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  • Cook County Health and Hospitals System is the largest provider of health care to Illinois' poor and uninsured. It's struggling with rising medical costs, declining federal help, dependence on Illinois' Medicaid system and patients who can't pay their bills. The system as a whole provides $500 million annually in free care and serves more than 800,000 patients. A 2005 report by the State University of New York Downstate Medical Center on hospital care in the 100 largest U.S. cities and their suburbs found that “more public hospitals were lost between 1996 and 2002 (16 percent in cities and 27 percent in the suburbs) than for-profit (11 percent in cities and 11 percent in suburbs) and non-profit hospitals (11 percent in cities and 2 percent in the suburbs).”
  • What is behind the restructuring trend? The fact is, changing governance or legal structure cannot by itself turn around a struggling system. But it can offer effective additional tools for addressing many of the pressures faced by public hospitals that are over and above those faced by your private sector colleagues and competitors. Not the least of these pressures is simply the ability to make and implement decisions quickly in a rapidly changing health care environment. As you can see from this slide, there are a range of other potential public sector obstacles and constraints that can diminish the effectiveness of a health system that is controlled in any major way by city or county government, even if there is a separately appointed governing board. Note specifically the difficulties in public entities doing joint ventures as a result of interpretations of the pledge of credit provisions in the Florida Constitution. Another question is WHEN do hospitals restructure. Some do restructure because of financial difficulty, but that is not the only reason. We are currently seeing substantial additional interest from healthy safety net systems (like Broward) as a result of the desire to be responsive to changes in the health care system. In fact, since restructuring does take resources, there are good arguments for restructuring when a system is not in crisis.
  • Main Campus 42 acres 2.3 million square feet 26 buildings (1912-2004) 3,800 parking spaces Senior Health & Wellness Center (Old Deaconess Hospital) 9 acres 385,000 building square feet 9 buildings (1927-2000) 800 parking spaces Board made significant decision to install EPIC Primary care in 1999 ED in 2004 Inpatient in 2009 Partners in Care is out Patient Centered Medical Home -- 10,000 uninsured County residents enrolled Mission statement developed in the strategy effort commissioned and led by the Board in 2007
  • Secure, liquid balance sheet Bond ratings upgraded Moody’s S&P Fitch Have to maintain ~4% operating margin to support A rating -- performance expectations set by bond markets Successful refinancing of capital structure Build America Bonds issued Covenants relaxed Maturities extended Continued clean up of credit balances, cost reports and reserves Contingent liabilities addressed Prepared to invest to meet patient needs
  • Secure, liquid balance sheet Bond ratings upgraded Moody’s S&P Fitch Have to maintain ~4% operating margin to support A rating -- performance expectations set by bond markets Successful refinancing of capital structure Build America Bonds issued Covenants relaxed Maturities extended Continued clean up of credit balances, cost reports and reserves Contingent liabilities addressed Prepared to invest to meet patient needs
  • Secure, liquid balance sheet Bond ratings upgraded Moody’s S&P Fitch Have to maintain ~4% operating margin to support A rating -- performance expectations set by bond markets Successful refinancing of capital structure Build America Bonds issued Covenants relaxed Maturities extended Continued clean up of credit balances, cost reports and reserves Contingent liabilities addressed Prepared to invest to meet patient needs
  • Balance between health and human services goals and need to operate effectively (earn a margin) Issue bonds and responsible for creditworthiness of the institution Led development of strategy and transformation program that has changed direction of the System Involved in all major decisions Capital Consulting Leadership Recognition that shape of the institution has changed and more professional management is necessary Scale and scope of operations Challenges of meeting the mission Potential for misappropriation
  • MetroHealth presentation

    1. 1. MetroHealth County Council Briefing May 19, 2011
    2. 2. Goals for Today’s Discussion <ul><li>Provide context on public, safety-net hospitals </li></ul><ul><li>Provide background on current situation at MetroHealth </li></ul><ul><ul><li>Describe mission and capabilities </li></ul></ul><ul><ul><li>Provide facts about role in providing healthcare in the County </li></ul></ul><ul><ul><li>Recount actions to strengthen financial condition </li></ul></ul><ul><ul><li>Look forward to a future with health reform </li></ul></ul><ul><li>Inform you of the future challenges we face </li></ul><ul><li>Gain your support so that we can stay focused on our mission </li></ul>We welcome questions afterwards
    3. 3. US Public Hospitals Today <ul><li>Serve a critical role in their communities, ensuring access to care for patients who are uninsured or are covered by Medicaid or Medicare </li></ul><ul><li>Public hospitals (National Association of Public Hospitals) are major providers of care in the nation </li></ul>1 out of 4 emergency room patients 1 out of 4 babies born Just 2% of all hospital beds provide all this: 1/3 of all outpatient visits 1 out of 5 people hospitalized 1/2 of all Level 1 trauma centers 2/3 of burn care beds Train 20% of all medical residents Operate with lower margins than the rest of the hospital industry <ul><li>In 1981, half of NAPH members were traditional City or county owned hospitals. Less than 10% retain that structure today </li></ul>
    4. 4. A Tale of Four Cities <ul><li>St. Vincent’s – closed (April 2010) </li></ul><ul><ul><li>Two bankruptcies in span of five years </li></ul></ul><ul><ul><li>One of two New York City academic medical centers </li></ul></ul><ul><ul><li>Uncompensated charity care, rising costs drove closure </li></ul></ul><ul><li>Detroit Medical Center -- purchased by a for-profit healthcare management company (Dec 2010) </li></ul><ul><ul><li>Michigan’s largest charity care provider, Detroit’s largest employer </li></ul></ul><ul><ul><li>Bailed out in 2003, struggled to remain in black for past seven years </li></ul></ul><ul><ul><li>Need to renew facilities in the face of limited capital drove sale </li></ul></ul><ul><ul><li>Purchased by Vanguard Health Systems ($3.4B 2009 revenue) </li></ul></ul><ul><li>Cook County Hospital System – restructuring (2011) </li></ul><ul><ul><li>Plans to close a hospital June 1 st , Oak Forest Hospital to convert into an outpatient center </li></ul></ul><ul><ul><li>Provides $500 million in free care to more than 800,000 patients </li></ul></ul><ul><ul><li>Illinois’ largest provider of health care to the poor and uninsured </li></ul></ul><ul><li>Grady Hospital – future in doubt after years of restructuring </li></ul><ul><ul><li>Drowning in debt, In need of $200 million to remain solvent </li></ul></ul><ul><ul><li>Loss of local and federal funding forcing layoffs and service cuts </li></ul></ul><ul><ul><li>Atlanta’s largest public hospital, 80% of patients are Self Pay or Medicaid </li></ul></ul>
    5. 5. Significant Number of Public Hospitals Closed in Past Decade <ul><li>Why Public Hospitals Close </li></ul><ul><li>Growing uninsured and underinsured population </li></ul><ul><li>Aggressive competition for insured patients and services </li></ul><ul><li>Urban Emergency Departments more likely to close </li></ul><ul><li>Managed care rates below better-networked systems </li></ul><ul><li>Declines in Medicaid reimbursement rates </li></ul><ul><li>Public support limited by local budget stress </li></ul><ul><li>Escalating cost of technology, personnel, supplies </li></ul><ul><li>Margin erosion in highly fixed cost operation </li></ul><ul><li>Required upgrades in facilities and technology … </li></ul><ul><li>… With limited access to capital </li></ul>
    6. 6. v Cuyahoga County Provides Average Support Source: America’s Public Hospitals and Health Systems, 2009: Results from the Annual NAPH Hospital Characteristics Survey Grady Health System Broward Health-Broward General Medical Center UMDN J-University Hospital LAC-LAC+USC Medical Center Alameda County Medical Center University Health System at San Antonio LAC-Harbor/UCL A Medical Center LAC-Olive View/UCLA Medical Center Parkland Health & Hospital System Harris County Hospital District NYC HHC-Bellevue Hospital Center Santa Clara Valley Health & Hospital System JPS Health Network University Hospital, The University of New Mexico Health Jackson Health System University Medical Center of El Paso The MetroHealth System The Health and Hospital Corporation of Marion County San Francisco General Hospital Cook County HHS-The John H. Stroger, Jr. Hospital of Cook Boston Medical Center Average of 91 NAPH Hospitals 2009 State/Local Support as % of Charity Care Charges For top 20 NAPH Member Hospitals Receiving Gov’t Subsidiary (+MH)
    7. 7. Value of County Subsidy Declined as Charity Care Grew MHS County Subsidy Trend 1981 - 2010 2005 2000 1995 1990 1985 2010 1981 County Subsidy ($ in 000’s) County Subsidy as % of Charity Care
    8. 8. Mission <ul><li>Academic Health Care System </li></ul><ul><li>Committed to Community </li></ul><ul><li>Saving Lives, Restoring Health, Promoting Wellness </li></ul><ul><li>Outstanding, Life-long Care </li></ul><ul><li>Accessible to All </li></ul>MetroHealth Capabilities <ul><li>County Owned, 6,400 Employees (#14 in County) </li></ul><ul><li>500 Employed Physicians, All SOM Faculty </li></ul><ul><li>Engaged in Teaching (CWRU, OU, Residents) </li></ul><ul><li>Significant Clinical/Behavioral Research </li></ul><ul><li>Strength in Primary Care, Depth in Specialties </li></ul><ul><li>Nursing Magnet Status (Top 5%) </li></ul><ul><li>750+ bed Acute Care Medical Center </li></ul><ul><li>ED with 100,000 Visit Capacity </li></ul><ul><li>17 Ambulatory Locations in County </li></ul><ul><li>Level I Trauma, Burn Center, LifeFlight, NOTS </li></ul><ul><li>Senior Health and Wellness Center </li></ul><ul><li>Skilled Nursing Care </li></ul><ul><li>Integrated EPIC Medical Record Throughout </li></ul><ul><li>Accountable Care Organization Pilot Underway </li></ul>MetroHealth: Mission-Driven Healthcare Provider 175 th Anniversary 2011
    9. 9. Highest Quality Healthcare <ul><li>Nationally recognized in trauma, maternal-fetal medicine, burns, neonatal intensive care, pediatrics, cardiology and radiology </li></ul><ul><li>Attracts $37.5 million research dollars </li></ul>
    10. 10. MetroHealth is Linchpin of the County’s Safety Net Provider Inpatient Discharges (2009) Uninsured/Medicaid Cleveland Clinic Health System 151,286 18% University Hospitals Health System 72,867 24% MetroHealth 25,557 53% Parma Community General Hospital 15,193 9% St. Vincent Charity Hospital 8,028 27%
    11. 11. Uninsured Visits 2010 200,000 visits by uninsured patients in 2010, an increase of 25% since 2008 45% of County’s uninsured visits originate outside Cleveland: 42% growth in two years
    12. 12. County H&HS Subsidy 5.6% Ohio HCAP GAP $51m Medicare $173m 24.3% Uninsured $119m 16.7% Medicaid $243m 34.1% Commercial $177.1m 24.9% 2006-2010 Change by Payor Uninsured Support Total $712.1 million MetroHealth 2010 Operating Expense by Payor Deterioration in Payor Mix Threatens Survival – HHS Levy Subsidy Inadequate Serving insured patients is a mandatory funding source
    13. 13. Getting Into the Black has Been a Priority … <ul><li>Historically System struggled to break-even; financial distress grew into 2008 </li></ul><ul><li>Board demanded swift action to avert financial crisis … </li></ul><ul><li>… And directed Transformation to address uncertain future </li></ul><ul><li>2006 Operating Income includes additional one time payment from County </li></ul><ul><li>Transformation began March 2008 with $11.3 million operating loss YTD </li></ul>Operating Income ($11.9) ($8.2) $3.0 $10.5 ($17.3) $8.7 * $37.7 $23.8
    14. 14. Consulting Investments for Operational and Financial Gains <ul><li>MetroHealth needed to adopt a business-based approach </li></ul><ul><li>Critical issues identified: </li></ul><ul><ul><li>Revenue cycle --Hospital operations </li></ul></ul><ul><ul><li>Medical home --Supply chain </li></ul></ul><ul><ul><li>Ambulatory operations --Campus renewal </li></ul></ul><ul><ul><li>Network development </li></ul></ul><ul><li>Managed carefully: business case/negotiated/phased/audited </li></ul><ul><li>Dramatic knowledge transfer to MetroHealth people </li></ul><ul><li>$25.5 million short-term investment for $68 million annually in long-term viability </li></ul>
    15. 15. Along with Increasing Solvency; Bought Us Time <ul><li>Key Actions </li></ul><ul><li>Refinancing of capital structure </li></ul><ul><ul><li>Build America Bonds issued </li></ul></ul><ul><ul><li>Restrictive covenants relaxed </li></ul></ul><ul><ul><li>Maturities extended </li></ul></ul><ul><li>Cleaned up balance sheets to enhance transparency </li></ul><ul><li>Upgrades from rating agencies </li></ul><ul><li>Prepared to invest to meet patient needs </li></ul>Balance Sheet Strength
    16. 16. Health Reform Promises Increased Coverage but at Lower Rates Future ability to shift cost limited Downward Pressure On Rates Coverage Expansion <ul><li>Disproportionate Share Hospital (DSH) payment reduction </li></ul><ul><li>Value based purchasing program in Medicare </li></ul><ul><li>State/Federal Budget Pressures cause rate reductions </li></ul><ul><li>Reimbursement methodology changes, e.g. hospital acquired infections, bundled payments, etc. </li></ul><ul><li>50-70% enrolled in Medicaid or </li></ul><ul><li>Medicaid-like health exchanges </li></ul>Affordable Care Act (2014) -- Impact on MetroHealth Net Revenue Impact
    17. 17. Strategic Imperatives for Long-Term Viability <ul><li>Increase attractiveness to insured patients </li></ul><ul><ul><li>Health care increasingly delivered in ambulatory setting -- patient preference, technology evolution, lower cost, etc. </li></ul></ul><ul><ul><li>Continue transformation of operations for service and quality improvement and convenience for patients </li></ul></ul><ul><li>Prepare for influx of ACA patients; develop a delivery model that serves them effectively and efficiently </li></ul><ul><li>Reduce cost to be sustainable at new lower reimbursement rates </li></ul><ul><li>We have made real progress with our Patient-Centered Medical Home </li></ul><ul><ul><li>Inpatient admissions 34.8% lower than patients not enrolled in program </li></ul></ul><ul><ul><li>Emergency Department visits also 6.8% lower than patients not enrolled in this program </li></ul></ul>
    18. 18. Ambulatory Success Drives System Health Hospital Inpatient Admissions and Outpatient Visits Source: American Hospital Association, 2005; US Census Bureau: National and State Population Estimates, July 1, 2005 <ul><li>Healthcare increasingly delivered in ambulatory setting </li></ul><ul><ul><li>Patient preference </li></ul></ul><ul><ul><li>Convenience </li></ul></ul><ul><ul><li>Technology migration </li></ul></ul><ul><ul><li>Payor preference </li></ul></ul><ul><ul><li>Lower cost </li></ul></ul>Outpatient Visits Inpatient Admissions
    19. 19. Exploring All Options To Sustain the Mission Average Age of Plant, 2010 <ul><li>$580 million to reach “A” rating benchmarks </li></ul><ul><li>$400 -- $600 million for new 300-400 bed hospital </li></ul><ul><li>Recent engineering analysis assessed facility gaps </li></ul><ul><ul><li>63% of buildings beyond useful life </li></ul></ul><ul><ul><li>Significant investment necessary to restore original condition </li></ul></ul><ul><li>Renewal a valuable opportunity </li></ul><ul><ul><li>Upgrade to modern functional spec </li></ul></ul><ul><ul><li>Size to need and purpose </li></ul></ul><ul><ul><li>Capture energy, maintenance, operations efficiencies </li></ul></ul><ul><li>Operations contributing capital to fund renewal </li></ul>Years
    20. 20. Our Mission is Vital to County’s Well-Being <ul><ul><li>Sustainability threatened </li></ul></ul><ul><ul><ul><li>Our mission demands we provide the uninsured with high quality healthcare </li></ul></ul></ul><ul><ul><ul><li>As the safety net we are committed to provide access to all </li></ul></ul></ul><ul><li>MetroHealth performs its mission effectively and efficiently </li></ul><ul><li>Our recent turnaround bought us time … </li></ul><ul><li>… But the fundamental problem is still with us ( “no margin, no mission” ) </li></ul><ul><ul><ul><li>We rely on positive margin and County subsidy to support that mission </li></ul></ul></ul><ul><ul><ul><li>Health reform is not a silver bullet </li></ul></ul></ul><ul><li>This condition demands further restructuring and renewal … </li></ul><ul><ul><ul><li>Restructuring of staff, support expenses to refocused mission </li></ul></ul></ul><ul><ul><ul><li>Network development of more efficient service locations </li></ul></ul></ul><ul><ul><ul><li>Campus renewal to focus acute services and reduce fixed costs </li></ul></ul></ul><ul><li>Or ??? </li></ul>
    21. 21. Your Support will Safeguard Access to Medical Care for the Uninsured of Cuyahoga County <ul><li>Support our mission and role in the community </li></ul><ul><li>Focus on passing the Levy in 2012 (10 months from now) </li></ul><ul><li>Preserve MetroHealth’s subsidy at current levels </li></ul><ul><li>Engage and support MetroHealth’s renewal plan for 2014 </li></ul><ul><ul><li>Ambulatory network development and main campus renewal </li></ul></ul><ul><ul><li>Engage capital need and help raise funds </li></ul></ul><ul><ul><li>Link access and economic development (in 2014) </li></ul></ul><ul><li>Address governance issues through the MetroHealth Board </li></ul><ul><ul><li>Appoint/reappoint to current openings and support confirmation </li></ul></ul><ul><ul><li>Plan for impending retirements/departures </li></ul></ul><ul><ul><li>Formalize dialogue through H&HS Committee </li></ul></ul>
    22. 22. Appendix
    23. 23. Search Process (example) ~200 Prospects 4 Candidates 3 Candidates Final Candidate Finalist Search Firm Panel Interview Campus Visit <ul><li>Physician Chair </li></ul><ul><li>CMO </li></ul><ul><li>Board member </li></ul><ul><li>5 administrators </li></ul><ul><li>3 PCU Executive Directors (physicians) </li></ul><ul><li>1 administrator </li></ul>Final Review <ul><li>External References </li></ul><ul><li>RSR Reference Report </li></ul>Campus Visit <ul><li>7 department chairs </li></ul><ul><li>2 administrators </li></ul>Board Panel: 5 members
    24. 24. Note: Excludes Compliance The MetroHealth System April 1, 2011 Mark J. Moran President and CEO Daniel Lewis Vice President, HR Alfred F. Connors MD Chief Medical Officer Sharon Kelly Chief Financial Officer John McInally Vice President Information Services Phyllis Marino Vice President Marketing & Communications John Corlett Vice President, Government & Community Relations Kate Brown Vice President, Development Ronald G. Fountain Board of Trustees Thomas Goins Vice President Construction/Facilities Edward Hills, DDS Chief Operating Officer Thomas Onusko Sr. Vice President General Counsel Building Experienced, Resilient Organization
    25. 25. Engaged Governance William S. Gaskill Vice Chair 30 3/15/12 Audit, Finance (Chair) Legal and Government Relations, Personnel, Space and Facilities, Strategic Planning <ul><li>Donna Kelly Rego </li></ul><ul><li>3/11/13 </li></ul><ul><li>Finance, </li></ul><ul><li>Personnel, </li></ul><ul><li>Strategic Planning (Chair) </li></ul><ul><li>Brenda Y. Tyrrell, Ph.D </li></ul><ul><li>Secretary </li></ul><ul><li>3/2/11 </li></ul><ul><li>Finance, Legal and Government Relations, Personnel, </li></ul><ul><li>Strategic Planning </li></ul>Polly Clemo 15 3/4/15 Legal and Government Relations, Quality and Safety, Space and Facilities Terence Monnolly 5 3/3/16 Audit, Space and Facilities (Chair) Brian Murphy 1 3/2/11 Strategic Planning Thomas M. McDonald 2 3/5/14 Audit (Chair), Space and Facilities, Quality and Safety John Moss 1 3/3/16 Finance, Legal and Government Relations, Space and Facilities Charles Spain 15 3/5/14 Legal and Government Relations, Quality and Safety (Chair) Ronald G. Fountain, EDM Chair 13 3/5/13 Ex officio all committees The MetroHealth System Board of County Hospital Trustees (2010) <ul><li>ORC 339 County Hospital </li></ul><ul><ul><li>“… preservation of public health…” </li></ul></ul><ul><ul><li>“… care of indigent sick and disabled…” </li></ul></ul><ul><ul><li>Non-partisan </li></ul></ul><ul><li>Governed by Board of Trustees </li></ul><ul><ul><li>Employ administrator </li></ul></ul><ul><ul><li>Control all funds </li></ul></ul><ul><ul><li>Define mission and strategic direction </li></ul></ul><ul><ul><li>Approve contracts and capital expenditures </li></ul></ul><ul><ul><li>Monitor System performance </li></ul></ul><ul><li>Represent public interest </li></ul><ul><ul><li>Transparency </li></ul></ul><ul><ul><li>Stewardship </li></ul></ul><ul><ul><li>Balance </li></ul></ul><ul><ul><li>Integrity </li></ul></ul><ul><ul><li>Institutional strength </li></ul></ul><ul><li>Pursue role actively </li></ul><ul><ul><li>Committee roles </li></ul></ul><ul><ul><li>Monthly cadence </li></ul></ul><ul><ul><li>Regular retreats </li></ul></ul><ul><li>Exemplary citizen leaders </li></ul><ul><ul><li>Volunteers </li></ul></ul><ul><ul><li>Qualified </li></ul></ul><ul><ul><li>Committed </li></ul></ul><ul><ul><li>Principled </li></ul></ul>
    26. 26. MetroHealth Select Benefits County Financially <ul><li>Narrow network option provides healthcare through MetroHealth </li></ul><ul><li>Started with Cuyahoga County employees in 2008 </li></ul><ul><li>County Human Resources Workgroup estimated savings in benefit costs of $3,000-$4,000 per year per employee </li></ul>