Bermuda shorts 13: hurricane season

by Bill Shields

06 June 2019

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.

Hurricane season came early this year. Officially, the season starts on 1 June, but this year a tropical storm formed in late May to the South of Bermuda. While it did not amount to very much, it may be a harbinger of interesting weather as we enter the summer and sea temperatures warm considerably.

This may also serve as a metaphor for healthcare reform as a new funding model was also introduced on 1 June. As I have written previously, the Ministry of Health has been keen to move away from a fee for service model to one where income is more predictable and is capped.

Being 46% of total healthcare expenditure in the country, it was always likely that reform would have an early impact on Bermuda Hospitals Board (BHB). In practice, this means that for 2019/20, BHB will receive a block contract based loosely on the outturn for 2018/19, but not subject to inflation, utilisation or major changes in service.

The changes are further complicated as the government will, in future, collect insurance premiums from the three health insurance companies in the country. It will do this in regular payments via the Mutual Reinsurance Fund and pass this onto BHB.  Previously we have billed the insurers for claims and they collect premiums from their members with the difference between the two paying for administration of the scheme and generating either a profit or loss.

This is a temporary solution, pending development of a more sustainable situation, which will not, however, see a return to fee-for-service. We look forward to ongoing dialogue on a sustainable, value for money, payment system.

As a consequence of moving to fixed revenue, BHB will need to ensure the incentives developed under fee-for-service are reviewed and, if necessary, realigned. For example, hiring of additional staff, sanctioning overtime, weekend working and performing expensive procedures may make sense when every additional case is paid for. But alternatives may become more attractive with a block contract. Equally this may lead to additional nurse practitioners taking on some procedures currently undertaken by physicians.

None of these potential benefits should, however, mask the very real challenge that $14m (4% of turnover) in cost savings presents the organisation. This will be delivered, almost exclusively, from cost reduction. While this is not new in the NHS, BHB has no safety net. We borrow commercially; we can become overdrawn; our capital expenditure comes from cash reserves, borrowing and retained depreciation; and we have no external financing or resource limit constraints.

As a consequence of this, we must return to profit at the earliest juncture if our cash reserves, which have reduced by 50% over the last three years, are to support future service development.

This has also led to a renewed focus on cashflow forecasting, initiation of a vacancy control factor, creation of a vacancy control panel and rigorous performance management of the savings programme. And these will continue until the organisation returns to sustained profit delivery.

There is a real need to invest in new infrastructure including an electronic medical record to replace outdated systems, some of which are still based on paper. And two of our three sites need redevelopment, with replacement through a public-private partnership likely. This should facilitate the delivery of efficiencies through modern working practices, automation and reduction in duplication.

Alongside these challenges, we need to strengthen the programme management office, increase oversight through a reconstituted steering group and align all of this to more comprehensive, inclusive budget-setting. This will clearly be a major focus over the coming months.

Away from the office, having been in the UK and Washington DC in the last two months, I am now looking forward to the imminent arrival of my son and his girlfriend for two months – hopefully without his dirty laundry this time!

During this trip, we will be going back to the USA to New York and Florida to celebrate his 21st birthday, something that has come round much more quickly than expected. The ability to get off the island (subject, of course to hurricanes) and visit the continental USA has been an unexpected bonus of life in the North Atlantic. Notwithstanding its breathtaking beauty and subtropical climate, Bermuda is only 21 square miles and life can sometimes feel a little repetitive. This is particularly the case for someone who can get sunburnt at midnight and has no golfing ability whatsoever.

While I go off to ensure I have lots of factor 70 sunblock, I wish you all a happy Bermuda Day and, until the next time, good day.

Read our other 'Bermuda shorts' blogs here:

Bermuda shorts 1: the heat is on
Bermuda shorts 2: a collection of firsts
Bermuda shorts 3: putting the focus on costs
Bermuda shorts 4: dark and stormy
Bermuda shorts 5:lost in the triangle
Bermuda shorts 6: flying a kite
Bermuda shorts 7: end of the beginning
Bermuda shorts 8: howzat!
Bermuda shorts 9: finding a way
Bermuda shorts 10: yes, we have no bananas!
Bermuda shorts 11: a winter’s tale
Bermuda shorts 12: spring forward