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transcript
Boston Medical Center HFMA Capital Conference April 10-11, 2014
Chicago, Illinois
April 10, 2014
Presentation by Mary Beth Begley
Director of Treasury Operations
Presenters and Agenda Today’s Agenda Items
Overview of Boston Medical Center
Utilization and Financial Statistics
Current Challenges
Strategic Initiatives
Clinical Campus Consolidation Project
Conclusion
1
Overview
Boston Medical Center (“BMC”) is a private, not-for-profit academic medical center located
in the South End neighborhood of Boston
BMC provides a full range of primary, secondary and tertiary services
611 licensed beds in 2 inpatient facilities on an integrated medical center campus
21% market share in PSA of Suffolk County in 2011
Volume remains strong with 26,000 discharges, 132,000 emergency room visits and 678,00
clinic visits in FY2013
BMC serves as the principal clinical teaching site for the Medical and Dental Schools of
Boston University
Operates 43 accredited residency programs with approximately 700 resident and fellowship
positions
Campus consists of BMC facilities and university academic and research facilities
BMC and Boston University are members of the Faculty Practice Foundation
(approximately 850 MDs)
Critical role in the Boston market as a safety net provider
2
Boston Medical Center Corporation
Faculty Practice
Foundation, Inc.
BMC Insurance
Company Ltd.
Boston
University
Steward Research
Specialty Projects
Corp
Univer Development
Foundation, Inc.
East Concord
Medical
Foundation, Inc.*
BMC Integrated Care
Services, Inc.
BMC
NAB
Business
Trust
Sole
mem
ber
70%
SH 30%
SH 90%
SH
10%
SH
Member Shareholder Other
* BMC and BU each appoint ½ of the Directors
Note: The chart does not include BMC entities or affiliates that are inactive or financially immaterial
BMC HEALTH SYSTEM, INC.
Boston Medical Center Health Plan, Inc.
Obligated Group Entity
Affiliates included in
BMC (Parent
Company Only)
Financial
Statements, but not
members of the
Obligated Group
3
BMC is the principal teaching hospital of Boston University School of Medicine (“BU
Medical School”) and the Boston University Goldman School of Dental Medicine (the
“BU Dental School”)
Boston University and BMC are corporate members of the Faculty Practice
Foundation (approximately 850 MDs)
Virtually all faculty of BMC’s active medical-dental staff are members of one or the
other school
The chiefs of BMC’s clinical divisions serve as the chairpersons of the
corresponding academic departments in the BU Medical School and BU Dental
School
The Dean of BU Medical School is an ex-officio member of the BMC Board
BMC and BU have engaged in a joint development project at BioSquare for research
and business that will facilitate collaboration between researchers and clinicians of
BMC
Relationship with Boston University
4
BMC’s unique role as the largest safety net hospital
in New England
Created in 1996 as country’s first full asset merger of two public hospitals with a
private academic medical center. The merger continues the 100+ year mission of
Boston City Hospital to serve all regardless of their ability to pay.
Largest and busiest provider of trauma and emergency services in New England with
over 129,000 emergency room visits last year.
Safety Net focus: 150,000 low-income patients/year; 65% of patients from Boston’s
neighborhoods with greatest levels of mortality and health disparities; specialized
programs include grow clinic, child witness to violence, preventive food pantry, social
workers and 200,000 translations in 21 languages/year.
BMC is a leader in medical research and teaching: $132M in grant awards in FY12
with research specialties including infectious disease, cardiology, Parkinson’s
disease, geriatrics and endocrinology. 772 residents and fellows part of 73 residency
training programs. Over $300m of research on campus
5
Boston Medical Center Service Area
3
Boston Medical Center Market
PLYMOUTH
MIDDLESEX
NORFOLK
BRISTOL
SUFFOLK
ESSEX
County Discharges
Percent of
Total BMC
Patients
Primary Service Area
Suffolk 17,952 62.0%
Secondary Service Area
Bristol 328 1.1%
Essex 725 2.5%
Norfolk 2,709 9.4%
Middlesex 4,076 14.1%
Plymouth 2,054 7.1%
Total SSA 9,892 34.2%
All Other 1,119 3.9%
Total 28,963 100.0%
Boston Medical Center
2011 Patient Origin
6
Key Volume Indicators
Outpatient Visits (000s)
Emergency
Ambulatory Surgery Clinic
131.3 132.3 128.2 129.7 132.0
568.6 612.1 635.0 662.1 682.2
25.0 24.8 26.0
28.4 27.8
2009 2010 2011 2012 2013
30.3 30.2
29.0
26.1 26.0
2009 2010 2011 2012 2013
Discharges (000s)
Source:
BMC Records
7
Financial Performance
Total Operating Revenue
($000s)
1,078
993
1,006
975
1,006
1,054
2008 2009 2010 2011 2012 2013
69.3
-24.7 -34.9 -30.3
2.6 4.8
-3
-2
-1
0
1
2
3
4
5
6
-60
-40
-20
0
20
40
60
80
2008 2009 2010 2011 2012 2013
($000s)
EBITDA Net Income
($000s)
Excess Margin
(%)
Cash Flow Margin
(%)
117.5
53.9 53.0 52.4
81.5 79.9
0
2
4
6
8
10
12
0
20
40
60
80
100
120
140
2008 2009 2010 2011 2012 2013
Source:
Boston Medical Center audited financial statements for FY 2008 – FY 2013, FY13 Operating Revenue adjusted to exclude bad debt expense for comparison purposes. 8
Financial Performance
MADS Coverage
(x)
Cash on Hand
(Days)
92.4
113.7
82.7
119.9
174.0
192.0
2008 2009 2010 2011 2012 2013
4.12
1.89 1.86
1.43
2.60
2.90
2008 2009 2010 2011 2012 2013
Source:
Boston Medical Center (Parent Company Only) audited financial statements for FY 2008 – FY 2013, 9
BMC’s Role In MA Health Care Reform
Coverage
Moved more patients to coverage than all other hospitals in Massachusetts
combined
150,000 low-income patients served annually
BMC HealthNet Plan is the largest insurer of care to Medicaid and
Commonwealth Care with almost 300,000 statewide members.
Financial Impact
Since 2008, BMC took a disproportionate share of Medicaid cuts
$140m/year decrease in payments to address impact of low Medicaid base
rates
33% cut in inpatient rates
10
BMC’s completes one of the biggest hospital turnarounds
in the nation…
Finished FY12 and FY 13 with a small surpluses in each year---without cutting
back on care.
Implementation of numerous cost savings and efficiency strategies to reduce
total medical expense through routine cost reduction and the development of
novel programs designed to reduce unnecessary hospitalization, emphasis on
prevention and screening:
Project RED to cut costly hospital readmissions
Patient Centered Medical Home Programs
Diabetes management program
Yoga for back pain, on campus and at five CHC’s
We know that access to high quality health care for our patients and our
future depends our ability to get people healthy and keep them well
11
12 2012 BCBS Relative Hospital
Prices • AG report shows BMC’s BCBS price is ~50% lower than BWH’s and ~25% lower than Beth Israel’s
• DHCFP report shows BMC’s commercial prices are 20-28% lower than BI’s for key DRGs (severity adjusted)
2012 Leapfrog Patient Safety Ratings
• Named a 2012Top Hospital by the Leapfrog Group and received an “A” score for safety
• Publicly reported patient safety ratings show BMC performs on par with MGH, BI and BWH and substantially better than Tufts
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
BWH BIDMC BMC
Re
lati
ve P
rice
Pai
d
And has demonstrated our value…
12
MA health reform law advances needed cost controls, but BMC’s challenges
remain largely unaddressed
▪ Continued downward pressure on Medicaid rates and MCO rates
disproportionately affect BMC
• Federal cuts could total $40m/year
- - DME, IME, NIH and sequestration
- - In 2014 federal reform reduces Medicare reimbursements (BMC’s best
payer)
▪ Low commercial rates and no opportunity for cost-shifting
▪ Projected operating losses in futures years will be mitigated by ongoing
performance improvement efforts and substantial and complex campus
consolidation plan
…but BMC faces continued revenue and cost pressures
13
FY2013 Accomplishments Strategic Initiatives
Patient satisfaction scores improved dramatically Received certification for Patient Centered Medical Home
for Family Medicine & General Internal Medicine practices Family Medicine Chair won Peter Drucker award for work
on re-engineered discharges (Project RED)
Provide the right care for every patient. No Less…No More.
14
Opened a state-of-the art specialty pharmacy in the
Shapiro building that offers prescriptions for patients, staff and the general
Completed substantial improvements to our billing and collections systems
Received Board approval for clinical campus redesign project
Be the lowest cost, highest
performance health care
provider
Mission and Performance Based Funding. Preferred Provider in Target Commercial Markets
Successfully achieved all year two benchmarks of the Medicaid Waiver process to receive the full funding of $103 million for FY13
Received year one payment for meeting goals associated with “Meaningful Use” standards to expand EHR
Inpatient volumes increased
Lead in integrated care Revised board governance structure to better position
BMC for state payment reform and national health care reform
Continue to work with community health centers on development of an ACO
Campus Redesign Rationale
• The redesign of BMC’s campus is the culmination of the 1996 merger of Boston City Hospital and
Boston University Medical Center Hospital---and a critical component of the hospital’s strategic
plan.
• The redesign project will yield at least $25m/year in savings while maintaining patient services at
current levels on a more rational, operationally efficient, and patient-centered footprint.
• The redesign will position BMC for new models of health care delivery and state-mandated cost
controls.
• The redesign will address vast differences in the current state of facilities and create a state-of-
the-art clinical workspace to solve BMC’s most pressing care delivery needs.
• The project’s innovative approach provides a coordinated, comprehensive solution to BMC’s care
delivery needs.
• The construction process itself will be innovative---the first hospital project in Boston to use an
Integrated Project Delivery (IPD) approach to maximize efficiency.
15
Real Estate Strategy:
Overview of the plan and major real estate changes
• Improve operational efficiency by
consolidation of inpatient and surgical
operations on a single site
• Improve patient experience through
increased private room availability, an
expanded ED, modernized patient care
areas, and improved patient accessibility
• Sustainable design and a reduced
carbon footprint through the use of
green technologies and energy efficient
upgrades
70,000 sqft addition to Menino
20,000 sqft addition to Moakley
Renovations to Menino and Yawkey
Exiting East Newton facility and
potential sale/lease back
Overall goals of real estate plan Major real estate changes
16
Our split clinical campus is associated with over $25M of
excess operating costs
• Ambulance transports 2.1
• Two Dietary depts 1.9
• Two Pharmacies 1.7
• Two OR suites 1.4
• Two Radiology depts 0.5
• Patient transport 0.5
• Lab inefficiencies 0.5
• Public Safety 0.5
• Two Receiving depts 0.3
• Two Respiratory depts 0.2
Example Operating Inefficiencies
$ Millions
17
Our clinical campus redesign plan would consolidate
operations on the Menino campus
18
… and requires an incremental capital expenditure of $170M
over 5 years
36
34
4 13
100
107
38
35
3
170
Menino Yawkey Moakley Dowling Enabling Total budget*
Baseline spend
Incremental spend
* The baseline spend in total budget includes $13M of capital avoidance from projects on the East Newton side of
campus (Evans electric vault, EN MRI, EN air handling, EN rook)
Capital requirements for clinical campus consolidation
$ Millions • The total plan
requires ~$270M
capital
• $100M of the total
is spending that
would be required
over the same
period on existing
buildings (including
$13M on Newton)
• The total
incremental
capital required to
execute the
consolidation is
$170M
19
Funding would be a mix of framework capital, sale of
assets, philanthropy and potentially debt financing
270
75
40
50
105
Total
Philanthropy / Bond Financing
Endowment
Sale of In-Patient Bldg.
Framework Capital
Sources of capital for BMC campus consolidation
$ Millions
• $100M of the capital
would come from
hospital’s available
funds
• Sale of In-patient
building is estimated
to yield $50M+
• There are relatively
modest additional
funding requirements,
but timing would
require borrowing
from Board
designated funds or
debt financing
20
Overview of impact of clinical campus redesign on BMC’s
FY14-17 capital framework
540
(107)
(58)
(88)
792
458
(163)
(415)
912
Net cash available**
Clinical campus redesign plan (net)
Potential strategic initiatives
Approved strategic initiatives
Total cash available before strategic initiatives
Board designated funds
Routine capital
Required commitments
Net cash from operations*
21
Summary of BMC Multi-year capital framework (FY14-FY17)
$ Millions
* Includes prior year cash for all entities.
.
Conclusion
Academic medical center with unique focus on vulnerable, indigent populations
Strong commitment from Commonwealth of Massachusetts
Integrated relationship with Boston University as primary teaching hospital site
Successfully managed through the fiscal crisis and reduced state funding by adjusting
service lines and costs
Remains an integral provider of services to the City of Boston and an integral source of
research funding and training for Boston University
Continued focus on margin improvement through implementation of strategic initiatives
including the clinical campus redesign project
22