Expect to focus on expense reduction. Given that more than 50% of our income comes from Medicaid, BMC experienced financial turbulence because Massachusetts' reforms led to a significant decrease in Medicaid reimbursement rates and a decrease in supplemental state funding. This combined with the Great Recession put significant pressure on BMC's already thin margins. As a result, we focused intensely on expense reduction and cost-control efforts, including freezing management salaries and making supply-chain improvements, which led to flat expenses year over year starting in 2010. All hospitals that rely on government funding should prepare for decreases in reimbursement levels and develop an expense-control plan that maintains their financial viability, even as they plan for more patients.
Bigger isn't always better. Hospital consolidation has made headlines, particularly in Massachusetts, as academic medical centers partner with community hospitals through acquisitions or affiliations. This trend will likely continue, but there is a countervailing trend at play. As providers seek to deliver care in the most appropriate and cost-effective setting, more care is being delivered outside of the hospital in doctors' offices and community health centers. Falling inpatient volume is a sign that reform is working; every hospital's infrastructure must reflect this new reality. At BMC, we are redesigning our clinical campus, with greater efficiencies and a smaller footprint. Created in 1996 following the merger of Boston City Hospital and Boston University Medical Center, BMC has been operating a split campus configuration with costly operational inefficiencies. Expanding our emergency department and centralizing operating rooms and intensive-care units will help us meet future patient demand and have a more immediate positive effect on margins than adding new facilities.
Ignore conventional wisdom. Many assumed that because it was the region's largest safety net organization, BMC would be at a disadvantage when reform hit and people suddenly had more choice of where to receive care. However, that was not our experience. Our patients chose to continue to receive care at BMC. We attribute that to two things: Our patients are satisfied, and they rely heavily on the ancillary services we have built around them, ranging from the traditional, such as transportation, to the unique, such as our first-in-the-nation hospital-based food pantry established in 2001. This doesn't mean safety net hospitals won't face competition for the newly insured. My bet, however, is that they have an advantage because they are already skilled at meeting the diverse clinical needs of the population they serve.
Focus on programs integrating care. When the Affordable Care Act implementation is complete, it will be less about people getting insurance coverage and more about how that coverage will work. When successfully implemented, the ACA will incentivize providers to treat the whole patient and keep people healthy.
We have focused on developing programs that truly integrate care. We see the importance of spending money on nonreimbursable services to achieve the best health outcomes for patients. We keep patients in lower-acuity-care settings by investing in care-management services and services such as patient navigation, to ensure patients schedule follow-up appointments and fill prescriptions before they leave the system. These programs require investment and are unlikely to generate revenue, but they are essential to helping patients make the lifestyle choices that improve their health. Without programs like these to support patients, many, if not most, patients will fail in their efforts to improve their health. If our patients cannot succeed, we will have failed.
There is more change ahead for America's hospitals. We are asking patients to make their health a priority and eliminate unhealthy choices and habits they have developed over the years. As an industry, we need to do the same thing. Providers cannot rely on the same habits and business practices that have worked in the past. We must change along with the people we care for to keep our hospitals healthy and strong.
