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Agent of Change
New CEO Benfer tries to right the St. Rafe's ‘freighter'
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Business New Haven
4/3/2000
By: BNH
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Last July David W. Benfer succeeded James J. Cullen as president and CEO of New Haven's Hospital of Saint Raphael. Benfer, now of Branford, was previously CEO of the Provena Saint Joseph/ Morris Health Network in Joliet, Ill. He is also president of the American College of Healthcare Executives. He spoke with BNH regarding his tenure to date at the financially struggling hospital.
Now that you've had eight months to get your feet wet, what has surprised you most about your experience at St. Rafe's?
What has surprised me the most are the challenges we're experiencing in adjusting to the payment reductions from Medicare. In Connecticut - because we are overly dependent on Medicare, and have a much higher percentage of managed Medicare than many institutions - trying to adjust to that and continue our momentum in a lot of the clinical initiatives that we're trying to do has been a real challenge. The analogy I use is that we're like a freighter, not a speedboat - you can turn a speedboat quickly, but a big institutional freighter is harder to turn. It's multiple factors: cultural change, systems change, process change, and it's working to convince legislators that we're suffering, and it's real.
You are a new CEO in a town with a diminishing number of CEOs. Have you felt a great deal of pressure to expend time on non-hospital business - boards, speaking engagements and such?
I've had some, but I've been very careful about what I participate in, because there are only so many hours in the day and I also have some national professional responsibilities: I'm finishing a three-year term as chairman of the American College of Healthcare Executives. And that does take some time. I've accepted an invitation to serve on the Connecticut Yankee Boy Scout Council, to serve on the Regional Leadership Council, and to participate in the Chapel West [special services district]. But [overall] I think in the short term I can contribute more to the community by helping to stabilize Saint Raphael's financially and moving it forward clinically.
Gov. Rowland has asked the legislature to eliminate the state's gross-receipts tax on hospitals. Is that likely, and what will be its impact?
The gross-revenue tax elimination is a very positive step in the right direction. Now we have to get it passed. It has a very significant impact for us - $300,000 a month.
At the federal level, what financial impact will the restoration of some Medicare reimbursement have on the hospital?
The reductions of the Balanced Budget Act [of 1997] reduced payments for Medicare to Saint Raphael's by about $77.5 million over five years. The 'restoration' that took place last year modified that by about $1 million, and most of the improvements went to non-hospital-based services - nursing homes, home care, etc. On a macro level, the federal government has obtained $2 of savings in the Medicare program for every $1 they thought they were going to achieve - twice the outcome they expected. Which is why many of us in the hospital industry are concerned that they overcut, don't realize how bad it is on hospitals and that there has to be change. There's a bill in the House and the Senate, that we've tried to encourage people to support, which would restore another $1 million over the next three years. That's not a huge swing, particularly for a place like ours - a major trauma center, takes all comers, doesn't turn anyone away, in the heart of an economically deprived community. We're dealing with a lot of life's tragedies, and there's minimal reimbursement. We lost $9.9 million on the Medicaid system last year on an in- and out-patient basis. It's a struggle.
The wave of hospital/health system consolidation seems to have eased. Nationally there were 30 percent fewer deals in 1999 than in '98. Why?
There was great hope that mergers would bring wonderful synergies and economic efficiencies to the field. In reality, they have not provided much value. If you look at the consolidations that have taken place, they haven't saved a lot of money, they haven't consolidated clinical programs at various sites very efficiently and they haven't delivered what people thought they were going to deliver. Big is not always better. My view is that health care is absolutely a local issue that's driven by relationships. You get too big and too removed, and you're not going to know what's going on [in the community].
Three years ago Connecticut seemed to be heading in the direction of a two-system state, with a Yale-New Haven-Bridgeport Hospital system, and a St. Rafe's/St. Francis system. Are we still moving in that direction?
I think it has paused, and I think one of the issues people will be watching is, will everybody be able to survive? The population has declined for four years; do we need the [hospital] capacity that we have? We need it in the New Haven market, because both Yale-New Haven and Saint Raphael's are very, very busy. But do we need it [outside the urban centers]? As more of the less complex activities are done on an out-patient basis, what's left is the very complex, which comes to tertiary centers like Saint Raphael's and Yale-New Haven. Long-term that calls into question how many smaller units do you need from an access point of view? That will be one of the questions Connecticut will be struggling with.
You mentioned changing the culture of the hospital. How?
First, we want to preserve the caring, compassionate and giving nature of our culture. The change is about the economics - recognizing that in order to continue our mission and our ministry, we need to stay economically strong and economically viable. We just completed our first quarter [October through December 1999] out of the last six where we didn't lose money. That's a culture swing, because all our staff participated in turning that around. We have to create a culture that is constantly trying to improve, constantly challenging what we have always done. Because the resources aren't going to be getting greater; they're going to be getting tighter.
What's going on in the HMO industry in Connecticut, where we're down to about six companies?
Managed care in its truest sense probably never really took hold in the New Haven market. I'm talking about full-risk capitation, where a buying group of hospitals and physicians come together and receive a monthly payment to take care of your life. In Connecticut, it was never a full-risk model: Some specialties were paid for on a procedure basis; some of the primaries were capitated; the hospitals were paid on a per-diem risk pool. It was never a pure capitation model. Plus, the number of lives in each pool was not substantial enough to use concept of the law of large numbers, which is the insurance principal. So capitation didn't happen, and probably won't happen in this market. Yet at the same time, we saw length of stay drop precipitously, people were being paid on a per-diem basis, so we drove a lot of diagnostic procedures, lab tests, into the front end of the hospital stay. The original per-diems were negotiated on the basis of a longer length of stay. It costs us $690,000 to open the doors of this place every day of the year. That's a lot of money.
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