Minnesota Hospital Association


May 30, 2013

Health Care Leader

In this issue:

MHA Summer Trustee Conference sessions focus on health care transformation

The Minnesota Hospital Association’s (MHA) Summer Trustee Conference, July 12-14 at the Arrowwood Resort and Conference Center in Alexandria, will help trustees navigate transformation, patient safety and the future of health care. Session highlights include:

  • Blue Ribbon Panel Report: Governance Practices in an Era of Health Care Transformation features Center for Healthcare Governance President/COO and American Hospital Association Senior Vice President (Chicago, IL) John R. Combers, M.D., who will share the findings from interviews with board members, executives and clinical leaders, and analysis by an expert panel of how boards are evolving to guide their organizations through the profound changes now underway. You will learn what the study identified as the most important contributions boards can make to help their organizations prepare for significant changes, as well as the conversations boards have not yet had that would move their organization’s strategic plan forward.
  • In a second, breakout session, Making a Difference for Patients: The Governance Role, Dr. Combes will highlight quality initiatives from throughout the country and how trustees can provide the safest environment for their communities.
  • During a keynote presentation, Minnesota’s Health Insurance Exchange and Potential Impacts for Providers, MHA Vice President of Regulatory and Strategic Affairs Matt Anderson will explain the key features of Minnesota’s health insurance exchange, MNsure, and how its implementation is predicted to affect hospitals and health systems in every corner of the state.
  • This is just a sampling of what the Summer Trustee Conference has to offer. For more information or to register, download the conference brochure.^top of page

    Laraway named MHA Trustee of the Year

    St. Cloud Hospital board member honored for service

    Each year, the Minnesota Hospital Association (MHA) honors a hospital or health system board member who has dedicated time and skill to the preservation of health care via its Trustee of the Year Award. This year’s winner is Steve Laraway, board member at St. Cloud Hospital.

    Laraway, a St. Cloud hospital board member since 2005, has served as chair for the past two years. He has also served as trustee director on the Minnesota Hospital Association Board of Directors for six years; attended numerous state and national hospital governance conferences; and championed “deep dive” presentations for his fellow hospital board members on topics ranging from physician recruitment to designing care delivery to maximize value.

    Fellow board member Teresa Bohnen, president of the St. Cloud Area Chamber of Commerce, says: “Steve is visionary in working with the board and administration in developing an approach to dealing with the impact of health care reform and guiding our strategic planning process so St. Cloud Hospital is well-prepared/positioned for the future.”

    Laraway was honored at MHA’s Annual Awards Banquet on May 17. ^top of page

    The “top ten” facts every hospital trustee should know about HIPAA

    The Health Insurance Portability and Accountability Act of 1996 (HIPAA) establishes safeguards to protected the privacy and security of protected health information (PHI) that is maintained by hospitals and other HIPAA covered entities. In 2009, HIPAA was amended by the Health Information Technology for Economic and Clinical Health Act (HITECH) and its several sets of federal regulations, all of which continue to enlarge HIPAA accountability and the risk of an enforcement action by the U.S. Department of Health and Human Services’ Office of Civil Rights (OCR).

    The 2013 Summer Trustee Conference will feature Susan Ziel, a nurse attorney and partner with Krieg DeVault LLP, who will provide an important HIPAA update for trustees. For now, Ziel offers up the following list of the “top ten” facts that every hospital trustee should know about HIPAA.

    1. PHI is that confidential information which is created or received and maintained by a hospital in the delivery of health care services to its patients. PHI can exist in many forms, whether it be a fax copy of a laboratory report, a conversation in an elevator, a laptop that stores patient billing information or a trash can filled with old patient medication records.
    2. PHI should only be accessed on a “need to know” basis by authorized users for authorized purposes, as in the case of a physician who is authorized to access a patient’s PHI for treatment, peer review or other authorized purposes. Absent any “need to know” and authorized purpose, a physician’s access to PHI out of curiosity, for example, would represent a HIPAA violation.
    3. PHI should only be disclosed by hospitals in order to perform certain treatment, payment and business functions and otherwise, only to the extent required or permitted by law. Beyond these typical disclosures, hospitals must obtain a HIPAA-compliant authorization that is signed by the patient who is the subject of the PHI, or alternatively, the patient’s legal representative, if applicable.
    4. Hospitals must adopt certain administrative, physical and technical safeguards in order to protect the privacy and security of its PHI, in addition to any electronic media, such as a computer, laptop, tablet, mobile phone, “jump” drive, back up tape, CD or DVD that stores the PHI.
      • Examples of administrative safeguards include the appointment of a privacy/security officer, policies and procedures, orientation and training programs, confidentiality agreements and standard methods for identifying, investigating, mitigating and correcting HIPAA violations.
      • Examples of physical safeguards include secure premises, locked offices and file cabinets, location of electronic media and PHI in supervised and/or secured locations, shredding of PHI before disposal.
      • Examples of technical safeguards include those intended to protect PHI and electronic media that is either “at rest” (e.g., workstations, servers, mobile devices, document storage) and PHI “in motion” (e.g., encryption of mobile devices and email involving PHI, prohibition on texting involving PHI).
    5. A hospital’s failure to adopt and fully implement these administrative, physical and technical safeguards could result in an unauthorized use or disclosure of PHI under HIPAA, or alternatively, a breach of unsecured PHI under HITECH, both collectively referred to as a “breach.”
    6. Examples of a breach include, but are not limited to the following: (a) a misdirected fax containing a lab test result that is received by a person who does not “need to know” the results; (b) an elevator conversation about a patient newly diagnosed with a communicable disease that is overheard by the other persons in the elevator; (c) the loss or theft of an unencrypted laptop that stores patient billing information; and (d) the disposal of old patient medication records that have not been previously shredded.
    7. A breach must be reported not only to the patient(s) whose PHI was the subject of the breach, but also to the OCR. The state’s attorney general must also be notified to the extent any personal information such as an individual’s social security number, was a part of the PHI.
    8. A breach may result in a patient complaint to the OCR or the attorney general. A breach can also prompt an independent investigation by the OCR, the U.S. Department of Justice (DOJ) in the event of suspected criminal activity, and also the state’s attorney general.
    9. A breach can result in an enforcement action by the OCR that imposes civil money penalties on a hospital or even an individual hospital representative, ranging from $100 to $50,000 per violation, capped at $1.5 million. Criminal penalties can also be imposed by the DOJ.
    10. An effective HIPAA compliance program is essential in order to safeguard the privacy and security of PHI and to limit the risk of a breach that could have a detrimental effect on a hospital’s resources, relationships and reputation.

    Please plan to attend Ziel’s informative HIPAA update at the Summer Trustee Conference.
    ^top of page

    The strength of combined voices and a consistent message

    By Mary Krinkie, Vice President, Government Relations, Minnesota Hospital Association, St. Paul

    The 2013 legislative session adjourned on May 20 with state lawmakers completing their necessary work of addressing the state’s $627 million projected budget shortfall and passing all of the major appropriation bills to fund state government for the 2014-15 biennium. This has been a successful year for MHA and our members at the Capitol, being able to advance, alter and impede legislation that would either enhance or intrude on a hospital and health care system’s ability to care for patients of their community.

    In January, MHA identified five key areas that were priorities for the 2013 legislative session. Through the hard work of our members and trustees, it is gratifying to report a favorable outcome on each of these key issues.

    Keeping staffing decisions with hospitals and health care professionals (Chapter 51)
    First and foremost, MHA’s top policy goal for the year was to prevent a government imposed mandate establishing a nurse-to-patient staffing ratio. While we would have preferred no legislation on the nurse staffing issue, the final bill language reflects an acceptable compromise for the majority of our members. With a very pro-labor legislature and governor, this issue has been one of the biggest legislative challenges that MHA has faced in many years.

    Without the early, persistent and persuasive advocacy efforts of MHA members and trustees in particular, this outcome would not have been obtainable. Our combined voices with the same consistent message really did make a difference. We showed how effective we can be at the grassroots level when we unite on an issue. Your work of the past year will yield positive results down the road. Many of the Minnesota Nurses Association’s staunchest legislative allies are now on the record saying that while they were willing to support this legislation, they would not support mandated staffing ratios. We will have to remain vigilant and remind them of those statements, because this issue is not likely to be settled by the current legislation.

    The work now turns to helping MHA members with the implementation of the law, which requires the reporting of nurse staffing levels and for the Minnesota Department of Health to conduct a study of the correlation between nurse staffing levels and patient outcomes. MHA will provide input to the study work group and also try to minimize any new data collection burdens on hospitals.

    Expanding Medicaid to 138 percent of the Federal Poverty Guidelines (Chapter 1)
    Early in the session lawmakers moved forward with implementing one of the most important provisions of the Affordable Care Act, the expansion of the Medicaid program to include adults without minor age children who earn less than 138 percent of the Federal Poverty Guidelines. Minnesota was uniquely positioned to opt into this expansion because much of this population was already eligible and had been previously covered in the MinnesotaCare program. This Medicaid expansion will be paid for with federal dollars for the first three years and then moves to 90 percent federal financial participation.

    The expansion of Medicaid for low income individuals earning less than $15,000 a year will be good for the state’s budget, good for reducing provider uncompensated care and good for the individuals who will now have insurance coverage and access to a broader benefit set without MinnesotaCare premiums, enrollment waiting times, and a $10,000 annual inpatient hospital cap.

    Implementing a Minnesota-based health insurance exchange (Chapter 9)
    State policymakers had to decide whether Minnesota should operate its own health insurance exchange or opt into a federally mandated exchange. In typical Minnesota “can do” attitude, Minnesota is moving forward with a state-run exchange, now called MNsure. MHA advocated for and believes this approach will best serve Minnesotans. MHA is pleased that the funding for MNsure is not the provider tax, but rather a premium fee on all products sold through the exchange, starting out at 1.5 percent and increasing to 3.5 percent in 2015 and 2016.

    Restoring Medical Education and Research Costs (MERC) funding (Chapter 108)
    Restoring MERC funds was the highest budget restoration item for MHA. We are pleased to report that the final Health and Human Services bill includes $12.8 million in state funds, restoring MERC to its pre-2011 funding levels. This money will leverage federal matching funds and will help hospitals, clinics and pharmacies maintain their training programs for our state’s future physicians, advanced practice registered nurses, pharmacists and dentists. Data shows that if we train health care professionals in Minnesota they are more likely to remain in Minnesota.

    Supporting new Medicaid payment models
    MHA did not want legislation to pass that would hinder the ability of our members to move forward with innovative care delivery projects. Working in collaboration with the Department of Human Services, five hospitals are participating in Health Care Delivery System (HCDS) demonstration projects, with another request for proposals having been recently released. For the first time in many years, payment cuts to providers were not under consideration and the final Health and Human Services bill includes a 5 percent payment increase for physicians and a 3 percent payment increase for outpatient hospital services in Minnesota’s fee for service Medicaid program. In addition, with the help of advocacy efforts of MHA members, the state did not rely on an increase in the hospital surcharge as a funding mechanism for the Department of Human Services’ budget.

    The pace of health care legislation in Minnesota is almost staggering. January seems like ancient history, not five months ago. Numerous other bills will now become law, while literally thousands of other bills did not survive the legislative process. Once again, thank you for your outstanding work in supporting the legislative priorities of the hospital community. Defeating mandated nurse staffing ratios would not have been possible without the entire team’s effort! ^top of page

    The science of patient safety

    The role of leaders in setting organizational outcomes

    As leaders of your hospital, your role includes setting the mission and vision for the organization and ensuring the cost-effective use of resources. Among the six key areas of responsibility for the board of trustees is the responsibility for ensuring high quality care. In an era of increased accountability and transparency, hospital governing boards have an even greater responsibility to set the tone for an organizational culture that embraces patient safety and quality. That is, the board must ensure that patient safety is a focus and that the structures and processes are in place to support it. “Part of the board’s responsibility is to weigh organizational resources and priorities,” said Robert Moravec, M.D., an MHA consultant on the Partnership for Patients contract. “If the hospital truly has a patient safety focus, the board will allocate resources to ensure patient safety goals and outcomes are met.”

    “Although the board is not responsible for the day-to-day operations of the hospital, it needs to understand the science behind patient safety to ensure that measures are being taken to ensure the delivery of high quality and safe patient care,” notes Dr. Moravec. In general, board members need to understand the four principles of patient safety:

    1. It is the system that must be designed for success. Individual and personal performance is not the driver of sustainability. Medicine requires team work and a hospital cannot build safe patient care by focusing on one individual. Safety is everyone’s responsibility. The fallacy is that hard work and vigilance are sufficient for success.
    2. The systems must be designed in a way that makes safe care hard to fail. Processes should be standardized where possible and appropriate. Create independent checks. “It is most important to learn from our mistakes and when things go wrong” says Dr. Moravec. The five most important questions are:
      1. What happened?
      2. Why did it go wrong?
      3. What would you fix?
      4. How would you fix it?
      5. How will you know it worked?

    3. Recognize that these principles apply to both technical and team work. Most adverse events are the result of communication breakdown between teams and team members. In a hierarchical system like hospitals it is easy for those at the top to ignore information from others. Often, those with the most important information directly affecting safe care are the day-to-day staff at the bedside with the patient. It is important for the entire care team to have the same or a shared mental model where everyone has the same idea and plan for what is expected.
    4. Teams make wise decisions when there is diverse and independent input. “Medicine is a team sport,” says Dr. Moravec. “It is important for the board and senior administration to set the culture for everyone to be able to speak up when they sense something is not right, just as it is important for leaders to listen and respond when a voice expresses concern about a patient safety issue.”

    How does the board ensure this model is in play?

    1. Ask for reports and data on patient safety. But it is not enough to just look at the data. Boards should come to expect that the data is personalized.
    2. Dig deeper into the actual patient stories behind the numbers and graphs. How many adverse health events has the hospital had this month, who was it and what happened to the patient?
    3. Set the expectation that each board meeting will begin with a story of patient care (both positive and negative). By personalizing the story, it helps connect trustees with the safety improvement work and makes the data less abstract. In hearing the stories, the board should ask what was learned from the experience.
    4. Finally, ask for an action plan for achieving a specified goal. “The goal should be informed, achievable, and transparent to the whole organization,” notes Dr Moravec.
    ^top of page

    All eyes on the horizon: trends to watch in health care

    By Bob Clarke, CEO, Furst Group, Rockford, IL

    With health care reform a reality, you might think health care leaders could finally exhale and look out at a landscape with a bit more certainty about the future. But sequestration hurt reimbursements and other obstacles loom. One thing, however, is sure: there won’t be any dust on the calendars of health care decision-makers, who have much to do in a short amount of time as reform’s deadlines approach.

    Here are a few other trends to keep your eye on in the months ahead:

    Squeeze play. Independent community and rural hospitals — and Minnesota boasts many of these — are carefully considering their future, as the swell of mergers and acquisitions imposes unwanted pressure. Some have joined systems or affiliated with a larger player, but many believe they have a commitment to their community to stand alone and resist the pressure. I firmly believe that partnerships do not have to equal a merger or sale. There are opportunities for community and rural hospitals to not only survive but thrive in today’s marketplace.

    The march of the ACOs and exchanges. The number of ACOs continues to grow as reform takes hold as a reality. Tellingly, for-profits are sitting this one out. And when it comes to exchanges, a number of GOP-controlled states are opting for the sidelines as well, as the government scrambles to get its own infrastructure up and running in those vacuums. Will it be ready in time? Hard to say.

    Political fireworks. Reform remains a divisive force in the land, with congressional GOP leaders still looking for ways to block its implementation. The Affordable Care Act (ACA) is even more of a lightning rod at the state level. For example, nine Wisconsin lawmakers wanted to pass a bill that would allow the state to arrest any federal workers who attempt to enforce the ACA’s requirements in their state.

    Learn the lingo. Former Modern Healthcare editor David Burda notes that “managed by Medicare” and “what’s your number?” are the new catchphrases in the health care industry as organizations wrestle with ways to cut operating costs so they can stay in business at a time when Medicare and Medicaid reimbursement rates are dropping.

    Whose job is it anyway? DaVita buys Newt Gingrich’s think tank. Duke and Lifepoint team up. Health systems roll out insurance products. Insurers buy hospitals. Look for more of the above as consolidations continue — not just consolidation of care, but of financing and insurance.

    Watch the quiet giant. We can talk all we want about United, Wellpoint, CHA or Kindred. They have a large footprint in the industry and deservedly so. But watch to see what Walmart does in the months to come and beyond. They are already providing immunizations. They recently contracted with the likes of Mayo Clinic and Geisinger to provide certain types of free operations for employees. On the financial side, they recently partnered with American Express to provide free checking accounts to consumers. What’s next?

    A new breed of executive. Not that long ago, many health care executives didn’t even have smartphones. The health care leaders of the future will need a skill set that incorporates technological savvy with the proliferation of information technology. But they’ll also need to be skilled in assessing risk like an underwriter, predictive modeling, and understanding analytics to measure clinical and financial performance. Watch to see a new generation of leaders begin to make their mark in an industry where most of the workers, including the C-suite, view their jobs as a calling. ^top of page

    Fact sheets on MHA federal policy priorities available online

    Documents outline initiatives and positions on patient safety and quality, health care reform and more

    The Minnesota Hospital Association develops a variety of fact sheets to help inform legislators, the media and other stakeholders about important issues impacting Minnesota’s hospitals. Fact sheets also allow MHA to explain its position and request actions from Congress on key health care issues. The briefs outline the association’s initiatives and positions on the following issues:

    For more information contact Ann Gibson, MHA’s vice president of federal relations/work force, (651) 603-3527. ^top of page

    Evolving health care delivery: the cultural imperative

    By Seth Finestack, MS, CPF, Manager, Wipfli, Edina, MN

    The fusion of major changes in the U.S. health care delivery system carries the potential for organizational meltdown. If delivery system leaders can recognize the fundamental changes to assumptions, behaviors, and systems required of their organization, it is possible to transform the culture and organization, and move successfully into the next generation of profitable, patient-centric health care. If they fail to properly handle the caustic elements of the change at hand, the chain reactions may be fatal.

    At some point in our lives, each of us can expect to become a patient needing care from the U.S. health care delivery system. Our objective is clear, a return to health after an acute or chronic disease event. For some, the “new normal” requires a modified definition of desired health status driven by a recent diagnosis. The status quo has changed. We seek to buy health status outcomes with some certainty — understanding that we will need to go through various processes of diagnostic testing, clinician visits, and procedures on the journey to the desired health status we can literally live with.

    Most industries tend to continue operating status quo until external market-driven events require a change to status quo. In March 2010, the U.S. health care delivery industry experienced a system-wide “wake up call” when decades of uncontrolled cost increases, advocacy for process over clinical outcomes, and too much focus on fixing sickness versus maintaining wellness culminated in the Affordable Care Act (ACA). Adherence to Centers for Medicare and Medicaid Services’ “triple aim” definition of an exceptional patient experience while lowering the cost per episode of care and maintaining the health status of a defined population is the new strategic/operational focus.

    This article examines how a fundamental change in clinical culture will be necessary to achieve a new normal of patient-centered care — integration of processes into episodes of care (outcomes) with exceptional patient experiences. Leadership needs to embrace this kind of transformation in order to remain sustainable and relevant. Proactive reform requires the clinical integration of the preventative, diagnostic, and treatment services to a given population via a lower cost model that enhances desired outcomes, e.g. the “right care” at the “right time” in the “right setting” at the “right cost” with the “right outcome.”

    Clinical integration is often defined as: “A structured collaboration among a hospital/health system and physicians within an active and ongoing program designed to improve the health, quality and efficiency of health care services across the community.” So, why clinical integration and why now? The key reasons center on health reform requirements, greater demand for cost/quality reporting and process improvements, a shift of cost management from payers to providers, and the overall fiduciary responsibility of a health care delivery organization to improve both access and health status to both communities and patients served.(1)

    Third-party reimbursement will rapidly migrate over the next few years from fee-for-service (FFS) to a value-based (outcomes) focus. Clinical integration is a way for physicians and health systems to bridge the gap between the FFS reimbursement world and tomorrow’s value-based payment world. Clinical integration takes one of two paths, often simultaneously: top down, involving a single signature, managed care contracting organization like an accountable care organization (ACO); or bottom up, involving a system’s transition to large-scale performance improvement initiatives centered on physician engagement, staff development plans, etc.

    Most current business models will need to transition, if not completely transform, in support of these new coordinated care imperatives, e.g., patient-centered medical homes (PCMHs)(2) and ACOs, to name a few.

    Since most care is coordinated by physicians, clinical integration requires physician engagement. Engagement should be continuous, long-term in duration, and centered on listening to and deliberating with medical staff members to design better care delivery processes. This should occur through the use of multiple strategies/techniques to reach all physicians and find common ground. Conversely, engagement is not a quick fix to a problem/issue, a research tool or survey, a forum for debate, a publicity tool, or a strategy for educating/persuading individuals toward compliance. Although a physician might be the clinical lead for a care management process, these principles apply to all staff involved with care delivery, clinical and administrative alike.

    When new and unknown elements — patient-centered models, clinical integration, physician engagement in decision-making and implementation, and all the sub-elements of the ACA — are blended in organic systems like our health care delivery system, the process and results carry a high risk of caustic reactions. On the other hand, a methodical, behaviors-based approach to organizational change can evolve the culture needed for continued success. Building engagement and supportive processes for all who come into contact with patients is one key to creating more effective, efficient models of care delivery. In order to build engagement, an organization must focus inward on organizational culture.

    Why Culture Matters
    Organizational culture consists of three levels, (listed in order of difficulty to change with first being most difficult):

    1. Assumptions
    2. Shared values
    3. Behavior patterns

    Behavior patterns are seen, but they are based on the values (stated or unstated) and basic assumptions that are almost always invisible and not articulated. Unfortunately, the operational “quick fixes” of the past — reimbursement acceleration tactics, patient satisfaction initiatives, and the like — are not going to fundamentally change care delivery. They won’t change every day clinician behavior or the orientation of resources around a new value system. When an industry experiences a transformation, performance improvement is not sufficient to address intrinsic tensions. It’s the proverbial bandage for major organ failure. The entire system —leadership, strategic plans, business models, and operating procedures — needs to be under the microscope. All the evidence and research about change show that culture matters more than almost any other factor, including governance and strategic plans.

    Culture, according to Dr. Robert A. Cooke, is the behaviors that members believe are required to fit in and meet expectations within their organization.(3) What happens, then, when new behaviors are needed for a highly integrated and patient-centric business model? In a recent Becker’s Hospital Review, Alan Zuckerman, FACHE, FAAHC, contends “health care executives must recognize that their organizations’ cultures are at odds with this new posture and work to reshape the cultures to make them more adaptable, flexible and risk-bearing.”(4)

    What’s Wrong With the Culture?
    Would anyone make a major diet or fitness change without first stepping on the scale? Of course not.

    An organization’s culture might have all the elements necessary to successfully evolve in the new health care marketplace, but more likely there will be aspects of the culture that do not align with collaborative decision making, physician engagement, or the achievement of ACA-mandated outcomes.

    To effectively evolve culture for a new future, organizations must first measure and understand what their culture is today. All organizations have success embedded in their cultural DNA, and all have developed organizational “habits” that are barriers to major change. The key, as with good patient care, is in the diagnosis.

    How Can Culture Be Diagnosed?
    Cultural assessments come in all shapes and sizes. Successful data gathering efforts begin with the end in mind. If the goal is to fundamentally reconstruct what drives the systems and behaviors to achieve completely new methods and outcomes, organizations need to probe more deeply. Edgar Schein, the godfather of the study of organizational culture, says organizations need to get down to basic assumptions.(5) This means examining and making clear the deep-seated reasons clinicians practice medicine, provide care and operate in shared practice models in the first place.

    Cultural anthropologists love to use the observation of artifacts to assess groups of people, especially those that no longer exist. Organizations can and should do the same for their living, breathing health care delivery systems. Here are some key questions to answer in the assessment phase:

    • To what extent do administrators actively engage physicians, nurses, and staff in strategic planning, budgeting, and “crisis” decision making?
    • What is measured and reported on a regular basis? To who are results reported? What are the resulting actions?
    • What is considered great behavior from a physician? What is acceptable? Tolerated? Unacceptable?
    • How are individuals compensated?
    • What is the physical space like? Where are the improvements made first? Last?
    • What stories dominate the break rooms, labs, and nurses’ stations? Where did they come from? Why are they important?

    The answers to these questions, along with the traditional measurement tools noted earlier, provide the organization with a clear view of the current culture. Once understood, a planned roadmap for cultural change can be created collaboratively to address future challenges and provide strategies and tactics for transition.

    Wipfli views cultural change as central to localized health care delivery reform. It’s not a slide show or a programmatic fix. Culture is how an organization is organically comprised to deal with everyday problems and systems and how it achieves long-term results.

    This article is an introduction to our upcoming white paper on tactics and tools to assess and address the necessary cultural changes in a new care delivery environment. Please contact Perry Hanson or Seth Finestack if you are interested in receiving a copy of the white paper.


    1. Patient-centricity: A Transformational Journey for Administrators, Physicians and Trustees, by Perry Hanson, MHA, Wipfli LLP
    2. Patient-Centered Medical Home: What to Expect on Your Path to Becoming One, by Gina Koebke, Wipfli LLP
    3. Behavioral Norms and Expectations: A Quantitative Approach to the Assessment of Organizational Culture, by Robert Cooke and Denise Rousseau, Group & Organization Management, March 1988
    4. Innovation in Healthcare Leadership: The Time is Now, by Alan M. Zuckerman, FACHE, FAAHC, Becker’s Hospital Review, July 11, 2012
    5. Organizational Culture, by Edgar Schein, American Psychologist, February 1990
^top of page

Eight questions for improving financial performance

By Jamie Townsend, B.E. Smith, Lenexa, KS

The path to a healthy bottom line sounds simple: maximize volume and reimbursement while delivering care in the most effective manner, and reduce cost. In practice, it’s anything but simple. With ever-changing regulatory and reimbursement requirements, astute financial management is crucial to your organization’s success, if not survival. You must ask some tough questions to steward your organization through these challenging times.

  1. Have you determined your organization’s key success factors to achieve optimum profitability?
    Profitability requires a focus on reimbursement combined with efficient care delivery and effective productivity management. The entire financial picture must be taken into account — for example, if leadership focuses on revenue cycle without equal emphasis on expense management, profitability will suffer. This balanced approach should be applied throughout your organization, particularly in multi-facility health systems that provide a range of services, each with different financial and care provision characteristics.
  2. What is your organization’s financial performance potential?
    Missed opportunities in revenue and savings are common. In today’s economic environment, many healthcare leaders believe even a small margin, such as 2 to 3 percent, is an indication they are doing well. Actual margin potential might be 10 percent, but management systems to ensure it reaches that level may be lacking. Identify opportunities by evaluating operations piece by piece to determine areas for improvement. Then, create processes to accurately monitor the financial picture for the organization and for each area reviewed.
  3. Would improving contract negotiation or cost reporting uncover unrealized reimbursement opportunities?
    Contracts and cost reporting are extremely complex, but have a significant impact on an organization’s ability to generate margin. Examine your contracts to ensure rates are balanced with costs and reimbursement is optimized. For example, you may be losing money on commercial contracts with an inpatient per diem and no carve-outs (i. e., an inpatient rate without consideration for surgical procedures). Examine the fine print in insurance contracts — clauses that erode revenue or delay payment are common.
  4. Do you optimize reimbursement through your case management and patient access process before/at the point of patient registration?
    Advance information is the key to optimizing reimbursement at the access point. Arm your case managers, patient access staff and others involved in the patient care cycle with the information they need to make sure that the patient’s admission and plan of care are in sync, and pre-certifications and medical necessity documentation are verified prior to treatment.
  5. How well do your case managers know each payer and service type?
    Reimbursement criteria can change and are different for each payer (even within payers). Establishing a system that makes this information accessible to case managers will set them up to succeed. For example, in a complex multi-hospital system, you might tie it to payer contract negotiation. Each time a finalized contract is entered into the financial system, critical information is provided to everyone who needs it, including case managers.
  6. Do your staffing ratios and skills mix ensure optimum patient care and productivity in each department?
    It’s important to adjust staffing based on patient volume and acuity. Skill mix also needs to be appropriate — some areas must be staffed at 100 percent RNs, while in other areas this mix would be greater than the care and service needs require. Track progress by measuring productivity. Measure and monitor your organization’s metrics, and compare results to benchmarks from top-performing organizations, other respected peers and established industry ranges. Use the comparison to understand how your organization is an exception or may be underperforming.
  7. Do your managers know their areas’ key factors for financial success, and do they have the tools to succeed?
    For managers and directors to successfully deliver their part of the revenue cycle, they must know what affects profitability within their span of control and how to implement positive change. Innovative leaders employ a management approach that integrates clinical and financial performance. Develop your organization’s leaders’ capabilities in these key areas early in their careers — it will not only improve performance, but will build a sustainable leadership base for your organization.
  8. How does your revenue cycle management adapt to change?
    Proactively managing the revenue cycle will enable you to take advantage of all opportunities. Don’t wait until the patient has left the facility and the business office is processing charges. Successful leaders understand that the revenue cycle begins at pre- admission and ends at the successful resolution of the claim. Build a process that defines the cycle for your organization, as well as the steps and accountabilities throughout. Factors to consider include:
    • How will you negotiate contracts to realize optimum rates and payment terms?
    • If reimbursement criteria change, how rapidly do you know and distribute the information? How will you adjust your systems, such as documentation and charge capture, to adapt and communicate those changes?
    ^top of page

    Fall Trustee Regional Meeting Series

    Save the Date
    MHA will hold its annual series of regional dinner meetings for trustees in October in and November. Please mark your calendar for the meeting closest to you.Registration and dinner will begin at 5:30 p.m. and the program will run from 6 – 7:30 p.m. Look for more information on program topic and registration in late September.

    • Oct. 22 – Fairview Ridges Hospital, Burnsville
    • Oct. 29 – Douglas County Hospital, Alexandria
    • Oct. 30 – District One Hospital, Faribault
    • Nov. 6 – St. Joseph’s Area Health Services, Park Rapids
    • Nov. 7 – St. Luke’s Hospital, Duluth
    ^top of page

    Governance of nonprofit hospitals and health care systems

    By J. Patrick Plunkett, Larkin, Hoffman, Daly & Lindgren, Ltd., Minneapolis, MN

    Nonprofit hospitals and health care systems are faced with many of the same legal issues and concerns as for-profit businesses, particularly with respect to employee matters and contractual relationships. In addition, hospitals and health care systems must comply with increasingly complex laws and regulations directed specifically to the health care industry. Given the current environment, it is not surprising that the governing boards of some nonprofit health care organizations overlook (or are unaware of) the separate laws that are applicable to the organization by reason of the organization’s nonprofit and tax-exempt status.

    The terms “nonprofit” and “tax-exempt” are not synonymous even though most nonprofit organizations are, to one extent or another, “tax-exempt,” and most “tax-exempt” organizations are also “nonprofit” organizations. In general, a non-profit organization is an entity formed under state law for purposes not involving financial gain to private shareholders. In Minnesota, most nonprofit organizations are formed under or governed by the Minnesota Nonprofit Corporation Act (the “Act”). The Minnesota attorney general has authority to investigate Minnesota nonprofit corporations and to commence legal proceedings to ensure compliance with the Act. A “tax-exempt” organization is an organization which is exempt from one or more: (a) federal or state income taxes; (b) federal or state excise taxes: (c) state property taxes; or (d) state sales taxes. In most instances, “tax-exempt status” must be separately sought and received from each of the separate taxing authorities. The Internal Revenue Service, the Minnesota Department of Revenue and local taxing authorities are authorized to ensure compliance with their respective requirements for tax-exempt status.

    A nonprofit health care organization is required by the Act to be managed by or under the direction of a board of directors or board of trustees. The role of the board is to provide overall direction and governance for the organization, not day-to-day management. Some of the key functions of the board include: (a) defining the mission of the organization; (b) strategic planning; (c) appointing and removing the president or comparable executive employee; (d) reviewing management’s performance; (e) reviewing and approving finances; (f) reviewing and approving long-term commitments; (g) adopting and amending the organization’s articles of incorporation and bylaws; (h) reviewing and approving Form 990 (per IRS requirements); and (i) approving contracts with professional fundraisers (per Minnesota law).

    The board generally takes action at a duly called meeting (which may include directors who participate in the meeting remotely via telephone). Proper minutes of the meeting should be maintained. The board may also take action by written or electronic action signed by all of the directors. (The articles of incorporation of the organization may permit the board to take written or electronic action by fewer than all of the directors). The use of proxies by directors is not permitted in Minnesota. In addition, the polling of directors, outside of a duly called meeting, either in person or via the telephone, does not constitute proper action, although it may indicate the “sense of the board.”

    The board may establish committees having the authority of the board. In doing so, the board should specify the power of each committee, particularly as to whether the committee has the authority to take final action with respect to a matter, or whether the role of the committee is to investigate a matter and make recommendations concerning the matter to the board (or another committee), which has the authority to take final action.

    Individual directors are charged with certain “fiduciary duties,” commonly referred to as the “duty of care” and the “duty of loyalty.” The duty of care requires directors to: (a) act in good faith; (b) use ordinary care; (c) be informed; and (d) attend and participate in board activities. The duty of loyalty requires directors to: (a) act in the best interests of the organization; (b) disclose conflicts of interest and comply with the organization’s policies and procedures concerning conflicts of interest; and (c) maintain confidentiality. The law does not require directors to give money to (or get money for) the organization, although many organizations include these requirements as a condition for serving on the board.

    The law imposes on a nonprofit, tax-exempt organization the requirement that the organization follow and comply with: (a) its articles of incorporation and bylaws; and (b) applicable law. The Minnesota attorney general seems to take the position that this “duty of obedience” also applies to individual directors. However, many of the examples that the attorney general uses to describe the application of the duty of obedience to directors are clearly covered by the duty of care. Since individual directors do not have the authority to act for the organization, or to cause the organization to comply with its governing documents or applicable law (unless specifically authorized by the board or the organization’s articles or bylaws), there is a strong legal argument that the duty of obedience is not an “individual” duty. Rather, as a part of the duty of care, the board must be diligent in establishing corporate policies for compliance with applicable law, and overseeing management’s performance. ^top of page

    Trustees encouraged to participate in Minnesota Hospital PAC/American Hospital Association PAC golf open

    The Minnesota Hospital Political Action Committee (PAC) and American Hospital Association PAC leaders encourage trustees to participate in the groups’ premiere fundraising event on Monday, Aug. 19 at Territory Golf Club in St. Cloud.

    The PAC golf open is a great opportunity to spend the day networking with hospital CEOs and top management team members while also raising money for the PAC. Trustees may participate for $200. Trustees who have already contributed $200 or more are qualified to participate at no extra charge. However, they must register for the event with PAC staff.

    Participating in the PAC helps support state and federal candidates who understand the important role hospitals play in their communities.

    Those who are unable to attend the golf open are encouraged to consider contributing at lower club levels created exclusively for trustees. Under that arrangement, trustees may contribute $25, $50 or $100 to be recognized as leading contributors to their hospital’s PAC goal.

    Of course, trustees may still participate at club levels set by the American Hospital Association PAC — those levels are $350, $500 or $1,000. Contributors who give at those higher levels will receive additional acknowledgment in national materials.

    The Minnesota Hospital PAC thanks the following trustees who have already contributed $25 or more as of May 7:

    Gold Level – trustees giving $100 or more
    Larry Anderson, United Hospital District, Blue Earth
    Richard Berge, District One Hospital, Faribault
    Diane Cross, University of Minnesota Medical Center, Fairview, Minneapolis
    Paul Kent, FirstLight Health System, Mora
    LaVonne Koenen, Granite Falls Municipal Hospital
    Barbara Muesing, Essentia Health Fosston
    Clayton Peterson, St. Joseph’s Area Health Services, Park Rapids
    Mary Theurer, Lakewood Health System, Staples

    Silver Level – trustees giving $50 or more
    Robert Musgrove, FirstLight Health System, Mora
    Gene Wenstrom, Prairie Ridge Hospital and Health Services, Elbow Lake
    E. Paul Wicht, Lakewood Health System, Staples

    Bronze Level – trustees giving $25 or more
    N. T. Koenigs, Swift County-Benson Hospital
    Barbara Peterson, Lakewood Health System, Staples

    For more information contact Carol Eshelman, MHA PAC coordinator, at (651) 603-3539; or Kristin Loncorich, MHA director of government relations, at (651) 603-3526.

    ^top of page