CEO Gary Myers talks Hospital strategies for coping with the rising cost of healthcare.
Last month, Northern Inyo Hospital (NIH) CEO Victoria Alexander-Lane outlined some of NIH’s strategies for coping with the rising cost of healthcare. Mammoth Hospital is also facing this challenge, said CEO Gary Myers in an interview with The Sheet last week.
“I think every hospital in the country in facing the same problems that NIH is facing,” he said. “The whole delivery model is really shifting, from sick care to health care.” That shift translates into lower reimbursement rates for traditional healthcare services, with a greater emphasis on preventative care.
During healthcare boom times, Myers said, few hospitals were incentivized to cut the cost of services. Now that hospitals have escalated costs, many outside employers are finding they can’t sponsor historic healthcare plans anymore, while individuals are beginning to shop around for better deals.
“Healthcare has become too expensive, because the consumer never had any skin in the game,” Myers said.
The shift through the Affordable Care Act from commercial to government-subsidized policies, intended to help bring down the cost of healthcare for the American consumer, also comes with drawbacks. Myers said government payers do not reimburse hospitals as well for their services.
Then again, he said, “It’s not just the government payers, although the government payers are certainly some of our lowest payers. Even commercial payers are much more difficult to negotiate favorable [reimbursement rates] from.”
Meanwhile, state agencies like CalPERS now cap their surgical reimbursement. Myers used the example of knee replacements, a common procedure at Mammoth Hospital, to illustrate the impact of this capping. “We used to get a specific percentage [reimbursed],” he said. “Now it’s capped, so any cost above that, we pay. The cost of just the prosthesis [for a knee surgery] is almost the cost we’d get reimbursed.”
A larger hospital with a greater demand for such procedures would get a better deal, Myers said; Renown Hospital in Reno pays 60 percent of what Mammoth Hospital pays for the same prosthetic device.
Mammoth Hospital and NIH struggle with issues like the cost of supplies, given both hospitals’ small, rural nature. Myers said Mammoth Hospital serves a large geography, but a small population; “Critical mass is always a problem for an institution like ours, when you have a high, fixed overhead,” he said.
The Hospital has to staff not only for a small local population, but for massive influxes of tourists during peak weekends. This necessitates a flexible job pool, Myers said.
He also pointed out that Mammoth Hospital must stay open 24 hours, seven days a week, 365 days a year. And, “We have to see everybody, regardless of whether people can pay,” he said. Myers said that the Hospital did about $3 million of uncompensated care in the community last year. “But that’s part of our mission,” he said; “that’s why we’re here.”
Mammoth Hospital, like NIH, is brainstorming solutions to these challenges. Myers said the Hospital is going to vendors and renegotiating contracts to get the cost of materials like prosthetics down; working to decrease infection rates and medication errors, already in the low percentiles, to reduce patient re-entry; and investing in electronic health records. Myers noted a new ‘patient portal,’ a web-based program that will allow patients to access their records online. “That will cut down on call volume and the staff required to handle that information,” he said.
Like NIH, Mammoth Hospital is also adapting its personnel policy to cut costs. This past year, Mammoth Hospital used a flex staffing model, Myers said. “With the lack of snow, we didn’t have the volume we usually have,” he said. “We went out to the whole employee base and said, ‘We can lay off, or we can all share the pain a little bit.’ The staff chose to share the pain.”
Flex staffing required employees with 40 hours or more to take one day off every two week pay period. Flex staffing did not affect these employees’ benefits. Myers said the flex staffing model was extremely successful, allowing Mammoth Hospital to come out of a challenging business year with a 3 percent margin (i.e. profit). And when the Hospital makes a margin, employees share in the success with a cash payout.
“It’s been a very successful model,” Myers said of flex staffing. “I won’t call it a win-win, but everybody likes time off to play, too.”
Perhaps reflecting this, the Hospital’s annual Employee Satisfaction Survey returned high scores, said Human Resources Manager Jeff Byberg. Byberg said the Hospital conducts the survey through HealthStream Research, which has a database of 457 hospitals with over 220,000 employees. 238 Mammoth Hospital employees (74 percent of the workforce) participated in the survey, and the survey returned scores better than HealthStream’s national comparisons norm in all categories.
“Mammoth Hospital’s 2014 percentile score for all questions combined is at the 90th percentile,” he said. “The percentile score in 2013 was 57.”
“We were surprised in a year when we had to flex, that our scores actually went up in terms of employee satisfaction,” Myers said. “It was the best satisfaction survey we’ve ever had.” In fact, Myers said the survey scores attained a goal the Hospital had set to achieve in 2017.
Myers concluded that Mammoth Hospital is still “absolutely” challenged with rising healthcare costs. “We are becoming much more sensitive to our charges,” he said. Myers said he still believes the Hospital’s clinic prices are competitive. As for out-patient surgery, “You could definitely find it less expensively in a place with a surgical center,” he said, but he pointed out that such facilities have the luxury of being open from 8 a.m. – 5 p.m., and taking only patients who can pay for their services.
In spite of the challenges faced by Mammoth Hospital, because of its current strategies, “Whereas many facilities will raise their costs, this year the net price increase was .3 percent,” Myers said. “We’re in the business right now of trying to cut the cost.”