The quality of a hospital or health system is usually linked to patient outcomes, not to administrative or financial efficacy. But smooth interactions between patients and the hospital business office should also be viewed as critical to an organization’s quality, says one CFO.
Children's Hospitals and Clinics of Minnesota, based in St. Paul and Minneapolis, Minn., has been recognized as a “Top Children’s Hospital” by The Leapfrog Group seven times since 2006. The health system has been acknowledged as a model for quality and efficiency in patient care.
While justifiably proud of the hospital’s patient outcomes, Alec Mahmood, chief financial officer at Minnesota Children's, thinks his finance team must view itself as an essential component of the quality patient experience.
Editorial director Richard Pizzi spent a few minutes with Mahmood discussing how the finance department can contribute to hospital quality, particularly in the face of a changing healthcare reimbursement system.
Is there something unique to the culture of Minnesota Children’s that drives quality, and if so, what does that mean to the finance team? Everyone is very proud of the quality indicators and benchmark reports that compare us to other children’s hospitals. Even within the finance world, the staff is well aware of where we rank in quality data. The outcomes are one thing, but interactions between patients and the business office is very important to us. I come from the for-profit world. In that environment, I would want to see proof that we could be reimbursed and cover our costs for new procedures and treatments. But here, we need to prove first and foremost that there is greater efficacy for treatments. We believe that if the quality is there and the outcomes are there, the reimbursement will be there.
If we have to generate good outcomes for expensive procedures, I have no problem going back to the payers and saying ‘here are the outcomes and what we’ve done for your members – look at how the quality has improved.’ Payers are responsive to quality data. If you can show the outcomes are better, payers can take that data back to their employer groups.
How is managing reimbursement and controlling costs different at a children’s hospital than at a standard acute care facility? You have almost no self-pay at children’s hospitals. Almost every kid is going to qualify for some form of insurance or Medicaid. On the supply side, I would say that there are fewer options for hospital supplies than there are on the adult side. As a result, it’s easier to adhere to a formulary when purchasing some supplies. There are still choices, of course, and physicians have some leeway. But purchasing decisions go back to quality, and I think we do a good job of controlling costs.
I know you use Lean management practices at Children’s. How does that work in your health system? The number one thing we’ve taken from the Lean approach is the daily engagement system. Each of the different department directors has a daily huddle with their staff. Even the senior managers have a daily huddle call with all the directors of the hospital. They learn firsthand what the burning issues are for the different areas of the hospital. The cost reduction part of Lean emphasizes empowering people to make changes that will eliminate waste. We’ve used that approach in many areas and it has saved quite a bit of money.
Children’s is part of an accountable care pilot with the Minnesota Department of Human Services. What are some of the financial goals of the program? We’re about one year into this three-year demonstration program. The goal is to bend the cost curve, and our role is to demonstrate continuity of care within the population and manage costs. Pediatric systems are not as mature as adult health systems when it comes to cost of care. Essentially, there are no broad cost of care initiatives in pediatrics, but we know that we’re moving toward that approach. For us, this is an educational process. We want to gain experience with this approach, but quality outcomes are also an important part.
As you indicate, the healthcare reimbursement system is changing. What are some of your expectations for how things will shake out? One thing insurance companies are good at is managing chronic disease patients. Those skills have been adopted by hospitals and clinics over the past few years, and the adult health systems are doing a better job of managing those patients. But the pediatric world is far behind this approach. At pediatric systems, so much of your cost is not in the classic chronic disease areas, but in the NICU [neo-natal intensive care unit]. I think the state demonstration program will be a good opportunity for us to learn how to better manage health conditions. But we don’t get access to the kids until they are born. We don’t get to manage the care of pregnant women. That makes it harder to address some of the factors that put kids into the NICU.
What are some of your financial goals for Children’s over the next few years? Typically, my goals would be split evenly between revenue and cost cutting. But it’s a bit different here, as we’re a union shop. The staffing ratios are designated by the union contracts, so one hundred percent of my initiatives are revenue-based. One example that I mentioned earlier is to get payers to recognize the quality outcomes we generate, and pay us accordingly. During recent contract negotiations with two of our larger payers, we were able to use quality data to demonstrate that we deserved higher reimbursements. It’s certainly an easier conversation to have when you have that data in front of you.