MetroHealth presentation

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MetroHealth County Council Briefing

May 19, 2011

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Goals for Today’s Discussion

Provide context on public, safety-net hospitals

Provide background on current situation at MetroHealth

Describe mission and capabilities

Provide facts about role in providing healthcare in the County

Recount actions to strengthen financial condition

Look forward to a future with health reform

Inform you of the future challenges we face

Gain your support so that we can stay focused on our mission

We welcome questions afterwards

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US Public Hospitals Today► Serve a critical role in their communities, ensuring access to care for

patients who are uninsured or are covered by Medicaid or Medicare

► Public hospitals (National Association of Public Hospitals) are major providers of care in the nation

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

► In 1981, half of NAPH members were traditional City or county owned hospitals. Less than 10% retain that structure today

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A Tale of Four Cities

► St. Vincent’s – closed (April 2010)► Two bankruptcies in span of five years ► One of two New York City academic medical centers ► Uncompensated charity care, rising costs drove closure

► Detroit Medical Center -- purchased by a for-profit healthcare management company (Dec 2010)

► Michigan’s largest charity care provider, Detroit’s largest employer► Bailed out in 2003, struggled to remain in black for past seven years► Need to renew facilities in the face of limited capital drove sale► Purchased by Vanguard Health Systems ($3.4B 2009 revenue)

► Cook County Hospital System – restructuring (2011)► Plans to close a hospital June 1st, Oak Forest Hospital to convert

into an outpatient center► Provides $500 million in free care to more than 800,000 patients► Illinois’ largest provider of health care to the poor and uninsured

► Grady Hospital – future in doubt after years of restructuring► Drowning in debt, In need of $200 million to remain solvent► Loss of local and federal funding forcing layoffs and service cuts► Atlanta’s largest public hospital, 80% of patients are Self Pay or Medicaid

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Significant Number of Public Hospitals Closed in Past Decade

Why Public Hospitals Close

Growing uninsured and underinsured population

Aggressive competition for insured patients and services

Urban Emergency Departments more likely to close

Managed care rates below better-networked systems

Declines in Medicaid reimbursement rates

Public support limited by local budget stress

Escalating cost of technology, personnel, supplies

Margin erosion in highly fixed cost operation

Required upgrades in facilities and technology …

… With limited access to capital

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Cuyahoga County Provides Average Support

Source: America’s Public Hospitals and Health Systems, 2009: Results from the Annual NAPH Hospital Characteristics Survey

15%18%20%21%22%22%

30%31%32%32%

40%41%41%

53%54%57%

70%70%

89%90%

144%

Grady Health SystemBroward Health-Broward General Medical CenterUMDN J-University

Hospital

LAC-LAC+USC Medical CenterAlameda County Medical CenterUniversity Health System at San

AntonioLAC-Harbor/UCL A Medical CenterLAC-Olive View/UCLA Medical CenterParkland Health & Hospital

SystemHarris County Hospital DistrictNYC HHC-Bellevue Hospital CenterSanta Clara Valley Health & Hospital

SystemJPS Health NetworkUniversity Hospital, The University of New Mexico Health Jackson Health SystemUniversity Medical Center of El

PasoThe MetroHealth SystemThe 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)

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Value of County Subsidy Declined as Charity Care Grew

MHS County Subsidy Trend 1981 - 2010

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

0%

50%

100%

150%

200%

250%

300%

350%

2005

2000

1995

1990

1985

2010

1981

County Subsidy ($ in 000’s)County Subsidy as % of Charity Care

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Mission

Academic Health Care System

Committed to Community

Saving Lives, Restoring Health, Promoting Wellness

Outstanding, Life-long Care

Accessible to All

MetroHealth Capabilities

County Owned, 6,400 Employees (#14 in County)

500 Employed Physicians, All SOM Faculty

Engaged in Teaching (CWRU, OU, Residents)

Significant Clinical/Behavioral Research

Strength in Primary Care, Depth in Specialties

Nursing Magnet Status (Top 5%)

750+ bed Acute Care Medical Center

ED with 100,000 Visit Capacity

17 Ambulatory Locations in County

Level I Trauma, Burn Center, LifeFlight, NOTS

Senior Health and Wellness Center

Skilled Nursing Care

Integrated EPIC Medical Record Throughout

Accountable Care Organization Pilot Underway

MetroHealth: Mission-Driven Healthcare Provider

175th

Anniversary2011

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Highest Quality Healthcare

Nationally recognized in trauma, maternal-fetal medicine, burns, neonatal intensive care, pediatrics, cardiology and radiology

Attracts $37.5 million research dollars

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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%

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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

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County H&HS

Subsidy5.6%

Ohio HCAP

GAP$51m

2.2%1.5%

-4.0%

0.3%

Commercial Medicare Medicaid Uninsured Medicare$173m24.3%

Uninsured$119m16.7%

Medicaid$243m34.1%

Commercial$177.1m

24.9%

2006-2010 Change by Payor UninsuredSupport

Total $712.1 million

MetroHealth 2010Operating Expense by Payor

Deterioration in Payor Mix Threatens Survival – HHS Levy Subsidy Inadequate

Serving insured patients is a mandatory funding source

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Getting Into the Black has Been a Priority …

Historically System struggled to break-even; financial distress grew into 2008

Board demanded swift action to avert financial crisis …

… And directed Transformation to address uncertain future

• 2006 Operating Income includes additional one time payment from County• Transformation began March 2008 with $11.3 million operating loss YTD

-$20.0

-$10.0

$0.0

$10.0

$20.0

$30.0

$40.0

2003 2004 2005 2006 2007 2008 2009 2010

Operating Income

($11.9) ($8.2) $3.0

$10.5

($17.3)

$8.7 *

$37.7

$23.8

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Consulting Investments for Operational and Financial Gains

MetroHealth needed to adopt a business-based approach

Critical issues identified:

– Revenue cycle --Hospital operations

– Medical home --Supply chain

– Ambulatory operations --Campus renewal

– Network development

Managed carefully: business case/negotiated/phased/audited

Dramatic knowledge transfer to MetroHealth people

$25.5 million short-term investment for $68 million annually in long-term viability

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Along with Increasing Solvency; Bought Us Time

Key Actions

Refinancing of capital structure

– Build America Bonds issued

– Restrictive covenants relaxed

– Maturities extended

Cleaned up balance sheets to enhance transparency

Upgrades from rating agencies

Prepared to invest to meet patient needs

Balance Sheet Strength

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Health Reform Promises Increased Coverage but at Lower Rates

Future ability to shift cost limited

Downward PressureOn Rates

CoverageExpansion

Disproportionate Share Hospital (DSH) payment reduction

Value based purchasing program in Medicare State/Federal Budget Pressures cause rate

reductions Reimbursement methodology changes, e.g. hospital

acquired infections, bundled payments, etc.

50-70% enrolled in Medicaid or

Medicaid-like health exchanges

Affordable Care Act (2014) -- Impact on MetroHealth

Net Revenue Impact

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Strategic Imperatives for Long-Term Viability

Increase attractiveness to insured patients

Health care increasingly delivered in ambulatory setting -- patient preference, technology evolution, lower cost, etc.

Continue transformation of operations for service and quality improvement and convenience for patients

Prepare for influx of ACA patients; develop a delivery model that serves them effectively and efficiently

Reduce cost to be sustainable at new lower reimbursement rates

We have made real progress with our Patient-Centered Medical Home

Inpatient admissions 34.8% lower than patients not enrolled in program

Emergency Department visits also 6.8% lower than patients not enrolled in this program

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Ambulatory Success Drives System Health

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08

Adm

issi

ons/

Vis

its p

er T

hous

and

Hospital Inpatient Admissions and Outpatient Visits

Source: American Hospital Association, 2005; US Census Bureau: National and State Population Estimates, July 1, 2005

Healthcare increasingly delivered in ambulatory setting

•Patient preference•Convenience•Technology migration•Payor preference•Lower cost

Outpatient VisitsInpatient Admissions

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Exploring All Options To Sustain the Mission

02468

101214161820

MetroHealth "A" RatedHospitals

Average Age of Plant, 2010

• $580 million to reach “A” rating benchmarks

• $400 -- $600 million for new 300-400 bed hospital

Recent engineering analysis assessed facility gaps 63% of buildings beyond useful life Significant investment necessary

to restore original condition

Renewal a valuable opportunity

Upgrade to modern functional spec

Size to need and purpose

Capture energy, maintenance, operations efficiencies

Operations contributing capital to fund renewal

Yea

rs

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Our Mission is Vital to County’s Well-Being

Sustainability threatened Our mission demands we provide the uninsured with high quality healthcare As the safety net we are committed to provide access to all

MetroHealth performs its mission effectively and efficiently

Our recent turnaround bought us time …

… But the fundamental problem is still with us (“no margin, no mission”) We rely on positive margin and County subsidy to support that mission Health reform is not a silver bullet

This condition demands further restructuring and renewal … Restructuring of staff, support expenses to refocused mission Network development of more efficient service locations Campus renewal to focus acute services and reduce fixed costs

Or ???

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Your Support will Safeguard Access to Medical Care for the Uninsured of Cuyahoga County

Support our mission and role in the community

Focus on passing the Levy in 2012 (10 months from now)

Preserve MetroHealth’s subsidy at current levels

Engage and support MetroHealth’s renewal plan for 2014 Ambulatory network development and main campus renewal

Engage capital need and help raise funds

Link access and economic development (in 2014)

Address governance issues through the MetroHealth Board Appoint/reappoint to current openings and support confirmation

Plan for impending retirements/departures

Formalize dialogue through H&HS Committee

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Appendix

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Search Process (example)

~200 Prospects

4 Candidates

3Candidates

Final Candidate

Finalist

Search Firm Panel Interview Campus Visit

Physician Chair

CMO

Board member

5 administrators

Physician Chair

CMO

Board member

5 administrators

3 PCU Executive Directors (physicians)

1 administrator

3 PCU Executive Directors (physicians)

1 administrator

Final Review

External References

RSR Reference Report

External References

RSR Reference Report

Campus Visit

7 department chairs

2 administrators

7 department chairs

2 administrators

Board Panel:

5 members

Board Panel:

5 members

24Note: Excludes Compliance

The MetroHealth SystemApril 1, 2011

Mark J. Moran President and CEO

Mark J. Moran President and CEO

Daniel LewisVice President, HR

Daniel LewisVice President, HR

Alfred F. Connors MDChief Medical Officer

Alfred F. Connors MDChief Medical Officer

Sharon Kelly Chief Financial Officer

Sharon Kelly Chief Financial Officer

John McInally Vice President

Information Services

John McInally Vice President

Information Services

Phyllis MarinoVice President

Marketing & Communications

Phyllis MarinoVice President

Marketing & Communications

John CorlettVice President, Government &

Community Relations

John CorlettVice President, Government &

Community Relations

Kate BrownVice President, Development

Kate BrownVice President, Development

Ronald G. FountainBoard of Trustees

Ronald G. FountainBoard of Trustees

Thomas GoinsVice President

Construction/Facilities

Thomas GoinsVice President

Construction/Facilities

Edward Hills, DDSChief Operating Officer

Edward Hills, DDSChief Operating Officer

Thomas OnuskoSr. Vice President General Counsel

Thomas OnuskoSr. Vice President General Counsel

Building Experienced, Resilient Organization

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Engaged Governance

William S. GaskillVice Chair

30 3/15/12Audit, Finance (Chair) Legal and Government Relations,

Personnel, Space and Facilities, Strategic Planning

Donna Kelly Rego27 3/11/13

Finance,Personnel,

Strategic Planning (Chair)

Brenda Y. Tyrrell, Ph.D

Secretary 10 3/2/11

Finance, Legal and Government Relations,

Personnel, Strategic Planning

Polly Clemo15 3/4/15

Legal and Government Relations, Quality and

Safety, Space and Facilities

Terence Monnolly5 3/3/16

Audit, Space and Facilities (Chair)

Brian Murphy1 3/2/11

Strategic Planning

Thomas M. McDonald2 3/5/14

Audit (Chair), Space and Facilities, Quality and Safety

John Moss1 3/3/16

Finance,Legal and Government Relations, Space and

Facilities

Charles Spain15 3/5/14

Legal and Government Relations, Quality and Safety

(Chair)

Ronald G. Fountain, EDMChair

13 3/5/13Ex officio all committees

The MetroHealth SystemBoard of County Hospital Trustees

(2010)

• ORC 339 County Hospitalo “… preservation of public health…”o “… care of indigent sick and

disabled…”o Non-partisan

• Governed by Board of Trustees o Employ administratoro Control all fundso Define mission and strategic directiono Approve contracts and capital

expenditureso Monitor System performance

• Represent public interesto Transparencyo Stewardshipo Balance o Integrityo Institutional strength

• Pursue role activelyo Committee roleso Monthly cadenceo Regular retreats

• Exemplary citizen leaderso Volunteerso Qualifiedo Committedo Principled

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MetroHealth Select Benefits County Financially

Narrow network option provides healthcare through MetroHealth

Started with Cuyahoga County employees in 2008

County Human Resources Workgroup estimated savings in benefit costs of $3,000-$4,000 per year per employee