Bermuda shorts 1: the heat is on

by Bill Shields

14 June 2017

In April 2017, after 30 years working in NHS finance, former HFMA chairman Bill Shields moved to Bermuda as chief financial officer of the territory’s hospitals board. In this series of blogs, he documents his experiences.

My first month in Bermuda was fascinating both from a personal and professional perspective. First, I found out how difficult the driving test is – yes I failed and that’s a big deal when you are as incompetent on a scooter as I am.  I’ve also had to get ‘comfortable’ with temperatures that seldom dip below 70 and some disturbingly big cockroaches.

I’ve also been getting to grips with the nuances of the health system.

Bermuda has a population of 60,000. The British overseas territory is in the North Atlantic 600 miles East of North Carolina (not the Caribbean which is 900 miles to the South). It has one of the highest costs of living in the world and is consistently towards the top of the OECD rankings for health spending.

Putting that into figures means a per capita spend of $11,102 – almost twice the OECD average – and total healthcare spending amounting to a sizeable 11.5% of GDP – only Switzerland and the US spend more. Conversely, Bermuda has lower life expectancy than the UK, Canada and Portugal; all of whom spend considerably less.

The country follows a system of reimbursement broadly similar to the US with fee for service based on diagnosis-related groups or DRGs (but using ICD9 as the basis of coding rather than ICD10) being the primary source of revenue. This is supplemented by government grants in a number of areas including mental health.

Bermudian healthcare is funded through insurance. The Standard Health Benefit (SHB) defines the minimum offer provided through health insurance and each year an actuarial calculation is done to determine the price of this package – known as the Standard Premium Rate (SPR). Different insurers then offer additional benefits at different prices. This means every Bermudian knows what they will get and how much they will pay. It tends to work reasonably well unless patients have no insurance cover.

Employers must provide insurance coverage and pay half the costs.  

Bermuda Hospitals Board (BHB) receives around 45% of its revenue from government in the form of grants – covered by one of the government’s health insurance plans and ‘subsidy’ payment for the under and uninsured. This latter category has been increasing in recent years as the country’s working population has reduced, creating a situation where fewer healthy people pay into insurance plans and the remaining population has become older and sicker. Last year, the hospital board billed $124m for these patients.

BHB is a quango (not a pejorative term here) established by a 1970 act of Parliament. It employs its own clinicians – hospitalists (general physicians), emergency department consultants, anaesthetists and psychiatrists. It also has arrangements with some groups who are part-time and may actually run services, such as diagnostic imaging, in direct competition. And it provides facilities for independent contractors – surgeons – who will bill separately for their own services. Not surprisingly, this can create confusion!

That said, we face many of the same problems as the UK. Bermuda also has a winter bed crisis that seems to have become a year-round phenomenon with patients who are medically fit for discharge, but with few places available for them to be discharged to. The board also has a current financial problem meaning it will deliver a deficit this year due to withdrawal of government funding and an inability to match the cost base to the new income level.

More generally there is an ongoing debate concerning the best way to fund healthcare in the future based on many of the principles the NHS has embraced around reducing waste and getting things right first time.

The board’s chief executive and I were recently called to appear before the Public Accounts Committee to explain the impact on our financial viability of the change in government funding. That was a new experience for me and one that comes on the back of two earlier meetings with the minister of health and her permanent secretary to discuss the same issues. More on which next time.

Until then, good day!

Bermuda shorts 2: a collection of firsts
Bermuda shorts 3: putting the focus on costs