Bermuda shorts 3: putting the focus on costs

by Bill Shields

08 September 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.

In 2009, as the incoming chairman of the HFMA, I was fortunate enough to attend the American National Institute of HFMA US held in Seattle. My lasting memory of that conference, in addition to meeting Al Gore the keynote speaker, was the doom-laden predictions on health spending in the US. Already spending in the mid-teens, in terms of percentage of GDP, the concern was about further year-on-year increases. A move away from fee for service and towards population health was unavoidable.

How bizarre, then, that at this year’s event in Orlando, in the aftermath of yet another failed attempt by president Trump to repeal the Affordable Care Act, I should find myself listening to a very similar set of presentations. The only difference was that now the percentages being talked about are even higher. Recent predictions suggest the US will be spending nearly 20% of GDP within a few years and you didn’t have to go far at the conference to hear even higher, scarier predictions.

Equally surprising, and in stark contrast to the NHS, was the almost total focus on revenue maximisation and the correspondingly limited attention given to cost containment and reduction.

Translating this to a Bermudian context, Bermuda Hospital Board (BHB) had seen revenues increase almost every year until this year due to the change in the standard premium rate (SPR) fees and a one-off subsidy payment reduction (please feel free to refer back to my earlier correspondence).

The finance function is, therefore, now turning its attention to cost reduction with the implementation of our financial recovery plan and a drive to deliver $29m of recurrent and non-recurrent savings through adoption of a programme management approach.

This will be developed and delivered against the backdrop of a very changed political climate in Bermuda. You will recall I mentioned the July general election in my last blog – A collection of firsts.

The election led to a landslide victory – 24 seats to 12 and almost 60% of the popular vote for the opposition Progressive Labour Party. Health did not feature as a major campaign issue, other than a pledge to increase competition in healthcare, a commitment to resolve the country’s problems with long-term care and a renewed commitment to improve mental health.

Given the fragile nature of the economy, however, time will tell whether increased funding will also feature in future. So far, the incoming administration has committed to follow the fiscal discipline of the previous government, in much the same way that Gordon Brown did in 1997 with the incoming Labour government. This has led the new health minister to reconfirm the funding arrangements for BHB, which have led to a reduction of $51m in cash terms in this financial year.

As we finalise our financial results for month four, it is becoming clear that the reduction in revenues has not been matched by a rightsizing of the workforce, both permanent and temporary. In the NHS, you might see evidence of this in locum and agency expenditure. Here in Bermuda, it is shown in expenditure on casuals and overtime.

In a jurisdiction where the collective bargaining agreement with our trade unions can lead to triple time being paid in some circumstances, this is every bit as critical as the agency challenge faced by the NHS.

Those of you following the blog will be pleased to hear I finally passed my driving test and am now the proud owner of a Kia Picanto. I have also managed to gain some first-hand experience of Bermuda’s health system – nothing to do with the new car!

Some over-enthusiastic jet ski driving by my son, with me as a passenger, resulted in some damage to my lumbosacral joint (the L5/S1 disc). What was fascinating to me was the arbitrary nature of what is and what isn’t included in an employee health plan.

For example, anti-inflammatory drugs are, but painkillers aren’t. Physiotherapy provided at BHB is included, but if this provided in a doctor’s office, there is a substantial co-payment. Difficult though this may be for me to get my head around, I’m well-informed, fairly healthy and have no co-morbidities. For some of our indigent population, the prospect of accessing these services is daunting to say the least.

This can only get more complicated when you consider that some will also have to access financial assistance, may have a minimal level of insurance cover or no insurance at all, or may choose to have treatment in the private sector, or off the island altogether in the US.

These are all aspects of care that BHB will be focussing on as it continues to work on its clinical services plan. This will determine the business areas that BHB should operate in, what threats we have from other providers in the private sector and the opportunities we have to repatriate work from the east coast of the United States.

As we develop and finalise the plan, I will keep you updated on progress.

Bermuda shorts 1: the heat is on
Bermuda shorts 2: a collection of firsts