Over the last couple of weeks, several media outlets have published articles on our fiscal year 2017 financial results, bond ratings and, more recently, the Centers for Medicare and Medicaid (CMS) star ratings. I very rarely blog about financial matters and have previously shared my thoughts on the CMS star rating system, but given the amount of press we’ve received this year I thought it important to weigh in on both.
First, our fiscal performance and bond ratings – with apologies to the finance team for my loose use of financial terms. In fiscal year 2017, our operating margin was 0.4%. That means that for every dollar in payments (revenue) we received, we spent (expenses) 99.6 cents of it on patient care and running the health care system. Although the system has had a positive operating margin for four years in a row, our 0.4% operating margin in 2017 is significantly lower than the 1.5% to 2.5% we achieved in the previous three years. This is important because even small changes in operating margin can have a big impact on how we are perceived by financial institutions and bond rating agencies, and affect our ability to borrow money to upgrade our facilities and invest in things like Epic. Despite the drop in operating margin this year, all three major bond rating agencies either upgraded our rating or kept it the same because of the substantial progress we’ve made in improving the quality of care we deliver to our patients – as well as our continued stable financial performance.
As you know, we’ve been intensely focused on improving the quality of care we deliver through focused process improvement activities, the addition of a new system level AVP for quality informatics, equipment upgrades and the installation of a fully integrated electronic health record. Thanks to the work of many, and the support of the board in making these expenditures, we have seen improvements in the quality of care delivered at all of our hospitals, especially over the last six months of FY’17.
Unfortunately, this progress is not fully reflected in the latest CMS ratings posted on the Hospital Compare website. In the most recent ratings, we received a four-star rating for UMass Memorial HealthAlliance; a three-star rating for UMass Memorial Clinton Hospital (current ratings are based on pre-merger data); a two-star rating for UMass Memorial-Marlborough Hospital, and a one-star rating for UMass Memorial Medical Center.
Overall, the number of one-star rated US hospitals doubled this year and many of them are disproportionate share hospitals and tertiary referral centers like our Medical Center. I do not think any of our hospitals deserve a five-star rating nor do I believe the Medical Center deserves a one-star rating. The biggest criticism we have of the star rating system is that it equally weights the hospital standardized mortality rate – the single most important measure of quality in a hospital – and the 30-day readmission rate, which has been shown to be associated with negative outcomes for patients as reported in JAMA, Nov 2017 issue. Tertiary care facilities that accept a large number of transfers and care for a high percentage of Medicaid patients, like the Medical Center, typically have very high readmission rates which negatively impacts their star rating.
Almost daily, I personally review the quality data from our hospitals and can say with absolute certainty that the quality of care we deliver at our Medical Center is the same as the quality of care we deliver at our other hospitals, despite the difference in the star ratings. This is not to say that we do not have problems, however, we are focused on the right things and putting action plans in place to address them. Based on the most current quality data available, the quality of care we deliver in our hospitals and our clinics is about average, but average is not good enough for the patients we serve. We aspire to be in the top decile for all quality measures and will continue to make whatever changes necessary to achieve this goal. We have made significant progress towards this aspiration but there is still much work to be done, especially around the recurring issue of patient flow and ED boarders.
In 2018 we are going to do everything we can to make progress with our quality improvement program and maintain a positive operating margin. You can help by continuing to work with your teams to implement ideas that improve quality, make it easier for patients to get appointments, improve patient flow through our operating rooms, clinics, and emergency departments, and create a better experience for our patients and their families. If not for the 55,000 ideas we have implemented together over the past four years, I am quite sure we would have a negative operating margin and a junk bond rating as we did in 2013 when our operating margin was -2%.
If you have questions about our ratings or what we’re doing to address improvement areas, be sure to speak with the local Quality leader at your location. Thank you for all your great ideas, commitment to quality, and for taking great care of our patients and one another.
Eric