Management Development ProgramBusiness of Healthcare at BMC

Session Objectives

▪ By understanding the business side of BMC, participants will be better able to:

– Connect their management roles to the overall business goals of BMC

– Explain how changes to the market and business environment affect BMC

– Improve our ability to respond to changes in the business environment.

– Increase employee engagement with the use of tools to better communicate business operations to your teams

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• Introduction, Session Objectives and Outline

• Hospital Facts and “Hot Topics”o How does BMC make money?o Patient and Revenue Cycles

• Volume, Volume, Volume!

Session Outline

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Hospital Facts and Hot Topics

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Hospitals are registered with the American Hospital Association as oneof the following types:

Hospital Types

General Provide patient services, diagnostic and therapeutic, for avariety of medical conditions. Boston Medical Center is a “General” Acute Care Hospital.

Specialty Provide diagnostic and treatment services for patients who have specified medical conditions, both surgical and nonsurgical

Rehabilitation and Chronic Diseases Provide diagnostic and treatment services to disabled individuals requiring restorative and adjustive services

Psychiatric Provide diagnostic and therapeutic services for patients who require psychiatric-related services

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Hospitals are organized as

Public hospitals• In general, public hospitals provide substantial services to patients living in poverty.• Federal hospitals serve specific purposes or communities• Public hospitals are often funded in part by a city, county, tax district, or state.

Private, not-for-profit hospitals • Are nongovernment entities organized for the sole purpose of providing health care.

Roughly 87 percent of nonfederal community hospitals are not-for-profit. In return for providing charitable services, these hospitals receive numerous benefits, including exemption from federal and state income taxes and exemption from property and sales tax.

Private for profit hospitals• The remaining nonfederal community hospitals are investor-owned, which means that

they have shareholders that may benefit from profits generated by the hospital. For-profit hospitals do not share the charitable mission of not-for-profit hospitals (though many do provide some charity services), and they must pay taxes.

Hospital Types

Boston Medical Center is a private, not-for-profit hospital.

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Boston Medical CenterHospital Facts Sheet

Staffed Beds: FY12 FY13 FY14 Patient Activity: FY12 FY13 FY14Medicine/Surgery 306 300 300 Discharges 26,132 26,035 26,119 Obstetrics/Gynecology 47 32 32 Outpatient Clinic 656,940 681,177 720,132 Intensive and Coronary Care 58 58 58 Outpatient Ancillary 243,528 189,745 206,297 Neonatal Intensive Care 21 22 22 Emergency Room 129,714 129,783 128,839 Nursery 34 34 34 Ambulatory Surgery 28,382 27,840 29,406 Pediatric Intensive Care 6 6 6 Outpatient Observation 8,126 7,792 7,928 Pediatrics 30 30 30 Total 1,092,822 1,062,372 1,118,721 Rehabilitation* 9 0 0Total 511 482 482 Employees:

Hospital FTEs 4,506 4,573 4,767 Average Length of StayMedical/Surgical 4.73 4.95 5.29Newborn (Includes NICU) 4.73 4.66 4.60Occupancy Rate (Staffed Beds) 70.6% 75.9% 79.2%

* Rehab unit closed 7/1/2012; FY12 reflects 9 months of operation

Hot Topics – Revenue

How does BMC make money?

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Typically, hospitals get their revenue in a variety of ways:• By providing medical services• For nonmedical services• Through donations and grants from individuals, foundations,

or the government• Through gains on investments

Hospitals group the way they make money into three different categories:• Operating Revenue: delivery of patient care• Other Operating Revenue: nonpatient care activities• Non-Operating Revenue: peripheral business activities

Hospital Revenue Terminology

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• To understand how hospitals generate revenue for patient services, it is important to understand the “payers” in the healthcare industry.

Hospital Revenue - Payers

• Public payers include federal and state governments—which fund Medicare and Medicaid

• Private payers are insurance companies.

• Finally, there is the uninsured population, which includes people who are expected to pay for their own health care, unless they qualify for “charity/free care” as defined by the hospitals internal policies.

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Highlights:• BMC’s payor mix is substantially different

from other hospitals• 81% of BMC revenue comes from

governmental sources• Governmental rates of payments are

generally not negotiable• Any payments shortfalls are magnified by

BMC’s payor mix

Patient Demographics

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Acute Hospital Financial Performance, by Hospital System: FY11

Highlights:• Partners and Care Group hospital systems make up 52% of the entire profit in the state.• Mass General Hospital alone makes up 24% of the entire profit in the state.• BMC had the largest loss for an individual hospital in the state.• Steward Health Care System (10 hospitals) had the largest combined loss in the state.

Hot Topics – Patient and Revenue Cycles

Patient/Revenue Cycle

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CLINICALDOCUMENTATION

CODING & CHARGE CAPTURE

FINANCIALCOUNSELING

PAYMENTPOSTING

THIRD PARTY

COLLECTIONS

CONTRACTMGMT

SCHEDULING

REGISTRATION

COPAYMENTCOLLECTION

PRE-REGISTRATION

DENIALS / AUDITMGMT

CLAIMSEDITING

SUBMISSION

HIM, CODING

UTILIZATIONREVIEW /

CASE MGMT

Revenue Cycle Overview

Patient Care

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Revenue Related Challenges:

▪ Reduction/Lag in Governmental Dollars Owed to BMC

▪ Governor’s Budgetary Powers

▪ Future Years Not Yet Secured

▪ Reduced Demand for Healthcare, Fewer Elective Procedures

▪ Changes to insurance reimbursements: tiers and pay for performance

▪ Change from fee-for-service to payment for population management

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The Changing Economy

Volume, Volume, Volume!

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Types of Patient Volume

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Bedded outpatients: BMC typically receives payment for the procedure (SDC) but no added payment for the care on the inpatient nursing unit.

Category DefinitionPatients in Beds

Inpatients in BedsInpatient Discharge Admission to a hospital bed for

inpatient careOutpatients in Beds

Observation Admission to a hospital bed for observation, typically <24 hours, but may stay longer

Bedded Outpatient Admission to a hospital bed for extended recovery after an outpatient procedure (OR, Cath Lab, etc.)

Other Outpatient ServicesClinic Visit Doctor's offi ce visit - may also include

minor procedureEmergency Room Treated in the Emergency Department

and released to homeSurgical Day Care Operating Room, Cardiac Cath, EP Lab,

Endoscopy or other significant outpatient procedure.

Other Outpatient Services Radiology (MRI, CT, US, Xray, etc.), Cardiology (EKG), PT/OT, Lab, etc.)

Outpatient Pharmacy Outpatient Retail Pharmacy

Highlights FY15 IP discharges are projected to grow 646 discharges (or 2.5%) to 26,632 from FY14 projection of 25,986 FY14 IP discharges are projected to increase 0.1% from FY13 associated with strong inpatient Medicine discharge volumes

Annual Inpatient Discharge Trend

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4.9%

2.8%

0.1%

-4.3%

-9.9%

-0.4%

0.1%

2.5%

-12.00%

-10.00%

-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

FY08 FY09 FY10 FY11 FY12 FY13 FY14Projected

FY15Budget

% G

row

th /

(Dec

line)

Period

FY08 - FY15 Annual Inpatient Discharge Trend

Fiscal Year FY08 FY09 FY10 FY11 FY12 FY13FY14

ProjectedFY15

BudgetDischarges 29,357 30,179 30,215 28,917 26,060 25,959 25,986 26,632

Boston Organization of Teaching Hospital Financial Officers (BOTHFO): December 2014 Volume Report

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Highlights As of December of FY15, BMC’s inpatient discharges were down 1.7% for the year while the average for other BOTHFO hospitals was up 2.7%.

FY15 YTD Discharges

FY14 YTD Discharges % Change

FY15 YTD Patient Days

FY14 YTD Patient Days % Change

BIDMC 9,669 8,442 14.5% 51,341 45,111 13.8%BMC 6,409 6,521 -1.7% 31,215 31,146 0.2%BWH 11,479 11,639 -1.4% 65,453 65,539 -0.1%Children's 3,939 3,862 2.0% 27,609 26,683 3.5%DFCI 245 305 -19.7% 2,562 2,462 4.1%Lahey 5,285 5,206 1.5% 26,106 25,256 3.4%MGH 13,586 13,162 3.2% 77,370 77,958 -0.8%St. E's 3,221 3,270 -1.5% 16,128 15,340 5.1%Tufts 4,375 4,533 -3.5% 23,670 23,698 -0.1%Total 58,208 56,940 2.2% 321,454 313,193 2.6%

Total Excl. BMC 51,799 50,419 2.7% 290,239 282,047 2.9%

Discharges (3 Months) Patient Days (3 Months)

Market Forces are Leading to Lower Inpatient Volumes

Stricter Requirements for Inpatient Admission• Changing technology and requirements for inpatient admission resulting in more

observation and surgical day care patients

Care Management Medical home model leading to lower admission rates from Medicine and Family Medicine Reduced readmission rates due to penalties (Medicare, Medicaid) Efforts to limit Emergency Room usage

Competitors New emergency rooms and service guarantees from other Boston ER’s, along with efforts

to attract specific patient populations (Carney marketing to Vietnamese patients). Falling ER volume (walk-ins, ambulance and trauma) from BMC’s core market areas. Competitors consolidating referral networks and cutting out BMC

For example: New Steward arrangement with Partners for trauma care Rate differentials make it difficult for BMC to grow its network

Financial Pressures on Patients The economic downturn, combined with increased prevalence of high-deductible health

plans, results in fewer elective procedures

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The Right Care…no more, no lessCan only work if there is volume!

Patients can be divided into 4 groups based on the “front door” they use to arrive at BMC:

9,380 9,223

8,341

7,888

7,972

7,977

6,800

7,200

7,600

8,000

8,400

8,800

9,200

9,600

10,000

2010 2011 2012 2013 2014

Emergency Ambulance

Actual

Budget

8,993

8,034

7,090 6,908

7,383

6,996

6,400

6,800

7,200

7,600

8,000

8,400

8,800

9,200

9,600

2010 2011 2012 2013 2014

Emergency Walk-In & Other

Actual

Budget

7,815 7,929

7,350

7,590 7,431

7,789

6,800

7,200

7,600

8,000

8,400

8,800

9,200

9,600

10,000

2010 2011 2012 2013 2014

Elective BMC/CHC

Actual

Budget

3,940 3,709

3,279 3,539

3,287

3,506

2,600

3,000

3,400

3,800

4,200

4,600

5,000

5,400

5,800

2010 2011 2012 2013 2014

Elective Non-BMC/CHC

Actual

Budget

Emergency Admissions -- Volume vs BudgetJanuary 2013 to December 2014

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Emergency Admits: FY15 Bud 3,945 FY14 Act 3,890 FY15 Act 3,724 FY15 Act 3,724

% Var -5.6% % Growth -4.3%

1,351

1,108

1,215

1,167

1,266 1,251

1,325

1,230

1,134

1,332

1,261

1,297

1,244

1,111

1,265 1,250

1,271

1,243

1,278 1,287

1,380

1,337

1,122

1,265

1,000

1,100

1,200

1,300

1,400

1,500

Jan

-13

Feb

-13

Mar

-13

Ap

r-13

May

-13

Jun

-13

Jul-

13

Au

g-13

Sep

-13

Oct

-13

No

v-1

3

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Ap

r-14

May

-14

Jun

-14

Jul-

14

Au

g-14

Sep

-14

Oct

-14

No

v-1

4

Dec

-14

Inpatient DischargesEmergency Admits

Actual Budget

Emergency admissions in FY15 are down 5.6% from budget (221 discharges) and 4.3% from prior year. ED admissions account for 72% of the total inpatient variance to budget.

Monthly Walk-in Volume Trend

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Walk-in volume has been decreasing since June 2014 (on average 511 visits per month for the last 7 months).

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2013 8087 6387 7757 7671 8450 7951 8275 8056 7757 7868 7041 7392

2014 7722 6817 7948 7795 7965 7440 7072 7402 7308 7279 6113 6513

500

1500

2500

3500

4500

5500

6500

7500

8500

Walk-in Volume by Month

Vo

lum

e

Questions?

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Wrap-Up

Thank You!