>> Thank you, everybody,
for [APPLAUSE].
Don't clap yet.
See that for. You may want to take that back.
So first, before we start I just got to
acknowledge Dr. Frakes in the back here.
He was my auditing professor
back in the day when I was at WHU
so I think he's come to critique or
take my diploma back,
I'm not sure. We'll see how this goes.
So a little nervous now.
Thank you. Tell you a little
bit, just horror story.
So I'm really very young,
Ruben so the reason
I got this job, I had to pay off my bill,
and I'm still trying to pay that off,
so I relate to everybody's questions
regarding hospital billing.
No, not really.
But I did start the hospital back in 1988.
It's hard to believe it's been that long.
Great family to work with.
I don't know if you or many
know this in 2002,
I tried to escape.
I resigned from Pullman Regional Hospital as
CFO and moved to Tucson, Arizona.
I didn't get too far out of town before
Scott asked if I could
stay on and we'd work
out some type of arrangement.
So I still reside in Tucson.
I've been doing that for 15 years.
So half of my career has been living in
Tucson and still working
at Pullman Regional Hospital.
Pullman Regional Hospital is
dear to my heart.
I have past board members
in here tonight and they
all know once you
get Pullman Regional into your system,
it's hard to get it out.
It becomes a part of you.
You believe in the community. You believe
a lot in what we're doing.
I really appreciate that,
especially working with fine people like
Mr. Adams and Mrs. Eiler,
Dr. Cagiano that have
really become family members.
Shauna Patrick, who's my controller here,
has been with me, Shauna,
we've been together 16, 17, 18.
I mean, it's been a long time.
>> Twenty years.
>> Yeah, it's amazing. You got great people.
So let me start with a little bit.
One of the nice things about doing it in
this environment is I've
always believed whenever
I'm talking with anybody,
you have to give them a takeaway,
you're investing time here
and if I failed to do that, I failed.
The nice thing is we're feeding you,
so at least you
give away full, hopefully.
So at any point,
if you want more, feel
free to get up and go get more.
And so, at least there's one takeaway,
so I feel good about that.
But let's start with a little bit here.
Well, words of wisdom here.
So being an account,
the pessimistic side of
me that really ring true.
But our goal
tonight is talk a little bit about
healthcare and specifically
healthcare Finance 101.
We have about an hour so
I'll hold pretty true to that.
We'll get you out a little probably early,
but really, this is your time.
If there's questions you have specifically,
I will address those the best I can.
If there's something I don't
know, I'll go find out,
and I'll make sure that you all
know within a few days.
But hopefully, you'll find
this very meaningful in
terms of a better understanding.
So that's our goal.
To do that, we have to have a baseline of knowledge.
We have to have a working platform
to communicate effectively.
Because healthcare, like any industry,
we have acronyms, and
I don't know if it's purposeful,
so nobody else can come in it's like a club.
Or if it's actually the fact that we just
try to simplify our lives by having acronyms,
and we throw them out as
if they're everyday speak.
So let me talk about a little bit of things
just to make sure as
we're going through this,
as I mentioned something,
we're on a common ground.
So first thing, when we taught gross charges,
this is what we bill the patient.
Isn't what we get
paid but any patient comes in,
it's going to be whatever they had done
times whatever quantity of whatever
they did and that's
going to be what gets billed down.
From there, we have contractuals
or deductions from revenue.
That consists of things like bad debt.
We have patients that don't pay their bills,
hard to believe.
We also take care of the indigent,
those that can't pay their bills.
So we have charity care,
ways by which they can have services,
as part of our mission.
And so they'll come in, and if they qualify,
parts or all of
their bill can be written off.
And then in addition to
that, we have contracts.
Now, we have a contract
with federal government,
Medicare and Medicaid Services,
and they tell us what they're gonna pay us.
You don't get to negotiate that.
Under that means you get
told what you're going to get paid.
However, other insurance
companies like Primera, Blue Cross,
now Group Health, Molina,
any of those we negotiate contracts with.
We never get 100%.
Back when I started,
we had contracts that were
98% of charges or 90% of charges.
And today, the best commercial
contract we have is right around
73.5% of charges so,
things have changed significantly.
That was my sign to repeat the question.
So is Medicare, Medicaid
around 33, 34% charges?
The write off is around 45% of charges, 50%.
We'll get into that a little bit of why,
what that means and how that works.
And specifically, it means for
Pullman Regional Hospital.
So if you take that gross charge and you
subtract those write offs,
be it bad debt, be it contractual,
that's really the net revenue.
That's what the hospital has to
be able to fund current expenses,
which would be salaries, wages,
benefits, and future.
Things like capital, etc
that ends up being part of
depreciation and the like.
From there, once you minus all of
those daily operational expenses out,
that's what we have in terms of
our basically operating income.
Now, I'll tell you, in healthcare,
margins are small.
In almost especially
critical access hospitals,
most of them don't
have an operating bottom line.
The only way they have a
positive bottom line and many
don't is the fact
through non operating means.
In our particular case,
we have a great community that supports us.
We're a public hospital district,
and we get tax support,
which has been tremendous blessing to us.
In addition to that, we have
some properties in which we rent.
We get some rental income off of.
That's a non operating.
That's not what we're in the business of doing.
And then other things
are like foundation donations,
which are very beneficial
to us in order to be able to
provide the spectrum and
the overall care that we're able to do
here that many communities can't do.
So a lot of it is
the support we've had
from the community itself.
So that ends up being the net income.
And in our business, it's
almost you can't have a profit.
We're a nonprofit so you
can't have profits, but we have excess.
We have excess of revenue over expenses.
What does that mean? It's bottom line.
You call bottom line, call it net income,
call it anything you want.
It's really your profit.
Now, I'll tell you
a story just for a second.
I'll just digress for a minute.
And Al probably appreciate this.
My wife's a pharmacist,
and she's probably in
terms of knowledge and brightness,
she outshines me by far.
But last her senior year she had to
take an online course or one of those
that just to fill a GR and I said,
I'll take accounting it'll be simple.
I'll teach you. I'll help you.
I thought we were gonna
get divorce our first year of
marriage because she
couldn't understand well,
what's this net income or profit or excess?
Why can't you just call it the same thing?
Oh, it is. It just depends
what business line you're in.
Owner's equity is the same
as the net worth is the same as,
etc, and she just couldn't get it.
I finally just said,
okay, I think somebody else has to help you.
But we got through it,
and we're still married.
It's been 30 years.
So somehow we made it through that.
But a lot of these terms are interchangeable,
and we'll talk about some
of those so I'll throw those out.
Here's your first opportunity to have a quiz.
She said, I can't ask her questions,
but no, this is for the whole room.
Let me ask you a question.
This is your first test.
These are reimbursement theories.
These are different
reimbursement methodologies in healthcare.
One is diagnosis related groups, DRGs.
Folks may have remembered those
came back in the early 80s.
Medicare came down with that and said,
we're going to say every patient that has
a x diagnosis of
this will be in this grouping,
then we're gonna pay y.
So they created this
in order to control their costs.
MSDRGs is another methodologies.
Anybody know what that means?
What's the difference between
a DRG and an MSDRG?
So there's certain things
Medicare don't typically pay for.
Pregnancies not very many people in
the Medicare population are pregnant, etc.
So commercial payers have
additional DRGs listed,
which are the MS side of
it, medical surgical side.
Common procedural terminology, CPTs.
Full charges or percent of
charges. And also costs.
Let me ask the question.
Which of these does Pullman Regional Hospital get paid
under? Go ahead, Mayor.
>> All.
>> Thank you. Good answer.
Every single one of those.
Not confusing whatsoever.
We just got to figure
out which one and play the game right.
And by the way, insurance companies love to
change what's acceptable and non acceptable,
what's allowable, non allowable.
We'll get a little of that.
But we get paid
under every single one of those.
So it's really dependent on the payer.
If we had 100% Medicare,
it's so much easier to budget we don't.
We have a variety of various insurers.
Today, our population in terms of Medicare,
Medicaid runs about 45% of our charges.
Pullman is in a very good position
from the terms of the ability to do what we
do because we have a very good
pair mix due to the fact that we
have Washington State University
here and SEL here.
Not very many communities of
our size in rural America have that luxury.
Most of them typically
you can think of small farming communities.
There's a lot of Medicare,
Medicaid, especially.
You think of Othello, think how
heavily Medicaid their population is.
It's hard to make anything, and
we'll go into why that is in a minute.
So again, we're still laying
some framework about hospital Finance
101 because some of this is
meaningful in how you approach
services you may provide.
Hospital structures, these are
really the three types of structures,
public, which would be federal, state,
local ran facilities,
non for profits, and for profits.
In our geographical area,
how many of these do you think we have?
Think of the quad cities here.
You may not. We have
two public hospital districts in this area.
In fact, there are
three public hospital districts in this area.
Pullman Regional Hospital,
we're public hospital district.
Number 1A of Whitman County
doing business as Pullman Regional Hospital.
And then you have
Public Hospital District Number 3.
Anybody name who that is?
Whitman. Can anybody name
the other public hospital district Garfield?
Do the hospital in Garfield?
No, they do a assisted living
in home health, but that's their district.
They used to years and years ago,
there was a hospital,
but they don't have one now.
So those are public hospital.
What about non for profits in
our region? Think of any?
You got Gritman down
the valley, you have Tristate.
Today, you have a for profit in
our backyard you never
had before this last year.
St. Joe's. That will be a new dynamic.
>> Steve, does Garfield
include the EMS system?
>> It very well could.
So does Garfield's hospital
district include the EMS?
Likely to support that.
I'm not clear on that, but likely.
They do have some tax bonds.
So in our population,
you can see this is a distribution
of this across the United States.
Many are not for profit,
as you can imagine,
supported in one way or another.
Not very many for profits.
In fact, CHS, which is
Community Health Systems is one of them.
Almost all of them run
out of Tennessee for some reason.
I don't know if it's a tax advantage or
that's where they all.
RHSC, which actually runs
Tristate is another one of them.
But many of them are divesting
so if they aren't making money, they get out.
I'll tell you, right now, for
profits typically run
margins are working towards
margins in the double digits.
Non for profits are typically
around 1-2% across the United States,
and we're really no different than that.
You'll have a few that are
higher than that, but not very many.
You can see how many are in
urban settings versus rural settings.
So not a complicated system at all.
It's very pretty simple.
This is one segment of that.
Remember, under payment methodologies
we just talked about,
this is one aspect, and this is
just the Affordable Care Act, by the way.
And by the way,
you're here. This is you.
So to get paid, there's really pretty
simple you just got
to work through all of these means.
A lot of regulatory issues
and things so people wonder why
healthcare is a challenge in terms of
reimbursement and making profit
there are so much.
One of the highest regulated bodies
in the United States is hospitals.
This is just to get payment
under this new healthcare system.
So there's no additional taxes
wasted within this at all
it's pretty seamless.
And this is changing all the time, so you
got to learn how to play for it.
This down here, which
is the Medicare Medicaid Services,
it's changed significantly,
especially under physicians,
if you recall and how they got
paid just changed this last year,
and they are going to now their increases,
which was budgeted and under the SQR,
which was the growth.
That's how they got additions
every year. Now they've changed that.
And it's called MACRA, and
the way physicians will see increases,
there'll be no new money
there'll be winners and losers.
And it's all based on
quality and what your reporting scores are.
And if you do it right,
then your neighbor doesn't do it
right he loses money,
and you get some of his money
because it's budget neutral.
And that's the payment increases that
physicians will see moving forward.
How many physicians like
to be under that model?
Not many.
How many people have felt our struggle
even here on a local level
to find a primary care physician?
A few.
It's been a challenge.
We have people retiring,
and it's hard to recruit.
Pullman's very attractive from a destination,
but you can imagine some of
these rural communities where it
is really a struggle when we struggle.
In fact, we were down in
some of our primary care practices.
I say our, because it's a community when I
think half the providers they
used to have four years ago,
and they're trying to recruit in.
It's challenging on the market
because why would you want to do that,
especially under the old payment models?
We're going to talk a little bit about that.
The revenue cycle.
So as you think
about Healthcare Finance 101,
how we make our money is
through seeing volume today.
There will be a point in time,
I think, years from now,
in which the less you see,
the more you make because
it'll be value-based.
You want to keep people healthy,
which should be really our mission.
Today, we keep people
healthy that's not good for
our bottom line,
but it's the right thing to do.
And we're doing those things today.
We have a whole care coordination team
over here with
social workers and we
don't get paid a dime for that,
but it's the right thing to
do for our community.
If I was strictly a
for-profit, you know what?
They wouldn't have that. Your Red Sage
would be open 10:00-2:00.
It wouldn't be open 7:00-7:00,
because I would be cutting every cost
I could out of this organization
and putting every dollar I
could to my stockholders.
There would be things I wouldn't run.
I would not run 7.2 physicians
in my emergency department, not 24/7.
I don't have that many physicians,
but around the clock.
I'd run a bare bones 4.5 FTEs,
run them till the bone and fire and hire
another one coming in two years,
burn them out, get another,
because I could save
hundreds of thousands of dollars.
But the quality of care wouldn't be there,
and you'd just burn through people.
It's not that their quality is
bad because they still score very well.
It's the fact that
the experience is much different.
I speak from a personal level
on many of these.
My wife works for CHS as a pharmacist.
And I will tell you, it has been a struggle.
They opened a brand new facility in
2004, December. Sound familiar?
We opened ours in December.
They have been burned through 15 pharmacists.
They have three at any one time,
and they've burned through 15 pharmacists
since she started to today.
We've had one retire.
Tells you a little difference of
the culture because it's
not about the people,
it's about the bottom line.
So when you think about revenue cycle,
you think zero to zero.
You'll all be experts.
You can start consulting
businesses after tonight,
because not very many people really understand this.
Zero to zero. How much do you owe when
you come in and do
registration or you come in for a lab?
Before you have that down,
how much do you owe the hospital?
Nothing.
You come in, you have that service when
you have that surgery,
whatever, you go through a process.
You hit registration.
Within that registration process,
there's things that should have
happened either before or
happened during with authorization.
Does your insurance authorize you to do this?
Did you have to have a referral?
If you didn't have to have
a referral, I'm sorry,
you'll have to go back to
your primary care, get the referral.
Then when you can come back, we'll have
the procedure after that.
If not, and they didn't
require a referral or we had the referral,
then we have to have authorization because
if we don't have authorization,
they won't pay us.
And if we miss that step, it goes what?
We're out, or we fight insurance companies.
We write a few letters.
I'll tell you this year is
much better than before.
We've had 64 denied claims.
Last year, at this time we
had 250 denied claims.
Jumping through insurance companies' hoops
on trying to get paid. That's this process.
Registration, insurance verification,
point of service collection.
We don't do a ton of that here
because our people are very good
here in Pullman about
paying for their services.
Some places,
they'll require you to almost pay
your deductible upfront
before they'll ever treat you.
Financial clearance all the way
through till the very back end of it.
After we do all of the billing process,
insurance pays, we go out,
we collect the deductible,
we write off the contractual write-off,
that account goes to zero, zero to zero.
That's the revenue cycle.
All of those things have to flow
very fluidly in order to get there.
Sometimes they work seamlessly.
We can get paid 14 days and be done.
On average, Pullman Regional Hospital takes
34 days to collect zero to zero.
How's that compare across the nation?
Across the nation, it's gotten much better.
It used to be around 50 days.
Now it's about 48 days across the nation.
We do very well here,
and we've got good payers.
And some of them, you can get
this whole process done
within a couple of weeks.
Sometimes it's not that easy.
We still have accounts
that we're working on that are
almost a year old. Got denied.
We appealed the denial
because they didn't tell us they
changed the rule on what had
to be authorized beforehand.
We had the physician write
that this is appropriate.
They are in review.
They deny it. We go back through it,
and we fight it.
We finally get it paid, or a patient
comes in and they say I have Primera.
Give you the card.
Come to find out, shoot,
no, I don't. We changed.
But you don't get that until you get
the denial from the insurance company.
You go back through and they go,
no, I haven't.
Then they give you
a different card and you go through
that process and it takes time.
So this is just how this segment
would work zero to zero.
You schedule, you come in,
you check eligibility, you treat, you code.
The coding aspect,
that's your medical records.
Once it gets coded,
and by the way, do this right.
So one thing, let's say you had a total hip.
If the physician didn't write that he put
the device in and didn't chart
that he put the device in
but you are walking around,
evident that you really had a total hip,
we don't get paid
because it wasn't documented.
So if you didn't document,
it doesn't matter if you did it or not.
You didn't do it. So you
got to document for everything you do.
So a lot of this is making sure we educate,
train, and then you
go through the whole collection process,
which is active collections,
insurance billing, post collection,
which if somebody didn't pay,
how do you collect that,
all the way to legal
where you might do liens.
Many times, hopefully, it goes very clearly,
but sometimes it doesn't work as well.
So this is just another aspect of
that. This is one bill.
Fifty percent of everything we
do is going to be done on the front end.
And most hospitals in
the past haven't treated
the registration staff as a key player.
Fifty percent of getting
this right happens there.
If you don't train those people
and you don't keep good people,
you got a 50:50 chance of ever getting paid.
We do a very good job much better, 2015,
we wrote off almost two
point some million dollars
in process errors and
things because the front end was bad.
Now, much of that we denied.
We got denials and stuff.
We had to fight to get every penny of it,
and we do very well at that.
But if we fix it on the front end,
we don't have to fight it on the back end.
And so we did a tremendous amount
of effort to clean this up on the front end.
And today, it's basically gone.
Fifteen percent is in
the actual medical records,
so the coding aspect of this.
This is when it goes through
our coders, inpatient outpatient.
They read the documents.
What was documented?
What should that CPT be?
Make sure they code all of that out
that DRG, that's their job.
If they do very well at that,
we get paid well.
And then 15% is on
the charge entry now charges.
So this happens here.
I've talked to nurses.
I've talked to staff many times saying,
don't make the decision on
what should be charged to the patient or not.
Document effectively so that
we can bill appropriately.
Because if you document
what we did, then we can bill.
If somebody can't pay, I have
all ways to be able to help them,
charity care payment terms.
Let's pay it over 12 months, etc.
Those types of things I
can help patients with.
But if the nurse upfront
decides the poor college student,
they're probably only eating Top Ramen.
Let's not bill them.
I won't charge them for that.
They don't look like they should be.
Then I have to raise charges
somewhere else to cover
that. That's a loss leader.
So we aren't pricing
effectively for everybody else.
We have means by which to handle that.
So let's just bill appropriately.
So that's part of that charge entry side.
That's what they do.
And then the billing aspect,
which is your financial
services component to it.
So a little bit
about Pullman Regional Hospital.
We'll get a little more specific.
Those are some high-level aspects of it.
We're going to drill down a
little more about who we are,
what we do and how it works.
So today, most people
know Pullman Regional Hospital.
But I don't know if very many
people know or how many people
know we have
Pulman Regional Hospital Clinic Network.
We own today three clinic practices directly,
which are wholly owned means
Pullman Regional Hospital is 100% owner.
They're as an LLC,
but really they're 100%
owned by the hospital.
That includes Palouse Pediatrics,
Palouse Psychology & Behavioral Health, and today,
Pullman Family Medicine, who just
joined that clinic network as of April 1st.
So we go back and we talk just a little
bit as to why
we might get into some of these.
In addition to this, we have joint ventures
with really three groups today.
One is Palouse Surgeons.
The other is under Palouse Specialties,
which is Palouse ENT and Palouse Urology.
Those are owned 40% by Pullman,
40% by Gritman,
and 20% by Whitman.
Three hospitals came together.
Why would we do that? That's craziness.
Let them Let them sink or swim.
You're on your own. Dr. Cagiano,
would we have an emergency department if we
had no general surgeons there?
>> It wouldn't be a full emergency services.
>> You couldn't even
offer an emergency department
without having a general surgeon.
You could offer an urgent care.
But by rule and regulations,
you couldn't offer an emergency department.
You wouldn't be a hospital without him.
Well, we had that situation facing us.
We had one general surgeon on
the Palouse running 365 days,
we're doing three hospitals who said enough.
If the hospitals didn't jump in,
we wouldn't have had anybody.
And we said, what do you need?
I will only take call one week every four.
We got to have three other general surgeons.
That's the standard, so
the three hospitals come together.
We have four general surgeons today.
Do they make enough money within
their practice to pay for themselves?
No. Because, really,
for this community, you probably need 3.5,
but it's hard to get a half a doc.
They usually come in wholes for
some reason. I don't want a half a case.
But no, they come in wholes.
And so there's a subsidy. There's a support.
But the services they brought into
the hospital offset that.
That's not always true within primary care.
But without primary care,
we wouldn't have a hospital again
because they had so many
additional tests that they order.
But under that model,
if we go back and look and
how many people want to be under
that payment models that
they were physicians especially?
Physicians coming out of training today,
they want to take care of patients.
They don't want to run their own business.
They want out of the insurance world.
Who would want to do that anyway?
It's a pain. They want to come in.
And by the way, if they come into
Pullman and under our model,
no, you have to be a partner.
And by the way,
your pay is going to go down
25% next year compared to this year.
Now, where do I sign up?
That sounds really good to me.
I have no security
for me and my family.
It's not going to happen.
When you can go to Spokane and have
an income guarantee
that's out of the gate 30,
40% higher and you know
you're going to get paid that every
year plus probably a raise.
You wouldn't come. That's part of
the challenges
Pullman's facing with recruitment.
So today, that's why
physicians coming out of school,
they want an employment model.
And we have met that.
We have adjusted our practices to meet
those things because access
to care is really important on the Palouse.
So we have here about almost 450 employees,
of which 274 are full-time,
174 are part-time.
We have a great volunteer in
auxiliary team that helps
support our services at Pullman.
Some are here tonight, and I
really appreciate that.
And then we have a very active medical staff.
And the nice thing is, we've been fairly
successful on recruiting, which is good.
It continues to be the case.
So I'm happy to say
that folks haven't heard we have
successfully recruited our
fourth orthopedic surgeon to
the Palouse who will
be joining the Inland Orthopedic Group.
That's awesome. Those guys will
be thrilled because that
will make their quality
of life that much better.
On an annual basis, if you go back to
our knowledge base, we gross build.
This is when we collected.
I'd love it if we did.
Life would be so much easier for me.
But we build out 116, almost $117 million.
Pullman Regional Hospital
isn't a small business.
We have a pretty substantial footprint.
Of that, do you know how much we have at
the end of the day last year to work with
to pay future bills
like new equipment technology?
A million dollars.
Not a very high margin in healthcare.
Not a lot to work with.
And that is after we had
donations from the foundations, etc.
We've got to then reinvest in the future,
and that's the way to do it is
by having some type of bottom line.
>> Steve, with the robotics,
I can't remember how much that cost,
but we wouldn't have
been able to all do that.
We'll stick with that.
[NOISE] That's your profit.
Now there's you million dollars.
>> So the question was and the comment was,
in terms of robotics,
and many may or may not know we have
a da Vinci surgically assisted device
in our OR used primarily
for single site incisions,
laparoscopic procedures when the recovery
is so much better because you don't
have the open incision
and you don't have all of
the after recovery time.
It's pretty seamless.
That's probably a wrong word
for an accountant really,
but it seemed to fit.
[LAUGHTER] So it is seamless.
It's pretty much a stitch, and they're done.
But it's amazing what
they can do within that.
That machine alone was over $1 million.
And we had a lot of
people in the community saying,
man, why would you buy such a thing?
We were successful,
and our main reason to do it
wasn't because we'd have an edge in
a market and drive a lot
of business. It was recruitment.
Folks coming out of
urology school today are
trained on a da Vinci.
Are they going to come to
a market that has none,
and that's the only thing they've known?
No. So we were successful in that,
and Dr. Keizur has a partner now, Dr. Smith.
And that was a great value.
Dr. Smith, by the way,
the two of them combined
today are doing twice the volume.
The volume was there. We didn't get it all.
So now Moscow also valued from that,
but the whole community value from that.
And so it was really important as
a part of our services that we offer.
We're going to switch
gears a little bit here,
and that's a lot of this.
If you want more, come
to board meetings, Stephan.
It's an ever-evolving thing,
and it'll be different next year.
This presentation would be different than it
is this year because it's changing every day.
But how does Pullman Regional Hospital
develop its prices?
Because that's an important question.
Do we price higher than our competitors?
Do we price differently than
our competitors? How do we do it?
I will tell you when I first
took over in 1995,
I struggled with how hospitals,
especially the ones I was
involved with because I came out of
trying to combine Pullman Regional
and Gritman Medical Center
and ran the corridor for three
years in a joint venture.
I was assistant CFO.
And Gritman did exactly
the same way we did it.
And what you do and what we did,
ashamed of it back then, is
you developed a new service.
You went out and figured out what
the pricing was on many of those.
Let's say it's X-ray and you wanted to
do MRs. What's the average price?
What are other people charging
for this service?
That's how you developed your prices.
What is CMS going to pay us?
Well, CMS pays this and you two times that.
Just a rule of thumb. That's what you do.
And then every year you're
going in the budget, I think I'll raise it.
Yeah, 5% sounds good.
And you do that for 20 years,
and what do your prices reflect? Nothing.
They're meaningless. So we said,
that's not what we want to do in our pricing,
and we want to be fair and adequate.
So we go through a structure in
which we evaluate what are our costs.
Because we got to cover our cost.
If we don't cover our costs,
we aren't here. Pretty obvious.
What's our required profit?
Nasty word. That's a four letter word.
It's actually more than four,.
No five. No it is six. I can count.
It's a six-letter word. Profit. We got
to have excess because we need to
reinvest back into the facility.
We have to buy equipment.
We need technology.
If not, you're going
to be obsolete in a little while.
And then, really, your prices only matter.
If I was 100% Medicare,
I'll charge you nothing
because I get paid
cost under Medicare program.
It doesn't matter what I cost.
I don't matter what I
charge because they're going to tell
me they're going to pay so
why do I matter anyway.
But that's not true across the board.
It does matter.
So prices have to reflect your pair mix.
What are the insurance companies?
We go through that process,
and then we evaluate on
every single price down to the CPT level,
which is by procedure.
What's our cost compared to the market?
What's the market? If our costs are too high,
is it fair for me to raise my prices 5%?
Probably not.
I should probably control the cost.
If my costs are within reason,
then is it okay to raise 5%? Well, maybe.
But if I have $45 million
in the bank or $150 million,
and I want to charge 10% more,
because as a CFO,
I'd like to have 180 million.
That's probably not fair,
either 'cause I have too much cushion.
Now, I'm gouging.
So we look at that as well.
So we want to be fair and equitable.
And I don't want to charge
more than the market.
And in our market, we look at six hospitals.
We have to do blended because it would be
collusion if I was to call Tricity and say,
what do you pay? What do you charge?
I wouldn't be Ryan, I'd go
jail and I don't look good in orange.
So we do a compilation of six hospitals,
and we have an external group do this.
And we say, what is the price
on an average in the market?
Now, in some areas, I will tell you,
specifically an MR,
we were too high two years ago.
I had the orthopods call me and
say they're getting a lot cheaper,
and people are starting to shop because
of the fact of high deductible plans,
where they have $1,500 out
of pocket, they're shopping.
We need to look at
our market a little tighter than broader.
When you pull Spokane hospitals in,
Tricity hospitals
in they're probably too broad.
So we narrowed that market and say,
what should we charge for that service?
And that's how we established our prices.
So now getting into
just reimbursement and how we get paid.
Medicare, Medicaid,
people remember in 1997,
the Clinton administration
balanced the budget.
And as a result of that,
there were two hospitals and
rural communities closing every
week and people not
having access to care anymore.
It's a bad thing. So they came out with
this determination
called critical access hospitals.
It's critical for our weakest population
in terms of Medicaid,
people that can't pay in our elders
to be able to access care
in these communities,
we need to do something about it
because if we,
federal government not paying them
enough to stay in existence,
basically, they're not covering their cost,
there's not enough volume,
and they can't survive.
So that came out. So Medicare pays us today,
our cost plus 1%. Now, I'll tell you what.
It's not plus one because we still
have remember a few years ago,
sequestration,
Everybody thought that went away.
It's still not. We get cost minus 1.
So we lose money on
every Medicare Medicaid patient.
Doesn't mean we shouldn't take care of them.
We should care for them.
But we will never make more.
By the way, I forgot to tell you something.
It's not truly cost.
It's allowable cost.
You know who determines allowable?
The federal government.
So you know those same physicians I
told you about in the emergency department?
Because physicians can
bill a professional fee.
In addition, we build the technical field,
which is the nursing staff
and the room board.
The way Medicare looks at it,
then that professional fee covers
that physician cost.
If there are additional costs,
like you want them 24/7,
but there's not a patient
there, that's your problem.
That's not our cost.
So that's non allowable.
So it's not 100% of your cost.
It's what Medicare says will be
100% of your costs.
And then our commercial players
have to make up the difference.
This is the rub.
This is where commercials are fighting
back because
we have employers that are saying,
wait, I can't have
double digit increases year
in and year out on our premiums.
We say the same thing.
We provide healthcare, and
we don't like it either when
our insurance for our employees
goes up by 10 or 12%.
So we start going, okay, how are we doing
differently? But we're paying ourselves.
I was like, oh, geez,
can we do this differently?
So commercials have really pushed
back on what they used to pay us.
That's why I don't get 95%
of charges anymore.
And now I get 73.5% of
charges by some contracts,
because they're trying to
drive that price down.
>> Are those two costs the same?
>> So are those two costs the same? Yes.
>> The left and right of diagram?
>> They are. So it's
your total cost to provide that service?
>> Is that a variable cost of
providing that service as
opposed to is there an overhead allocation?
>> Let's go there. Let's talk about that.
So when are we going to get there?
So yes, and yes,
it is a variable.
But understand in our who we are
from we being a rural hospital,
it's semi-variable.
At only a certain level can you
go down before you hit a floor.
We have to by a certain amount,
if we're going to offer 24/7 emergency care,
and I can't have nobody
in there when you show up.
Somebody has to be
there with the lights on to
care for you. That's the floor.
So it's a semi-variable.
So there is some fluctuations
in those costs based on volume.
But it's really hard, and
I'll share a little bit about
Pullman's approach to that
on how you control those variable costs.
I will tell you
from a productivity standpoint,
what's the number one expense
you have in healthcare?
What's your highest cost?
>> People.
>> People. We're a service industry.
Sixty percent of our costs relate to people.
What's the number one thing
that you try to control?
People. Because I can cut
a lot at trying to chisel down utilities,
but I can't turn off
enough lights if I was one staff member
less to cover that cost
of turn off all the lights every day
when somebody walked out of the room.
So there is some variability.
Now, one of the challenges there is how
predictable are our services.
Can anybody tell me
how many people are going to come into
the emergency department
between seven tonight and nine tonight?
Is there a football game?
Probably higher predictability that
I'm going to have
more admissions into
my emergency department than I have when?
>> And more ambulance runs from the city.
>> Exactly. You can have some of that,
but it's still variable,
and it doesn't always come.
When we had the Apple cup here,
we staffed a whole unit just in
case because the year before
we were inundated
and we didn't have that many.
That's the challenge we run.
We can run on an inpatient unit,
med surg unit,
two inpatients to 12 inpatients.
And that can be a difference in hours,
and it can be a difference in days.
So we have 25 beds across the board,
OB, ICU, and med surg,
and we can have census from 2-25,
and that can be within the week,
and then back to five and then to 10
and it's
really hard to get that predictability.
How do some hospitals deal with that?
I'll tell you, a lot of your for profits etc.
will say, okay, staff,
I hired you full time.
You have a family and kids. That's all right.
Come on in. Well, we're going to pay you
full time. I'm sorry.
I don't have enough patients, go
home without pay.
I do that to you
three or four times this month.
Guess what? You're going to the hospital
down the street that doesn't do that to you.
We don't low census,
and a lot of it's low census.
We don't do a lot of that here because
your actual turnover rate
increases significantly.
It's better to retain
those employees than it is
to be training new employees all the time.
That's part of the challenges we have here.
And that's why Medicare decided,
we'll pay you at least your cost
because when you have enough volume,
you can cover those loss leaders every
now and then because you have enough volume,
and your variability is a lot greater.
Here it's not, so that's
why Medicare came in and said,
we'll pay your cost.
Problem with that is there's no incentive to
control your costs. I'll give you an example.
A lot of our total hips,
total joints are Medicare population.
No surprise. Hey,
you had one? Two.
>> Which your bodies work?
>> Of course. Does it help
Pullman Regional Hospital to
negotiate with Smith and Nephew and
Depew on those devices and save money?
Does it help our bottom line
for especially the Medicare population?
Thank you. Not one bit. I get paid my costs.
Where's my incentive to control the cost?
However, we did go and we do.
I negotiated with Depew and
Smith and Nephew a year and a half ago,
we saved 1.2 Million in our device costs.
Most of that goes to the federal government.
It's the right thing to do,
because that will save eventually,
if every hospital worked
hard at doing those things,
that saves critical access
hospitals the chopping block.
If I lost critical
access hospital reimbursement today,
remember that $1 million I
told you we had last year,
take five million off of that.
We would have lost $4 million.
We wouldn't last.
You would be amputating major services.
There'd just be things you would
not do in this market.
It just would not be there.
No, ICU.
You wouldn't have a hospital around
this area that had an ICU.
Behavior health? Forget it.
Those people are on their own.
Good luck on managing your drugs and
your problems because you couldn't afford it.
Positive margin areas.
These are where we make money,
especially on a commercial side.
Imaging, surgery, pharmacy,
women's health, lab pathology.
And we don't actually
have a pathologist
that is part of the hospital.
They're actually a group out of
Spokane that reside here.
But those are your moneymakers today.
Your negative things, medical groups,
physician practices.
Oftentimes, for every employed physician
across the nation,
in primary care costs $110,000.
That's net.
That's the bottom line.
That's the loss. You cover.
I'm pretty close to that.
Not quite. I'm pretty close.
Transitional care units, your home health,
your ICUs, your emergency department.
There's so much fixed cost in those.
Now, my physicians
would say they make money.
But they do, in essence,
because they order tests.
People end up going to the surgery.
It's important to have all of them.
You can't have one without the other.
So how much did that cost?
You go to a store and you look and say,
okay, what's that TV going to cost me?
You can see exactly what you want.
No one patient that come
through the emergency department
with the same thing is exactly the same.
You come in, I do your hip.
Your hip isn't the same as
your hip and your hip.
How long it takes that surgeon
because you had a complication within
there can be significantly
different than the person that
had no complication.
The resources and intensity
of services are much different.
In some areas you're going to get paid more
because that DRG will reflect that,
but not always use the way Medicare pays you,
they pay you off a DRG.
Now, there are two different DRGs,
one with complications, one without.
But you might have been
the same surgery without a complication.
But you might have been in the OR
because when that surgeon was in there,
it took a lot more time.
It took him 45 minutes
where the other patient took 20 minutes.
The resources are much different.
But the amount that we're going to get paid
is the same for that particular insurance.
But if you go back to those methodologies,
remember those cost,
fixed percentage charges, DRG, MSG,
MSERG, those all have influences within this.
So those are all different.
Hey, we're just talking about
you, by the way.
We're talking about orthopedic surgeries.
Not you specifically, just talk prices.
Welcome, by the way. So again,
some reimbursement methodologies
and we've talked about.
Under the hospital,
you have percentage charges.
You have per diems, case rates,
a mix of the DRG, MSDRG components to it.
APGs, which is an outpatient payment scheme,
we have none of those here.
They do have them, and
they are significant across the nation.
We're just fortunate some
insurance companies want me to go to there.
Primera wants us to go to that.
However, in order to do that,
the system behind that to
capture all that would cost us 50,000,
so I asked Primera to pay for that.
They didn't want to, so they keep
paying me percent of charges.
But there's a big investment.
We're moving towards VBS,
which is value based purchasing.
Bundled. Anybody heard of bundle payments,
especially the joint replacement program
that CMS has done across the nation?
That's a movement.
What that's doing is saying,
we're going to give you
this pot of money between your physician,
hospital, nursing home,
and everything else in between,
PT, etc., you divvy it out.
You've got to deal with only
that component of it.
Problem with that is
if you're not on the same team,
you got winners and losers.
So I'll tell you right now a bundle payment,
we're going to work
really closely with physicians.
I'm sorry, nursing home,
you're out because I don't want
that patient with nursing home because
then I have to give them some of that money.
So we're going to try to do everything we can
to keep them within this little group.
That's why you need
to work collectively together,
because usually there's winners
and losers in those things.
But that's where it's moving.
These value based things
are evolving significantly.
Eventually, a lot of our payments
will be based on keeping
people out of the system,
which ultimately should be what we're doing.
That's in the business we're is
taking care of those in needs
and trying to keep people healthy.
But you can't make people be healthy.
So, these are the basic overviews,
and we've talked a little bit
of that within that.
So you've got for us
we critical access hospitals.
Other systems outside of that,
PPS hospital, progressive payment systems,
those are your typical urban.
They're going to get this DRG fixed rate.
And the more they see then,
the more they're going to make because
they can cover their overhead.
Critical access hospitals were
not able to do that,
so that's why they came
up with this methodology.
I covered that. We will move on from that.
I probably covered that.
So hospitals converted to
these CAH since cost reimbursement
was and is greater
than the reimbursement we would
have received under PPS.
So that's why it was important to move to.
There's requirements to stay that.
Back under Obama, he
had within his proposed budget plan,
you couldn't be a critical access hospitals
within 10 miles of another facility.
Or you would lose
your critical access designation.
Do you know how far we are from Gritman?
9.2 miles. Why didn't we
build it up the hill, another.
But the issue was,
who cares if it's 10?
Why not 15? Why was it 10?
Because it was a budgetary number.
They looked to see how
much could they capture.
That helps our budget.
Fortunately enough, Congress did not pass that.
They didn't even entertain that.
We only had to go a few
times to DC to fight that.
But that was the discussion.
What's the mileage?
You know what I would have done,
Mayor, come and say,
please close down Bishop Boulevard,
Mike us go around.
Let us go half a mile.
Exactly. Something. We just 0.8 of a mile,
please figure something out.
So, Irene, part of your question,
cost typically in hospital.
Variable cost includes your supply,
your implants, your staffing,
your food, your dietary,
your pharmacy, fixed costs,
CEO, core staffing,
utilities, bad your debt service,
and then your physician compensation
because many of them have a fixed payment.
Not all of them.
So are very productivity based,
and so the more you see,
the more you made,
but that's changing in their environment.
So really some of
these really truly are semi variable.
There's only a certain level
that we can go down to.
So this is supposed to be a true and false.
I'm just going to give you the answers here.
Generally, in many are
not sensitive to volume.
If we saw 15,000 emergency
department visits or
5,000 emergency department visits,
I'm sure hoping the hospital
still keeps one CFO.
It's tongue and cheek. So I'm
hopefully not volume dependent.
But at some point,
like even our human resources, at some point,
we need additional support when we
have a few years ago,
we had 300 employees.
Now we have 450.
The amount of paperwork
and processing the payroll,
etc, is more intensive.
So we either have to find
system applications to do that, technology,
or we have add resources and
staffing to be able to help support those.
So cause volume increase.
What happens to your fixed
cost per unit of service?
So volume goes up, and
I have a fixed cost, me.
Let's say we have 100 patients,
and we allocate the cost of
administrator over those 100 patients.
Now I have 200. What happens
to that cost per unit?
It goes down. Same thing.
If we have 200 and it goes down 100,
that cost per unit goes up.
Same with variable cost.
Units of service equals
patient days for room and board,
revenue, and charges for ancillary services.
Reimbursement under PPS hospitals.
You decrease your volume.
What happens to your reimbursement?
It goes down.
The less you see, the less you make.
That's traditional. We all know that.
You go to Walmart. They sell 1,000 TVs.
They sold thousand TV.
They sell 2000 and they mad more.
The more they sell, the more they make.
Guess what? Kirklaxs hospitals,
that's counterintuitive. It's not true.
If I see less patients,
what's my reimbursement from Medicare going
to be? It's higher.
Catch. Why? Because they pay me my cost.
My cost per unit went up.
So, the less I see,
the more I make, more I see,
the less I make because I'm
only ever going to get paid my cost.
It's counterintuitive.
And so that's always confusing.
It doesn't matter if you're sitting
on the board or not, yes, sir.
>> But don't Medicare define what I mean,
they have observation bids,
which you get paid less for
versus a regular bid.
So they're defining your costs going to be
that observation bid
that's all I want to reimburse.
Are they doing those kind of things still?
>> So the question really
is under Medicare reimbursement,
how do they define how they'll pay you?
Do they drive business?
I'm phrasing this.
>> Nursing homes, too. Cheaper over
there than they are than regular hospital.
>> So are they driving
businesses to certain things like
observation, like inpatient care?
Is it better to have a Medicare patient
in an inpatient bed or an obs bed?
Obs Observation, sorry,
abbreviation. Which one's better?
For Medicare, honestly, having them in
an observation bed is
better because then Medicare,
constituents or customers have
to pay 20% of that charge.
If they're in an inpatient bed,
they have a straight
deductible and it's done.
And if they met that earlier, it's done.
So Medicare population has
to pay for that 20%.
So having them in an outpatient setting
makes a lot more sense for Medicare.
They have requirements, so
now they have it used to be
based on certain criteria based driven,
now it's based on
how many midnights you're in.
Are you in two? If you're
in two, then you're knobs.
If you're in more than two,
then you're in in.
It's based on that.
So by the way,
we asked for that, and we all hate it.
Now, we said, we don't
like the way you're doing this.
You got to simplify, and then
they simply we didn't like it.
So some of the things
that are influencing healthcare and
why it's getting challenging.
We had a major change in
our classification ICD 10,
which is your diagnosis
and related classifications.
This changed from ICEC 9 to 10 in 2014,
actually, in 2015, and
it really substantially changed.
The coding aspect went from like,
8,000 codes to 80,000.
And so it's got a lot more specific.
It's really hard to run today to get
any comparables is almost impossible,
especially on inpatient care
or surgeries and stuff
because of the fact that ICD
10 is so specific,
like they literally have some.
If you hit by a car on a rural road,
then you code it to this.
But if you were hit by a dog, it's different.
I could throw some up,
and you'd be like, really?
That's a code. And they are that specific.
It's really strange.
Some of them are hilarious.
I don't know how they came up with them,
but they are like,
bit by a shark while scuba
diving. Did they live?
Inpatient quality reporting,
the macro which I
talked about earlier on physician reporting,
this is significant.
You could have upwards of 9%.
Now, for physicians that can be
a huge swing in their pay in any one year.
Yet, on the other side, if you do it well,
you might gain readmission rates.
We got to monitor that.
All of these things are
reporting requirements that we have to do.
We don't get any additional money,
but if you don't do them,
then you make less money.
So one of the things in that in summary,
as we start to wrap this up,
why does our foundation help us?
There are many non cost based programs.
Psych and rehab, don't make money.
So by providing certain services
and continue to support those
across the continuing to have
the foundation helping us within that so
that we can be self sustaining and
self determining in our
future is really important.
Skilled nursing facilities, SNIFs,
home health agencies,
non reimburseable cost centers.
It's just certain things that we don't get
any payment for,
but we want to continue to
provide those services because
it's important to our community.
That's where the foundation that's where
being a public hospital district really help.
Other things within cost reimbursement cost
per head that are non cost services.
Things like today are
care coordination, I mentioned earlier.
This the right thing to do.
Honestly, it costs us money to do it.
We look to grants, and
that's part of the foundation's efforts
to bring in those type
of things to help offset that.
It doesn't dollar for dollar,
but it's caring for patients and
getting them in the right place so
that their care is better
so that they don't end up in
the emergency department with
a major problem down the road.
Those are really important things to do.
Nobody's paying for you today.
Some of the things
the foundation has really helped us with in
their giving the whole hydro
works pool therapy,
underwater treadmill, we would
not have had that.
The system we had had
failed and would not be obsolete.
It'd basically be probably
a mosquito pond. It'd be gone.
And that helped us tremendously.
The 3D mammography unit
where you have been blessed
with happened in 2014,
the 2015, various areas,
a lot of different areas, services.
In 2016, the OR project.
And then now one of
their major efforts is 2017 on the expansion.
And as we look to that,
why we needed that.
In 2004, when we opened this,
we thought we plenty of space forever,
and now we're out of space.
With volume increasing as much as they have,
as much as 25, 30%,
we need more space.
And that will be the case for a while.
Then there's I've probably got this
out of order, but the surgery project,
which is well underway and should
be done by August,
end of August and coming online
by September, which will be perfect.
So summary Healthcare finances is complicated.
I mean, we can't do it justice in an hour.
I hope that you got a little bit of
taste of the complexity and what
it means within our institution
on how we manage that.
But each input is unique.
Therefore, care delivery must be flexible.
It can't be stagnant.
Everybody we're going to treat you the same.
We'll put you on a conveyor belt.
We'll run you through
because you're all the same,
and I can then control all my costs that way.
And we can't do that in healthcare.
Physician orders drive.
Physicians still drive everything we do.
Without physicians in our community,
we would not have a hospital.
They still drive everything
that the care today.
So orders drive provisions of care,
adding to the variability.
Payment is also variable depending
on who's the insurance payer?
What coverage do you have?
Does your insurance company cover that today?
Not tomorrow? By the way,
one of those things that we
want an example of this. What do I mean?
Primera decided, and I'll say this wrong,
and please correct me those that, no.
But Propathol is that the right word,
the administration of the drug with
anesthesia drug, especially colonoscopies.
Doctor Jones likes that.
It works very well. He wants
the CRNA in the room.
>> It's patients wagon too.
>> Man. I loved it. I had that done.
It was awesome. I remember nothing.
But, you know, I got to tell you,
when I came out of it, I had it done
here I didn't do it at home.
And I had John O'Brien,
my materials manner come in and make
sure I got to where I
needed to go after we were done.
And I told him, Hey,
call my wife, tell her I died.
'Cause I thought it'd be funny.
I don't remember actually
saying that. I'm glad he didn't call her.
But I thought it would be funny,
I guess, apparently.
He's probably what you tell
people under that stuff.
It was awesome. But premier
decided, we're not paying for that.
It's an additional cost.
Even though a physician preference is that,
they're just not going to pay for it.
So we help subsidize that for
the CRNAs because it's really important to
a physician for that aspect of care.
That's what insurance companies do,
so that insurance company is
part of that negotiating those raised,
payer mix regulations have
a big influence of how and what we do here.
We're going through part of that,
within the next few months,
we'll have a review by
an outside agency that will come
in and evaluate how we're doing,
are we meeting the Medicare standards?
Technology changes rapidly.
How do we reinvest in that?
So we need a profit in order to reinvest,
or the foundation has stepped in in
many gaps where we didn't have that
to be able to offset that and
help us continue to offer
high quality technology and
keep our prices reasonable.
And then many different players in
healthcare. Yes, sir.
>> Truly a negotiable rate
what I hear from
insurance companies standard here,
what is the limitation?
You may want to negotiate
you're only going to be told
how much you're going to get.
>> So the question is, is it
a truly negotiated rate or you just told?
Medicare or Medicaid, they're the big boy
you're told. You don't negotiate.
Other commercial payers, you do
have the opportunity to negotiate.
You're negotiating power is limited by even
within our community wall
by who's negotiating what?
The more players and as we talk about
fully integrated health
systems where you have
physicians and hospital and
all that working collectively,
you have more negotiating power.
So then you do have the ability to
go and see now,
at some point, you got to approve outcomes.
If you're improving, this is what we're
doing, and we're working on that,
part of the center of excellence with
the orthopedic surgeons
is in developing that.
At some point, we will develop
a bundle payment that we can take to
a Primera or to a uniform and say,
why would you want to send your patients to
the West Side to have this done here?
Here's our outcomes. By the way,
our prices are half
of what they are over there.
So why wouldn't you want to have it done
here, keep them local?
But if you can prove that, you
got to have statistics to do that.
You got better negotiating power.
>> How long negotiation look for?
>> Typically, two to three years.
So right now I'm
working on the Primera contract.
Hospital loan, it's really hard
because Grandma just signed last year,
so I'm not going to get any better than that.
If I had an isolated market, I could.
So I would take the same contract
that Tristate can get with Primera,
but they have one eighth the number
of covered lives in their arena,
so they can get 90 plus percent of charges.
They just don't have the same volume we do.
Were here, they can drive a lot of that.
But it's getting more and more challenging.
Have people heard of what narrow markets are?
Okay, so we have
one in our arena. It's a catalyst group.
They went directly to
the Blue Cross of Idaho
to a very isolated market,
and they said, We'll
take care of those patients.
If that patient goes outside,
so these are self purchased insurance plans.
If that patient goes outside of the market,
they have a $50,000 deductible.
So they can go to Gritman.
They can't come to Pullman,
because that's how narrow
they did the market.
They kept it in Idaho. Those are happening.
>> [inaudible] for pricing supply and
demand in theory, determines price.
So how has the Pullman Hospital done
in demand growth
compared to population growth?
How are we competing with the other guys?
>> How are we competing on supply and demand?
>> Are we increasing demand
as fast or faster as the population growth?
>> Not in all areas.
So a lot of that is contingent on providers.
And can you get a provider
within those specialties?
One of the things we're
actively trying to recruit, too,
and we have been successful here just
recently is in non invasive cardiology.
The other areas in pulmonology and sleep.
The demands there,
we have to outsource that today,
so an outside group does all of that.
All of those funds go outside of
our market to be able to do that,
because we may do the study
here but the providers aren't here.
So there's no reinvestment back into
the community for those like services.
So in some areas,
it's a real challenge
because it's specific on that.
In other areas now we're keeping up,
and that's one of the reasons we're looking
at building the fourth or
adding same day services expansion
is because the demand has been there.
We are at capacity and we have
just no more room in order to get that.
Now, I say that almost tongue in cheek,
because there's a lot to
do with physician preferences.
And if you're a physician
and Dr. Tinsted could speak to this,
you don't want to start surgery at 6:00 at
night unless it's an emergency.
You prefer to get in and get out,
and so you get back to your clinical
care for your patients.
And so most physicians have
blocked schedules because then
they can control their life.
They don't want to just,
what do you have today?
We'll call and see if we
can get them in today.
That doesn't work very well in their life.
So you have to have that capacity.
But in order to do that, sometimes you have
those downsides because nobody
wants to start 2:00,
3:00, 4:00 in the afternoon.
If we could run 24/7
in those areas and people willing to do it,
you could control the cost much better.
But you can't today
because a lot of it's best off preface.
>> Practical areas you'll be dealing with.
>> You might.
>> [OVERLAPPING] What you have in
this market is, well,
I can go 9.2
miles and I can
start at 7:00 so I'll take it there.
Oh, no, wait you stop. We want
them here we don't want you to do that.
So some of that predictability
and stuff is very
challenging in our markets just
based on providing healthcare.
So I don't know if that totally
answered it adequately or not.
We can talk more if it didn't,
no. Other questions?
>> You must have figures too.
>> I have a good figure.
>> [OVERLAPPING] who's top of the game.
But even a surgeon
knows that they're only good for
so many hours of solid surgery
before they get a
little punch drunk, too, a little bit.
So they know that you can commit
a surgery unit for how long and of course,
that affect your price too.
>> Well, yeah, and that's really dependent.
You're exactly right.
The quality of care of your providers,
be it your nursing staff to
your physicians diminishes greatly
if you don't give them enough rest time.
And so one of the key importances
of recruitment is to provide,
and especially physicians break in between,
so they aren't on call all of the time
because you will burn them out
and in short order.
Same goes for your nursing and support staff.
If they don't have rest
between shifts, and we used to do this.
So you'd be done,
and you had to go late
because the case went late,
and you were on call,
and you got called back,
and then you had to come back in at
7:00 in the morning to
start it all over again.
The quality goes down.
Now what we do is we have a call shift.
And then when they're
not on call, then they're off.
So they don't come in the next
day that's a different group.
So you have to have staff,
which adds some cost,
but it provides a better quality of care.
Plus rest between shift,
we guarantee a certain amount
of rest between shift
so that they aren't only getting eight,
that they're getting 10, so
they get a full night's sleep.
>> You're speaking of staff, there's
a difference in cost
too depending on if you
have your own staff versus travelers.
We have allowed travellers
here from time to time.
>> Yeah, occasionally.
>> [inaudible] Swedish in Seattle.
>> Yeah, 2.5 times the cost for
traveling compared to what you can keep here.
You're typically doing that in areas.
Most of the time here in our market now,
not when you were on the board,
we had a problem back then
just turnover because you
were doing a lot of low senses, etc.
Today, if we have
a travelers generally do
to somebody that's on maternity leave.
It's a planned event
you know they're going to be out
for 12 weeks. It makes sense.
You're going to pay a little more,
but you wouldn't want to hire because you
made a commitment to employ them forever.
So you do short term stuff like that.
We don't have nearly the travelers we
used to. It's typically that.
>> Do you think the value based system
will survive if
the Affordable Care Act went away?
That was in the Affordable Care Act,
meaningful use, etc.
>> So, will the value
based payment system continue
to exist if the Affordable Care Act changes?
The Affordable Care Act will change,
inevitably, it'll change somehow.
It doesn't matter what administration,
it will change. I do.
Health care at the rate it was
going is non sustainable it has to change.
You can't continue to have
escalating payments and expect
anybody to be willing
to do and be able to pay for it.
So what does have to change.
How we deliver healthcare needs to change.
We're reactionary,
but America has done that to himself.
We've done to ourselves.
We don't want anybody telling us
what to do we just want to make
it better when we didn't do it because
that's a lot of how we live.
I didn't take care of myself, but fix me now.
So some of that needs to change.
That getting in front of that and changing
our culture and how we
respond to that needs to change.
So, yeah, I do believe
in some sense, it will.
There's demonstrations that are
showing how it will be.
I don't know what it'll take.
But today,
part of the problem is the fragmentation in
healthcare and the lack of
communication between
even us and our providers.
You think you're all on
the same page, but you're really
not in all sense.
So streamlining that,
integrating a lot of that will
have a lot of impact on that.
And I do believe that
it will take such a foothold.
It started out at 20% demonstration expecting
two years value based
purchasing will represent
80% of the payments in two years.
They originally thought it would be
five but that's how
quickly it has broadcast it out.
So it's here to stay,
and we've got to learn how to deal with it.
The problem will be
is we're under this payment model,
which the more we do, the more we make,
in some sense, I just
contradicted something else like this.
But that's the healthcare system
today, fee for service.
Tomorrow, when we finally get there,
I don't know what it'll look like.
When it's value based and
you're providing value
and keeping people healthy,
how do you bridge that gap?
That'll be the challenge.
And hopefully you have enough to
survive that period of time.
And so it's really important.
Now, we utilize again,
I'm promoting Ruben and his staff.
But that's what we've determined
as part of that pathway there to
survive those time periods so that
we aren't falling behind in technology and
other things so that when you get there,
you can't provide it because you're
too far behind the curve anyway.
>> When will it come that you're going
to be dictated that I
don't need to have another MRI just
because I had one here for the specialist.
And the insurance company is going
to say you already have one MRI
for that particular injury
you don't need to have another one
or they won't approve the second one.
>> So the question is, when will that happen?
When will that occur?
Meaning, will insurance companies
dictate the fact that
somebody else ordered a secondary test
that has already been done? Is that fair?
I'm doing this for her.
She's told me I got to repeat these,
so I'll get paid tonight.
No, I'm not getting paid anyway.
It's cost, I'm going to paid cost.
So the question is, when will that happen?
It's happened, that happens today.
Insurance companies, if you had an MR,
they aren't going to approve.
That's part of that whole pre authorization.
If they see you had this test done,
they're not approving one for another one.
They'll deny it, so you
won't get it. So that happens today?
[inaudible] Exactly.
So some of that's happening today.
Now, is there duplication of services?
Yes. That still happens in some sense,
but more and more that's changing.
So one of the things that
is when you start looking at
an integrated model and you
start looking about coordination,
it's when you're all on the same team.
Well Dr. Joe is
much better at this than I am.
I'm going to send my patient
there because
I know that patient will come back,
and we're not competing against each other.
That'll be important to control costs.
Because today we compete
against each other for
the same patient for many different services.
We have a few more minutes. Yeah, Pat.
>> Steve, what do you see
as the overriding benefits
of acquiring other medical practices.
That's the first part of my question.
And the second part is,
do you see us acquiring more in the future?
>> So the question is, what are
the advantages of acquiring
other medical practices,
be it physician practices or anything?
And will we look
to acquire more in the future?
I will tell you this Pullman
Regional Hospital has not
aggressively ever gone
out and tried to buy any.
We have reactionarily responded to requests.
So Plus Pediatrics as an example, 2009,
remember, Al, Dr. Frosted, and Mike.
When Al decided he was going to retire,
Mike realized I'm going to be basically
the only pediatrician
on the blues, I don't want it.
And I don't want this headache.
And by the way, I can make more money
by being a locum and
traveling and getting out of here
and making a lot more money.
So they realized that
in order to have pediatric,
which Al had established on
the Palouse and continued to be here,
they needed something different.
They came to the hospital and said,
would you be willing to look at this?
And for the sake of the community,
we responded and say,
yeah, we'll look at that.
Most of everything we've
done has been in response, too.
So many providers today,
when they look at the model
of reimbursement and trying
to recruit into it,
are facing challenges and saying,
people don't want to come to that model,
they will come to the hospital and say,
can we look at something different?
We'll always look and say,
what does that look like?
So there's no future plans
right now to continue,
but we would respond, being the thing.
Some have decided to stay independent,
the advantages that we're
starting to see that are coming.
I talked about care coordination,
I mentioned a couple of different times.
There are new reimbursement models that
will pay you per member per month to do that.
Most all that resides in primary care.
We had no access
because we had no primary care.
Under our clinic network provider
that to get to
the new revenue streams that are
emerging under these value based models,
that's one of the advantages
of coordination and integration.
So that's coming,
and we're getting ahead of some of that.
Contract negotiation because you're all going
to the same person and you're
not divide and conquer,
you're going jointly, we'll
also have some advantages there.
>> You just took over Pullman
Family Medicine as of April.
>> Correct.
>> So how do
those competing practices recruit?
>> Well,
I'm sure I understand your question.
>> Do they recruit separately?
>> No.
>> If they were asked to recruit
a general physician [inaudible]
>> So I see your question now.
So the question is, is today
Pullman Family Medicine may
have an opening. How do they recruit?
How's the hospital involvement with
that compared to like Palouse Medical Group?
Today we're working closely
with Pullman Family Medicine,
identifying what the needs
are of the community,
what type of provider should be there?
We work with them jointly.
Palouse Medical Group because they're
independent are out doing their thing.
They're trying to recruit in.
There's still a competitive model.
The nice thing is, in our market,
I'll tell you today, we work
closely with them and
have a lot of communication.
So thankfully enough, it
isn't eat what one can and kill.
It's whatever I do for me is just my thing,
and it's that tragedy of the commons,
which we're all going to
fish out of the same pond.
The more fish I make or catch,
the better off I am
until we're all out of fish.
That doesn't happen today. We do coordinate.
So there's some communication
which is nice in our market.
It's not a stream line, though,
because we don't have that involvement.
Yes, sir.
>> When you talk about coordination,
you see changes in
the hospitals, for example,
with all of the hospitals in this area,
some of them might end up closing.
>> That's a great question.
So the question is,
in this area will
all hospitals exist, long term?
Will some in danger of
closing or is there better models?
I couldn't professionally tell you
that all will exist and should exist.
There's a lot of duplication of services.
And I lived the cord run for three years.
It doesn't make sense to have three RMRIs in
a basically 20 mile radius when
they're almost $2 million each.
Now, you still may need two
because of volume,
but it should be volume driven.
I do eventually believe for this area,
there has to be coordination of that.
You could have a very
effective and inpatient care unit.
And they focus on that
and they do it very well.
And still in communities,
I'm pointing outside because
I think Pullman ought to be
central because they are.
They're the middle. And then outside that,
you could have outpatient surgery centers
or support or urgent care centers,
etc, but you work collectively.
I believe long term,
that's where it'll get to.
I think until reimbursement dictates
that, it won't change.
And under a critical access model,
because we get paid our costs,
what advantages is there to do that?
So, today we have a fake glass bottom,
there's not a lot of
incentives to control class.
There's some. There's not a lot.
But if that model went away,
problem is, could you react quick enough?
I think that some of that's happening,
we are partners in
the general surgeon practices,
the specialty practices,
medication oncology coming on board.
That will be collective.
More and more that communications happening.
I think that'll evolve long term. How long?
I have no idea. I realize at some point,
if that happens, and I
think that ultimately needs
to I don't know if you.
>> That was going on in
Reagan's time when they
had if you wanted
a MRI and Gritman wanted one,
there was a committee that determine
whether you ought to have one
because of the population and the size.
And that went away.
>> I think eventually you'll
come back to some of that.
I do believe they'll drive.
>> Some of us remember there was
a vet school that also [inaudible].
>> >> That was my love of
working for two facilities.
That was awesome. By the way,
it is a little after 7:00.
I do want to be respectful of your time.
I have nowhere to go,
I will stick around if
there are other questions.
But I appreciate the fact
that you all team out. Thank you.
[APPLAUSE]
>> Thank you, Steve.
>> Yeah, Ruben. Thank you very much.