Overcoming Hospital Financial Challenges

Rising prices and sky-high interest rates are posing significant operational and care delivery challenges for hospitals. In our latest episode of Value-Based Care Insights, Nillie Djassemi, CFO of Houston Physician’s Hospital, shares valuable insights on navigating these challenges. Together, Dan and Nillie explore the importance of investing in vendor management and capital expansion to thrive in today’s economy.

KEY TAKEAWAYS: 

• Health care providers can mitigate financial challenges by creating operational efficiencies, partnering with their physicians, and building a culture of employee engagement.
• Given the inflationary pressures, finance leaders must engage with  payers and adjust their payer contracts.
• To manage financial strain effectively, finance leaders must think creatively about supply costs and non-labor expenses, then structure purchase agreements with their vendors.

LISTEN TO THE EPISODE:

 

 Transcript:

Daniel J. Marino: 

Welcome to Value-Based Care Insights. I am your host, Daniel Marino. There is a recent survey that came out by Kaufman Hall, their hospital, national Hospital Flash reports. It is actually really good. I have looked at it many times both on the hospital side, in the physician side, and in the recent report that they put out, they mentioned that, five takeaways that were interesting observations from the hospital perspective.  

One is that hospitals are still operating in a negative margin, although that margins is decreasing actually in April, with all the hospitals that they surveyed. There was actually a 0% operating margin, but that also takes into consideration the larger hospitals. 

Many of the smaller hospitals, particularly the community hospitals or specialty hospitals still are operating at a loss. Volumes within the hospitals are decreasing, but interestingly enough, length of stay is increasing and we all know that certainly affects the star ratings. And a lot of the performance around value-based purchasing. 

Medicaid disenrollment is also occurring, but the biggest one that I saw that again, is still an issue that we are seeing with many hospitals, many physician practices, is inflation continues to really be a significant challenge with hospital finances. Well, I am pleased today to have as my guest, a long-term colleague and friend. 

Nillie Djassemi. Nillie, is the Chief Financial officer of Houston Physician Hospital down in Houston, Texas. Nillie, welcome to the program.  

Nillie Djassemi:

Good morning. How are you Dan? 

Daniel J. Marino:

Doing great. Doing great. Thank you. So Nillie, given those above challenges that I mentioned and some of the things that are identified in the Kauffman Hall National Hospital Flash Report, what are you seeing as some of the major issues affecting Houston Physician's Hospital financial performance? 

Nillie Djassemi:

I Think the two major drivers for Houston Visits hospital is the reimbursement pressures from the payers. We are, in the last 18 to 24 months, we have had to go into renegotiations with a few payers and, we got beat up, Dan, we got

Daniel J. Marino:

Yeah. 

Nillie Djassemi:

knockout actually on one of them. We just got knocked out. 

And the other one is supply costs. Which is not, I mean, we are seeing that everywhere, every hospital is dealing with that. And so we are doing some things that are helping us offset those increases in supply costs that we can talk about later.

Daniel J. Marino:

Well, and as you know, revenue is one side of the equation, but your expenses and how you structure those are the other. 

And if your expenses are going up, You cannot just automatically increase your revenues. Your revenues are fixed and tied into the payers.

Nillie Djassemi:

That is correct, yes. And so we have definitely started increasing the revenue and not through rates, but through volume.

Daniel J. Marino:

Right.

Nillie Djassemi:

And the volume growth is helping us help offset the rate impact. 

Daniel J. Marino:

Have you focused more on surgeries or is there an ambulatory component either through the A S C or maybe through some of your therapies that are figuring into your volume expansion? 

Nillie Djassemi:

Yeah, so we have definitely brought in different types of surgeons. So we have opened up a, not opened up, but we have definitely expanded.

Daniel J. Marino:

Mm-hmm.

Nillie Djassemi:

Our robotics services through the GYN and general surgeries. And so we bought a DaVinci last year and

Daniel J. Marino:

Oh, great.

Nillie Djassemi:

Yeah, so just because, you know, I mean that is definitely for GYN and general surgeons, that is definitely something they want and we have not really focused on that, those service lines before. 

So we invested in one again, that was in play probably three years ago when we made that decision. And it just took a long time to get that here because of all the supply chain issues. So we actually were not able to launch it till mid last year, and it was supposed to be launched much sooner than that. 

So those were things that we had already. We knew that we had to prior to the reimbursement pressures coming down the pipeline.  

Daniel J. Marino:

Right. So you needed to do something in terms of volume.

Nillie Djassemi:

Yes.

Daniel J. Marino:

You know, I guess the supply chain challenges that you had a couple years ago essentially worked in your favor. 

Right? Because now you are able to get that and add additional surgeries based on some of the robotics to support it, which, I think that is certainly key. How about some of the turnover and the staffing challenges that you have had? Are you seeing a lot of turnover? Is it stabilizing? Are you particularly in the nursing arena, are you able to recruit or are you still see this a challenge in your organization?

Nillie Djassemi:

I cannot say it is a huge issue. Our turnover rates are much lower than what I see around the market, but it is still a problem. Right, because every time someone leaves the cost of bringing them back is so much more, plus the training cost and everything. 

Daniel J. Marino:

Sure.

Nillie Djassemi:

Right. I want to say our people, our nurses and our non-clinical staff are happier here. 

Our turnover rate is lower. But we still the challenges. Of course we do because the nurses and especially on the inpatient and in the surgery world, that is where our nurses are. Right. Yes, they all talk, they know the market. So yes, we have had to deal with increases in looking at the market rates. 

We are doing market analysis every six months now. We used to never have to do that. Right, 

Daniel J. Marino:

Right.

Nillie Djassemi:

So, HR has processes now where they actually have to look at market rates and market analysis every six months. Dan, you know, that is crazy.

Daniel J. Marino:

You gotta do it.

Nillie Djassemi:

But you have to, because we do not want to be caught off guard if our CSTs are coming to us and like, Hey, someone down the street is paying me X dollar more an hour. 

We do not want to be caught off guard. We want to be able to have that knowledge in our back pockets to be able to give them, no, that is actually not true. Or, yes, that this is what we can do. And it is very difficult. It is very, very difficult. But that is the process that we put in place to help for us to be knowledgeable.

Daniel J. Marino:

Well, you have to be competitive, right? I mean, getting that insight, that is the only way to be competitive and to be totally transparent to our listeners. I have had the wonderful opportunity to work with Houston Physician Hospitals for a number of years, and nearly your leadership team has built a great culture down there. 

And I have felt time and time again, I have spoke about this with many folks across the country. You have to be competitive on rates, but in order to really manage a lot of the turnover challenges, the financial challenges related to our workforce, you have to create a strong culture, right? You have to create the culture that makes people want to work there. 

And as you have said, and I agree with you, I think people are happy working in your organization, and we see that a lot of times with smaller community hospitals or with specialty hospitals.

Nillie Djassemi:

Right. Yeah, we definitely, I think I have told you this, Dan, before I came to H p H, I came from a more corporate healthcare background and so, The employee engagement here is something I have never experienced anywhere else. 

And I am not just saying that cause I work here, but we put in a lot of effort to have that high employee engagement. And it takes resources and it takes a lot of time, but it does pay off because our turnover rates are so much lower. We still have to deal with the pressures right, the external pressures of inflation with salary rates. 

But, I really do think that is a huge piece of the puzzle is that we put so much into employee engagement. And look, when I first started here, our ceo, I would be like, wait, we are spending how much on t-shirts? We give out, we are known for our t-shirts here

Daniel J. Marino:

so little things make a difference,

Nillie Djassemi:

It is a little things. It really is. We, every month, in my department, there is one thing we focus on every month in the departments. And for example, last month, we focused on integrity. And each person had a banner. And it give me what your integrity motto is for you as a person. 

Right? And so everyone, it was not all across the hospital, but for all my departments, they did the individual one. But across the hospital, what we did was every department made their own banner. And then we were able to hang it up in our cafeteria area, and everyone could see what everyone's motto was in terms of integrity. 

That is one of our mission statements that we believe in. And so it is just, we really do focus on that. And this month we have something else that we are doing.

Daniel J. Marino:

And the culture piece is huge. If you are just tuned, again, I am Daniel Marino. You are listening to Value-Based Care Insights. 

I am here talking to Nillie Djassemi, she is a Chief Operating Officer. I am sorry, chief Financial Officer of Houston Physician Hospital. Nillie. I want to get back to one other thing that you mentioned, and I would like to dive into this a little bit with where interest rates are right now. It is, of course putting a lot of pressure on hospitals to fund some capital expansion, some new equipment and so forth. 

How have you responded to that?

Nillie Djassemi:

So last year, I was approved for X amount of capital purchases through my main bank and I actually had not used majority of it cause we had slowed down the purchasing. Right. Capital purchasing. But I had the ability to actually pull all of it and put it in basically in an escrow account. 

I would have to pay interest and principal on it, but the interest rate on it was only 3%.

Daniel J. Marino:

Oh, wow. Right.

Nillie Djassemi:

Because I was approved for that loan back in 2021 and so you do not ever want to pull money out when you are not using it. Right. I mean, to me, I am like, God, I am not

Daniel J. Marino:

The arbitrage factor just makes sense, right? 

Because if you have got that line that is paying 3% as opposed to funding something else through an equipment vendor that is 8%. I mean that interest arbitrage is key. That makes a lot of sense.

Nillie Djassemi:

Yeah, I think it actually was three and a half percent. So we ended up back actually, it was late fall, we ended up pulling it and I have been using that for the capital funding that we have needed for 2023. 

Now, obviously that is going to run out in 2023, so then we will have to revisit all of that again. But it was a huge, huge, decision, a great decision that we made. And it definitely helped us out for this year. Now I have some different things I am thinking through for 2024. 

Which is related to what I was mentioning earlier, related to working with the vendors on potential placement agreements or usage agreements, or even one of our large vendors, we are doing a conversion project with them, they are trying to gain market share in one of our Orthopedic subspecialties. And so we are going to have to buy a bunch of equipment. And so what we are going to do is do a conversion project. If we convert so much, so many supplies to them, we will actually get some capital credit back if we purchase with them. If that makes sense.  

Daniel J. Marino:

So, then it sounds like you are definitely have had to become a lot more innovative. As to how you have structured these relations with the vendors. And so are you seeing the vendors being a lot more willing to structure deals differently?

Nillie Djassemi:

Yes, for sure. Because if you know your landscape of what you have in the hospital. Like for example, if you have 70% Medtronic or 70% Stryker, Boston Scientific, whatever your vendor landscape is, and you can maybe talk to the vendors that want to gain market share and see, hey, look, I am going to need X, Y, Z. These capital items, what are some things that you can work with me around capital? 

Cause they want you to buy capital and they want to get that supply cost.

Daniel J. Marino:

Well they want to keep that long-term relationship right?

Nillie Djassemi:

Yes.

Daniel J. Marino:

And I mean they are seeing the challenges as well too when you are talking about all the foundationary pressures that are occurring.

Nillie Djassemi:

Exactly.

Daniel J. Marino:

If you do not have the relation with the hospitals, you are not going to get anything through.

Nillie Djassemi:

Yeah, so I have had to really get into supply chain. I have had to get my hands real, real deep into supply chain, negotiations, contract modeling with them. And again, we are a smaller hospital, but I think one of the things for CFOs out there is really getting your hand into supply chain and not, 

Daniel J. Marino:

I agree with you.

Nillie Djassemi:

being consistent with it, but really getting in there, looking at it. 

You know, another thing that the hos, the way we positioned this hospital, we did not want to go into contracting because we got better rates of local contracts.

Daniel J. Marino:

Right.

Nillie Djassemi:

Well that is coming back on us. And so I am actually having to really look at, do I want to go into the G P O pricing? 

Daniel J. Marino:

Yeah. Well many hospitals have gone into G P O and there is a lot to be said for a lot of participating in a national rate negotiation. 

Through a gpo. Right. So, I give you credit for looking at that. I think that is great.  

Nillie Djassemi:

Yeah. And before, we were actually better off not being, and not everything was off gpo, just some of the, especially high dollar implants, but we are looking at it now with our vendors. But I have to have meetings with them quarterly. 

I am with them, you have to have that relationship with them to start having those conversations.  

Daniel J. Marino:

Yeah, you do. Absolutely. So, Nillie, when you think about the financial performance and the financial pressures that your hospital is under, have you had to look and make any tough decisions on services? 

Have you refocused a lot of your attention on maybe some of those services that are not? You know, it is a shame, but they are just not making any money. Or you have no choice but to either reduce those or maybe you have made the decision the other way. Hey, we know we are going to lose money, but this is the right thing to do for our patients, for our physicians, so it is going to be a loss leader for us. 

Have you dove into those types of services and those discussions?  

Nillie Djassemi:

So since we are so focused on our primary source of revenue does come from surgeries, right? And so we do not typically do cases that are under. 

Daniel J. Marino:

Sure.

Nillie Djassemi:

And so I cannot say that. 

The reason why we have actually grown the volume just not in orthopedics or sinus, and those are high. Those are our bread and butter. Right? Those are the high volume.  

Daniel J. Marino:

Sure. The high continu margin services. 

Nillie Djassemi:

Right. But, you know, we have had to really look at expanding to other service lines because we cannot just depend on that. 

And so the margin, so no, we have not for what you are saying is, have we had to stop the service? No. We have actually grown services that are not as high margin as the other service lines have been, and like PT is another, physical therapy is another example of resources that we have put a lot of resources in the growing our physical therapy service line. 

We are going to hopefully hit a hundred thousand visits in 2023. Is it high margin? It is not. It is high volume and it carries itself and so we think from a quality perspective, keeping those. The types of surgeries that we are doing, the post care of going into physical therapy within our clinics, that we know that we are, we train those therapists. 

We know their outcomes. It is a huge satisfy for our patients.  

Daniel J. Marino:

Well, it is a big value add, right? Not only, like you said, for your patients, but, also for your physicians, and it is part of what you need to do if you are going to create a strong, comprehensive services in support of, say, orthopedics or some of the other service lines. 

I know that as and I, we do this in our own business, right? You are constantly looking at where you can become more efficient. You are constantly looking at where you could maximize your financial opportunities, but sometimes you just have to do it because it is the right thing to do.

Nillie Djassemi:

Yes, that is right. 

Daniel J. Marino:

So in looking at some of the activities happening around, Houston area, there has been a lot of collaboration in other markets where, The physicians in the hospitals have just to head form a tighter relationship, whether it has been in an integrated network or just to do some collaboration of services. 

Are you having any of those discussions? Are you seeing collaboration is kind of a key as it picked up a little bit? Or do you feel like the relationship that you have right now with your physicians have really been good and has been strong? 

Nillie Djassemi:

No, we have definitely had to reach out to different practices around the market. We are looking into that for sure. There are recruitment efforts into going out and creating those relationships with large practices, especially since we are the high quality, low cost option. In the market. 

Daniel J. Marino:

Well, and I think in working with your organization, you have been extremely physician friendly, right? 

Your level of collaboration with physicians I think is really something that has carried you, and that is just embedded in your culture, right? That is the fabric of what you do. So I could see that is really a big value driver for your team, for your physicians and so forth. 

Well, Nellie, this has been great. I really appreciate the conversation. For our listeners, particularly those on the finance side, any pieces of advice that you might be willing to share or can offer to some of our listeners?  

Nillie Djassemi:

I think the couple things that I would focus on is revenue cycle technology. 

I think the payers are way ahead of us, and we, as the hospitals have to get on board with revenue cycle technology. And like, for example, Dan, you know, we are working on this 8 55 project with you. Yep. And really digging into our 8 55. What are the trends? That is just one, something very simple 

but I am actually looking at several different revenue cycle technologies to come in through the intake process, through the billing process, the collection. It is tough, right? Because margins, I do not have a lot of resources to put into it, but we have to get smarter with revenue cycle technology.

Daniel J. Marino:

Well, and I will tell you, that is an area that I think every finance person, every cfo. Focuses on revenue cycle. They all think and they all believe that the revenue cycle has to improve. And I fully agree. Well Nillie, this has been great. I really appreciate your time. 

You know, if any of our listeners want to reach out to you or network with you, any thoughts, how can they get ahold of you?

Nillie Djassemi:

Sure. LinkedIn is great. That is very easy. My name is and Nillie just send me, I think Daniel have it in the detail. And so yeah, just definitely look me up on LinkedIn.

Daniel J. Marino:

Great. Well again, thanks again for your time, Nillie. This has been fantastic. Love to have you back some time down the road. Hopefully things will kind of improve a little bit and sounds like certainly within, with what you are doing within your organization. You guys have made some real strides, so I commend you for that.

But thanks again for your time today. This has been great.  

Nillie Djassemi:

Thank you so much. I appreciate you having me on. 

Daniel J. Marino:

And I want to thank our listeners for joining in today and until our next insight, I am Daniel Marino, bringing you 30 minutes of value to your day. Thanks and take care. 

About Value-Based Care Insights Podcast

Value-Based Care Insights is a podcast that explores how to optimize the performance of programs to meet the demands of an increasingly value-based care payment environment. Hosted by Daniel J. Marino, the VBCI podcast highlights recognized experts in the field and within Lumina Health Partners