a very prolific cardiology program. Orthopedics is about 30% of our operating room business. Oncologywe have a pretty robust organ transplant program for liver and kidney, a bone marrow transplant program, a pretty high-end radiology
radiographic oncology program. It is actually
the thing that makes it so unique is that the medical staff is actually a 400-member medical group and so there are a handful of independent doctors. But for the most part we are contractually linked to a 400-member medical group that makes up 40 specialties.
David Burda: Very good. Hank, tell us a little bit about Las Palmas.
Hank Hernandez: Thank you. Yes, were part of the HCA system. There are two HCA hospitals in El Paso. El Paso is a rapidly growing community. It just really will be growing a great degree here in the next year or two primarily because of base realignment. Weve got a (U.S. Army) 2nd Armored Division relocating back from Germanywhere its been since most of World War IIand so its adding quite a bit, if you will, by way of an economic generator for El Paso.
El Paso is unique also in that there are two new medical schools going up in the entire U.S. and El Paso is one of them. Theyll be under the Texas Tech system and so again were seeing a lot of growth in El Paso and obviously overall competing for healthcare providers. We have also two Tenet (Healthcare Corp.) facilities with one new Tenet facility building on the far east side.
So a lot of growth going on at the border. El Paso is about 77% Hispanica Latino population. Weve got two large HCA facilities there. My facility, Las Palmas Medical Center (is) acute, full service; we do everything. Were just going to start a renal transplant program. Were probably about six months away from doing that and heavily promoting bariatric surgery right now, and of course weve got all of the other services as well.
David Burda: Good. Juanita, tell us a little bit about Memorial Hermann Texas Medical Center.
Juanita Romans: Id be glad to. Memorial Hermann is the largest healthcare system in Texas
its a not-for-profit
and it really covers the whole city of Houston. There are 11 hospitals and theres the Texas Medical Center, which has the academic hospital, and the TMC is what we lovingly call the Texas Medical Center and thats the area that Im responsible for. That includes (the) outpatient environment as well as the Childrens Hospital, which is a 240-bed children s hospital. It is a full-service hospital.
We have an adult hospital that covers the Heart and Vascular Institute, which has 144 beds. Its a free-standing facility that takes care of all of the heart and vascular services. We have transplant service for liver and kidney, and a helicopter service thats one of the oldest in the country and we are very proud of that. We now have six helicopters that recently the community helped us purchase after we had been in the business for about 25 years.
It also includes the Mischer Neuroscience Institute, which is the largest
has the largest market share in neurosciences in the city of Houston and a Level I trauma center is attached to that as well as TIRR, which is the Texas Institute for Research and Rehabilitation, which is ranked fourth in the country in terms of its rehab services.
So we are a fast-growing city; one of the fastest-growing in the U.S. and the fourth largest, and were trying to keep up with healthcare demands with an indigent population of about 30%.
Burda: Gene, how many helicopters does St. Joseph have?
Gene Woods: We used to own our own helicopter. Years before I got there, we sold it off and now were debating whether that was a good idea or not. But Im responsible for one of the larger systems in the state of Kentucky. Its seven hospitals called St. Joseph Health System ranging from a 25-bed critical-access hospital in the very rural part of Kentucky, Appalachia, to a 468-bed hospital, urban tertiary facility, in downtown Lexington, which houses the states largest heart program. We just recently came together. As I was coming in here I was told that we made the 100 Top Hospitals (list from Thomson Healthcare) for the second or third time in a row, so a lot of quality care provided there. Were part of CHI, Catholic Health Initiatives (in Denver), which has 72 hospitals in 19 states and about $8 billion in patient revenue.
Burda: One of the stories weve been covering is President Bushs fiscal 2009 budget proposal, and he has proposed Medicare and Medicaid savingsor cuts if you prefer that wordof $200 billion over the next five fiscal years. Maybe we could start with Gene. Gene, if you could talk a little bit about your payer mix and what would happen to your system financially if those reductions were to go into effect.
Woods: Sure. In our payer mix it really depends on the communities because we do serve a wide geography, and some communitiesfor example in Bereatheyre about 70% Medicare/Medicaid and about 10% self-pay, so it depends on what geography youre referring to. We did do some calculations, and we think that in 2013 those cuts could amount to about $100 million in less revenue for us specifically, which has us all obviously extraordinarily concerned especially since we already have negative margins, if you will, in the whole Medicare book of business. So that combined with the Medicaid proposal cuts, which in a state like Kentucky, which is already running a deficit on Medicaid and were subsidizing about $3 million or $4 million, that has some real implications for how we can deliver care in a state like Kentucky with some very significant health status issues.
Burda: Juanita, could you talk about your payer mix and what would happen to you if those cuts took effect?
Romans: Much like (Gene was) saying I think it depends on where youre looking in the city of Houston because it changes. So Ill do a little bit from the system but then Ill focus in on the Texas Medical Center.
The Medicare cuts as youre probably aware would be devastating, I think, to healthcare across the country, particularly in light of the fact that in Houston, because we have such large uncompensated care, thats one of the areas where we really try to be very efficient in the care and maximize what we can offer our patients through the reimbursements that they set now. I think its not only going to have a devastating effect on the hospitals but from what I can understand also the physicians. And I think thats going to create some real losses potentially in the opportunity for patients to access certain physicians.
So its not just going to be on the hospitals. I think that the physicians are going to feel the brunt of that as well.
Right now if you have fully loaded costs, you do not see a margin in the Medicare business, so it will only deteriorate more and impact I think the services that were able to provide for the entire community, which includes the uninsured.
Burda: Thank you. Hank, hows your payer mix and how would those cuts affect your facility?
Hernandez: Payer mix is predominantly
obviously El Paso, a border community, is predominantly Medicare and Medicaid. I think the word used by Juanita and othersdevastatingis pretty remarkable and also the impact not only to hospitals but to physicians offices. I mean were already looking at probably (having) a greater impact on our emergency rooms as more patients are unable to frequent or at least go to physicians offices. I think its going to drive bigger demand for episodic care in emergency rooms and have tremendous impact on hospitals. And again, with the result of having taken care of patients in emergency rooms, there is no primary-care provider for them to go back to. So I think it just continues to feed on itself, and I think the word devastating clearly sums that up.
Burda: Robin, how would you answer that question?
Brown: Well, I think a lot of what Im going to say has already been said, but Ill give it a little San Diego flavor. As a system its really quite diverse, but at my hospital we have about 50% Medicare utilization, which I think is comparable at all the hospitals. Some of the differences though
like Juanita we have about 25% uncompensated care in the region. We also have a very large disproportionate-share hospital in our system so it would definitely impact our hospitals. It would also definitely impact the fact that we have a very large foundation model of medical practice, so historically we have not been in the physician business but we are very much in the business these days.
One of the things I forgot to mention as part of our hospitals, we have eight additional clinics that are attached as feeders. Most of those clinics are loss leaders financially. But obviously their contribution is significant because they feed into technical and tertiary activity.
I think that one of the immediate impacts of this is going to be that it will definitely cause us to rethink our capital planning because thats all foundationally built upon a revenue stream, whether we are funding it ourselves or whether were going to capital markets or whether even seeking philanthropy. People like to fund things that work.
I think the other area that its going to impact us on is going to be our efforts around quality and patient safety because were going to have to take some hard looks at our expense budgets and just how were committing operational resources. So I think the impact is going to be both operationally and its also going to have a pretty significant impact on our ability to execute our strategic plan in the case of capital funding.
Burda: Robin, you mentioned quality and patient safety. Starting in October, Medicare is going to stop paying hospitals for eight types of errors they believe pop up after admission. How are you dealing with that or preparing for that?
Brown:Well, about eight years ago when I first came to Green
and this is before any of these efforts
we felt it was important to start differentiating ourselves on the dimension of quality. Id listen to a lot of people talk about their idea of what quality meant and just out of pure frustration, I said, Can we define it?
And back in those days I think I got a copy of the balance scorecard and I read it and I was impressed with it, and so we just started defining quality around the dimensions of clinical outcomes; processes, including the core measures but additional processes; patient safety; and then patient satisfaction. So we had kind of a pillar that we developed and that first year we just watched the run charts. Thats all we did.
Then we said, Are there
do you think that there might be some benchmarks here that we could put on these run charts? And we did that. We have just reorganized ourselves around this effort because we realized that there is a distinct
other than just being differentiated in the marketplace
there is an immediate impact on reimbursement, and weve added a considerable (full-time equivalent personnel) complement. Weve brought in an executive to lead this area. Before we had a lower-level director that was leading this charge. So there is a considerable amount of resources being put into this with some very, very high expectations. But clearly it all happens at the bedside, so to the extent that you are tempted to skinny that down, no amount of infrastructure is going to allow you to get the results that you need.
Burda: Have you put a dollar figure on this new initiative when it kicks in Oct. 1? Whats the potential hit for you guys?
Brown: No, I havent to tell you the truth.
Burda: Hank, have you done anything like that?
Hernandez: No, we havent, but clearly it is as weve just discussed, this is part of our strategic plan. I think historically hospitals have looked at capital spending, youve looked at other types of metrics, but clearly the quality agenda has to take a big step, big priority, with respect to strategic planning.
My hospital is doing really well in a lot of measures and is recognized within HCA as one of the best hospitals, but clearly the numbers keep moving, and thats a good thing. The other benefit I think is that because of HCA and its sheer strength, we have a lot of corporate support, so I think that certainly helps out as well.
But with respect to all of the benchmarking and to best-demonstrated practices, its those kinds of things that I think hospitals struggle primarily with because where hospitals are being tagged with this improvement, a lot of what really happens or doesnt happen is related to medical care. We see that there are some issues there in bringing some of the medical staff members along. I think its got to be something thats being looked at by both parties, if you willphysicians and hospitalsif youre truly going to make some impact, and were hoping to see more change in that respect.
Burda: Juanita, are you doing anything special with your physicians to make sure they dont commit those eight fouls?
Romans: The whole idea of providing quality has been a cornerstone of our organization for some time. So getting involved in this has been a long-term process. We too enjoy a lot of the awards from Thomson (Healthcare) as well as the University (HealthSystem) Consortium. So that being a baseand then the government being much more involved in looking at the errors and the core measures and not paying for things that shouldnt have happenedthats just kind of turned up the heat I think in terms of looking at how do you hardwire making sure that the quality that youre giving is absolutely documented in the record? Because thats many times what it comes down to.
Youre providing the quality but you have to be consistent 100% of the time that its documented appropriately. So were trying to use technology to improve that in our (computerized physician order-entry system) and the medical records, the electronic medical records. Were trying to use the technologies to make it easier for our staff to do that.
The staff, however well intentioned, I think have a lot of things that
they have quality, they have safety, they have service, the new clinical technologies that theyre using every day. I dont think that Ive ever seen a time when the clinical staff at the bedside was so pressured to do a topnotch job and so I give them a lot of credit.
But I think that administrativelyand I go back to one of Robins commentsis that some of the cuts I think will have an impact on our capital spends and our capital spends are those technologies that we can help the staff do a better job with. So I think that its all kind of together. We should, from a mission perspective, be trying to deliver the best possible care that we can. I think the governments emphasis on that, although looked at as protecting the community, I think is also just a cost-saving measure.
Burda: Gene, how are you handling that or preparing for that? Also, have you had any private health insurers decide not to pay you for similar adverse events?
Woods: Yes. And let me just highlight
this is also part of the strategic-planning process and it manifested itself a couple years ago when we did the 100,000 Lives Campaign (sponsored by the Institute for Healthcare Improvement). The board wanted to know
dont tell me about the statistics; tell me how many lives youve saved. And we saved 79 lives. We also, specifically to your question, in 2004 actually approached our biggest insurance company and said lets put a clause on pay-for-performance. And weve been the beneficiary of incremental reimbursement because of that.
I think the challenge right now with the proposed plan is its robbing Peter to pay Paul, and I think thats going to cause in some communities a disproportion of access. Some hospitals that are already teetering, that are providing an essential service, could get less funding. And a community that has one hospital
if that hospital goes away there are different quality implications. So were clearly very focused on pay-for-performance, but we think
everybody agrees there has to be a line between economics and quality.
The only other thing Ill say is we also need to expand our concept here. We won the Joint Commissions (Ernest Amory) Codman Award last year for decreasing anti-coagulant bleeding complications. And because were fortunate to have a good cost accounting system we were able to show that the investments we made in pharmacy yielded $1 million in savings a year.
You can both improve quality and decrease cost. I think the way that the government is approaching it right now potentially has some unintended consequences. I think thats something that we all fear.
Burda: OK. Melanie, your turn.
Evans: Thanks very much. This is for the tax-exempt hospitals and health systems in the room. The tax-exempt hospitals and health systems have either been restructuring or refinancing their auction-rate debt since mid-February since the market collapsed. Im wondering if you could tell me how your debt portfolio was affected or your capital plans have been affected by the turmoil in the market and not just in the auction-rate market but it sounds like there have been some ripple effects for other types of debt structures.
Woods: Thats one of the benefits of being in an AA-rated system like (Catholic Health Initiatives). Weve had very disciplined balance sheet managementespecially around debt-to-cap ratios and cash reservesso weve been the beneficiary. I think the markets have been much more discriminating recently. Before the reward for having better-rated issues was not as much as it will be given the turmoil in the market. So we have been fortunate to be in a fairly good position relative to capital access.
Ill give you an example: Its the rating and also being a big system; last year we purchased 20 64-slice CTs as one company. We had a different conversation at the table with those equipment manufacturers than we might otherwise so weve been very fortunate in that regard.
Romans: Memorial Hermann is not one of those institutions that has these real deep pockets and have collected cash over time. Weve really made the money and put it back into the company and so we have seen a real impact from the effect of this. I think it has really made us concentrate on our use of capital. We kind of have a very careful eye on whats happening to the debt market out there. We have a very strong rating with Moodys (Investors Service) and Standard & Poors; however, I think that whenever you go from having some debt insurance thats like 3% or 4% and you go to 10% or 11% I think that makes everybody pause. I think that some of the most prestigious organizations in the country right now are impacted from that and were no different from that.
Evans: Thank you.
Brown: Scripps has enjoyed
probably the last seven years have probably been its most successful in its history, and we too have a very, very strong balance sheet at this point. Very, very high levels of cash and a very supportive philanthropic base, but this has caused us to pause and in the short term its increased cost; obviously the cost of this debt. But probably more importantly its caused us to rethink also our capital plan going forward and what we had perceived as something being quite stable is other than that. And it also is causing us to rethink the issuance of additional debt.
So I think this whole event causes us to regroup and say, Given that capital plan, that five-year plan that we pushed out in front of our board just months ago, is this something were going to have to rethink and come back around with something a little bit more conservative?
Burda: Jessica, you have something?
Jessica Zigmond: Actually Im curious about
as you know healthcare is a major domestic issue in the presidential campaign and undoubtedly will bring changes for the new administration. Im curious if you could talk about any concerns that you have about what a new administration would bring with regard to financing or accessing healthcare?
Burda: Hank, you want to go first there?
Hernandez: Concerns regarding?
Zigmond: A new administration and the debate as it is now with regard to the candidates.
Hernandez: Well, I think it would be essentially to hopefully not start this whole issue with cuts and those kinds of things all over again. Hopefully, be able to look at the many experts who have testified before Congress on the various kinds of issues that have been touched on today. I think that would be a great starting point, if you will, to be able to see whats been done already to clearly listen to the folks who are out, to use a cliche, where the rubber meets the road. And I think that what is savings or cuts, what are those things?
What kind of impact does that have on front-line physicians and hospitals, and hopefully to come up with some sort of a plan to be able to address the ability of hospitals to provide care.
Romans: I think my concern is that whichever story you listen to I dont think it takes the local market into consideration. And now theres this broad spectrum belief that you can fix healthcare on a national level and I just dont believe that. I think that there are many things that need to be done at the local level that will be much more impactful, particularly in areas where theres a high percentage of uninsured.
You go to different states and there is a different agenda; there are different problems, so I dont see an overall fix for this. And I see that the candidates right now are looking for one
a tube-sock approach rather than something that fits the particulars of the area.
Woods: I think (we) have this sense that even in well-performing hospitals and organizations that were holding this thing together at the margins; a system that is fundamentally broken and needs some significant attention. The way that we seem to be approaching it is the states are taking some initiatives around providing for the uninsured.
The recent effort in California was not very successful. But I think the challenge is that we might wake up and find ourselves with a system thats even more fragmented with each state having its own particular version and Im not sure thats the right way to go.
I know there is a fear about a large federal initiative, but at this point the avenues that weve taken have not obviously worked very well, so I do believe that whether you call it universal care or some other term that it is time that we get all of the players around the table, insurance companies included, the pharmaceuticals, the providers.
If you look at the silos that weve created with incentive insurance and our physicians have different incentives than the hospitals, and vice versa, and the communities out there wondering whats going on that they cant get insurance they cant pay for gas let alone fund their medical billsthere is the sense that we have to take a different approach. And Im both concerned about the national potential for waste but more concerned I think by the fragmentation thats occurring at the state level.
Brown: I dont think its going to matter too much on who wins the election, whether its a Republican or Democrat, whether they go off with a market-based solution or more of a universal approach with more federal intervention. I think the challenge that we faced in California, particularly in San Diego, its the uninsured and its just a mountain-load of unfunded mandate. I do not believe thats going to change. I do not see anybody sitting around with a large amount of cash infusion for our system.
I think its going to point back to the fundamentals, which have always been, since I started in this business, profitable, targeted growth, efficiency in operations and differentiating yourself in the marketplace with quality and being able to differentiate yourself, because at the end of the day the good work that we do for our patients is ultimately going to sustain us. Now, without large amounts of infusion of capital and a little bit of assistance, thats going to be a hard order. But I think that those three fundamentals are ultimately going to separate the winners from the losers in this industry.
Burda: Robin, you mentioned market-based approaches to reform. A key to that is consumerism. A key to consumerism is transparency, both in clinical performance and price transparency. Have any of you posted your chargemaster or prices on your Web sites or somehow made that available to the public? And has that changed anything at all in how people use your facility?
Hernandez: Theyre readily accessible. I mean you can dial in and be able to get that information. I think the issue is that when youre really looking at that kind of information youre looking at historical kinds of financial data. Its not the most current at that particular time. I think when we look at how do we compare with other organizations, were usually looking at (data) least a year behind or something like that.
But I think specifically its
I dont have an issue with it. I think its one of those just like anything else. Were all competitive people, and I think all of us would like to provide the best care at the lowest cost. And certainly the consumer wants that information as well and I think there probably is an opportunity, as the demand is out there to be able to have more transparency with that respect.
Burda: Juanita, can a patient go to your Web site and find out how much a hip replacement costs?
Romans: Weve been very, very transparent with all of our quality data and our service data. There was a state bill that talked about putting the chargemasters out on the Web and that was
they didnt want to do that.
Burda: The hospitals didnt want to do that?
Romans: Right. I dont think its because we didnt want that to be available. The problem is interpreting that data. And I think that right now its a lot easier to interpret the quality data thats out there than it is the financial ones. And until we come up with something that helps the public understand that data when its put out there, I think it would be more confusing than helpful.
So I think we have to watch because the way that not-for-profits do their financial statements and what their deductibles are and all of thatI mean its soup to nuts from one organization to another. Id like to hear what other people have to say about putting out that kind of information.
Woods: I think we have the same issues of how useful it is to the consumers. Now, the question is we dont want that provider to hide behind that either so we have a balance and a debate. We are actually trying to work with some insurance companies now about can we actually partner together so that on the hip replacement you can actually go and type that in because different plans are different. Factor in your deductible, your copayments and all of that. So we are very much supporters of transparency whether it be quality, understanding that some of the data is not useful or understandable yet either. But were working on some pilots now with insurance companies in terms of how the consumer can make discernible choices based on good information.
Burda: Whos more willing to post information like thathospitals or the insurers? Are they willing partners or are they reluctant?
Woods: Its a bit of a dance. At different points probably different folks have a vested interest. But I think it goes back to the fragmentation of the system. We are trying to bridge some gaps here in the absence of a more comprehensive system approach nationally in our markets.
Burda: Robin, have you guys posted prices on your Web site?
Brown: No, but it is a big area. I think like others weve done a lot of work with quality and posting. The CEO of our system is very much interested in this area in terms of simplifying our billing processes, particularly because we have the physicians side of this thing and its been slow slogging in this area. There is definitely an interest to simplify it; to be more transparent. Like the other panelists, I dont think it would be quite that meaningful if we just threw it out there at this point, but it is definitely an area of focus.
Burda: Well, one of the side effects of consumerism is for higher out-of-pocket costs for patients through high-deductible health plans, (health savings accounts) and things like that. Has that affected your bad debt in any way? I mean thats kind of a big fear. Patients will have higher out-of-pocket costs. They wont be able to pay that and you guys are stuck. Any experience with that Hank? Have you seen a difference in your bad debt based on the growth of this type of insurance?
Hernandez: No, not really. I think the bad debt that we are experiencing is really probably more related to whats going on in the economy. I think things are just tough right now for a lot of different folks. Hopefully Im not oversimplifying it, but I think what people are wrestling right now with respect to what you mentioned earlier is: Do I fill up my tank at $60 vs. can I make my premium this month? I think those are the real issues that were seeing. Im certainly not qualified to speak (for) the other hospitals, but especially in a border community I think people are much more sensitive to those kinds of issues right now.
Burda: Juanita, have you seen any difference?
Romans: I havent seen that much, but I can tell you what I have seen from the higher out-of-pocket is that the market is changingbecause before people would come to the emergency room for their outpatient care and their episodic care. Now we see a whole lot of urgent care (facilities) that are physician-owned. I mean it is truly changing the face of the market in our community and its because the person who has a deductible to go to the emergency room of $250 can go to an urgent-care center and pay much, much less. So I think that there has been a desire for the consumer or the patient to be more responsible with using their healthcare dollars and so theyve increased that from the companys perspective, but I think that its really changing how the market is responding to that.
Burda: Gene, have you seen any utilization changes because of that?
Woods: Were seeing some of the effect of Medicare Advantage plans. I dont know if thats some other folks but if I remember correctly it was about 100,000 folks enrolled in that in Kentucky now so were seeing some of the impact on that in terms of our payments. But not so much bad debt related to that. I think there are other factors. ...
Burda: Robin, anything on that?
Brown: I havent seen any significant impact. I know we anticipated more; I just havent seen it.
Evans: Mr. Hernandez, Im sorry. Im going to exclude you one more time. This is again for the tax-exempt systems in the room. Im interested in how you might be readying for the new (Internal Revenue Service) community benefit and charity-care reporting (regulations). I guess Im interested in maybe sort of
you may have previously adopted the Catholic Health Association model, and there is a little bit of breathing room for some of the new reporting requirements from the IRS. But it asks for sort of a tally and a breakdown of different types of charity care and community benefits and also offers you the opportunity to report Medicare shortfalls and bad debt that you may see as potentially charity carejust not necessarily from folks who enrolled in your charity-care programs. How are you going about preparing or collecting that data and then reporting it publicly? Would you like to start?
Romans: Theyre calling it the Sarbanes-Oxley of healthcare. I think its been difficult. First of all Id tell you that as the CEO for the Texas Medical Center campus, our systems financial department really is dealing with this so Im only getting little bits and pieces of the information about how difficult this is. But I will tell you that Ive heard this from not only our own system but from many of my colleagues about how difficult this is going to be and how expensive its going to be to collect the information and provide it, and its just one more expense. So you keep piling on the expense of the reporting and the expense of making sure that the systems are there so that you catch everything. There is as much of a concern about submitting all of it and then when they go back and audit and find something wrong, so you have to be very, very careful about what youre reporting. So I think its going to be expensive.
Woods: Yeah. Were a Catholic system so we follow the Catholic Health Association guidelines (and) in our system in Kentucky (we have) about $24 million in charity care excluding Medicare and bad debt and, as a system, $480 million in community benefit. I think I would echo
clearly youve got a couple of bad apples that have (hurt) the entire industry and its going to result in a heck of a lot expense, but were prepared fully and we intend to comply completely.
Brown: I kind of put this in the category of an unfunded mandate. Just another one, but I think this is an area where I feel a little bit better prepared just because when we started experiencing some significant success as an organization. Im talking about Scripps as a whole. We put a lot of effort into this area because we were starting to have some success and it was being noticed in the marketplace and we felt that our tax-exempt status was going to be questioned. So we did, a number of years ago, spend a considerable amount of time at our corporate offices, not at the individual, but at corporate, gathering that information, and I would say that its a big area of emphasis for us because I think sometimes people dont understand that the reason you need to make tens of millions of dollars is to keep up with some of these other unfunded mandates whether its seismic requirements and some of the onerous capital needs of your organization.
So these things just need to be done but the public sometimes tends to look at things like that as being, well thats just excessive, or when they start seeing even your top salaries being posted on different Web sites. These are things that are looked at in isolation of a larger picture and I think we have to be careful about these things. But I think being able to tell your story to talk about your vision and your mission and what youre doing for the community and the importance of you in the community is just something that will never cease. That story needs to be told. You cant over-communicate your story, and that also includes this underwriting that our systems do for uncompensated care.
Woods: Just on that last point we focus on (the IRS Form) 990. I dont think weve done as good a job as an industry in telling our story. We serve 16 of the poorest counties in Kentucky with outreach programs, and last year we helped this couple who didnt have money for heating with a (U.S. Department of Agriculture) grant, or through a mobile clinic we served 2,000 patients, facilitated free medications of $4 million. Those are the stories that I think we as an industry need to do a better job in telling because if we dont, then it gets focused on things that are important but perhaps not as relevant to the whole scope of things here.
Burda: Now Hank, does this make you snicker because as a for-profit youve had to do this sort of financial reporting for years?
Hernandez: Well, not snicker, other than it not only is well-known what investor hospitals do but I mean weve just completed a round of employee forums. One of the things that I was talking about to my staff just last week is the amount of charity care that we did. Were a midsize hospital; its not a very large hospital but it was $32 million last year on top of everything else that weve done, so its pretty significant. But again, I think you feel good when you go to bed at night. You know you touch people in a variety of ways and youre out there delivering healthcare with your peer facilities.
Burda: Juanita, you had a comment?
Romans: Just another comment and Ill just keep my comments to the Houston market because Memorial Hermann has the largest market share and HCA is next. And I will tell you that we provide more of the uninsured care to the city of Houston than any other system, but HCA is second. So I think that what I was speaking to with the documentation and the work that its going to take to produce that, I think that youre right. I think the story needs to be told about the kind of care that we do get, and the county, Harris County in Houston, just does not have the resources to take care of the uninsured load. So consequently it falls on the not-for-profits as well as HCA, the major for-profit in Houston, to provide that careand that story is not out there.
So my first comments were about the work that its going to take and the expense its going to take to do that but there is a silver lining, I suppose, if the story gets out there about really what kind of service were providing to the community, which is absolutely huge.
Burda: Lets stay on HCA for a second here. Now, HCA recently went private from a publicly traded company. Hank, has anything changed in your life because of the ownership status or structure of your parent organization? Then Ill ask Juanita, as a competitor of HCA, have you seen a difference in the countrys largest for-profit hospital chain in terms of ownership change?
Hernandez: And were sitting next to each other too.
Burda: Yeah! It worked out just right didnt it?
Hernandez: Well, you know to answer your first question with regard to has anything changed? Not at all. And Im certainly not qualified to speak for HCA. Im speaking as a person who runs or is an administrator who runs one of the HCA facilities. Nothing has changed. We continue to do the things weve done before. Obviously I think all of us represent different organizations, and Im sure everybody is proud of the organization they represent.
I hadnt worked in a large nonprofit hospital before I joined HCA. I think when you look at the culture that comes from Nashville, if you will, from (HCAs CEO) Jack Bovender and the senior administrators that run the corporation, we continue to provide I think superior patient care in spite of the tremendous amount of impediments, if you will. The organization has not changed. We werent given any new directions, if you will. Its business as usual. And certainly the decision was made at pay scales way beyond mine for a variety of reasons.
But I think in the community that I happen to live in, were a good corporate citizen. There are a tremendous amount of things that we do. Lots of scholarships to get folks in to choose a healthcare profession. We give a lot back to the community. None of that has dried up or changed because we went from being a publicly traded organization to a private.
Burda: Juanita, have you seen a difference?
Romans: No. We really havent. HCA is really, like I said, second only to Memorial Hermann in providing care to the uninsured in Houston and theyve been good partners. There are many times where weve come together because we had common goals and common causes, so theyve been a good partner to us. We havent seen any change at all.
Burda: Lets talk a little about physician-owned hospitals. I think, Juanita, you mentioned that earlier as maybe changing the way that people seek care. Are any of you dealing with or have been affected negatively by an opening of a physician-owned hospital in your service area, because that seems to be the knock on it. Theyll put a general acute-care hospital out of business, but I dont think weve seen that yet. So Robin?
Brown: No, no. Most of San Diego used to be
long before I got there in 1981
populated with a lot of physician-owned facilities that initially got bought out by American Medical International as a for-profit, so there was that proliferation long before I got there, and then most of these hospitals were in some state of duress. This is even before DRGs and they were purchased and many of them have since been closed. So weve seen over the two and a half decades Ive been there kind of a consolidation of the market where we have maybe about five systems represented outside of the university system. And theyre all not-for-profit.
Burda: Hank, have you seen any changes in your market because of physician ownership?
Hernandez: There has been change in the way physicians practice. I think Id be very honest and very candid and say that I particularly have a fundamental issue with that. I think most hospitals probably do. I know its a stance that HCA has taken as well but weve got sort of a conflict-of-interest issue with respect to physicians owning certain either ambulatory surgery centers or hospitals and those kinds of things because, quite frankly, regardless of what I think, the literature will reveal the physicians practices change as they acquire or invest in these types of organizations. You tend to see hospitals lose market share specifically with respect to paying or insured patients and then you see a lot of cherry-picking and those kinds of things.
Burda: How does that manifest itselfin your staff bylaws? In other words, you cant have privileges at one of your hospitals if you own a competitor?
Hernandez: Different hospitals have taken a different stance on that. I havent in my hospital. I think thats because where I happen to be located there are two other very large Tenet facilities that are actually larger than mine. We have an open medical staff. And the way that I lead my hospital is that you try to build a hospital
sort of the culture that were trying to do in my particular facility is make it very difficult for a physician not to practice at Las Palmas. And so we havent changed issues relative to bylaws and come out with punitive things.
I know Ive heard some discussion with other facilities and I think that, to an extent, endears physicians to practice at my particular facility. But you have seen some movement, as Ive said with them moving patients, particularly commercially insured patients, to their own individual organizations. And as I said, I think when you mentioned earlier we were talking about disclosing transparency with respect to clinical outcomes and by our chargemaster and financial kinds of things, I happen to be a proponent that physicians should be much more transparent with regard to ownershipeither ownership or an investment of some sort in anything that they happen to be in. And I think it cuts both ways and certainly they should be able to communicate and educate the consumer with respect to that.
Burda: Juanita, are you requiring your physicians to come clean on any side businesses theyre running?
Romans: Well, I hope they will. I think
and foremost I want to start out by saying one of our major beliefs and strategies is that we believe the best patient care is delivered through partnership between the hospital and the physicians. So we have set up all kinds of opportunities to joint-venture. We understand the dilemma and the pressures that are on physicians today with their reducing reimbursements too. So weve made that a No. 1 strategy for us, a No. 1 initiative, in terms of partnering with physicians.