Mike Burke is the chief financial officer at NYU Langone Medical Center in New York City. He sat down with editor Richard Pizzi to discuss how the finance team at the medical center dealt with the recession.
What's been the biggest financial impact of the recession on NYU Langone Medical Center?
The biggest impact on NYU has been the impact of the recession on state government. The cut in the tax revenue stream in the state has led to a cut in Medicaid payments. Another big impact was the liquidity crisis in the stock market and the impact that had on financial returns. Like a lot of people, we took a hit on our investments. But weren’t hurt as bad as some, because in December 2008 we changed the asset allocations in our portfolio and have become more conservative. Most of our money is in cash and cash equivalents. We made that change 2 weeks after I took over the CFO role, and I did that with the recommendation of our finance committee, who have a deep knowledge of the financial markets.
You say you changed the way you managed the medical center's investment portfolio? What advice do you have for other hospitals in this area?
Being in New York, we are very attuned to the stock market and have a lot of advisors who are familiar with the market. We did not rely on hedge funds and other new investments that some people in the healthcare industry did. We were more conservative, and it benefited us. We did not have a huge increase in our asset portfolio, but our assets also did not whipsaw back and forth, up and down, like those health systems that put their money in hedge funds. Some other academic medical centers across the country took a financial hit because they invested in some of these risky instruments.
Many health systems cut back on capital spending during the recession. Did NYU do the same?
We are uniquely positioned to afford capital projects through the improvement in our capital structures and our cashflows. We are in the midst of total system-wide transformation efforts and are trying to make our physical plant more efficient. We have also made big investments in information technology. We think our investments in IT will give us a 20 percent financial return. We are seeing some returns now, but will see more once we automate systems that we are currently using manually.
Did the recession impact your labor costs?
It didn’t really affect the labor side. In fact, we’re actually looking at growing our staff and improving collections through our growth. We want to improve quality of care and improve our documentation techniques, which ultimately improves reimbursement and coding. And we want to continue improving the revenue cycle. We have had dramatic improvement in our revenue streams. We are also looking at ways to improve supply chain costs, increase productivity and boost throughput.
How have you managed the increases in charity care and bad debt that came with the recession?
Actually, we haven’t had a big increase in bad debt and charity care. It just hasn’t happened to us. We haven’t had a big increase in our Medicaid percentage, which is less than 10 percent of our volume. But we have been emphasizing charity care as opposed to writing off patient non-payment as bad debt.
Will financial conditions for hospitals improve over the next year?
It depends on whether the recession is a double-dip recession, or whether we come out of it quickly. Ultimately, it will probably take two years to get back to where we were prior to the recession.
Are you putting more emphasis on collecting patient payments upfront?
We’ve always done that. We’ve always tried to facilitate collection of money upfront, and we’ve been pretty successful – we have very low days in A/R. But we primarily focus on insurance payments instead of patient cash. We have a “best in class” revenue cycle team that has maximized the payments we recover from insurance companies.
How will the new healthcare reform legislation most impact NYU?
The legislation really should be called “health insurance reform.” Congress has taken a similar approach to the Massachusetts reform model, where you increase access to health insurance for the general population. Because that’s the approach, I think that healthcare institutions that are set-up to provide good quality care will benefit the most, because the newly insured – who may have primary care choices for the first time – will choose them. This can be beneficial, as the payment streams at health systems that used to pay for the care of the uninsured will be redirected to pay for other projects.