Hartford Business Journal

24 Hartford Business Journal • December 22, 2014 www.HartfordBusiness.com Industry Focus E c o n o m i c F o r E c a s t Health Care Q&a Healthcare industry faces consolidation, uncertainty, funding cuts Q&A talks about what's on tap for Connecticut's healthcare industry in 2015 with Kurt Barwis, president and CEO of Bristol Hospital and Health Care Group Inc. Q: What's the biggest issue facing Con- necticut's healthcare industry in 2015? A: With the advent of the Affordable Care Act the model of how hospitals get paid is chang- ing drastically. Right now we are in a fee-for-service payment environment and in the future we will be shifting 180 degrees away from that. Every hospital and hospital system is looking forward to how fee-for-value will evolve. Another significant evolving concept is the focus on popu- lation health: The notion that we develop systems of coordinated care that focuses on, and succeeds in, improving the health of a particular group or population of people. It seems logical that the intersection of fee-for-value and population health provides all of us with a brighter future. Systems of care that provide greater value/ quality outcomes are less costly and help people become and stay healthy. This concept is commonly referred to as the "Triple Aim." Given these dynamics, it's not hard to understand why Connecticut is experiencing a high degree of system- ization and it's why Bristol Hospital was seek- ing to be part of a larger Tenet/Yale New Haven Health System organization. One needs to be able to provide access to care and care coordi- nation across large geographic areas. Think about it: Approximately one third of the Connecticut state budget is allocated to health care, which includes the Medicaid pro- gram. What if we modernized the system of care for the estimated 750,000 Medicaid sub- scribers, improving their health outcomes and experience while at the same time reducing the overall programmatic costs? I'm not talking about the traditional way you cut costs by just reducing payments to hospitals, doctors and other providers of care, but rather reducing the number of tests and procedures because we are better coordinating Medicaid patient's care and improving their health status. Change is difficult. Moving forward, doing the right things, rewiring your DNA, means hospitals will experience declines in the servic- es they provide and generate less revenue, put- ting pressure on the bottom line. Hospitals are in a critical transitional period. The 29 hospitals in Connecticut get it for sure. The difficulty is that at the same time these same hospitals are retooling for the future, they are also experienc- ing unprecedented reimbursement cuts from the state and federal government. This year, Bristol Hospital experienced a $2.47 million cut from the Medicaid program and a $3.5 million cut from the federal Medicare program. Q: We all know of the consolidation wave sweeping through Connecticut's health- care industry in recent years. How will this trend play out in 2015? A: With the recent news that Tenet Health- care Corp. withdrew its application to acquire Bristol Hospital as well as Waterbury, St. Mary's and Eastern Connecticut Health Network, I don't see any other for-profit hospital companies making their way to Connecticut anytime soon. The impact of the devastating reimbursement cuts combined with a lack of access to capital will likely cause hospitals to continue consoli- dating or to seek partners that can provide capi- tal. While many consolidations and affiliations have been consummated and/or announced I absolutely think the deck chairs will continue to move. Access to capital remains a key issue. The ability of anyone to deliver "Triple Aim" value and most importantly extract value in return as part of their business design, is uncertain. Q: What are your projections for health- care costs in 2015? A: Defining what cost means is a very difficult topic. So cost to a hospital is what we pay for our resources — staff- ing, vendors, etc. On the labor side, we actually added 47 full-time equiv- alent jobs last year but have been dili- gent and more effi- cient in managing this component of our cost. Over- all, our labor cost year over year is relatively flat. I read about all the incentives compa- nies/businesses get for increasing and or keep- ing jobs in Connecticut and I am not sure what happened to ours. We actually lost $2.47 million in reimbursement from the state. On the supply side, or the non-labor side, we have done a lot with our network relationship with the Yale New Haven Health System Inc. to reduce what we pay for supplies. We have gone through and pushed back on other contracted services to make sure that we are getting the best price. So from a hospital standpoint, our costs are flat. The cost to the community for health care is what they pay for insurance plus what they pay for deductibles and co-insurance. I believe those costs will ultimately go down on an infla- tion-adjusted basis. A recent report on Health Exchange pricing by the Robert Wood Johnson Foundation suggests that one of the levels offered went up by a little over 3 percent year-over-year and another level actually went down. The one that went down was the lowest cost option. Q: Will Bristol Hospital finish fiscal 2015 in the red or black? A: Our 2015 budget process was a very dif- ficult one given the reimbursement cuts. We feel very fortunate that we were able to keep our staff intact. There were several shared sacrifice deci- sions that contributed to the final balanced budget. One of the things that we did specifically at Bristol Hospital was develop new service lines that are needed within the community and that impacted our bottom line in a favorable way. These include our bariatric, joint health, breast health and wellness, and wound care programs. These helped us reduce the impact of the gov- ernmental cuts, so we feel we are okay going into 2015 and that we will be in the black. n ▶ ▶ Change is difficult. Moving forward, doing the right things, rewiring your DNA, means hospitals will experi- ence declines in the services they provide and generate less revenue, putting pressure on the bottom line. KUrt BArWiS President and CEO, Bristol Hospital and Health Care Group inc.

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