A Hospital Chief’s Tough Task In Tough Times: Cut Costs, Improve Quality

Judy Rich is a bundle of energy, ideas – and worry. Since she became president and CEO of the Tucson Medical Center (TMC) in 2009, she’s had to face the impact of an economic recession that hit Arizona health care particularly hard. Now, as she leads the largest hospital in southern Arizona, she’s trying to adjust to a decrease in the number of paying patients, state cutbacks in health spending and a slew of changes from the new health law.

Tucson Medical Center, she says, is a safety net hospital where “28 percent of our patients are on Medicaid and 8 percent are uncompensated care.”

Rich spent the first 10 years of her career as a nurse and says: “I will be a nurse until the day I die.” While she’s credited with helping to turn the hospital around financially – it now has a surplus – she worries about a 10 percent drop in the number of inpatients since 2009. About 200 of the 600+ beds in the hospital are currently unoccupied. KHN’s Peggy Girshman recently talked with Judy Rich and here are edited excerpts of the interview:

What do you see as your biggest challenges right now?

Without a doubt, the biggest challenge we have is to take costs out of care. We believe that the way we will survive is to be the low-cost provider with the highest quality.

We’re working with the Brookings Institution, in Washington, and the Dartmouth Institute for Health Policy and Clinical Practice to put together a system that’s called ‘The TMC Accountable Care Organization.’ We have engaged 90 primary care physicians and said, “As we bend the cost curve we will share the savings with our physicians.”

How does it bring you revenue?

This is theoretical, because it doesn’t start until January. We have an agreement to get the same rates [from UnitedHealthcare’s managed care plan for Medicare patients] that we’re getting now. But over time, as we document the savings, the pool of reimbursements will keep shrinking. UnitedHealthcare will have money left over and the deal is: they keep some and we keep some. [And] the higher your quality and the better you’re doing with managing your costs and keeping people out of the hospital, the more eligible you’ll be for a return on this bonus pool.

One of the things we have to have with this – it’s kind of a predicate – is electronic medical records. I feel very strongly that my accountable care organization won’t work without a health information exchange. We’ll only get this much benefit [holds up fingers, close together] by not being able to share data. When you’re in the emergency department, if you’re one of those patients, we can tell everything about you. All the drugs you’re on, when you saw the doctor last. And that’s utopia.

What are you most afraid of about the health law?

I’m not so afraid that the Republicans are going to repeal it. But what I think is going to happen is that there’s going to be so much infighting, an inability to go forward that it’s all going to get paralyzed. We know how to make this better. I believe we really do. [Hospitals] have to stop incenting the high-end procedures.

As we get older and more people need more joints for orthopedics, more cardiac stenting and more colonoscopies, I think it’s really not about ramping up specialists to do more procedures to get paid more money so that they can all have an income that supports their lifestyle. It’s much more ramping up the primary care system and keeping people healthy.

What do you think the cuts in Medicare hospital funding in the new health law will do to you?

The 1.3 percent Medicare cut we’re going to get next year represents between $2 and $3 million. So where do I not spend $2 to 3 million? This year, we’re spending close to $40 million in capital projects. So some of it we take out of our operating income that we’ve earned and the rest we have to borrow.

And my $2 to $3 million next year? We had to reduce our match for our 401(k) retirement plans for employees for 2010. We may not buy something for the operating room that our surgeons would say ‘I really, really need this.’

We almost didn’t give our employees a raise this year. They hadn’t had a raise for two years. And we may not give them a raise next year. If you look at where your costs are in a hospital — 45 percent of them are labor. So that’s the first place you go to.

We’ve been looking at: Do we change the percentage of RNs? We have 1,000 people who are direct caregivers in nursing, 80 percent are RNs and 20 percent are helpers — patient care technicians, nursing assistants. Do we push that to 30 percent and push down our RNs to 70 percent? Those are the questions we’re asking.

What helps you sleep at night, in terms of hope and optimism?

What I’m hopeful about is that we will continue to see attitudes change from our staff, as they appreciate how difficult it’s getting. And we’ve all gotten a lot kinder about what’s realistic in this economy. I want to see physicians realize that they can do more partnering with us. And so I want our physicians to say:’ I’m a good doctor, I’m a good businessperson, so where’s a hospital that will help me do that?’

And then, I want to be informed, along with our board, because our board is a big, big part of our future, on the right decisions are and that we should be making. Every step of the way, as we react to all the stuff that’s coming out of Washington.

It seems like change from Washington is coming fast.

It does. It feels like I can’t read fast enough. That even when I read it, that I can’t understand it [or] that I can’t absorb it fast enough. Having the wisdom to make the right decision and not be wimpy about it is really important to me. Because if you’re just lukewarm, you’re probably not going to come up with the right solution.

I really believe that our hospital has decided to take the risk and say: ‘This is what we think is the right thing to do. How do we position ourselves so that we’re on the cutting edge of this new health care economy?’ If it doesn’t work, it doesn’t work. But we’re going to know that we put it all in there. We’re all in.