Healthcare Finance 101 with Steve Febus



thank you everybody / don't clap yet' see that friend you may want to take that back so first before we start you know I just got to acknowledge dr. Frakes in the back here al and he was he was my auditing professor back in the day when I was at W so I think he's come to critique or take my diploma back I'm not sure we'll see how this goes so a little nervous now no thank you tell you a little bit just kind of whore story so I'm really very young Ruben so the reason I got this job I had to pay off my bill and I'm still trying to pay that off though I relate to everybody's questions regarding Hospital billing no not really but I just started the hospital back in 1988 it's hard to believe it's been that long great family to work with I don't know a few or many know this in 2002 I tried to escape I resigned from Pullman Regional Hospital's and CFO and move to Tucson Arizona I didn't get too far out of town before Scott asked if I could stay on and we'd work out some type of arrangement so I still reside in Tucson I've been doing that for 15 years so half of my career has been living in Tucson and still working at Pullman Regional Hospital pulmonary the hospitals near my heart have passed board members in here tonight and then they all know once you give Pullman Regional into your system it's hard to get it out it becomes a party you believe in the community believe a lot of what we're doing I really appreciate that and especially working with five people like mr. Adams and mrs. Euler dr. Caggiano that have really become family members Shana Patrick who's my controller here has been with me Shawn and we've been together 16 17 18 I mean it's really a long time and yeah it's amazing you got great people so let me start with a little bit one of the nice things about doing it in this environment is I've always believed whenever I'm talking with anybody you have to give them a take away yeah that are you should you're investing time here and if I fail to do that I failed the nice thing is we're feeding us at least a gateway hole hopefully so at any point if you want more building free to get up and go get more and so at least there's one takeaway so I told you about that thing let's start with a little bit here something well where's the wisdom here so with being an accountant the pessimistic side of me you know that really ring true but our our goal tonight is talk a little bit about health care in specifically health care finance 101 in an hour we have about an hour so an all hope really true to that which you have a little probably early but really this is your time if there's questions you have specifically I will address those the best I can if there's something I don't know I will find out and I will make sure that you all know by the within a few days but hopefully you know that you'll find this very meaningful in terms of a better understanding so that's our goal to do that we have to have a baseline knowledge we have to have a working platform to communicate effectively because healthcare like any industry we have acronyms and I don't know if it's purposeful so nobody else can come in its like a club or if it's actually the fact that we just try to simplify our lives by having acronyms and we throw them out as if their everyday speak so let me talk about a little bit things just to make sure as we're going through this as I mentioned something we're on the common ground okay so first thing when we talk gross charges this is what we build a patient the advice isn't what we get paid but any patient comes in it's going to be whatever they had done times or whatever quantity of whatever they did and that's going to be what gets built out from there we have contractuals or deductions from revenue that consists of things like bad debt we have patients that don't pay the bills hard to believe right we also take care of the indigent those that can't pay their bills so we have charity care ways by which that they can have services as part of our mission and so they'll come in and if they qualify parts or all of their bill can be written out in addition that we have contracts now we have contracts with federal government Medicare Medicaid Services and they tell us what they're going to pay us you don't get to negotiate that under that means you get told what you're going to get paid however other insurance companies like Premera Blue Cross now now group health molina any of those we negotiate contracts with we never get 100% back when I started we we had contracts that were 98 percent of charges or 90 percent of charges and today the best commercial contrast we have was right around seventy three point five percent of charges and so things have changed significantly so the question that was my sign to repeat the question so is Medicare Medicaid around 33 34 percent charges the write-off is around forty five percent of charges fifty percent we'll get into that a little bit of why what that means and how that works and what specifically it means for pulmonary zone hospital so if you take that gross charge and you subtract those write-offs be a bad dad be a contractual that's really the net revenue that's what the hospital has to be able to fund it you know current expenses which would be salaries wages benefits and future things like capital etc that ends up being part of depreciation and then like from there once you – all of those daily operational expenses out that's what we have in terms of our basically operating income now tell you in health care margins are small in almost especially critical access hospitals most of them don't have an operating bottom line the only way they have a positive bottom line and many don't is the fat through non operating means in our particular case we have a great community that supports us we're a public hospital district and we get tax support which has been tremendous blessing to us in addition to that we have some properties in which we rent we get some rental income offer that's a non-operating that's not what we're in the business of doing and then other things are like foundation donations which are very beneficial to us in order to be able to provide the spectrum in the overall care that we're able to do here and any communities can't do so a lot of it is a support we've had from the community itself so that ends up being the net income in our business it's almost you can't have a profit we're a non-profit so we can't profits but we have access we have excess of revenue over expenses what does that mean its bottom line you call bottom line call it net income call it anything you want it's really your profit now I'll tell you a story just for a second I'll just digress for a minute and I'll probably appreciate this my wife's a pharmacist and you know she's probably in terms of knowledge and brightness she outshines me by far but you know she had to take her last or senior year she had to take an online course or one of those that just to fill a G you are I said I'll take accounting they'll be simple I'll tell you – I'll help you I thought we were gonna get divorced our first year of marriage because she couldn't understand well what's this net income or profit or excess why can't you just call it the same thing well it is justice depends you know what business line you're in you know owner's equity is the same as the you know the net worth is the same as etc and she just couldn't get it and I just finally just said oh okay I think somebody else has to help you but we got through it we're still married to spend 30 years so somehow we made it through that but a lot of these terms are interchangeable and we'll talk about some of those all the throw those out there's your first opportunity to have a quiz she said I can't ask her questions but no no this is for the whole room let me ask you a question this is your first test these are reimbursement theories these are these are different reimbursement methodologies in healthcare one is diagnosis related groups DRDs folks may have remembered they'll scream back in the early 80s Medicare female with that said okay we're going to say every patient that has a X diagnosis of this will be in this grouping and we're going to pay Y so they created this in order to control the cost the ms-drgs is another mess of methodologies anybody know what that means what's the difference between the drg and an ms-drg so there's certain things Medicare don't typically pay for pregnancies not very many people in the Medicare population are pregnant Exedra so commercial payers have an additional DRGs listed which are the MS side of a medical surgical side common procedural terminology CPT's full charges or percent of charges and also cost so let me ask the question which of these does pulmonary General Hospital get paid under go ahead mayor oh thank you good answer every single one of those not confusing whatsoever just go figure out which one and play the game right and by the way insurance covers love to change how what's acceptable not acceptable what's allowable not allowable again a little of that but we get paid under every single one of those so it's really dependent on the payer if we had 100% Medicare it's so much easier to budget we don't we have a you know variety of various church today our population in terms of Medicare Medicaid runs about forty five percent of our charges Poland's in a very good position from the terms of the ability to do what we do because we have a very good pair mix due to the fact that we have Washington State University here and SEL here not very many communities of our size in rural America have that luxury most of them typically you can think of small farming communities there's a lot of Medicare Medicaid especially you think of a fellow I think how heavily Medicaid their population is it's hard to make anything we'll go into why that is in a minute various so we're only again we're still laying some framework about hospital finance one-on-one because some of this is meaningful and how you approach services you may provide hospital structures these are really the three types of structures public which would be federal state local ran facilities non-for-profits and for-profits in our geographical area how many of these do you think we have think of the Quad Cities here so we know we have you may not we have two public hospital districts in this area in fact there are three public hospital districts in this area you have one Wiesel hospital where public hospital district number one a of Woodman County doing business as Bowman respond so and then you have public hospital district number three in main name who that is Whitman can anybody name the other public hospital district Garfield you know the hospital in Garfield no they do in a system living in home health but that's their district they used to years and years ago there was a hospital but they don't have one now so those are you those are a public hospital what about not-for-profits in our region think of any you got grid Minh down the value have tri-state today you have a for-profit in or backyard don't you no matter had before this last year st. Joe's that will be a new dynamic it very well could so does it does Garfield's hospital district include the EMS likely to support that I'm not good layer on that but likely they do have some tax bonds so in our in our population you can see this is a distribution of this across the United States many are not-for-profit as you can imagine support it in one way or another not very many for profits in fact CHS which is community health systems is one of them there's a you know almost all of them run out of Tennessee for some reason if it's a tax Avenger that's what they all are ATSC which actually runs tri-c is another one of them but many of them are divesting so if they aren't making money they get out I'll tell you right now for profits typically run margins or working towards margins in the double digits not-for-profits are typically around one to two percent across the United States and more really no different than that you'll have a few that are higher than that but not very many you can see how many are in urban settings versus rural settings so not a complicated system at all it's very pretty simple this this is one segment of that remember under payment methodologies we just talked about this is one aspect and this is just the Affordable Care Act by the way and by the way you're here this is you so to get paid this is really pretty simple you just got to work through all of these means a lot of regulatory issues and things so when people wonder why health care is a challenge in terms of reimbursement in making profit there is so much one of the highest regulated regulated bodies in the United States as hospitals this is just to get payment under this new health system so there's no additional tax ISM Li stood within this at all it's pretty seamless and this is changing all the time so you got to learn you know how to play for it this down here which is the Medicare Medicaid Services it's changed significantly especially under physicians if you recall and how they got paid just change this last year and they are going to now their increases which was budgeted and under the the sqr which was the growth that's how they got additions every year now they've changed that and it's called Macra and the way physicians will see increases there'll be no new money there will be winners and losers and it's all based on quality in what you're reporting scores are and if you do it right then your neighbor doesn't do it right he loses money and you give some of his money because it's budget neutral and that's the payment increases that physicians will see moving forward how many physicians like to be under that model not nanny how many people could have felt our struggle even here on a local level to find a primary care physician whew it's been a challenge we have retired people retiring and if it's hard to recruit Pullman's very attractive from a destination but you can imagine some of these rural communities where it is really a struggle when we struggle in fact we were down to in some and some of our primary care practices and this is just I say our because it's a community one thing half the providers they used to have four years ago and they're trying to recruit it it's challenging on the market because why would you want to do that especially under the old payment models we'll talk a little bit about that the revenue cycle so as you think about healthcare finance 101 how we make our money is through seeing volume today there will be a point in time I think years from now in which the less you see the more you make because there will be value-based you'll want to keep people healthy which should be really our mission today we keep people healthy that's not good for our bottom line but it's the right thing to do and we're doing those things today we have a whole care coordination team over here with social workers and we don't get paid a dime for that but it's the right thing to do for our community if I was strictly a for-profit you know what they would have that your red stage would be open from 10:00 to 2:00 it wouldn't be open 7 to 7 because I would be cutting every cost I could out of this organization and putting every block dollar I could to my stockholders there would be things that wouldn't run I would not run 7.2 physicians in my emergency department 24 not 24/7 I don't have that many physicians but around the clock I'd run at bare-bones four point five FTEs run until the born and fire and hire another one coming in to two years burn them out yet another because I could save hundreds of thousands of dollars but the quality of care wouldn't be there they may just burn through people it's not that their quality is bad because they still score very well it's the fact that the experience is much different I speak from a personal level on many of this my wife works for CHF as a pharmacist and I will tell you it has been a struggle we they have they opened a brand new facility in 2004 December sound familiar we open doors in December they have been burnt through 15 pharmacists they have three at any one time and they've burned through 15 pharmacists and since she started today we've had one retire tell you a little difference of the culture because it's not about the people it's about the bottom line so when you think about revenue cycle you think think zero to zero you'll all be experts I mean you can start consulting businesses after tonight because not very many people really understand that there are the zero how much do you owe when you start you coming into registration or you come in for a lab before you have that dent how much do the hospital not you come in you have that service when you have that that surgery whatever you go through a process you hit registration within that registration process there's things that should have happened either before or happen during with authorization does your insurance authorize you to do this did you have to have a referral if you didn't have to have our oh I'm sorry you have to go back to your primary care gets a referral then you can come back we'll have the procedure after that if not and they didn't require a referral or we had the referral then we have to have authorization because we don't have authorization they won't pay us and if we miss that step that's what we're out or we fight insurance companies we write we write a few letters I'll tell you this year is much better than before we've had 6064 denied claims last year at this time we had 250 denied claims jumping through insurance companies who so I'm trying to get paid that's this process registration insurance verification points oeufs collection we don't do a ton of that here because our people are very good here in Pullman about paying for their services some places they'll require you almost pay your deductible upfront before they'll ever treat you financial clearance all the way through til the very back end of it after we do all of the billing process insurance pays we go out we collect the deductible we write the contractual right off that account goes to zero zero to zero that's the revenue cycle all of those things have to have to flow very fluidly in order to get there sometimes they work seamlessly we can get paid 14 days and be done on average the hospital Pullman Regional Hospital takes 34 days to collect zero to zero how's that compare across the nation across the nation's gotten much better used to be around 50 days now it's about 48 days across the nation we do very well here and we got good painters and some of them you know you can get the sale process done and within a couple weeks sometimes it's not that easy we still have camps that we're working on and almost a year old got denied we appealed in denial because they didn't tell us they changed the rule and what had to be authorized beforehand we had a physician right that this is a plural appropriate they are in review they deny it we go back to it we fight it we finally get it paid or a patient comes in and they say I have primeira give you the card come to find out oh shoot no I don't we change but you don't get that until you get the denial from the surance come you go back through and so now I have then they give you a different card you go through that process and it takes time so this is just how this segment would work from zero to zero you schedule you come in you check eligibility you treat your code the coding aspect that's your medical records once it's get coded and by the way do this right so if you one thing let's say you had a total hip if a physician didn't write that he put the device in and didn't charge that he put the device in and but you were walking around evident that you have really had it to lip we don't get paid because it wasn't documented so if you need to document it doesn't kind of matter if you did you did it or not you didn't do it so you've got document for everything you do so a lot of this is making sure we educate train and then you go through the whole collection process which is active collections insurance billing post collection which if somebody didn't pay how do you collect that all the way to legal where you might do wings many times hopefully goes very clearly but sometimes it doesn't work as well so this is just another aspect of that this is one bill 50% of everything we do is going to be done on the front end in most hospitals in the past have untreated the registration staff as a key player 50% of the giving this light happens there if you don't train those people and and you don't keep good people you get a 50/50 chance of ever getting paid we do a very good job much better 2015 we wrote off almost two points some million dollars in process errors and things because front end was bad now much of that we deny we got of the denials and stuff we had a fight to get every penny of it and we do very well at that but if we fix it on the front end we'll have to fight it on the back end and that so we did a tremendous amount of effort to clean this up on the front end and today it's basically gone 15% is in the actual medical record so the coding aspect of this this is when it goes through our coders inpatient outpatient they read the documents what was documented what should that CPP be making sure they code all that out that DRG that's their job if they do really like that we get paid well and then 15% is on the charger entry now charges so this said this happens here I've talked to nurses I've talked to staff many times saying don't make the decision on what should be charged to the patient or not document effectively so that we can bill appropriately because if you document what we did then we can bill if somebody can't pay I have all kinds of ways to be able to help them charity care payment terms you know let's paid over 12 months etc those types of things I can help patients with but if the nurse upfront decides of a poor college student probably only eaten top ramen let's not build them I won't charge them for that they don't look like they should be then I have to raise charges somewhere else to cover that that's a loss leader so we aren't pricing effectively for everybody else so let's we have means by which to handle that so let's just build propria so that's that's part of that charge entry side that's what they do and then the building aspect which is your financial services component to it so a little bit about Pullman Regional Hospital get a little more specific those for some high-level aspects they've overcome drill down a little more about who we are what we do in L works so today most people know Pullman Regional Hospital right but I don't know very many people know how many people know we have pulmonary general hospital clinic Network we own today three clinic practices directly which are wholly owned means pulmonary hospitals 100% owner there at an LLC but really there did one time for sent on by the hospital that includes Pullman PDR police pediatrics Pulu psychology and behavioral health in today Pullman family medicine who just joined that clinic network as of April 1st so we go back when we talk just a little bit as to why we might get into some of these Oh in addition to this we have joint ventures with with really three groups today one is Palouse surgeons the red the others under Palouse specialties which is Palouse ENT and Palouse ravallo G those are owned 40% by Pullman 40% by grip men and 20% by women three hospitals came together why do we do that it's craziness let them do it let them sink or swim you're on your own dr. Caggiano would we have an emergency Armen if we had no general surgeons there you couldn't even offer an emergency department without having a general surgeon you could offer an urgent care but by a rule and regulations you couldn't offer an emergency department you wouldn't be a hospital without him well we had that situation facing us we had one general surgeon on the Palouse tour the 365 days we're doing three hospitals and said enough the hospitals didn't jump in we wouldn't have anybody we said okay what do you need I will only take call one week every four all right we got to have three other general surgeons that's the standard so the three hospital scheme the other we have for general surgeons today do they make enough money within the practice to pay for themselves now because really for this community pride need three three and a half it's hard to get a half a doc these are common holes some reason one half a case but no they they come in holes and so there's a subsidy there's a support but the services they brought in the hospital offset that that's not always true within primary care but without primary care we wouldn't have a hospital again because they had so many additional tests that they order but under that model if we go back and look and how many people want to be under that payment models that they were physicians especially physicians coming out of training today they want to take care of patients they don't want to run their own business they want out of the insurance world who would want to do that anyway it's a pain they want to come in and by the way if they come in to Pullman and under our model no you have to be you have to be a partner and by the way your your pay is going to go down twenty-five percent next year compared to this year where do I sign out that sounds really good to me I have no security for me and my family it's not going to happen when you can go to Spokane and have an income guarantee that's out of the gate thirty forty percent higher and you know you're going to get paid that every year plus probably a raise you wouldn't come that's part of the the challenges Pullman's facing with recruitment so today that's why physicians coming out of school they want an employment model and we have met that we have we have adjusted our practices to meet those things because access to care is really important on the Palouse so we have here about almost 150 employees of which 274 of our full-time 174 or a part-time we have a great volunteer in auxilary team that helps support our services at Pullman some are here tonight now really appreciate that and then we have a very active medical staff the nice thing is we've been fairly successful on recruiting which is good it continues to be the case so I'm happy to say that folks haven't heard we have successfully recruited our fourth orthopedic surgeon to the Palouse who will be joining the inland orthopedic group that's awesome those guys will be thrilled because that will make their quality of life that much better on an annual basis if you go back to our knowledge base we gross build this is one we've collected I love it if we did my life would be so much easier for me but we build out 116 almost 170 million dollars pulmonary the hospital isn't a small business pretty substantial footprint out of that you know how much we have at the end of the day last year to work with to pay future bills like new equipment technology a million dollars not a very high margin in healthcare not a lot to work with and that is after we had donations from the foundations etc but those are the things that are really you know we've got to then reinvested in the future and that's the way to do it is by having some type of bottom line almost yeah so the question was and the comment was in terms of robotics and many may or may not know we have at da Vinci Surgical assisted device NRO are used primarily for single site incisions laparoscopic procedures when their recovery so much better because you don't have the open incision and you don't have all of the the after recovery time it's pretty seamless long word for an encounter is that it seemed to fit so it is seamless pretty much a stitch and they're done but it's amazing what they can do within that that machine alone was over a million dollars and we had a lot of people in the community saying man why would you buy such a thing we were successful the main reason to do it wasn't because we'd have an edge in a market and drive a lot of business it was recruitment folks coming out of urology school today are trained on a DaVinci are they going to come to a market that has none and that's the only thing they've known now so we were successful in that in and dr. Kaiser has a partner now dr. Smith and that was a great value dr. Smith by the way the two of them combined today are doing twice the volume the volume was there we didn't get it all so great and no Moscow also value from that but the whole community value from that and so it's really important as a part of our services that we offer so in terms of we're going to switch gears a little bit here and that's a lot of this if you want more you know come to board meetings to defin we it's a ever evolving thing and it will be different next year this presentation would be different than it is this year because it's changing every day but how does pullman regional hospital develop its prices because that's that's important question do we price higher than our competitors do we price differently than our competitors how do we do it I will tell you when I first took over and 1995 I struggled with how hospitals especially the ones I was involved with because I came out of trying to combine Pullman regional and grip Minh Medical Center in ran the corridor for three years in a joint venture as assistant CFL and grandma did exactly the same way we did it and what you do and what we did you know ashamed of it back then is you develop the new service you went out and figured out what the pricing was on many of those let's say it's x-ray and you wanted to do your Mars what's the average price where are other people charging for this service that's how you develop your prices what does CMS gonna pay its well CMS pays this and you two times that and just for both left that's what you do and then every year you go and the budget I think I'll raise it at 5% sounds good and you do that for 20 years and what are your prices reflect nothing they're meaningless so we said that's not what we want to do in our pricing and we want to be fair and adequate so we go through a structure in which we evaluate what our cost is we got to have our cost if we don't cover our cost we're here right pretty obvious let's are required profit oh man that nasty weakness a four-letter word it's actually more for sick so five I can know yeah I can count it's a six letter word profit we got to have that sense right so if we need to reinvest back into the facility we have to buy equipment we need technology if not you're going to be obsolete in a little while and then really your prices are only matter if I 100 percent Medicare yeah I'll charge you nothing because I can't pay cost under a Medicare program no matter what I cost no matter what I charge because they're going to tell me what they're gonna pay so why do i do anyway but that's not true across the board it does matter so prices have to reflect your pair mix what are the insurance companies we go through that process and then we evaluate on every single price down to the cpt level which is by procedure what's our cost compared to the market what's the market if our costs are too high is if therefore me to raise my prices 5% probably not I should I control the cost right if my costs are within reason then is it okay to raise 5% well maybe but if I have 45 million dollars in the bank or 150 million dollars and I want to charge 10% Marcus as a CFO I'd like to have a high degree you know that's probably not fair either cuz I have too much cushion now I'm gal G so we look at that as well we want to be fair and equitable and I don't want to charge more than a market and in our market we look at six hospitals we have to do a blended because it would be collusion if I was the called tri-state say what do you pay when you charge you know that wouldn't be my nigella I don't look good in orange so whether we do a compilation of six hospitals and we have an external group do this and we say what is the price on an average in the market now in some areas I will tell you specifically an mr we were too high two years ago I had the orthopods come and say you know we can be they're getting a lot cheaper and people are starting to shop because the fact of high deductible plans where they have fifteen hundred dollars out-of-pocket they're shopping huh we need to look at our market a little tighter than broader when you befall Spokane hospitals and Tri City hospitals in quite abroad so we've narrowed that market and said what should we charge for that service and that's how we establish our prices so now getting into just reimbursement and how we attain Medicare Medicaid under people remember in 1997 the court or not the Clinton administration balanced the budget and as a result of that there were two hospitals and rural communities closing every week and people not having access to care anymore the bad thing so they came out with this determination called critical access hospital it's critical for our weakest population in terms of Medicaid people that can't pay in our elders to be able to access care in these communities we need to do something about it because of a got paid we sell gramma not paying them enough to stay in existence basically they're not covering their cost there's not enough volume and it can't survive so that came out so Medicare pays us today our cost plus one percent now I'll tell you what it's not plus one because we still we have remember a few years ago sequestration every thought that went away it's still not we get cost minus one so we lose money on every Medicare Medicaid patient doesn't mean you shouldn't take care of home we should care for them but we will never make more oh by the way forgot to tell you something it's not truly cost it's allowable cost but you know who determines allowable the federal government so you know the same for the additions I told you about in the emergency department because physicians can bill a professional fee in addition we build a technical field which is the nursing staff and that on board the way Medicare looks at it then that professional fee covers that physician cost if there are additional costs like you want them 24/7 but there's not a patient there that's your problem that's not our cost so that's not allowable so it's not one hundred percent of it cause it's what Medicare says will be one hundred percent of your cost and our commercial players have to make up the difference this is the rub this is what commercials are fighting back because we have employers are saying we need I can't have double-digit increases you're in and you're out on our premiums we say the same thing we provide health care and we don't like it either when our insurance for our employees goes up by ten or twelve percent so we start on ok how we do it differently but we're paying ourselves sounds not horrible jeez can we do this differently so commercials have really pushed back on what they used to pay that's why I don't get 95 percent of charges anymore and now I get seventy three point five percent of charges by some contracts because they trying to drive that place down so are those to cost the same yes they are so it's your total cost to provide that service let's go there let's talk about that so what I'm going to get there so yes and yes it is a variable but understanding I'm in are who we are from we being at a rural hospital it's semi variable that only certain level can you go down before you hit a floor we have to by certain amount if we're going to offer 24/7 emergency care and I can't have nobody in there when you show up somebody has to be there with the lights on to care for you that's the floor so it's a semi variable but so there is some fluctuations in those costs based on volume but it's really hard and I'll share a little bit about Pullman's approach to that on how you control those variable cause I will tell you from a Productivity standpoint what's the number one expense you have in healthcare what's your highest cost people or service industry sixty percent of our cause relate to people what's the number one thing that you try to control people because I mean I can cut a lot at trying to chisel down utilities but I can't turn off enough life that if I was one staff member less to cover that cost to turn off all the lights every day when somebody walked out the room so there is some variability now one of the challenges there is how predictable are our services can anybody tell me how many people are gonna come into the emergency department between 7:00 to 9:00 9:00 tonight is there a football game probably higher predictability that I want to have more admissions in my emergency department that I have when exactly you can have some of that but it's still variable and it doesn't always come when we had the Apple Cup here we staffed a whole unit just in case because the year before we were inundated and we didn't have that many that's the challenge we run we can run on an inpatient unit Med surg unit to inpatients to 12 inpatients and that can be a difference in ours and it can be a difference in days so we have 25 beds across the board OB ICU and Med surg and we can have an average I mean we can have census from 2 to 25 and that can be within the week and then back to 5 and then attendant and it's really hard to get that predictability how do some hospitals deal with that I'll tell you a lot of your full process this header will say ok staff I hired you full time you have a family and kids that's all right come on in we're going to pay you full time I'm sorry I don't have enough patients they going without me I do that to your 3 or 4 times this month guess what you're going to the hospital down the street that doesn't do that to you we don't we don't go census a lot of its local census and we don't do a lot of that here because your your actual turnover rate increases significantly it's better retaining those employees than is that be training new employees all the time that's part of the challenges we have here and that's why Medicare decided we'll pay you at least your cost because when you have enough volume you can cover those lost leaders every now and then because you have enough volume in your variabilities a lot greater here it's not so that's why Medicare so came in and said we'll pay your cost problem in with that is it doesn't there's no incentive to control your time I'll give you an example a lot of our total hips total joints our Medicare population no surprise right you had one now – all right so of course does it help Pullman Regional Hospital to negotiate with Smith & Nephew in de PUE on those devices in saved money does it help our bottom line for especially the Medicare population thank you not one bit I get paid my costs where's my incentive to control the cost however we did go and we do I negotiated with de PUE and Smith and nephews a year and a half ago we saved a million two in our device costs most of that goes to the federal government it's the right thing to do because that will save visually if every hospital worked hard at doing those things that saves critical access also freedom on the chopping block if I lost critical access Hospital reimbursement today you ran that million dollars I told you we had last year take five million off of that we would have lost 4 million dollars we wouldn't last you would be amputating major services there just be things you would not do in this market it just would not be there no I see you you wouldn't have a hospital around this area that had nice of you behavior health forget it most people are on their long good luck I'm managing your drugs and your problems because you can afford it positive margin areas these are where we make money especially on a commercial side imaging surgery pharmacy women's health lab pathology and we don't have actually have a pathologist that is part of the hospital they're actually a group out of Spokane that reside here but those are your moneymakers today your negative things medical groups physician practices oftentimes for every every employed physician across the nation in primary care cost $110,000 that's net net that's the bottom line that's the loss you cover we're close to that not quite I'm pretty close transitional care units your home healthier I see use your emergency department there's so much fixed cost in those now my physicians would say they make money but they do in essence because they ordered tests people end up going to the surgery it's important to have all of them you can't have one without the other so how much did that cost you go to a store and you look and say okay what's that TV going to cost me you can see exactly what you want no one patient comes through the emergency department with the same thing they're the exactly the same you come in I do your hip your hip isn't the same as your hip your hip how long it takes that surgeon because you had a complication with in there can be significantly different than the person that had no complication the resources and intensity of services are much different just so Mary is you're going to get paid more because that DRG will reflect that but not always because the way Medicare pays you they pay off a DRG now they're two different DRG is one with complications one without but you might have been the same surgery without a complication but you might have been in the loire because when that surgeon was in there took a lot more time it took in 45 minutes or the other patient took 20 minutes the resources are much different but the amount that we're going to get paid is safe for that particular insurance but if you go back to those methodologies remember those cost fixed percent of charges DRG MSD ms-drg those all have influences within this for those are all different depending on that we're just talking about you by the way or talk about orthopedic surgeries now now you specifically just talk prices welcome finally so again some reimbursement methodologies we talk to under the hospital you have percent of charges we have per diems case rates you know a mix of the DRG ms-drg components to it a PDR ap G's which is an outpatient payment scheme we have none of those here they do have them and they are significant across the nation we're just fortunate some insurance companies want me to go to their primera wants us to go to that however in order to do that the system behind that to capture all that would cost us fifty thousand so I asked premier to pay for that they didn't want to so they keep 80 percent of charges but there's a big investment we're moving towards VBS which is value-based purchasing bundled anybody heard of bundled payments especially the joint replacement program that CMS has done across the nation that's a movement what that's doing is saying we're going to give you this pot of money between your physician hospital nursing home and everything else in between PT etc you divvy it out you've got to deal with only that component of it problem with that is that if you're not on the same team you guys winners and losers so I'll tell you right now in our bundle payment we're going to work really closely with physicians I'm sorry nursing home you're out because I don't want that patient withheld nursing home because then I have to give them some of that money so we're going to try to do everything we can to keep them within this little group that's why you need to work collectively together because it usually there's winners and losers in those things but that's where it's moving this value-based things are evolving significantly eventually a lot of our payments will be based on keeping people out of the system which ultimately should be what we're doing that's in the business where ours is taking care of those in need and try and keep people healthy but you can't make people be healthy so these are the basic overviews and we've talked a little bit that within that so you've got products or critical access hospitals other systems outside of that PPS hospital progressive Kamath systems those are your typical urban they're going to get this DRG fixed rate and the more they see then the more they're going to make because they can cover their overhead critical access hospitals were not able to do that so that's why they came up with this methodology all right now I covered down we will move off an anti I covered that all right so hospitals converted in these cause since cost reimbursement was and is greater than the reimbursement we would have received under PPS so that's why it was important to me there's requirements to say that back in or Obama he had within his proposed budget plan you can be a critical access hospitals within 10 miles of another facility or you would lose your critical access designation you know how far we are from Griffin nine point two miles why didn't we build it's just up the hill another but the issue was who cares if it's can why not fifteen why was it can because it was a budgetary number they look to see how much could they capture all that helps our budget fortunately enough Congress did not pass that they didn't even entertain that we only had to go few times did you see to fight that but that was the discussion what what what's the what's the mileage you know what I would have done mayor coming you say please close down Bishop Boulevard make us go around that's no longer a let us go half a mile yeah exactly something we get these appoint eighth of a mile please figure something out so al part of your question cost typically in hospital variable cost includes your supply your implants your staffing your food your dietary pharmacy fixed costs CEO course staffing utilities that you know your debt service and then your physician compensation because many of them have a fixed payment not all of them some are very productivity based and so is the more you see the more you make but that's changing in their environment so really more some of these really truly are semi variable there's only certain level level that we can go down to so this is supposed to be a true/false I'm just going to give you the answers here generally in many are not sensitive to volume if we saw 15,000 emergency department a visit or 5,000 emergency department visits I'm sure hoping the hospital still keeps one CFL humming Qi so I'm hopefully not volume dependent but at some point like even our human resources at some point we need additional support when we have like a few years ago on we had 300 employees now we have 450 the amount of paperwork and processing the payroll etc is more intensive so we either have to find system applications to do that technology or we have add resources and staffing to be able to help support those so cause volume increase what happens to your fixed cost per unit of service so volume goes up and I have a fixed cost me let's say we have 100 patients and we allocate the cost of administrator over those hundred patients now I have 200 what happens to that cost per unit it goes down same thing if we have 200 and it goes down 100 that cost per unit goes up same the variable cost units are service equals patient days for room and board revenue and charges for ancillary services okay reimbursement under PPS hospitals you decrease your volume what happens to your reimbursement it goes down unless you see the less you make right that's traditional every we all know that you're Walmart they sell a thousand TVs they sold on TV they sell tooth health and they need more right the more they sell them more they may guess what critical access hospitals that's counterintuitive it's not true if I see less patients was my reimbursement for Medicare going to be higher katja why because they pay me my cost my cost per unit went up so the less I see the more I made them more I see the less I make because I'm only ever going to get paid my cost it's counterintuitive and so that's always confusing it doesn't matter if you're sitting on the board or not yet serve a comparative language or you I mean they have observation beds which you get paid less for versus a regular thing so they're defining your cost is going to be that observation page because everyone want to reimburse you and those kind of things so the question really is under Medicare reimbursement how do they define how they'll pay you do they drive business I'm kind of prison do the driving to nursing work trying to write so are they driving businesses to certain things like observation like inpatient care is it better to have a Medicare patient in an inpatient bed or a novice bed observation sorry abbreviation which one's better for Medicare honestly having them in an observation bed is better because then Medicare constituents or customers have to pay twenty percent of charge if they're in an inpatient bed they have a straight deductible one's done and if they met that earlier is that so the Medicare population has to pay for that twenty percent so having them in an outpatient setting makes a lot more sense for Medicare they have requirements so now they have it used to be based on certain criteria base driven now it's based on how many Midnight's are in are you into if you're into it in your knobs if you're in more than two then you're in then it's based on that so they took we by the way we asked for that and we all hate it now we said we don't like the way you're doing this you've got to simplify and then they simple and we didn't like it so some of the things that are influencing health care and wife's getting challenging we had a major change in our in our classification icd-10 which is your diagnosis in related classifications this change from icd-9 to 10 and 2014 2:15 and it really substantially changed a coding aspect one from like 8,000 codes to 80,000 and so it's got a lot more specific it's really hard to run today to get any comparables is almost impossible especially on inpatient care or surgeries and stuff because the fact that icd-10 is so specific like they have they live and I have some if you hit by a car in a rural road then you code it to this but if you're hit by a dog it's different I mean there are really I could throw some up and you'd be like really that's a code and there they are that specific it's really strange some of them are hilarious I don't know how they keep up with them but they are a bit by a shark while scuba diving you know did they live inpatient quality reporting the Macra which i talked about early on position reporting this is significant you could have upwards upwards of 9% fo physicians you know that can be a huge swing and their pay in any one year yet on the other side if you do well you might gain readmission rates we got to monitor that all of these things are reporting requirements that we have to do we don't get any as additional money but if you don't do them then you make less money so one of the things in that in summary as we can start to wrap this up why does our foundation help us there are many non cost based programs psych and rehab don't make money so by providing certain services in continuing to support those across continued and have the foundation helping us within that so that we can be self-sustaining and self-determining in our future it's really important skilled nursing facility sniffs home health agencies non reimbursable cost centers just certain things that we don't get any payment for but we want to continue to provide those services because it's important to our community that's where the foundation that's where being a public hospital district really help other other things within caution versus cost the overhead that our non services things like today our care coordination I mentioned earlier that's the right thing to do honestly it costs us money to do it we look to Grants and that's part of the Foundation's efforts to bring in those type of things to help offset that it doesn't dollar-for-dollar but it's caring for patients and getting them in the right place so that their care is better so that they don't end up in your emergency department with a major problem down the road those are really important things to do nobody's paying for you at today some of the things that foundation has really helped us with an annual giving the the whole hydro works pool therapy and underwater treadmill we would not have had that the system we had had failed and would not be obsolete it'd basically be a probably a mosquito pond now it would be gone and that helped us tremendously the 3d mammography unit that we have been blessed with happened in 2014 the 2015 various areas a lot of different areas of services in 2016 the o.r project and then now one of their major efforts is 2017 on the expansion and as we look to that why we needed that in 2004 when we opened this we thought we'd plenty of space forever now we're out of space with volume have increasing as much as they have as much as 25-30 percent we need more space and that will be the case for a while then there's the if I get this out of order but the surgery project which is well underway and should be done by August in the Baugus then come online by September which will be perfect so summary healthcare finances this complicated I mean we we can't do it justice in an hour I hope that you got a little bit of paste of the complexity of what it means within our institution on how we manage that but each input is unique therefore care delivery must be flexible it can't be stagnant everybody want to treat you the same we'll put you on the conveyor belt we'll run you through because you're all the same and I can then control all my cost that way and we can't do that in health care physician orders dry physicians still drive everything we do without physicians in our community we would not have a hospital they still drive everything that care today so orders drive provisions of care adding to the variability payment is also variable depending on who's the insurance payer what coverage do you have does your insurance cover to cover that today not tomorrow by the way one of those things that you know we want an example of this what do I mean primeira decided and I'll say this wrong and please correct me those that know but propofol is that the right word the administration of the drug with St sure drug fishy colonoscopies dr. Jones likes that it works very well he wants the CRNA in the room oh man loved it I had that done it was awesome I remember nothing but you know I got to tell you when I came out if I had it done here so I didn't do it at home and I had John O'Brien my materials manner come in and make sure I got to where you did go after we were done it and I told I told I told him hey come on like tell her I died cuz I thought it'd be funny I don't remember actually saying that I'm glad he didn't call her because I thought it would be funny I guess fairly but I somebody's probably what you tell people under that stuff it was awesome but premier decided we're not paying for that it's an additional cost even though physician preference is that they're just not gonna pay for so we help subsidize them for the CRNAs because it's really important a physician for that aspect of care that's what insurance companies do so that insurance companies a big or that negotiating those Ray's pair makes regulations have a big influence of how and what we do here we're going through part of that it within the next few months we'll have a review by an outside agency that will come in and evaluate how we're doing are we meeting the Medicare standards technology changes rapidly how do we reinvest in that so we need a profit in order to Reba or the foundation has stepped in in many gaps where we didn't have that to be able to offset that and help us continue to offer high quality technology and keep our prices reasonable and then many different players in health care all right yes sir he'll hear from insurance companies setting the standard here what is the limitation and you may want to go to so the question is is that it truly negotiated rate or you just told Medicare Medicaid they're the big while you're told you don't negotiate other commercial payers you do have the opportunity to negotiate your negotiating power is limited by even within our community wall by who's negotiating what the more players and as we talk about our fully integrated health systems where you have physicians and hospital and all that working collectively you have more negotiating power so then you do have the ability to go and see you now at some point you gotta prove outcomes if you're improving this is what we're doing and we're working on that part of the center of excellence with it with the orthopedic surgeons is in developing that at some point we will develop a bundle payment that we can take to a Premera or to a uniform and say why would you want to send your patients to the west side to have this done hemmed in here here's our outcomes by the way our prices are half half of what they are over there so I wouldn't want to have it done here keep them local but if you can prove that you've got to have statistics to do that you've got better negotiating power typically two to three years so right now I'm working on the premiere contract hospital loan it's really hard because grandma just saw him last year so I'm not going to get any better than that if I had an isolated market I could so I would take the same contract that Tri State can get with primeira but they have one eight and number of covered lives in their arena so they can get 90 plus percent of charges they just don't have the same volume we do we're here they can drive a lot of that but it's getting more and more challenging have people heard of what narrow markets are okay so we have one in our arena it's a catalyst group they went directly to the Blue Cross of Idaho to a very isolated market and they said we'll take care of those patients if that patient goes outside and so these are self purchased insurance plans if if that patient goes outside of the market they have a fifty thousand dollar deductible so they can go to Grima and they can't come to Pullman because that's how narrow they Maryland they did the market they kept it in Idaho those are happening the van properity population how are we competing on supply and demand yes absolutely not in all areas so a lot of that is contingent on providers and can you get a provider within those specialties one of the things were actively trying to recruit to and we are have been successful here just recently is in non-invasive cardiology the other areas in pulmonology and sleep the demand there we have to outsource that today so an outside group does all of that all of those funds go outside of our market to be able to do that because we may do the study here but the providers aren't here so there's no reinvestment back into the community for those like services so in some areas it's a real challenge because it's specific on that in other areas and we're keeping up and that's one of the reasons we're looking at building the fourth of our or adding the same day services expansion it's because the demand has been there we are at capacity and we have just no more room in order to get that now I say that almost tongue-in-cheek because there's a lot to do with physician preferences and if you're if you're a physician and dr. King said could speak to this you don't want to start surgery at 6:00 at night and that's just emergency you prefer to get in and get out so you get back to your clinical care for patients and so most physicians have block schedules because then they can control their life they don't want just well what do you have today okay well Gowell calls even get them in today that doesn't work very well in there right so you have to have that capacity but in order to do that sometimes you have those downside because nobody wants to start two three four in the afternoon if we could around 24/7 in those areas and people Roland do it you could control the cost much better but you can today there's a lot of us based off proposal you might yeah well what what you have in this market is of all I can go I can go 9.2 miles and I can start a seven so I'll take it there well no way it was stopped with one here we don't want you to do that so some of that predictability and stuff is very challenging and our market is based on providing healthcare so I don't know if that totally answered it adequately or not we can talk more if it didn't other questions I have a good together here is only top of the game but even a surgeon knows that they're really good for so many hours of solid surgery before you know they get a little question on do a little thing so you they know about you you can commit a surgery unit for how long of course that's that if that's your front yeah yeah well yeah and that's that's really dependent we've you're exactly right the quality of care of your providers be it your nursing staff to your physicians diminishes really if you don't give them enough rest time and so one of the one of the key importances of recruitment is to provide especially physicians break in between so they are call all of the time here we'll burn them out and in short order same goes for your nursing support staff if they don't have respiratory shifts and we used to do this so you'd be done and you had to go late because the case went late and you were on call and you got called back and then you had to come back in at 7 in the morning to start it all over again quality goes down now what we do is we have we have a call shift and then they when they're not called a nerd-off so they don't come in the next day that's a different group so you have to have staffing which add some cost but it provides a better quality of care plus rest between shift we guarantee a certain amount of rest between shift so they aren't only getting a that again 10 so they get a full night's sleep baby staff there's a difference in cost to have your own staff or subscribers now occasionally sex all over Swedish yeah yeah 2.5 times the cost for traveling compared to what you you can keep here you're typically doing that in areas most of time here in our market now not when you were on the board we had a problem at the end of just you know turnover because you were doing a lot of low senses etc today if we have at relations do we generally do to somebody that's on maternity leave it's a planned event you know they're going to be out for 12 weeks it makes sense you're going to pay a little more but you wouldn't want to hire because we you made a commitment to employ them forever so you do short-term stuff like that we don't have nearly the travellish we used to yeah it's typically that do you think the value-based system will survive with the Affordable Care Act one way in the affordable care act so will the value-based payment system continue to exist if the Affordable Care Act changes the affordable care act will change I mean inevitably it will change somehow who know it doesn't matter what administration it will change i I do health care if the radio was going is non-sustainable it has to change you can't continue to have escalating payments and expect anybody to be willing to do and be able to pay for it so it does have to change how we deliver health care needs to change we're reactionary but you know America has done that to himself we've done to ourselves we don't want anybody telling us what to do we just want you to make it better when we didn't do it because that's a lot how we live fix me now I didn't take care of myself but fix me now so some of that needs to change that getting in front of that and changing our culture and how we respond to that needs to change so yeah I do believe it in some sense it will there's demonstrations that are showing it how it will be I don't know what it will take but today part of the part of the problem is the fragmentation in health care in the lack of communication between even us and our providers and you know you think you're all in same page but you're really not in all sense so streamlining that integrating a lot of that will have a lot of impact on end I do believe that it will take such a foothold it started out a 20% demonstration analytic expecting two years value-based purchasing will represent 80% of the payments in two years they originally thought it would be five but that's how quickly it has broadcasted out so it's here to stay and we got to learn how to deal with it the problem will be is we're under this payment MA which the more we do the more we make in some sense I discount addicted something else like this but that's that the health care system today fee-for-service tomorrow when we finally get there I don't know what it will look like when it's value-based and you're providing value you're keeping people healthy how do you bridge that gap that'll do the challenge and hopefully you have enough to survive they have periods of time and so it's really important now we utilize again I promoting Ruben and his staff but that's what we've determined as part of that pathway there to survive those those those time periods so that we aren't falling behind in technology and other things so that when you get there you can't provide it because you're too far behind the curve anyway I don't need to have another MRI just because I had one here for the specialist and insurance companies can say you already have Lyme RI for that particular injury so officially nothing about is driving remainder goes so the question is when will that happen when will that occur meaning will insurance companies dictate the fact that somebody else ordered a secondary test that has already been done is that fair doing this for her just told me I got to repeat you so and I didn't get paid tonight no I can't even with its cost you pay cost so the the question is is when will heaven it's happened it happens today insurance comes if you had an M R they are going to approve that's part of that whole pre-authorization if they see you had this test died they're not approving one for another one they'll deny it so you won't get it what happens today it's now's when it exactly so some of that's happening now is there duplication of services yes that still happens in some sense but more and more that's changing so one of the things that is is when you start looking at an integrated model and you start looking about coordination it's when you're all on the same team you know dr. Joe is much better at this than I am I'm going to send my patient there except I know that patient will come back and we're not competing against each other that will be important to control cost because today we compete against each other for the same patient for many different services all right we have a few more machine that case oh the question is is what are the advantages of acquiring other medical practices be it physician practices or anything and we'll we look to acquire more in the future I will tell you this palma regional hospital has not addressed with we ever gone out and tried to buy any we have reaction airily responded to requests so Palouse pediatrics as an example 2009 remember out doctor frosted and mike when al decided he was going to retire mike realize i'm going to be the basically the only pediatrician on the blues i don't want it and I don't want this headache and by the way I can make more money by being a locum in traveling and getting out of here and and making a lot more money so they realized that in order to have pediatric which I'll had established on the Palouse and continued to be here they needed something different they came to the hospital said would you be willing to look at this and for the sake of the community we responded and say yeah we'll look at that so most of our everything we've done has been in response to so many providers today when they look at the model of reimbursement trying to recruit into it are facing challenges and saying people don't want to come in that model they will come the hospital say can we look at something different we'll always look and say what does that look like so there's no future plans right now to continue but we would respond and being the theme some have decided to stay independent the advantages that we're starting to see that are coming I talked about care coordination I mentioned a couple different times there are new reimbursement models that will pay you a per member per month to do that most all that resides in primary care we had no access because we had no primary care under our clinic network provider that to get to the new revenue streams that are emerging under these value-based models that's one of the advantages of coordination and integration so that's coming and we're getting ahead of some of that contract negotiation because you're all going to the same person and not divide and conquer you're going jointly we'll also have some Vantage's there correct so well I'm not sure I understand totally through supper no we all hospital recruits a general physician and that person okay so that's a I see your question now so the question is is today Poland family medicine may have an opening how do they recruit is that is that how the hospital involvement of that compared to like Palouse no today we're working closely with Pullman family medicine identifying what the needs are the community what type of provider should be there we work with them jointly plus medical group because they're independent or out doing their thing they're trying to recruit in there still and there's still a competitive model there although the nice thing is in on market I'll tell you today we work closely with them and have a lot of communication so thankfully you're not it is a you know evil one can and you know what it's you know whatever I do for me is just my thing and it's that tragedy of the Commons which we're all going to fish out of the same pond the more fish I make or catch the better off I am until we're all out of fish that doesn't happen today we do coordinate so there is some communication which is nice in our market it's not a stream line though because we don't have that involvement yes sir when you talk about coordination you see changes in the hospital's example with all of the hospitals in this area if some of might end up for these a great question so the question is in this area well all hospitals exist a long term will some in danger of closing or is there better models you know I would not I couldn't professionally tell you that all will exist it should exist there's a lot of duplication of services and end I lived the corridor on for three years it doesn't make sense to have 3 Rd MRIs in a basically 20 mile radius when they're almost 2 million dollars each now you may need to because of volume but it should be volume driven I do eventually believe for this area where there has to be coordination of that you could have a very effective and inpatient care unit and they focus on that and they do it very well instill in community so you know I'm pointing outside because I think Pullman ought to be central because they are they're the middle and then outside that you could have outpatient surgery centers or support or urgent care centers etc but you you work collectively I believe long-term that's where it will get to I think until reimbursement dictates that it won't change and under a critical access model because we get paid or cost advantages is there to do that so today we have a fake glass-bottom you know the there's not a lot of centers of control cause there's some there's not a lot but if that model went away problem is this could you react quick enough I think that it's some of that's happening I mean we are partners in general surgeon practices the specialty practices medication oncology coming on board that will be collective more and more that communications happening I think that will evolve long term how long I have no idea I realize at some point if that happens and I think that ultimately it needs to I don't know if you need this kind one they had if you are alive and it Griffin wanted one there was a committee gem tournament whether you ought to have will have because the population in the side yep and everyone away yep I think eventually to come back to some of that I do believe that some of those remember little bit school would also have scale occasion yeah that was mine that was my love of working for two facilities that was awesome by the way it is a little after 7 I do want to be respectful of your time I have nowhere to go I will stick around if there are other questions but I appreciate the fabulous amount thank you yeah thank you very much

1 Comment

  1. Excellent speaker, Steve is.

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