Bermuda shorts 6: Flying a kite

by Bill Shields

27 March 2018

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.

This month I’m getting ready to return to the UK for Easter. I plan to be in Bristol to see my son, Scotland to see my family, and York because I haven’t been there for a while!

Easter is an important holiday in Bermuda where, although Good Friday is a public holiday, the following Monday is not. One of the Easter traditions is that everyone flies a kite on Easter Sunday, whatever the weather. (Indeed, from the kites I saw flying last weekend in a thunder storm with hurricane force winds, no one here has heard of Benjamin Franklin!)

The other conspicuous feature about Easter is the wide availability of a seasonal delicacy – cod fishcake on a hot cross bun (yes, you heard that right).

While we have been spared the sort of weather the UK and most of Europe has been experiencing recently, my first exposure to a winter storm in Bermuda was interesting. Hurricanes are typically intense, last up to eight hours and strike between April and November. This particular storm lasted three days wfith winds gusting up to 80 miles per hour – fortunately, there was no structural damage to our house, but it was not really scooter weather.

I attended Parliament for the first time in March to hear the health minister, the honourable Kim Wilson, MP, deliver the health budget speech that formed part of the debate on Bermuda’s Budget.

The premier, David Burt, is also finance minister – not unusual in Bermuda where ministerial portfolios are often combined. Following election of the new administration last year, he produced a budget aimed at stimulating economic growth. In addition to a return to Bermuda Hospitals Board’s historical funding levels from government, there were a number of key features. These included: closing tax loopholes; relaxing building regulations in Hamilton (the capital); and switching ownership of local companies to allow non-Bermudians to have a 60% stake (compared with 40% previously).

None of these might sound earth-shattering when compared to the tribulations of Brexit. But they will allow for an increase in foreign investment, ownership and influx, all of which place additional pressures on the healthcare system.

Following on from the Budget, the Ministry of Health and the Bermuda Health Council (BHeC) have started their consultation on moving all of BHB’s outpatient revenues to a resource-based relative value system (RBRVS) with a planned implementation date of 1 June. This is a complex process, to say the least. There are over 570,000 procedure codes to be analysed and converted. The definition of outpatient includes all diagnostic tests, dialysis and same day surgery. And it is also planned to extend a version of RVRBS to physician and anaesthetist fees.

The methodology is used widely by Medicare in the US and provides remuneration for procedures based on their relative value to each other. RBRVS assigns procedures performed by a physician or other medical provider a relative value and this is adjusted by geographic region (similar to the market forces factor applied to healthcare resource group prices in the NHS). This value is then multiplied by a fixed conversion factor, which changes annually, to determine the amount of payment.

RBRVS determines prices based on three separate factors: physician work; practice expense; and malpractice expense.

So, for example, a generic 99213 current procedural terminology (CPT) code is worth 1.39 relative value units, or RVUs. Adjusted for North Jersey, it is worth 1.57 RVUs. Using a conversion factor of $37.90, Medicare paid 1.57 x $37.90 for each 99213 performed, or $59.50.

We will be taking our revenue quantum for the current year, weighting this based on the volumes of activity in each category, then establishing the conversion factor that is applied to the RVU. However, at the same time, we will be adjusting this to ensure revenue neutrality overall.

As with any change in pricing methodology, rigorous testing is required to ensure no unforeseen consequences. In a jurisdiction like Bermuda, where the population, while static, is ageing and becoming more dependent, there are few barriers to market entry. But there are a significant number of areas where it is either impossible to grow market share, or it would not be clinically effective to do so. And there are a range of procedures that have to be undertaken even though there are no economies of scale. It will be crucial that sufficient scenario modelling is undertaken.

Away from fee changes, our annual service implementation plan (ASIP), which describes how the clinical services plan (CSP) will be implemented, is nearing completion. This has been an interesting exercise, led by my team with engagement across the organisation and laying the foundations for delivery of our financial recovery and quality improvement plans.

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