Last night, the Lifespan Board of Directors approved the system’s operating and capital budgets for fiscal year 2014 (October 1, 2013 through September 30,
2014). The budgets we propose each year must be realistic, and this year’s budget reflects the considerable financial challenges we
face in this market.
The Lifespan budget, a combination of revenue and expenses, is a topic I’ve touched on before. Our operating revenue (income) comes from two main
sources—the government (Medicare and Medicaid) and commercial insurance payments (Blue Cross, United, Tufts, etc.). Because of soaring health care costs,
Medicare and Medicaid have come under tremendous pressure to reduce their spending—and in response, have started paying us less for the health care
services we provide and reducing certain subsidizes that we have historically received. Over this same time period, the Rhode Island Office of the Health
Insurance Commissioner (OHIC) has dramatically reduced (through regulatory caps) the amount of reimbursement increases we have traditionally obtained from
commercial insurers. We understand and fully support the necessity of stabilizing health care costs. However, the relatively sudden and dramatic decline in
reimbursement challenges our system’s ability to make the necessary corrections in a short period of time. The work is underway—launched under the auspices
of the Lifespan Operational Restructuring Initiative (LORI)—but turning around a business model built over decades is complex work and we are committed to
doing it thoughtfully.
In addition, the amount of care we provide to people unable to pay continues to skyrocket at an alarming pace. Over the last seven years, the amount of
“free care” we provide (as it is often referred to) has nearly doubled from approximately $50 million in 2006 to nearly $110 million for this year—fiscal
year 2013. In the past, we received some compensation from the federal Medicaid program, as did other hospitals that provided a disproportionate share of
free care. But that contribution has fallen to virtually zero. We are a non-profit system dedicated to providing care whether or not a patient is able to
pay for that care. That is a core part of our mission. But the fact remains that we currently provide approximately 62% of the uncompensated care in the
state while providing care for only 47% of inpatient admissions. We are hopeful that the insurance exchanges will help relieve part of this burden by
making it possible for more people to purchase insurance but that remains to be seen.
The reduction in patient revenues and shifting demand for services away from the hospital setting are among the reasons we have undertaken many of the
strategic initiatives now underway. We are focused on creating new models of care and new models of payment, building stronger partnerships with our
physicians, growing Lifespan Physician Group (LPG), engaging our employees in OpX initiatives, investing in a new information system and expanding our
ambulatory centers in East Providence and East Greenwich. As these initiatives bear fruit, Lifespan—taking its leadership responsibility seriously—will
emerge a stronger health care system better able to meet the needs of our patients, families and employees.
In the spirit of full transparency, I am writing this to share with you the challenges that our system faces in the upcoming year. You know as well as I
that we are working in tumultuous times. For that reason I would like to take a moment and thank every employee who has worked with us in our efforts to
control costs, increase revenue, and remain laser focused on quality, safety and the patient experience. It is very apparent that so many of you give your
absolute best to our patients, their families and your work every day—despite these difficult and uncertain times. As we work through our challenges, I
remain confident about the future because I know that we have the best possible team in place. (Now, more than ever, it is important to remember that
Medicine is a team sport!) The good and miraculous work I see being performed every day by our employees, physicians and scientists reinforces my belief in
the strength of our system and the nobility of our mission. Even in this time of tremendous upheaval and change, those truths remain undiminished.
In the steadfast pursuit of excellence, I remain,
Timothy J. Babineau, MD
President, CEO of Lifespan
President, Rhode Island Hospital