John J. Gantner - Executive Insights - the treasurer of Robert Wood Johnson University Hospital discusses the work of a CFO at a hospital - Column

Healthcare Financial Management, April, 2003

John J. Gantner, treasurer, Robert Wood Johnson University Hospital, New Brunswick, New Jersey

Sometimes a CFO has to make a leap of faith that he or she is making the right decisions, because those decisions can involve intangibles that reach far beyond financial data. According to John J. Gantner, treasurer of Robert Wood Johnson University Hospital in New Brunswick, N.J., if your decisions are guided by what is best for patient care, they will likely benefit the hospital over the long term. Gantner's hospital has taken a leadership role in adopting standards relating to patient safety, fiscal accountability, and ethics. Gantner spoke with hfm about what has guided some of the recent major initiatives undertaken at his hospital.

Our Biggest Challenges

At the top of the list, I would put the recent cutbacks by the Medicare and Medicaid programs. Getting paid for the ever more expensive services that we provide to our patients is certainly a major challenge for us. Probably every hospital GFO in the country would echo that statement. Medicare and Medicaid are two very important sources of revenue to us.

Challenge number two would be managing the cost of technology. Every hospital struggles with funding new technology costs, but I think our challenges are particularly acute because we're an academic health center. We are compelled to be on the cutting edge of medicine. Whether it's the latest drugs, the latest OR equipment, or the latest devices, all emerging technology is very expensive. And the need for new technology seems to be affecting just about every specialty. For example, we've just started doing computer-assisted joint-replacement surgery. It's a much more precise way to replace joints, but it requires a high-priced piece of equipment that is also expensive to operate and expensive to train our staff on. We have to figure out how to pay for that technology in the context of payment rates that are shrinking or at best very constricted.

Uncompensated care is another cost that has increased significantly in this hospital over the past two to three years. We deal with uncompensated care involving not only people from New Jersey or the New York metropolitan area who have no ability to pay, but also people from other countries who are seeking the best medical care that they can find.

In 2002, we wrote off $59 million worth of charity care--that's charges, not our costs. And we wrote off another $56 million as bad debt. So that's $115 million of charity care and doubtful accounts, or bad debt, at our charges. Our costs are certainly less than half of that, but even at 40 percent, that's a very large number.

Another challenge is information systems. We've demonstrated that information technology can be used to improve the quality of patient care as well as the patient's experience in the hospital, but information technology is expensive. Hospital information systems, generally speaking, have lagged behind those of other industries; there's less innovation in hospital systems in general than there is, for example, in systems for banking or manufacturing. Many hospital information systems are still evolving. You have to be careful that you don't buy vaporware--your investment should have a reasonably long life and represent an improvement over what you have today.

Another challenge any hospital CFO faces daily is the basic economic challenge of allocating scarce resources. We have a finite amount of money coming in and we have many excellent clinical programs that require substantial capital. No matter how well you do something, for a slightly larger investment, you could usually do it better. How do we allocate our resources and budget among so many worthwhile programs and centers of excellence and people? That's the challenge!

As the hospital gets more and more complex and as our programs expand and require more capital investment, it's tough to determine how to allocate money.

Medical Liability Crisis

Our physicians have led some of the statewide initiatives to improve the malpractice insurance crisis in New Jersey, which desperately needs to be improved. We fully support our physicians' efforts. In February, New Jersey physicians conducted a statewide slowdown or stoppage of elective procedures. This initiative was an effective way of heightening the general public's awareness of the malpractice dilemma. Throughout the three-day exercise, physicians on our staff took every step to be sure that patient safety was never compromised.

We did a little less business for three days. Most of our surgery is elective, so our operating rooms slowed down quite a bit. From our standpoint, whatever patient revenue we lost during that period was a worthwhile investment in our medical staff and in an issue that is very important to the community as well as to physicians.

I hope the malpractice situation in New Jersey won't get worse before it gets better, but it might just have to. There are very powerful lobbies on both sides of this issue, and three or four powerful constituencies have much at stake. I think if push came to shove, the state would have to take action to ensure that the public has adequate access to physicians. But I don't see the situation ever getting to the point where physicians leave the state en masse because they can't get insurance. That would be disastrous.