CEOS FOCUS ON FINANCES, DOCS

Doctors ranked No. 2 on hospital chief executive officers' list of most significant challenges for 2006, ousting the nation's chronic shortage of healthcare workers from CEOs' top three concerns for the first time in the American College of Healthcare Executives' fifth annual poll.

Financial challenges-such as operating expenses or public and private reimbursement-again ranked as the top concern for CEOs surveyed by the Chicago-based professional association. Despite the industry's record revenue of $544.7 billion and $28.9 billion aggregate profit in 2005 (Oct. 30, p. 8), 72% of chief executives listed finances among their three greatest concerns. That's compared with 67% in 2005.

Physicians-hospital relations jumped into second place with 40% of CEOs ranking doctors as a top-three concern-the strongest No. 2 finish since workforce shortages garnered 58% in 2003-underscoring the rising stakes for hospital CEOs as entrepreneurial doctors have increasingly become a competitive threat.

Thomas Dolan, ACHE's president and CEO, said chief executives recognize that hospitals and physicians both face financial pressures and will need to find new types of joint ventures to offset their respective risks and financial losses.
Doctors' incomes haven't fared as well as other professionals in recent years, he said. Dolan cited a June report by the Center for Studying Health System Change that found physicians' inflation-adjusted income fell 7% between 1995 and 2003.

Meanwhile, U.S. professional and technical workers' real income rose 7%, according to federal labor data. "Nobody in that situation would be very happy," he said. That's prompted physicians to build niche hospitals or diagnostic centers to boost income, Dolan said. Physician-owned facilities often compete with profitable services that hospitals rely on to shore up money-losing services, he said.

Competition from doctors; developing deals that benefit both doctors and hospitals; and physicians' requests for on-call reimbursement ranked as CEOs' top three doctor-related challenges, the ACHE survey found.

"Our future is contingent on partnering with physicians," said Pat Komoroski, president of 125-bed SSM St. Joseph Hospital West, Lake St. Louis, Mo. Located in a fast-growing community roughly 40 miles northwest of St. Louis, St. Joseph Hospital West faces increasing competition from physician-owned niche providers and diagnostic centers, Komoroski said. Private-practice gastroenterologists recently opened a competing endoscopy center, she said.

The hospital's strategic plan through 2011 includes a cancer center joint venture with local oncologists and a proposal to work with private-practice doctors to expand hospitals' cardiology services, including the addition of a cardiac catheterization laboratory, she said.

Overall, Komoroski agrees with the survey's ranking of chief executives' top three challenges. "I would say it's right on target," she said. Komoroski said her organization isn't immune to the financial challenges cited by her peers-particularly rising supply costs-or rising bad-debt expenses, despite St. Joseph Hospital West's emergent and affluent community.

Operating costs, Medicaid reimbursement and bad debt ranked as the three most troublesome financial challenges, the survey found.

The hospital finished an expansion project in January 2006 that added 45 beds and doubled its operating rooms to eight. Admissions rose an estimated 26% in the past year and revenue increased 32% to $290.3 million from $219.8 million in 2005-but supply costs spiked 39%, she said. Komoroski projected the expansion would lower the hospital's operating margin to 3.6% in 2006 from 5.6% a year earlier.

While still waiting for the final month of financial statements for 2006, St. Joseph Hospital West's operating margin is hovering around 2%, which Komoroski called "absolutely frightening."

Meanwhile, the hospital's bad debt rose to $7.2 million through November 2006 from $4.7 million for 2005, which Komoroski said she credited to the shift toward high-deductible health benefits, particularly among the self-employed professionals or employees of small firms who live in St. Joseph Hospital West's service area. Many are "an accident away" from bills they cannot afford despite well-paying jobs, she said.

Not everyone agrees with the survey's top three issues. Workforce shortages, which fell to fourth place in 2006, still rate high among Steven Nockerts' concerns. "I'd still rank that in the top three," said Nockerts, CEO of 25-bed Richland Hospital, in rural Richland Center, Wis. The hospital employs 65 registered nurses. Thanks to the industry's chronic demand for nurses, Richland Hospital's executives review RN salaries every six months and make "changes where and when appropriate" to remain competitive, Nockerts said. "It's a constant battle."

Quality and patient safety ranked fifth and sixth, respectively, for a second consecutive year. However, a growing number of CEOs listed those two issues among their three biggest worries in 2006; 29% of chief executives cited quality as one of their top three concerns last year. That's compared with 23% in 2005 and 18% a year earlier. As for patient safety, 27% said it ranked among the most-pressing worries in 2006, up from 20% in 2005 and 16% in 2004. Roughly 870 CEOs, or 41% of those surveyed, responded to the October poll.

Dolan praised chief executives' increased attention to quality and patient safety, but defended prior years' lower percentages on those issues. With so many significant concerns, "The urgent pushes out the important," he said.

CEO TOP CONCERNS

Hospital chief executives fretted most about money, doctors and the uninsured in 2006

Financial challenges 72%
Physician and hospital relations 40%
Care for the uninsured 37%
Personnel shortages 30%
Quality 29%
Patient safety 27%
Government mandates 23%
Patient satisfaction 16%
Capacity 11%

Source: American College of Healthcare Executives
Keyword : Health Insurance

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By Melanie Evans