HRET Trustee Institute
Good Grievance Rests On Financial Understanding
Issues Briefing from the pages of NJHA NewsLink:
Update from the NJHA Council on Governance
Good Grievance Rests On Financial Understanding
Last fall, Barry Bader, governance consultant from Potomac, Md., offered N.J.
trustees four major transformations to think about. They included the
shift from hospitals (the fundamental building block of healthcare) to systems.
Revolutionary changes in technology. The emergence of a new kind of healthcare
consumer — baby boomers who want choice, control and information. And last of
all, tremendous risk and uncertainty.
"Risk is inherent in healthcare today," says Bader. "There was a time the
hospital industry could absorb losses — serious cutbacks in Medicare and
Medicaid — and cost-shift to other payers. But in today's environment, there is
no place to cost shift. The real message [for trustees] is that we will be
governing institutions in a state of risk and uncertainty for the unforeseeable
future. Increasingly, we will be asked to make decisions based on imperfect
information."
New Jersey trustees, at least, have a "heads up" in terms of financial
information that can — and should — be used in making important governance
decisions. A recent report,
New Jersey Hospitals 2000 — Financial
Indicators and Legislative Issues, published by the New Jersey Hospital
Association, offers insight into the financial health of New Jersey hospitals.
“It's important for trustees to concern themselves [with the report] and to pay
attention to the financial ratios — learn to look at them much as they would
stock indicators," says Gary Carter, president and chief executive officer of
NJHA. "While New Jersey hospitals are not trading on Wall Street, these
financial indicators offer a window into hospitals' eroding financial
stability."
The report is matter-of-fact; it does not mince words. The opening statement,
for example, notes that "as 1999 came to a close, hospitals in New Jersey were
faced with the problem of moving into 2000 in their worst financial condition
in several decades. Operating margins and cash-on-hand are at all-time lows
with more than 60 percent of all hospitals generating a loss from operations."
Report specifics reveal, that from 1997 to (unaudited) 1999, New Jersey hospital
operating margins decreased from 0.8 to -1.3. Total margins moved from 2.5 to
-0.5. Days cash on hand from 39.5 to 43.9. Days in accounts receivable from
69.2 to 73.8. And average payment period from 67.3 to 71.3. NJHA's 1999
year-end
Financial Analysis & Statistical Trends report, released
last month, shows an even further decline.
Some of the external forces that have contributed to hospitals' financial
decline (and that are detailed in the report) include annual taxes on hospitals
amounting to almost $60 million, reduced Medicare reimbursement as a result of
the federal Balanced Budget Act, a $200 million shortfall in charity care
reimbursement and HMO denials. An individual hospital-by-hospital synopsis of
the impact of the BBA, medical malpractice reinsurance, state taxes and state
charity care shortfall is included in the report.
Also included are some of the hard-line steps hospitals are taking to reduce
capacity and lengths of stay in the system. "Whenever we bring up the
fact that (N.J. hospitals are) doing poorly — that HMOs are an issue, that
charity care is an issue, that the Balanced Budget Act is an issue — we are
told that we have a capacity problem," says Sean Hopkins, vice president of
Health Economics at NJHA. "Admittedly, it is an argument we have to face up
to."
The state’s hospital occupancy rate is currently 57 percent. If hospitals
operated at 87 percent occupancy — a percentage felt to be realistic — 22,000
hospital beds would be needed in New Jersey. Currently the state has 30,000
licensed beds — accounting for nearly 30 percent overbedding (at 87 percent
occupancy).
As Hopkins notes, however, steps are being taken. Since 1996, four New Jersey
hospitals — Zurbrugg-Riverside, United, Montclair and South Amboy (accounting
for 827 acute care beds) — have closed their doors. Another five acute care
facilities (totalling 1,476 beds) are in the process of converting to other
uses. Meridian is closing acute care services in Point Pleasant. South Jersey
is consolidating three hospitals into one. Virtua Health is closing acute care
services at its Camden campus. Trinitas is closing acute care services at
Elizabeth General, while Saint Clare’s is closing acute care services at its
Dover campus.
As for Medicare length of stay? That too has been reduced. According to the NJHA
report, Medicare lengths of stay have fallen — from 11.1 days in 1993 to 7.2
days in 1999, a reduction of 35 percent. During that same period, the national
Medicare length of stay has only come down 21 percent.
To obtain a copy of New Jersey Hospitals 2000 — Financial Indicators and
Legislative Issues,
call NJHA’s Health Economics department at 609-275-4024.
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Issues Briefing From The Pages Of NJHA NewsLink:
Hospitals and doctors will finally see some reimbursement relief from the two
failed HMOs
, HIP and APPP. Gov. Whitman signed a bill that
would pay hospitals $100 million over three years for care they provided
patients enrolled in the HMOs...
Paying hospitals that treat a disproportionate
share of Medicare patients continues to be a priority issue
both with NJHA and the New Jersey delegation. Getting what was promised earlier
from HCFA is at the crux of the matter...
NJHA is working with hospitals and
legislators to promote gun safety so that children don’t end up
in the E.R. as a result of gunshot wounds. A press conference April 20 will
launch the new “trigger lock” safety initiative... With so much media focus on
medical errors, one issue that’s in the spotlight is the
reuse of medical devices
labeled for single use only. The FDA has released related draft guidelines for
hospitals to follow... New Jersey may be included in
a new federal government
Metropolitan Statistical Area (MSA), which would create an
influx of additional Medicare dollars for the state. The state Chamber of
Commerce at first opposed the change in classification but has since rescinded
its opposition.
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Update From The NJHA
Council On Governance
Spring brings with it a number of educational opportunities for trustees.
In April: Join governance expert Keith Pryor, managing director of
Diversified Search Companies, for a half-day seminar as he explores the basics
of boardsmanship. Topics include the sensitive relationship between trustees
and CEOs, trustees' fiduciary responsibilities and how to optimize performance.
NJHA's Ron Czajkowski, vice president of Communication and Member Services,
will also discuss some of the critical issues affecting healthcare in New
Jersey.
April 19, from 8:30 a.m. to 12: 30 p.m.
In May: The New Jersey Healthcare Leadership Congress and NJHA Annual
Meeting, Merrill Lynch Conference Center, Princeton. Keynote speaker, Scott
Chandler, M.D., of Healtheon/WebMD, will discuss, The "E”-volution: Is Your
Hospital Ready?" Also featured will be a debate of the candidates for New
Jersey’s U.S. Senate seat, followed by a networking reception.
May 25, 10 a.m.
In June: Regional meetings are as follows: Regions I & II:
June 6, 5
p.m., Underwood Memorial Hospital. Regions III & IV,
June 1, 5 p.m.,
New Jersey Hospital Association. Regions V & VI,
June 14, 5 p.m.
Rahway Hospital, and Region VII (to be determined).
And finally, don't forget to register for NJHA's new
Trustee to Trustee
Discussion Forum. Go to NJHA’s Web site (www.njha.com). Click on the
"Discussion Forum" icon, and "Request a Password." Fill in the form and request
"Trustee-to-Trustee Discussion Forum." See you there.
For more information on trustee education opportunities, contact NJHA’s
Education department at 609-275-4115 or Sally Roslow at 609-275-4224.
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