Hospital Finance Revealed by a Hospital CFO
Summary
TLDRIn this video, Dr. Eric Bricker discusses the candid insights of Steve Phebus, CFO of Pullman Regional Hospital, who reveals the financial realities of hospital management. Phebus explains the challenges of operating a small, critical access hospital with a tight profit margin, emphasizing the importance of outpatient services and the paradox of 'healthy patients being bad for business' in a fee-for-service model. He also addresses the impact of expensive technology on healthcare costs, the necessity of price adjustments in response to patient shopping, and the staffing dilemmas that affect profitability. The talk highlights the complexities of balancing financial sustainability with patient care in the healthcare industry.
Takeaways
- π₯ The video features Steve Phebus, CFO of Pullman Regional Hospital, discussing the realities of hospital finance with transparency.
- π Pullman Regional Hospital is a small, critical access hospital with 25 beds, generating around $117 million in charges and about $1 million in profit annually.
- π° The hospital's profit margin is less than 2%, indicating that hospitals are not excessively profit-driven but rather operate on slim margins.
- π Revenue is primarily from outpatient services (66%), followed by inpatient care (23%), and medical professional groups (11%), highlighting outpatient services as a major income source.
- π€ The business model of hospitals is paradoxically dependent on patient volume; healthy patients, therefore, equate to less business.
- π οΈ The hospital invested in a da Vinci robot to attract and retain urologists, illustrating how expensive technology can be a recruitment tool, driving healthcare costs.
- π‘ Price transparency and patient shopping led to Pullman Regional Hospital lowering its MRI prices after realizing they were the most expensive in the area.
- π There is service duplication with a competing hospital just 9 miles away, reflecting inefficiencies in the healthcare system.
- π©ββοΈ Hospitals staff for maximum occupancy regardless of current patient numbers, leading to fixed staffing costs and inflexibility in labor expenses.
- π’ The hospital acts as a major employer in the area, suggesting that much of healthcare spending is tied to job creation within the industry.
- π Hospital prices are considered meaningless by the CFO himself, emphasizing the complexity and often arbitrary nature of healthcare pricing.
Q & A
Who is the speaker in the video transcript?
-The speaker in the video transcript is Dr. Eric Bricker.
What is the main topic of the video?
-The main topic of the video is the confessions of a hospital CFO, based on the presentation by Steve Phebus, the CFO of Pullman Regional Hospital.
What is the significance of the video by Steve Phebus?
-The video by Steve Phebus is significant because it provides a candid and transparent look into the financial operations and challenges faced by a small rural hospital.
What type of hospital is Pullman Regional Hospital?
-Pullman Regional Hospital is a small, critical access hospital with a maximum of 25 beds.
What is the annual revenue and profit of Pullman Regional Hospital?
-Pullman Regional Hospital has an annual revenue of approximately $117 million and makes about $1 million in profit.
What percentage of the hospital's revenue comes from outpatient services?
-66 percent of the hospital's revenue comes from outpatient services.
Why does Steve Phebus say healthy patients are bad for business?
-Healthy patients are considered bad for business because a fee-for-service model relies on patient volume; without it, the hospital's revenue decreases.
Why did Pullman Regional Hospital invest in a da Vinci robot for robotic surgery?
-They invested in the da Vinci robot to attract younger urologists, as it is a technology many are trained on during their residency.
How did the hospital respond to patients shopping around for cheaper MRIs?
-The hospital lowered the prices of their MRIs to compete with a nearby hospital offering them at a lower cost.
What is the impact of staffing for high volumes regardless of the hospital's census?
-Staffing for high volumes regardless of the census means that the hospital's labor costs are not variable, which can impact their profit margins and pricing strategies.
What does Steve Phebus suggest about hospital prices?
-Steve Phebus suggests that hospital prices are not fixed and can be adjusted based on market pressures, such as patient shopping behavior.
Outlines
π₯ Insights from a Hospital CFO's YouTube Video
Dr. Eric Bricker introduces the topic of a hospital CFO's perspective, highlighting a YouTube video by Steve Phebus, the CFO of Pullman Regional Hospital in Washington. The video, which has gained significant attention, showcases Phebus's candid discussion about hospital finances, revealing that despite being a small critical access hospital with only 25 beds, they have a significant profit margin of nearly 2%. The hospital's revenue is primarily from outpatient services, which is common among hospitals. Phebus candidly addresses the paradox of healthy patients being bad for business in a fee-for-service model and emphasizes the hospital's efforts to keep people healthy despite the financial implications. The video also touches on the necessity of expensive technology, like the da Vinci robot, for recruiting physicians and the impact of high deductible health plans on service pricing.
π Hospital Economics and the Reality of Staffing
This paragraph delves into the economic realities of running a hospital, as illustrated by Steve Phebus. It discusses how hospitals, including the small Pullman Regional Hospital, must staff for maximum occupancy regardless of the actual patient count, leading to fixed labor costs. Phebus explains that staffing cannot be variable based on patient volume due to the need to maintain a reliable workforce. This fixed cost structure impacts the hospital's profit margins, which are slim, and raises the question of healthcare as a job creation field. The paragraph also addresses the issue of service duplication with a nearby hospital in Idaho and the implications of high fixed costs on the ability to reduce healthcare prices. Phebus concludes by emphasizing the disconnect between hospital prices and actual costs, suggesting that the listed prices are not necessarily meaningful indicators of true expenses.
Mindmap
Keywords
π‘Hospital CFO
π‘Critical Access Hospital
π‘Revenue and Profit Margin
π‘Outpatient Services
π‘Fee-for-Service
π‘Healthcare Technology
π‘Price Transparency
π‘Staffing and Labor Costs
π‘Duplication of Services
π‘Hospital Prices
Highlights
Dr. Eric Bricker introduces the video based on a presentation by Steve Phebus, CFO of Pullman Regional Hospital.
The video has gained significant attention with nearly 20,000 views, highlighting the insights of a rural hospital CFO.
Pullman Regional Hospital is a small, critical access hospital with a maximum of 25 beds.
The hospital's annual revenue is $117 million, with a profit margin of less than 2%.
Most hospitals receive about 50 cents on the dollar, indicating a complex financial structure.
66% of the hospital's revenue comes from outpatient services, reflecting a common trend in healthcare finance.
Steve Phebus candidly discusses the paradox of healthy patients being 'bad for business' in a fee-for-service model.
The hospital's financial model is at odds with its outreach and care coordination programs aimed at keeping people healthy.
Pullman Regional Hospital invested in a da Vinci robot to attract and retain urologists, illustrating the role of technology in physician recruitment.
The hospital's high MRI prices led to a decrease in demand, prompting a price reduction in response to patient shopping behavior.
Price transparency and patient shopping around for services are proven to be effective in driving market efficiency.
Duplication of services between Pullman and a competing hospital in Moscow, Idaho, shows inefficiencies in regional healthcare.
Hospital staffing is based on maximum occupancy, regardless of current patient volume, leading to fixed labor costs.
The hospital's profit margin could be influenced by variable labor costs, but staffing practices limit this flexibility.
Healthcare spending is partly a jobs program, with much of the revenue supporting employment in the healthcare field.
Eliminating healthcare waste may involve confronting the reality of job losses in the healthcare sector.
Steve Phebus admits that hospital prices are largely meaningless, echoing a common critique of healthcare pricing.
Transcripts
hello this is dr eric bricker and thank
you for watching a healthcare z today's
topic is
confessions of a hospital cfo
now this video is based upon a youtube
video
by a gentleman named steve phebus who is
the cfo of pullman
regional hospital in pullman washington
which is in
far eastern washington it's like right
on the idaho
border now this video has like 17
000 views and like over like 170 likes
so how in the world could a hospital cfo
from rural washington state have a
youtube video
with close to like 20 000 views it's
unreal and i'm going to leave a link in
the show notes
but this video is of mr phoebus
presenting to
hospital board members hospital
physicians other hospital executives i
mean it's a small hospital
so it's in like a small conference room
but
he's just so frank and sincere and look
i mean
stephen he's a good guy and so we can
learn so much
when he talks straight about how a
hospital cfo
thinks now like i said pullman regional
hospital is a small hospital it's a 25
minute hospital which is referred to as
a critical access
hospital and critical access hospitals
they actually max out at 25 beds once
you have more than 25 beds you're sort
of no longer considered a critical
access hospital
okay now he also says they do 117
million dollars a year
and build charges and they make about
one million dollars in profit a year
case very transparent about this
now most hospitals end up getting paid
about 50 cents on the dollar
so they probably make about 60 million
in revenue
which means that that profit margin
there of one million
is a little less than two percent right
one percent of sixty million dollars
would be six hundred thousand dollars so
two percent would be like one point two
million
so it's a little less than two percent
profit margin right so they're not like
rolling over uh in swaths of cash for
profit market
now interestingly he also on one of the
slides he breaks down where that
um revenue is coming from it's 66
percent outpatient
23 inpatient and they own a handful of
small physician groups
so it's 11 from the medical professional
groups okay so notice
again the majority of the revenue for
the hospital is for outpatient services
and this is true for most hospitals so
again when we think about hospitals and
hospital finance
we shouldn't think of them as making
tons and tons of money from their
inpatients
it's actually kind of outpatient stuff
it's imaging it's outpatient surgery
it's
lab okay next up he is very frank about
the business model of the hospital
and he says healthy patients are bad for
business why well listen he calls it
like he sees it
because if you have healthy patients
nobody comes into the hospital
and when you have a fee for service
based organization
if you don't have patient volume then
you don't have a hospital
so at the end of the day he says look
healthy patients are bad for business he
calls it like he sees it
now i will tell you in the same breath
he says look we do things
to we have outreach program care
coordination program etc etc all this
stuff
to try to keep people healthy and keep
people out of the hospital he says we
try to do
the right thing but he says multiple
times in this video
that they have to do the right thing and
yet
that is opposite to the financial model
for the hospital itself which is true
right we all know that
that oftentimes it's the way that
hospitals finances set up
that quote unquote doing the right thing
for the patient
actually ends up financially hurting the
hospital and he acknowledges this okay
next up he says look at this little 25
bed hospital in
rural washington they've got a da vinci
robot they do robotic surgery
why in the world would such a small
hospital in central place why do they
need robotic surgery
why okay he explains because they needed
to attract a urologist they only had one
urologist on staff
he was getting very senior he was going
to retire and the only way that they
could attract
younger urologists coming out of their
training was if they had
the da vinci robot system that a lot of
urologists train on in their residency
program
aha so here you have a driver of
healthcare costs
not being like necessarily like patient
demand but
actually expensive healthcare technology
as a physician
recruitment tool and that's an important
dynamic that i think is is is remiss
on a lot of people and mr phoebus points
this out very specifically how a lot of
times you have to use
expensive technology just in order to be
able to recruit and retain the
physicians
okay next up mri prices
at pullman we're too high and he said
because their patients started having
high deductible health plans he says
with deductibles of fifteen hundred
dollars
that the patient started shopping around
and the orthopedist
came to him and said look we're not
getting as many mris done here
because they can go less than 10 miles
away to a competing
hospital and they can get the mri done
for a lot cheaper there and they looked
around at their prices
and they were like the most expensive
place in the area
for mris and guess what they did they
lowered the prices of their mris okay so
for everybody that says that price
transparency and shopping doesn't work
and make the market more efficient
here is a specific example of how a
specific hospital
in washington lowered the prices of its
mris
because of the pressure from patients
that were shopping
on a high deductible health plan okay
we're not making this up this
literally happened it is not esoteric
academia
it happened okay next up he admits
that there is duplication of services at
a competing hospital
only nine miles away so just across the
border
in idaho it's the town of moscow idaho
i had never heard of moscow idaho it's
where the university of idaho
is okay now pullman's got about the
teleport in washington it's got about 35
000 people and the town of muscle's
pretty soon i think it's like 25 000
people
and both of these hospitals the two
times very close together again less
than 10 miles apart only nine miles
apart
guess what they have full er full um
surgical suite mris and so there was
actually
talk in the past about trying to not
have duplication of services between
those two facilities
and the talks fell apart so he's like
look we've got duplication of stuff
at these places it's true now next up
this is the key here this is probably
one of the most golden things he says he
look look he says look
we staff for high volumes at our
hospital regardless of our census
now he says that look at a 25 bed
hospital he said look sometimes our
census is two
can you believe it there's a hospital
that will have two patients in it
and sometimes they'll have the full
census they'll have every bed booked
at 25 patients he says that they still
pay the nurses regardless
but and i think this needs to be said
i'm not trying to be mean or whatever
but
listen when the hospital census is down
and people are still working
there's a lot of people sitting around
okay so
are there times when it's very busy of
course are there hospitals that are busy
all the time
of course are there hospitals at times
where it's incredibly slow
and people are just sitting there
absolutely
and so and the reason he says they still
have to stop so in other at other places
they might like cancel the nurses and
not pay them oh by the way when they
cancel their shift they don't pay the
nurse
he said look if we did that the nurses
would refuse to work in our place they'd
be like look
we'll go work at a different hospital
where they guarantee our salaries
and they're not gonna you know cut our
shifts
and cut our pay just based upon low
patient volume so from a
staffing standpoint they have to staff
for
the maximum occupancy of the hospital
and their costs are not that
variable when it comes to their staffing
because of that
why is this important i told you earlier
that they only made one million dollars
of profit in other words less than
two percent profit margin okay they
could have made a much
larger profit margin or they could have
lowered their prices if they could have
been more variable in their labor
so again the 617 million of bill charges
the 60 million revenue a lot of it is
going towards
it's a jobs program it is a major
employer
in this town so and i'll leave a link in
the show notes to talk about how
a lot of the spend or the waste in
healthcare is really
job creation for people working in the
healthcare field
now i'm not here to say that that is
good bad or indifferent but i am here to
say that we need to confront that
reality
that if we talk about eliminating waste
and health care then we need to have the
frank discussion of saying look that is
going to eliminate health care jobs
again you know obviously it's a tough
conversation to have but we need to call
spade as bait
okay final point i wanted to make what
is he saying
hospital prices are meaningless you have
a cfo of a hospital himself admit
that hospital prices are meaningless
we've said this over and over again on a
healthcare seat
and here's steve phebus is saying the
same thing so i want to thank steve for
you know making a wonderful presentation
again please watch it
it's like an hour and a half long you
might just want to listen to it in the
car
but that's the point i wanted to make
today and thank you for watching a
healthcare seat
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