Mary Ann Freas
Chief Financial Officer
Southwest General Health Center
Middleburg Heights, Ohio
Can you talk about how your job has evolved since you started as CFO at Southwest General?
When I walked into my position in December 2008, the economy was in turmoil. We were entering very uncertain times, with healthcare reform, the advent of the RACs. The key for me was to make certain our hospital remained a viable resource for the community. We started by making certain all the basics were in place. About a year before I arrived, Southwest General went through a fairly large cost reduction initiative. We paid attention to our operating expenses, our cost per case, our revenue realization. My role is to set a course for the business office, to set expectations, but the people who push it through are my colleagues who work in patient accounting, registration and payer contracting.
What was the biggest impact of the recession on Southwest General?
The first thing that we needed to address was the value of the investment portfolio. We had to reevaluate our asset allocations to make sure we were not exposed to too much risk. In addition to that, there was the threat of an increase in uncompensated care, as a lot of people in our community lost their jobs. After developing our 2009 operating budget, we created a contingency budget to identify all those things that could happen but we didn’t plan for, such as lower patient volumes, higher bad debt and charity care expenses. We had to be prepared for these occurrences. The contingency plan involved about $4-5 million in cost reduction that we did enact.
You mentioned RAC audits. Was preparing for RAC a complex process?
It was primarily a matter of providing vision and direction. It was not a lengthy process. I knew what we needed to do. We started with the assessment. We identified the areas where we needed to improve. It was also aided because we didn’t begin to receive letters from the RACs until the end of 2009, beginning of 2010.
Were your labor costs impacted by the recession?
In 2006-07, Southwest had been through a large cost restructuring. At the time, the hospital had downsized its labor force considerably. In 2009, we delayed our merit increases, which allowed us to minimize layoffs. We now have a more sustainable approach to our labor management. We have the long-term concern about Medicare payment reductions, so labor costs are always an ongoing challenge. We have a benchmarking process and productivity system in place. We have implemented a process improvement program.
Did you cut back on capital projects over the past few years?
In December 2008, the big capital project at this hospital was a $25 million information technology improvement project. We’ve just completed the third year of that project. That project helped us prepare for meaningful use, and to help us manage our costs through technology. Our board has just approved a $62 million expansion of our emergency department and critical care unit. We’re working on the financing of that project and expecting to break ground in the spring. Southwest has been pretty conservative in its capital projects in the last few years.
What will be the biggest impact of healthcare reform on Southwest General?
Medicare is 50 percent of our revenues, so what happens there will have the biggest impact on us. We think we understand the impact of value-based purchasing and readmission penalties. The fate of the state exchanges will have an impact.
What will your major focus be in 2012?
Leading our organization to focus on reducing cost per case. That’s the key. We have to plan that our reimbursement per case will go down. The additional emphasis will be the same old basics: manage the cash flow, manage the projects and make sure we make the right investment decisions in terms of our capital.