NEW YORK CITY—It's only fitting that executives from some of the nation's leading non-profit health care systems are gathered this week in the Big Apple, about five miles from Wall Street, because many of them are bullish on the future. Following a couple of years of uncertainty due to a struggling economy and debate over health care reform legislation, presenters at the 12th Annual Non-Profit Health Care Investor Conference expressed confidence that they are strongly positioned for the future. This despite the fact that their finances will be put more at risk as hospitals are held more accountable for care delivery and outcomes. Oh, and let's not forget the looming Medicare and Medicaid cuts, the need to better partner with physicians and other providers, the need to install robust IT systems and, of course, doing all of this while cutting costs.
This meeting, which is jointly sponsored by the American Hospital Association, Healthcare Financial Management Association and Citi, is a one-of-a-kind event. Executives from 29 hospitals get 30 minutes to tell their financial and strategic plans to a room full of analysts from the investment community and rating agencies. Then there's another 30 minutes in a break-out room for pointed questions from those very analysts. At times, it can feel a bit like speed dating as the CEOs, COOs and CFOs highlight their system's achievements and goals for the future.
While there's still another half day left, some themes did emerge during the first full day of presentations yesterday. For starters, the hospitals gathered here are on strong financial footing. Many, like Christus Health, show days cash on hand at 164 days or better. Or like Trinity Health, have operating margins at 3 percent or better. Interestingly, the financials are taking a bit of a back seat to strategy during most of the presentations. There's been much more emphasis on how the health systems are being positioned for change—both in reimbursement and care delivery. And for as much hype as there is around ACOs, the buzzword here is "integration." Trinity President and CEO Joseph Swedish said it during his presentation: the key for his organization is clinical integration, not necessarily an ACO. Or at least not the accountable care organization CMS envisions in its proposed regulation.
Another theme: costs. More specifically, cost reductions. For as well as these systems are doing, the executives know that they can't stand pat; they know that fewer dollars are coming their way and they need to find ways of trimming costs in every area. Community Medical Centers, for instances may begin to look at reshuffling its bond portfolio. Steve Walter, senior vice president and CFO, noted that the current portfolio is 100 percent fixed bonds. Even a small change toward swaps, for instance, could result in significant savings.
Hospitals will see less revenue, not just as payments are cut, but as utilization changes, Katherine Arbuckle, executive vice president and CFO of Bon Secours Health System, said during a luncheon panel discussion. At the same time, hospitals will have to make substantial investments in building out the care continuum, she added. After the lunch, she told me that value needs to become the new mantra for hospitals.
We'll provide more coverage from the conference in the June issue of H&HN.