Healthcare professionals discuss the business of hospitals

Healthcare professionals discuss the business of hospitals

Monday, 07 January 2008

• Travis Froehlich, vice president of planning for Seton Medical Center Williamson
• Ernie Bovio, CEO of Scott & White University Medical Campus
• Mark Clayton, senior vice president for strategic planning and development with St. David’s HealthCare

General

What is the difference between a medical center and a hospital?

No difference. Hospitals became more commonly known as medical centers when they began to offer both in-patient and out-patient care.

How do you attract and retain staff?

A competitive salary, an attractive work environment and excellent facilities.

What is the difference between a not-for-profit and a for-profit hospital?

A not for profit takes any margins and reinvests them in long term growth or in the community. For profits may do some of that, but they have to provide a return to their shareholders. A public hospital is owned and operated by a public entity. Private groups use the margin to reinvest in the community or stockholder-owned or partially stockholder-owned corporations who also owe a return to their shareholders. A public hospital can be like a private not for profit, but it is owned and run by a public group. It will try to produce a bottom-line margin, like a not for profit, but has access to government sponsored bonds or taxes to support it.

What is the source for the majority of your revenue?

The revenue is comprised of the different entities that pay the hospital. General categories include the government through Medicaid, commercial insurance and self-pay (or the private individual). Commercial insurance provides the most revenue with government funds coming in second.

What certification or permits are needed for hospitals?

The amount of certification and permits is lengthy. The top three come from:

The State of Texas Health Services – The hospital must apply for a license. The state surveys the facility before granting the license.

The Centers for Medicare & Medicaid Services – The hospital must get accredited to receive government funding.

The Joint Commission – The hospital must get accredited. In a rigorous survey, the commission goes through a lengthy process to determine deficiencies, which must be fixed before the process is complete. It must be renewed every three years.

How do you choose your doctors?

Froehlich (Seton) - “There’s a law in Texas that prohibits corporate practice of medicine, so a doctor who is providing patient care cannot be employed by a corporation that doctors don’t control. “There is a separate medical staff organization that is run by other doctors, and it sets the requirements in terms of education and experience. Doctors apply to them for privileges and go through a privileging and credentialing process. Often doctors will choose [to apply to] a site based on whether the goals and objectives are aligned — is the hospital and the team at the hospital going after the same goal that the doctors are going after? “Most of our doctors are not paid by the hospital — most are independent practitioners. We may contract with a group of doctors to provide hospitalist services, or we may contract with a group of doctors to where we cover some of their costs to do intensivist services. But generally, doctors who care for patients are independent practitioners rather than being on the hospital’s payroll.”

Bovio (Scott & White) - “In a typical hospital model, many of the doctors have a private practice and apply for a medical staff membership with the hospital to get access to the facilities. Because Scott & White emphasizes education and research, it has its own employees. The [salaried doctors] are more eager to participate in the educational programs.”

Clayton (St. David’s) - “Physicians apply to be members of the medical staff. They go through a process known as credentialing, and a panel of their peers (other physicians) review the applications and make decisions about the qualifications for those individuals to join the medical staff.”

 

How does competition play into the hospital business?

Froehlich (Seton) - “You make sure you have the capabilities to provide care on par with or better than your competitors. That means you have the right doctors, technology and capacity to provide care. You really compete on how well nurses are trained, how skilled your doctors are, whether you have the right technology and capacity and how well the team works together to provide care. And you need to provide it in a place that is convenient for the patient. So capabilities and convenience are the two drivers you compete on.”

Bovio (Scott & White) - “We look at the services already offered and the amount offered to see what we can bring. [We] have to take into consideration what our competitors are doing and if we can do it better.” Bovio said Scott & White pushes for a competitive edge with its medical record integration model. If a patient goes to the clinic in Georgetown and then comes to the hospital in Round Rock, the doctors can access the medical files on the computer. “That way they are not carrying papers and X-rays from one doctor to the next.”

Clayton (St. David’s) - “Competition is good for any business. Our focus is not so much keeping an eye on what another hospital system is doing, although we do that, but I think [it] is trying to meet the community’s needs better than the other guy. If you are able to outserve and outperform, I think the customers will choose the one that is providing the best service, that is doing that in the safest environment and doing that in a way that they feel is best.”

 

How do you get compensated for charity care?

Froehlich (Seton) - “We have a thorough process that assesses the ability to pay for care. The portion that the guidelines say [the person] can’t pay for, we categorize that as charity care and do not ask that it be paid for. We define charity care as care provided to someone who cannot afford to pay for the care. We try to be pretty purposeful about understanding a family or individual’s capability to pay for care. “Then there are people who have income qualifications or other qualifications that allow them to qualify for Medicaid. It doesn’t cover all of the cost of care, but it covers some. “If you walk in the door of an emergency department with an emergent condition, whether it is a for profit or a not for profit, it is required that care be provided.”

Bovio (Scott & White) - “We have a financial counselor on staff who meets with patients and assesses their needs. Those who can’t pay, we work with a group called Hospital Solutions, so they can find the resources they need to get care. We would never turn anyone away.”

Clayton (St. David’s) - “That area is probably very complicated. What I can comment on is there is a large charity unfunded burden. [About 25 percent of Texans are uninsured.] Much of that population is unfunded totally and, therefore, would be classified by some as charity. Now charity can also be a technical definition. In the case of hospitals, everybody who comes through the door, whether you’re a charity patient or not, unfunded or not, have insurance or not, are part of that equation. [Those with health insurance are] the ones paying the bill. This is what we’re struggling with, and certainly the hospitals bear a disproportionate burden in that regard. The bigger picture answer, in terms of how do we get paid for that is, really that all of us are the ones that are paying for that.”

 

Do hospitals get incentive funding? If so, when?

Froehlich (Seton) - “We have [gotten incentive funding] in Kyle for the Seton Medical Center Hays from the city and Hays County. This is one of the first [incentive packages] we’ve seen in the area. If you look at the economic impact of a medical care complex in terms of jobs and care for the area, etc., then — especially when you are the major employment and development anchor in a place that doesn’t have it — it makes very strong economic sense for some of those incentives to be put in place.”

Bovio (Scott & White) - “Typically hospitals, particularly non-profit hospitals, do not get incentive funding because they do not provide large amounts of tax revenue for the cities.”

Clayton (St. David’s) - “There are a variety of sources for that. Municipalities can and do provide incentives for different development activities that are in the city’s and a population’s best interest.”

 

Who provides loans and capital investment funds for hospitals?

Froehlich (Seton) - “It’s different by group. When we as a not for profit go to borrow major money, we borrow it through bonds. That’s how we borrow big chunks of capital if we need to.”

Bovio (Scott & White) - “The hospital has to go to Wall Street and the bond market. Sometimes Scott & White in Temple will use the local banks for projects, but typically large amounts must come from bond revenue.”

Clayton (St. David’s) - “The capital for the finances for any of our projects is generated internally so it would be through our reserves and our internal savings. Before you do that type of project, it requires our board approval and our partnership [Hospital Corporation of America] board approval.”