View from the finance chair


View from the finance chair

What does the current risk and insurance landscape look like to healthcare CFOs? Brian Lovdahl, CFO for Baldwin Area Medical Center, shared his views with HRMR.

Like many facilities, Baldwin Area Medical Center, an integrated hospital and clinic in Baldwin, Wisconsin, has seen decreased utilization of services over the past year. Chief financial officer (CFO) Brian Lovdahl believes this can be attributed primarily to three factors: 1) consumers are becoming more concerned with cost and are forgoing treatment; 2) consumers are looking to alternative solutions for diagnosing and treatment; and 3) consumers continue to fear health reform and do not understand how it applies to them. 

Against this backdrop, however, Baldwin Medical Center is forging ahead with new developments.

“These are exciting times for our organization as we have undertaken the process of building a replacement medical center on a greenfield site along a busy interstate,” says Lovdahl. “From the time we purchased the land to the time we will be putting shovels in the ground will be about 15 months.”

At the same time, a new electronic medical record (EMR) system is being implemented, that will be going live in March 2015. “Our staff has been handling the process really well and we are all excited for completing these two major tasks,” says Lovdahl.

Next to ICD-10, Meaningful Use, a new EMR system, and building a new facility, two of the biggest challenges for Baldwin Area Medical Center are staff recruitment and the need to generate revenue in the face of falling patient numbers.

“We are continuing to struggle with physician recruitment and having to find new sources of revenue through different service offerings. Our community is becoming a bedroom community for the Minneapolis St. Paul metro and people are getting more and more of their care at facilities closer to their workplace.

“We are having to offer weekend and extended hours as alternatives for our community; this adds to the difficulty of physician recruitment.”

Lovdahl believes that one of the most important and exciting challenges over the coming years will be the shift to population health, keeping people well and out of hospital wherever possible. Rather than viewing this as a threat, he sees it as an opportunity to broaden the center’s service offering.

“Healthcare organizations have made a lot of money by keeping patients in the dark but times are changing and we need to find ways to be successful by keeping patients out of our facilities,” he says.

“I believe that people genuinely want to be healthy but many do not know where to start. There are smartphone applications and devices that help you count calories while monitoring everything from exercise to sleep habits. As we are looked at less and less for routine services we need to offer services that have a real return on investment for the consumer.”

He adds, however, that the financial rewards for providers that achieve this shift have not yet been properly structured and put into action.

“Unfortunately, the evolution of payment for quality is slow, unclear, and inconsistent. There are no industry standards and this leaves providers trying to manage numerous contracts, reports, and reimbursement mechanisms. It is difficult to accurately budget for an upcoming year when so many of the insurance companies are developing new methods of reimbursement that haven’t been thoroughly vetted.”

Community health

Looking to the future, costs look set to remain an issue with the increased focus on population health and preventive care.

“Population health should be our goal every day we come to work,” Lovdahl says. “As the CFO, it has made my job more difficult because the mechanisms to be reimbursed are few and far between. We have hired staff specifically to improve the health of the community by going to schools and businesses and offering health screenings.

“I can confidently say that this has been great for the community, but unfortunately, it has also been a direct hit to our revenue stream. Our organization operates on a relatively small budget in a rural area and we operate with very high fixed costs. If we incrementally improve population health and reduce patient volume, it will actually force us to charge more for the fewer services we do provide.”

At the same time, as pressure is applied to spend less money on diagnostic tests and procedures, he increasingly finds himself put in a position where he has to weigh total cost of care with insurance companies vs professional liability risks.

“How can I justify telling a provider that they shouldn’t perform a test on a patient that they believe is necessary because we are getting monitored on our total cost of care or test utilization?”

As a relatively small provider with limited resources, Baldwin Area Medical Center addresses its insurance needs by partnering with an insurance broker that can provide the knowledge and expertise it needs to evaluate the market and bring the center what it needs at an affordable price. Baldwin is also a member of a collaboration of rural facilities in Wisconsin that is currently investigating the creation of a captive insurance plan.

“I believe that organizations should comparison-shop every two to three years,” he says. “I have found that a good broker can find ways to reduce cost by having a deeper knowledge of the market. They will also give you advice on coverage limits based on what they are seeing in the market.

“The last time we reviewed our policies we realized that we had coverage on our accounts receivable that was about 400 percent above the industry average.”

When it comes to making decisions about what coverage is required, good channels of communication with the center’s risk manager are also important.

“The risk manager should provide routine summaries of outstanding issues and potential for loss. The key to a good relationship between a CFO and the risk manager is understanding what coverage you have and knowing the people to contact when questions come up,” Lovdahl says.

2015 looks set to be a time of change, with increasing financial pressure but also the emergence of new ways to make and save money. If payment structures improve, centers like Baldwin will have a better chance to thrive; and people living in the communities they serve will gain a greater chance of maintaining long-term health.

Brian Lovdahl, CFO, Baldwin Area Medical Centre, HRMR, EMR, Minneapolis St. Paul