Talk finance and build a relationship with your CFO

High Reliability, The Healthcare FM Podcast is brought to you by Gosselin/Martin Associates. Our show discusses the issues, challenges, and opportunities within the Facilities Management (FM) function.

Perhaps the most important professional relationship a healthcare facilities director must build is with the CFO of the hospital. And so today's episode is dedicated to and titled "Talk finance and build a relationship with your CFO."

Thanks to our guests, Director of Facilities Management Robert Hacker and his CFO, Jim Corwin. Jim and Robert work for Community Memorial Healthcare in Ventura, CA.

For many directors of FM, finance, and money can be outside of their comfort zone. In this episode, Jim and Robert begin with the basics: How does a hospital get its funding? They discuss the basics of capitation and payer mixes and how they impact the FM budget creation process. They also discuss creating a relationship between an FM and the CFO built on credibility and trust.

Jim offers insights on how FM can bring even more value to the CFO/FM relationship. This is a relevant episode for all healthcare facility directors.

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Transcript

Speaker 00 0:03

Hello, and welcome to the High Reliability Podcast. I'm your host, Peter Martin, President of Gosselin & Martin Associates. As always, thank you for clicking on this podcast. Our podcast today is rebroadcast from a recent episode that appeared on our Healthcare Facilities Network YouTube channel. In this episode, we talk finance, we talk budgets, we talk relationships with our two guests, Robert Hacker, Director of Facilities Management, and Jim Corwin, Chief Financial Officer. Robert and Jim work for Community Memorial Healthcare in Ventura, California. As always, thanks for clicking on High Reliability and enjoy this episode. You know, when we started the Healthcare Facilities Network, this is the type of episode that we envisioned doing because it brings together a Director of Facilities Management, Robert Hacker, is CFO Jim Corwin at the same table. And those of you who work in healthcare facilities management or have worked in healthcare facilities management know how important the relationship between your director of FM, your manager of FM, your people at FM, and that CFO is. The CFO has the checkbook. But the CFO isn't always attuned with what FM is doing. And sometimes FM doesn't keep their CFO apprised of what they are doing. So it's a critical relationship that is not always intact on the facilities level for a variety of reasons. And this is why we're excited to bring you this episode. I'll just tell you, one of the difficulties is always titling episodes. Not a big fan of doing it. And this one was particularly difficult because Jim and Robert touch on so many different themes and we had originally envisioned it as more of a finance type episode, but it quickly evolved into something a little bit different and obviously you let it go that direction because I think what it did, you know, as I look back on this episode, both of them in their entirety, there are so many keys that these two gentlemen offer to developing that relationship between these two critical departments and so we were thinking about naming it it was really difficult to you know it wasn't exactly a finance episode and it wasn't you know a relationship episode so we came up with top finance and build a relationship which are kind of two you know they may not be in perfect synchronicity with each other but i think both themes are exhibited in here so it was um it was a fun episode to do and again i think that it is just so critically important of a relationship to have. All relationships are important these days in the work environment, but with your CFO, it is even more critical. So I thank Jim and Robert for appearing on this particular episode. We'll do more of this in the future because again, we can talk about finance and we can talk about budgets and we can talk about that, you know, Not all healthcare facility professionals are comfortable doing that because it hasn't always been a skill that was needed maybe when you were coming up in the 80s, 90s, and early 2000s. But it is really important now. But if you can't build that relationship first, then it doesn't necessarily matter how much business acumen you have, excuse me, your finance acumen that you have. You need to build the relationship too. They both go together. You can't have one without the other. And so with that, I am going to click over to us for episode two of Talk Finance and Build a Relationship with Your CFO. And as always, thank you for clicking on this episode. Have a wonderful day. Today's episode is a different one for the Healthcare Facilities Network. I hope it's one that you enjoy. Today, we are going to look at healthcare facilities management finances. It's the first episode we've done about finances, and I've enlisted two great guests to help me in this endeavor. First guest is Robert Hacker, and I'm going to ask them to introduce themselves in a bit. But we have Robert Hacker. He's a director of facilities management. And we have Jim Corwin. Jim is the CFO. So Robert and Jim worked together. And gentlemen, Robert, let's go to you first. Where do you work together? Tell us your title. Tell us who you are and where do you work.

Speaker 01 4:37

My name is Robert Hacker. I'm the facilities director for a small two-hospital system out here in Southern California. Community Health Care, I believe is our new title now. Community Memorial Hospital. health system was our old title. But I'm responsible for a two-hospital system and about 23 clinics or so. Typical facilities management scapegoat for everything.

Speaker 00 5:06

And Robert, you are located, one of your facilities is in Ventura and the other in Ojai? Correct. Excellent, excellent. And you may recognize Robert from our intern episode that we did. This is Robert's fourth, this is fourth time, right? I think this will be number five total. Five. He's got the early lead for the Healthcare Facilities Network. Robert, thank you. Jim.

Speaker 02 5:32

Hey, Peter. Thanks for having me. My name's Jim Corwin. I'm the Chief Financial Officer for, as Robert said, it used to be Community Memorial Health System. We are now Community Memorial Healthcare, and healthcare is one word there. We're trying a new branding strategy there. I was a professional musician, actually, for about five or six years, and then I got into healthcare finance, which I just fell in love with. And I've been a CFO since 1997. So in my 26th year of being a CFO, I was with Tenant for 12 years and for five of those as a CFO. And then I was the regional CFO for the state of California for Providence Health Systems, which is sort of a Seattle-based company. I was in charge of their hospital division for a while. And then they developed a physician division and they didn't have a leader. So they asked me very nicely, your job's at stake if you don't take it. But a few bucks and a few minutes later, they put me over a physician division. So from 2008 to 2020, I ran their physician division, grew from 300 doctors, did nine 900 physicians. We had 120 clinics. And I was running about three quarters of a billion dollars through there of net revenue, which is not dissimilar to our size. Robert said it beautifully. We have two acute care hospitals. ICS is a three hospital system just because we have the SNF and the skilled nursing facility is 75 beds. It's robust. It has a lot of care and need resources. reimbursements just gone berserk in the SNF area. It's made it more difficult. So Robert really has three facilities. We're very lucky that two of them are fairly new. So that means we don't have that huge central plant exposure, but our Ohio acute care hospitals are in bad shape. So I joined here four years ago and I'm just starting my fourth year. I started in August of 2020. And I just love being in a standalone. I always worked for health systems, Peter. So I was always about executing what they asked me to do. This is kind of fun because Robert and I get to actually make the decisions. I just wish we had more money. That's the only constraint Robert and I have. So it's perfect topic for you today, Peter, because that is our single biggest challenge is the ability to afford

Speaker 00 8:33

what needs to be done. Well, that's actually where I want to start, Jim, is money and kind of talking about perhaps some of the challenges of today that are a little unique. I'd imagine money is tighter than ever, but before you answer that, so you said you were a musician. Were you a full-time musician prior to? I was a

Speaker 02 8:52

full-time musician. What did you play? From 1979 to 1984. I was a bass player. I come from a family of musicians. So my father was Peggy Lee's band leader for many years. And my grandfather was a songwriter named Johnny Mercer. So Johnny Mercer wrote, founded Capitol Records. He wrote Moon River, Hooray for Hollywood.

Speaker 00 9:19

As I say, I think I've heard that name Johnny Mercer

Speaker 02 9:21

before. Yeah, yeah. He's pretty well known. So I still... manage his publishing catalog. Wow. But Robert doesn't give me much time to do that. It was focused on the

Speaker 01 9:35

hospital. I thought this was the health facilities network.

Speaker 00 9:38

Well, it is, but you know, whenever I, that's why I love talking to people is because you find every, that's really unique. And so it is the healthcare facilities network and you made a transition. So did you make the transition into finance out of the band? How did that, like, how does that happen? Yeah,

Speaker 02 9:56

yeah,

Speaker 00 9:56

I hurt my

Speaker 02 9:57

back and moving equipment and realized my grandfather set aside some money for college. And so I figured I'm just going to take advantage of it. I moved around a couple of industries and then found healthcare in 1990. And I met a healthcare CFO. He says, if you get good at healthcare, you will always be employed. and that people are always gonna need healthcare and it's only gonna get worse, it's not gonna get better, in the sense that people are gonna get older and need more care. So if you want security, get good at healthcare, you will have a job.

Speaker 00 10:36

He was right.

Speaker 02 10:37

Yeah.

Speaker 00 10:38

I think with all the difficulties the market faces today, there's still a lot of truth in that statement. So talk about today, Jim and Robert, obviously, We'll kick it over to you. I know you're probably chomping at the bit. But Jim, can you talk a little bit about the current market, current state of health care, the availability of capital, the tightness of dollars? How do you assess today? Well,

Speaker 02 11:03

what just has been the status development over the last 15 years, Peter, is nobody wants to pay for health care. Everybody wants it and they want it to be very good, but nobody wants to pony up the cash for it. We're unique in the senses. We have four systems. I saw a great speaker one time said the most successful healthcare systems in countries are where they just have one system. So forget universal care, forget anything. They have one system. In Switzerland, it's privatized. We have four systems. We have Medicare, Medicaid, private insurance, and no insurance. So one of our four quadrants of coverage is not just And that segment is growing. California has, you know, participated in managed care 30 years ago, thinking that the whole world's going to go to managed care and the rest of the country said, no, thanks. And so California is unique in the sense that they've accepted lower payments. Medicare has been ratcheting down their payment. I call them Medi-Cal on steroids now. And so in the old days, if you were 50, 60% Medicare, you could make some real money. And remember, we're not for profit, Peter. So our whole goal is to generate, we're not for profit, but not for money. But we need the money to reinvest And really, our reinvestment is pretty clear. New services, reinvest in people, but reinvest in our infrastructure. And that's the saddest part because when people had money, they didn't invest in the infrastructure. That was the time to do it because, I mean, oh, my gosh. Every time I've ever taken over a hospital, you needed $20 million just to get the central plant. where you needed just the central plan. And $20 million of central plan improvement gets you nothing relative to care. It saves you a ton of money on maintenance and repairs and stuff, but you really want your money to go into patient care. So I'm really dying to see what Robert does. He's got two of three new facilities. We've got to do something with our acute care in Ojai. But I think the secret is at least from a central is going to maintain it because he does have two relatively new structures that few people have the luxury of. Although with the AB 1953, the earthquake seismic requirements, Peter, a lot of people have built some newer infrastructures, but we're now these hybrid facilities of new and old, and the old is very old.

Speaker 00 14:22

So you talked about the, the, the four, you know, the four different systems that we have just last time and kind of big picture relative to the tightness of dollars and the ability to get capital. And this is even outside of your system, just kind of globally. Have you seen a market such as exists today in your experience in healthcare?

Speaker 02 14:43

No, this is the worst I've seen it. I'd really like to hear Robert's thoughts. Let me give you another minute. But I've never seen anything like where we're at now because the dollar need is bigger. You know, just these elevators. You know, hospitals have so many elevators. Just the elevators. You're talking millions and millions and millions of dollars. And that's not even done basic stuff. So... I don't even know how Robert has kept our facility running in the current state because we still have an old tower we're maintaining and less direct acute care but we're still running a lot of clinical services out of there and we've got a real worn down infrastructure in Ojai and I'm amazed Robert I mean literally and we give him a shoestring budget so I I mean, I pose the question, how do you do it?

Speaker 00 15:46

This is Peter Martin. If you or your organization is interested in advertising or partnering with the Healthcare Facilities Network, including sponsoring content, then please email me using the barcode in the lower right of your screen. From the trades level to the vice president level, from planning, design, construction, project management, compliance, safety, and security, the Healthcare Facilities Network reaches FM people where FM people are.

Unknown 16:10

Okay.

Speaker 00 16:11

Robert?

Speaker 01 16:13

Duct tape and bubble gum. It really is. It forces us to really and truly make decisions that we don't want to make. What I mean by that is sometimes we're going to defer certain things off. We may employ other maintenance strategies. A lot of my peers will talk about some of the more Trendy topics, reliability-centered maintenance has come into play in the last 10 years or so. But sometimes we're employing run to failure. And a lot of people don't like that, but guess what? We may have to let things go and we'll let it go well past its life cycle. And that kind of catches up to us later on. As Jim was saying, and he kept pointing out, the positive that we have two newer facilities. I'd like to say we have two very old facilities, one facility that both Jim and I are sitting in right now, a very old facility, and then we have a very old critical access hospital up in Ojai. The newer facilities, I'm not worried about as much. Obviously, newer facilities have their own issues. The first few years, they're higher cost than once they start getting onto that level curve. But, you know, it's hard sometimes to make decisions and then people don't like the decisions afterwards. What can you do to prevent that from occurring in the future? Well, guess what? We can't always prevent failures from occurring. So, you know, when we talk about finances, one of the things that I talk with Jim all the time about is how do we get paid? You know, and he was talking about like the four different basic pairs that we have or different categories. But, you know, Jim, you and I have talked about, you know, what is capitation? What does that really mean when we have a capitated market? You know, you have X amount of people that we're taking full risk on. What does that actually mean? Yeah, I mean, that

Speaker 02 18:29

is actually my expertise, both Robert and Peter. When I was with Providence, I had 200,000 and capitated lives. Well, what's happening is the insurance companies are trying to partner, especially in California, also Minnesota, Texas a little bit, but they need a partner to share the risk with. So what they did a lot of in the mid-90s and still try to do, but it's thinned out a little bit, is they want a risk partner. So what they'll do is they'll go to health systems like us and go first. You're rare because you're a fully integrated health system. You have joint ventures. You have clinics. You have not only three entities. One of them is skilled nursing, which is very vital in moving acute care through the system. But what they do then is they give us a portion of the premium. So what we've got to do, right now we haven't dabbled as much as I'm used to into the overall, so they share the premium with us. Well, what do we do? Right now we take a primary care cap in our clinics, which means they give us, say, $25 per person, and they just give us lump sum payments, and they say, Here's your quality goals. Take care of everybody. And they kind of wash their hands a little bit of it. They monitor it. But we're getting the premium. When I was with Providence, we took full risk, which means we would take risk in the hospital. And I take full risk on the professional services. with my doctor group because I had all the multi-specialties. So I could take a lot of the premium dollar. So, you know, a typical rate for commercial might be 80, 90 bucks a person. For seniors, it might be four to 500, even more per person. But remember, you get four or 500 bucks a month times 12. So you get six grand to take care of this one person. You better keep them healthy. The one advantage of capitation, if you do it right is people will stay healthy. In the late 80s, they were doing it, and doctors were keeping the money and denying care, and it just blew up in their face. when we retooled everything in the mid-90s, early 2000s, and really developed high-quality wellness programs. And so I would invest, even send people to the homes, and I would use that premium dollar to do that. And you find out there's a lot of extra money left if you do that, because high-end hospital care is built into that premium. If you keep it out of the hospital, You can really do well, but it's a very, it's a large and exotic infrastructure and you need to know how to manage it. So I'm preparing us to be able to do that in the next three to five years. What does that mean? I'm beefing up my case management area, those types of things to be prepared to take capitation. But we're really not designed in Ventura as not a big managed case. market yet. But for us to compete, we're going to have to do that. And we have wide enough services that we can take some risks once we know what we're doing, Peter. And so we're not there yet. So I'm not going to take that risk because it would blow up in our face. But it can really work well. But you got to be a good person in some ways.

Speaker 03 22:23

Sure. But

Speaker 02 22:26

Jim, as we're looking at that- I don't know if that made sense, Peter, or if it left any questions. So how does, I

Speaker 00 22:33

liked your explanation of capitation. I liked the visual of the doctor in the late 80s denying services too, because I think that tells a story. But how did those revenue streams, that impacts, you're up here dealing with those issues and now Robert's down here on infrastructure, running the hospitals. How do revenue streams, how does a revenue stream or lack of a revenue stream impact somebody at Robert's level, keeping that hospital going? So that would be the second question. Robert, the first one I'd like to ask, and you and I have talked about this a lot, and this is one of the reasons that I've asked you to come back on because you speak about it very eloquently. What are some revenue streams that a hospital has that you pay attention to because it impacts your work in healthcare facilities management?

Speaker 01 23:25

It's like

Speaker 00 23:27

a building block, right?

Speaker 02 23:29

Because Robert cares about everything. Sorry. I've never seen that. Jim, you know, we're working on this. You can spend a bed for six months because you can make more on the GME money. I'm going to jump in. I want him to answer, but A couple of things he does that I've never had with an engineer. One, he understands revenue like administrators do, for one. And he actually, because he knows I'm not in the room a lot of times, because they all love to meet without the CFO. And so he becomes a true gatekeeper. How do they meet without the CFO? You've got the money. Yeah, but they do planning and it's the early stages. And really they see it as we're just starting a new service or we're doing something. But Robert really acts as a gatekeeper, which I'm not used to. I'm used to engineering people, just scoping it out and saying, here it is, here's the the high dollar, low dollar, medium dollar thing. And sometimes they'll even start. But Robert says, I'm not doing a thing till we understand that there's an affordability index on this project. and and that's you if if you get anything out of this podcast that's a true added value you can bring as a head of facilities that you've got to know we've got to figure out how to pay it and if you're a good cfo your answer isn't always no it's let's figure out the option we can afford and that's another thing robert's amazing at that he'll come up with a solution he won't throw his hands up and his answer isn't always the biggest dollar one. He'll have the right way to do it and the next level of affordability, but it'll work better. And then here's the shoestring budget. This will just keep it going for three more years. So Robert, I don't know how you do that or when you started doing that, but it's an added value that you bring to an operations that I've rarely seen.

Speaker 01 25:43

Well, I think that's one of the reasons why we're having this podcast is there's a lot of folks out there, you know, my peers that don't have the financial background that I do. And you were talking about it a little bit about the different types of payers that we have, whether it be Medicare, Medi-Cal, private insurance. or, you know, some of the, what I would call the Obamacare plans, you know, or the indigent population. I pay very much attention to what that payer mix is because all of a sudden, if we're starting to get more Medicare patients, we're getting old, typically we're getting older folks and there's an effect that it's going to have on me. Typically, I don't care what the temperature is inside the patient room, they're too cold. And so we're getting these calls, it's too cold, it's too cold. And we're like, what are you talking about? It's 74 degrees inside the room. We also have issues with their loved ones. Maybe it's grandma or grandpa who's in the hospital. When their spouse comes to visit, we have other issues that start to develop around parking. I hate to say it this way, and I'm being very stereotypical. We have minor accidents in the park construction. They don't necessarily always park in the parking stall itself. They take up two spaces, little things like that. And then, of course, if we're getting, you know, a larger portion of Medicare, we start to have more visitors that come because we have, you know, it's grandma or grandpa that's in the hospital and, you know, here's all the kids that want to come out and see grandma or grandpa. It might be the last time to see them. So there's other issues that come about. On the other side, if the payer mix starts to shift to Medicare, typically these are people who don't have a lot of money or they have- Or Medi-Cal, I think you mean Medi-Cal. Medi-Cal, Medi-Cal. Well, I said Medicare twice, I'm sorry, Medi-Cal. Typically, we'll have other issues that start to develop. We have more vandalism. We have more theft. We have more disobedience within the hospital. And these are little things that pop up. And I have this conversation with Jim. I said, Jim, I'm seeing this. I'm starting to recognize and I'm seeing these issues developing in the hospital. And then I'll go back to him and say, hey, has our paramedics changed? And he's like, yeah, it has gone up. And I can actually tie these things together. The correlation is there. So I have to prepare for it. So as we are preparing our budgets, I come back and I say, look, if we're going in this direction, these are the things I have to worry about. You know, a lot of times we don't even look at it. But theft of cars, you know, cars getting broken into in our park construction. I can actually show a correlation very quickly on how, as our payer mix has started to shift, how that volume has gone up. Those incidents have gone up higher. And so it's little things like that that we're looking at and trying to control and make sure where we're headed. Because to me, the payer mix, I'm looking at it for two reasons. Number one, I know what the income is for Jim. patience as we can, understanding that everybody's going after them. But if it goes the opposite way, how do I start to tweak and prepare for those things? Understanding that there's going to be more damage, I hate to say it, to walls, to signs, to little things that can be easily taken. Yeah. How do you track that, Robert? I kind of watch it just for, there's a certain sense that I can feel It's an inherent ability that you can kind of feel. We can track it statistically. Now, I don't have a statistician on my staff, which I'd love to have to do some advanced analytics. It would be nice to come out and say, hey, but I can't afford it. And we as a system can't afford it right now. So some of this we can look at. We will track how many... assaults that take place, how many burglaries, how many thefts. It's little things that you watch and you can actually see it. How many calls that we're getting? Are we all of a sudden getting a lot of calls in the summer that it's too cold? Wait a minute. Typically, it's the opposite way around. But knowing that it's going that way, I've got to prepare for it. And it's little things. Again, some of the Older folks we have, one of the things you'll notice right off the bat is our handicap parking. All of a sudden it's impacted before the other parking. And a lot of times people don't put those things together on what's actually occurring.

Speaker 02 30:47

Well, Peter, when I was a regional state CFO for Providence, I actually got two finance people to support the seven engineers that we had across our state system because you needed that. They really need financial support, especially if they have financial value.

Speaker 00 31:12

It was funny. Robert, I know you're a... You're an ump and you're a baseball ump. And I was thinking, as you guys were talking, these sports teams have staffs full of analytic people to say something as mundane as go for a two-point, in football, go for a two-point conversion if you're down nine with three minutes. Yet here we are, a hospital and healthcare system that is infinitely more, infinitely more important than the Rams game or the Patriots game. And more

Speaker 02 31:43

complex.

Speaker 00 31:43

And you could take that analytics and put it to really good use. And yet you're struggling for funds. It's not a social comment. It's just kind of interesting where the focus goes. Well, the

Speaker 02 31:56

industry doesn't recognize infrastructure for some reason. They only focus on the direct care. But there's very rarely... There are some things in the cost report that have been fading and shrinking. that have some consideration for that. That's why my number one thing is to track my cash flow and start with my debt service. And then I have to generate a certain amount, not I personally, but as a system, we have to generate capital for Robert. And right now we haven't been doing that. We've been meeting our debt obligation and we've had a few bucks left over that really have gone to replace equipment. So, I mean, my goal is to get us to 40 50 60 million a year in extra because robert could easily consume if i gave him 50 million dollars he wouldn't waste it he would use it and do a ton of stuff that needs to be done that's going to really start crumbling i mean i'm more worried for the finance guy and the engineer guy 15 years from now because we're really going to hand them a very dangerous infrastructure because we did our best to keep it running with what we had but nobody considers the kind of capital you need to run a hospital and that's where I think if I had to say there's probably a biggest failure right now in the funding of healthcare it's the lack of consideration for infrastructure to support the process.

Speaker 00 33:43

Wow. Have you always focused on that, Jim, in your role? And I mean that as a compliment.

Speaker 02 33:50

Well, you know, it's funny. I mean, I started as a capital accountant, so that may have... kind of because then I always partnered with Robert's position because Robert often is not only in charge of fixing repair and central plant but usually the big construction projects he's got to have a deep hand in because all these third party people show up on our site and start going hey we can do this and that and Robert has to say no no no time out you don't understand you don't understand the distance to a power line or this or that. So, you know, he's engaged. But I noticed that when I was a capital accountant, I just marveled at the facilities position. I think it's one of the most important positions in your health system is a top-notch facilities. People and really the people they get underneath them because they need really very diverse people team you know because at some point you get tired of plumbers you know i'm sorry i was gonna say a bad word you get tired of plumbers messing stuff up and overcharging you and after a while robert just goes i'm gonna hire a plumber i'm gonna hire a painter i'm gonna hire this yeah but it's it's just insane i'm actually quite surprised our hospitals are still some of our buildings are still standing

Speaker 00 35:24

Robert, you were talking about revenue streams and what you follow. Now, typically, like census, is census a good, is patient census a good barometer to follow? base cash and the solvency of a hospital on from your experience? Absolutely

Speaker 01 35:46

not. I think that's the old school thinking. And you'll hear a lot of old CEOs, administrators talk about heads and beds. How many heads and beds do we have today? That really doesn't tell you anything because if you're losing money on a per patient day on a basis, and all of a sudden you have a lot of those patients, you're losing a lot more money more efficiently. Or do you have a mix where, hey, you know what? We're just at the breakeven point or we're actually making money. So, you know, when I hear people focus on, oh, the hospital's full, there's some good financial aspects to that. And I can go back and Jim knows this just as well. When the hospital becomes full, it becomes more efficient at processing people through. There's a natural push and pull effect. You want that to be in place. When the hospital's not full, there's not necessarily the natural incentive to move patients through at a rapid pace. Not that I'm taking quality away from it, but you know what? It's almost lunchtime. I will get to that task when I come back from lunch. Whether that be something as simple as their discharge meds, education before they go home, the social service visit. Those things, if, hey, that bed's ready to go. We have somebody waiting in the ED to come up. They might actually go ahead and do that before they take lunch, understanding that it goes. So that sometimes makes the flow a little bit faster when it gets to be full. But you've got to manage it. And this is where I say that the new breed of CEOs coming into hospitals is different. They're starting to really understand the actuaries and understanding what risk really is. where they haven't had to before. Prior to 1983, when DRG came into effect, everything was cost plus. It didn't matter what it cost us. We just build it and then we put a profit on top of it. So you couldn't lose.

Speaker 02 37:49

Well, yeah, I mean, here it is. I always caution... when i was at providence they always wanted to build build build oh we you know we're impacted let's add 50 more beds let's add 50 more beds the problem peter is that that next level of impacted volume this is where it really is terrible peter because the community needs it right but Right now, impacted volume is only no pay or low pay Medi-Cal. There's not the next level of blue cross pages impacted and can't get into your hospital. It's always low pay in business. And so I've always used to get pressured to do performance. We use our core payer mix. We're going to add 100 beds. So we're 30% this, 20% that. I go, no, because that next 50 to 100 patients is all going to be medical and lower pay so i recommend we look at it from that perspective but you know people want to grow and do these projects and that's where i've seen health systems make bad decisions because they just say you know build it and they will come but the payer mix is bad you know our medical has grown from 12 to 20 now that doesn't sound you know a lot of people have worse than that but that's eight points on 12 points you know that's a 75 increase in medical that that kills us you know and and the medical payment rates really low in california although they're starting to talk about bringing it up and that that to me makes the most sense right now we should be investing in the lower paid patients because if you keep them well peter you're going to be so much better. If you could take a low income Medi-Cal person, get them in touch with a care provider before they get sick, I guarantee you, you'll save a ton of money. You'll keep them out of the hospital. That's why I like getting that premium where we have doctors and clinics and we have outreach people. So that's a big project I just worked on is working with a managed care health plan to get us about $9 million of funding strictly for well care and quality. You know, we haven't done that in the past. We've always just tried to negotiate our rate and say, hey, you know, give us 8%, no, we'll give you 2, go 7, 3, you know, that kind of stupid stuff. I'm trying to get money for quality on the clinic side so we can keep these people out of the hospital. Sorry, Robert, I know you had a

Speaker 01 40:38

comment. Now we're starting to change more from a hospital and a episode of care to trying to keep them out, which makes us sound much more like an insurance company. We're starting to think and act like an insurance company. It's cheaper to take care of them in a clinic setting versus the high cost hospital setting.

Speaker 00 41:01

So you and I have talked about this a bit, Robert. Let's say that, so you're director of FM. I suppose there's a director of FM who's listening to this and saying, this is all well and good. I love hearing about the payer mix, but this doesn't impact me. Why does it impact them? Tell them why it impacts them and why you need to at least be a little bit cognizant of the payer mix if you want to be successful as a director today. Does that question make sense?

Speaker 01 41:35

Yeah, it makes sense to me. I think it's, in my opinion, and this is what's important to me, when I understand what's happening with our system or whether it's our system or anywhere else, when I start to see where the problems are, where the money's coming in and the effects that it's going to have on me, I can then actually go back to our CFO and I can come to Jim and say, hey, Jim, you know what? We're thinking about building this new clinic. And there's a lot of buzz around it. And I'm like, you know, I can build it. And, you know, do we have an ROI on it? Do we know how many patients we need to see? It's not my role necessarily, but I need to be able to come back to Jim to say, hey, I'm going to spend a million dollars building this little clinic down the street. Are we sure that's the right thing to do to make sure that all the players are there and that we're thinking about it? Just like I would do for anything else. Hey, we've got a boiler down. Is it time to replace the boiler? It's a business case. And everything we do now kind of resolves around a business case. Does it make sense for me? I'm going to replace a 20-foot section of pipe. But I know that I've got a 100-foot section that's running down above a critical area. If one section is going bad, we know that the rest of the pipe is going bad. Do I go ahead and replace all of it, or do I replace only that 20-foot section? So I need to have that confidence that when I come to Jim, I say, Jim, you know, I have a problem with the chiller. I need to replace the chiller. Or you know what? I've got three old elevators. I shouldn't say this out loud, but I know I'm being recorded. I've got one elevator that's been down for four years. Four years. And, you know, guys, it's about $350,000 for me to get that elevator modernized. But that one is not as important to me because it's in an older building. That elevator doesn't necessarily serve patients. It serves some of our staff, and I can deal with issues with our staff a little bit easier than I can with patients. So I come back to him and I said, you know, I have these three other elevators in our MOB that's a higher priority for me. And so... What I believe is when I come to Jim and say, here's really my priority and where it needs to be, he knows that I've done my research and he knows that I've done my critical thinking to come to him. And I think that bond, that relationship going back and forth is important because otherwise I can just throw my hands up and say, hey, you know what? I need to do it. And if it's not done, oh, you just said no, so it's not my fault.

Speaker 02 44:24

Yeah. I think, Peter, to really follow up on that, It's less, I think the challenge is when you're in facilities management that you think I don't impact the number, but that's not Robert's job. although Robert will actually give us some revenue ideas, but he's rare. But if you understand it, you're the only one that understands the condition of the facility in the next five years. So if you know the trend, you may say, Jim, we're heading in an upward trend. I can stall this for a little while. When do you think you'll have cash? I'll tell him here. He goes, that'll be good timing. I could do that bigger repair. So then that'll

Speaker 03 45:09

change

Speaker 02 45:09

the way he might just do a smaller fix to drag it out till some funds come in. Or he might do the opposite. He goes, Jim, we've been flush with cash for the first time in a long time. Let's do a couple of big things right now because I see your payer mix is going down and there's not going to be as much available cash in three to five years. So let's do something right now because we don't do it now. It will never get done. So it's less I can impact it or anything, but if you have that awareness as an FM, you can guide me on what it is. And the key is I have to trust that role. I think the worst thing is CFOs have this weird relationship with facility managers. You just want to spend all my money, you know, and it's actually almost more often than not adversarial, which is going to kill the whole house. system. You know, it's, you know, if mom and dad aren't the same page, family's going to crumble. You know, I think that's one of the biggest relationships in the health system that if it's functional, you're going to be in as best shape as you can be if it's dysfunctional. And I'd love to hear from other facilities managers because I've never seen a lot of facility managers Yeah,

Speaker 00 46:41

that's kind of part of the reason why I asked you that question, relative, have you always been this way? You mentioned the word infrastructure so many times, like, oh, very impressive. Let me ask, not so much with Robert, Jim, because it sounds like you guys have a strong relationship there, but based on your years of experience with Tenant and with Providence, how, in your eyes, do you think does the facility director, the facility manager build credibility with you to be able to get to the relationship that you now have with Robert? How

Speaker 02 47:16

do they build credibility? For one, Robert reaches out, whereas most facility managers won't. So I would always do the outreach. I would build a trust factor with them And so, and I would tell them how we're going to have a great working relationship and how I can help you. And then my goal is that's what I'm here for because we have two things, keeping our facilities running and taking care of the patients. Those are the two biggest things we do. The challenge I have is that they'll say, well, I got marketing orders from a COO or they'll circumvent it or they'll come up with their own way to finance stuff. Oh, I got this guy to put this on. Way down here, he's going to change. So when they don't partner with my role, I'd go, you know, stand. I remember, I won't say his last name. He was a good engineer, too. Guy knew his stuff. But he always circumvented the advice I would give him. You know, and it was strictly advice, but I'd always, you know, and I'd be in his office all the time. Stan, I was just there yesterday. You then went ahead and did this. Well, the COO said it had to get done. I go, well, then bring me and you and the COO, and then let's talk about a way to do it so we can afford it. Because we don't even have a capital budget for this. And corporate is not going to allow you to go over here. When you're part of these health systems, it's literally draconian in nature. I mean, the one thing I hated working for health systems, I honestly felt like they were trying to fire me every day. And after a while, I just developed a thick skin. Robert for a lot of health systems, big places. But it's that circumventing. Why would you, you know, they're used to that adversarial relationship with the CFO. That's going to do nothing but hurt the entity. Now, a lot of it too comes from the CFO. OK, so sometimes the engineer guy just has to go and slap the CFO and say, look, I'm on your side, but you've got to communicate with me, you know, and I'm not just some drunken sailor looking to spend all your money. OK, because that's really what a lot of CFOs act like. And that's not the case 85% to 90% of the time with these facilities. They have real problems. They have an infrastructure that almost can't be upkept with the amount of cash we have. That's a real problem. Real problem that's systematic. It's worse in California than anywhere else because there's no money in this state. But we've got to stop that madness. And this pairing is probably almost more important than the CFO and the COO in some ways. Because the COO is getting one FTE for $100,000 and Robert needs $10 million. Yeah. So yeah, you can partner with the COO all day long, but if you don't have a good relationship with facilities management, you're going to be a lesser CFO,

Speaker 03 50:38

period.

Speaker 01 50:41

Robert? No, I agree. It takes time to develop that relationship, and it takes time to... to be honest, to say, you know what, I would like to do X. And a lot of my peers, we would all say, hey, we would love to do certain things. We would love to have a robust, computerized maintenance management system and have a whole team that's sitting there, not only making sure that everything's done in a timely fashion, that we're also getting data out of it, that we can actually drive some decisions. But Sometimes we can't afford for those analysts to be behind the scenes. Is it more important for us to have that analyst there or that clinician that can actually see a patient in a clinic setting to try to help bring in that revenue? And so sometimes we have to give a little in order to try to generate that revenue for us to do the secondary things that we want.

Speaker 00 51:44

Do you find, and I know we're coming up at the end, do you find, is it more difficult these days? And this question goes to both of you because you both sit at these tables. Is it more difficult today to say no to clinicians, to doctors, to these people who come at you, these people, these groups that come at you and say, hey, we can make more because there's so much pressure to make money, right? And everybody's got ideas. So they come to you with ideas on ways to make money which they may be well-intentioned, but you gentlemen are responsible for the implementation, the actual dollars. Is it more difficult now to say no, to hold people off, or are pressures different today than they've been in the past?

Speaker 02 52:30

Well, I mean, let me start off in... Those pressures have always been there from MDs. I think one of my single biggest roles is to develop partnerships with doctors and explain to them and say no to them in a way that they understand. Because I will tell you, doctors are stubborn. They have all these great ideas. But if you say something to them that makes sense, you can win them over. So I think the problem Robert and I have had is I'm just heading into my fourth year. I've been there three years. And our facility had developed some bad habits and they couldn't say no. And it's one of the reasons we're in some of the difficulties that we're in because we just didn't say no. And I don't really say no. I say, let me tell you why that's going to be a challenge to do today. And I make sense. And then I can really tell what a doctor is made of. Because if he just says, ah, you're just missing a golden opportunity. Or if he listens and says, you know what, now that I hear your situation, maybe I can even partner with you. And you know what, get me just this piece of equipment. and then just getting this area to practice in. And that's where Robert comes in handy on the space. And then can we shoot for this and let's time it out. So is it different? No, doctors have been the same for 50 years. I think the challenge is they become more sophisticated in some ways and can respond back a little better. You know, so it's a huge challenge, but that's our single biggest responsibility is to be able to have those tough discussions. I've said more, no more than my predecessor. My predecessor liked to stay in his lane. He was a really good CFO, but he really didn't like to, he let the administrators and stuff deal with the docs. But I say, no, no, no, no, no. I managed 900 doctors for 12 years, man. I'm going to, you know, 2008 to 2020. I'm going to step in there and explain to them why the answer is no. And it really shows if they're the kind of doctor we want. I've got one doctor I'm saying, that's a partner we don't want anymore. They have no interest in partnering with us. It's all about partnerships. So, you know, Robert gets the byproduct of that because all the heat goes on the CEO, the CFO, and the COO from the MDs. And I like the fact that we've got our new CEO, I think, is a little more inclined to not say no, but not say yes, which is very

Speaker 00 55:21

important. Right. Robert, what about your perspective?

Speaker 01 55:26

You know, I think being in this field close to 30 years, there are certain things that pressures kind of come and go. And it depends upon, I hate to say it, what's actually happening with society. You know what? Boilers are going to go. Chillers are going to go. Pumps are going to go. Infrastructure. You know, we've got an older building, 50, 60, 70 years old. You know, we always thought we should tear it down and build a new building. Great. That's going to cost a couple hundred million dollars. But do we have the money to do it? It's impractical. We know that we can't do it. We do this in our life every day at home. We can buy a new car. We can buy a new house. But we might not be able to afford it. And we make those decisions. But at work, sometimes we throw that away. And I say, you know what? It's not up to me. It's up to Jim. Jim, I need to do this. You go find the money for me. and figure it out. So both Jim and I had a CEO that we worked with before who went to head up a children's hospital. And I remember when he went there, he said, it was going off to his retirement job because no DRG in a children's hospital. And what happened his first year he got there, DRG was implemented for children's hospitals. And he's like, I'm back to the 80s again, trying to cut costs and try to figure out where you can actually make a profit. And so the more efficient I can make the building, the clinic, the better off we are as a whole to make that money. But I think the same pressures are there that there's always have been. Do I think the doctors are getting smarter in how they ask for things? Yes, because... Even within the facilities world, we have seminars at the ASHI conference on how to ask for money, how to write business cases, how to talk to your CFO, how to talk to your COO, how to talk to your CEO about money, how to ask for it, giving templates on how to write things. It was all about how do I get versus how do we make this work. Because there's multiple ways of making it work. For those of you who are a little bit older, the old Sears, good, better, best. The three different tiers. Good is okay. It will get us there. It might not be perfect, but it will get us there.

Speaker 02 58:04

Peter, I'm going to keep it simple to wind up. Be honest to your CFO because I hated facilities guys that says there's no other option and stuff. And in my 26 years, I had seen other abilities to do the same thing. So be honest with them and tell him we can get by. We can fix this, but I'm telling you, Jim, two years from now you're going to have big big big problems okay so and it'll be way more expensive to fix then so help him understand the magnitude and don't don't tell because i'm not an engineer okay so you can buffalo me if you want to you know what you can you can you can bs an honest person i'm an honest guy so i trust my You guys have huge role. So I trust you implicitly. You can mislead me easily and I'll have to take your advice. Just don't do that. But at the same time, lay it on me. Don't hold back because I'll have to figure it out at some point. So build that relationship with your finance leadership. Be transparent, be honest and challenge them to help you. Help the facility. Challenge me. Put me to work. That's why I get paid a lot of money. But be honest. I just used to hate facilities guys when I knew for a fact you're just blowing smoke up my you know what.

Speaker 00 59:49

You wrapped it up really well. I was actually going to say this could easily be a class on creating that relationship between the director of FM and the CFO. And, you know, if you said one word that's going to come out of it, like in my eyes, realistic, realism, right? Just you got to feel with each other. And if you're not, none of that other stuff matters. If you can't trust.

Speaker 02 1:00:16

So this was- 100%. Well, well, well wrapped up, Peter.

Speaker 00 1:00:21

This is a great discussion, Jim Corwin, Robert Hacker. Anything we didn't cover, I know we got to get rolling. I kept you over a little bit, but any final word?

Speaker 02 1:00:28

Personally, I'm so glad you're doing something like this because this is something that's rarely talked about. I don't hear this. When you're in the boardroom, when you're in the XYZ, when you're in a senior leadership management team, you know, too often the facilities person isn't as engaged. Now, Robert gets a little more engagement than most, but it's still not enough. You know, this is an understood, discussed, and addressed issue. issue and relationship. And I'm very impressed that I'm even having this discussion with anybody because I think it's a great discussion.

Speaker 00 1:01:16

Well, yeah. And when I asked Robert, hey, why don't we do this kind of finance 101 building the foundation? And we didn't build as much of the foundation as I wanted because we got off on a great discussion about creating a trustful relationship. But he said, hey, how about I'll ask my CFO if he wants to appear? I was like, that would be fantastic because You need both of those perspectives because at the end of the day, it's going to come up through you eventually, right? Absolutely.

Speaker 02 1:01:42

Absolutely. And if any of your constituents, if they feed back, I'm perfectly happy to answer any questions, give any guidance. I have no problem with that.

Speaker 00 1:01:56

Excellent. Thank you. Jim Corwin, Robert Acker. Thank you for your time this afternoon. I appreciate it. You've been great meeting you, man. Thank you, gentlemen. Peter Martin, Healthcare Facilities Network. Thanks for watching. We'll be back.