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Dome - Facing Up to Financial Realities

Dome March 2014

Facing Up to Financial Realities

By: Ronald R. Peterson, President, The Johns Hopkins Hospital and Health System, Executive Vice President, Johns Hopkins Medicine
Date: March 1, 2014

Ronald R. Peterson
Ronald R. Peterson, President, The Johns Hopkins Hospital and Health System Executive Vice President, Johns Hopkins Medicine

When you first hear about the “performance” initiative that’s part of Johns Hopkins Medicine’s new Strategic Plan, you might think that means improving our bottom line by belt-tightening—a term that has a negative connotation for a lot of people.

Yet a well-secured belt provides the support necessary to keep a crucial garment from falling down. Of the six priorities outlined in our Strategic Plan—which aims to guarantee our continuing advancement through these difficult financial, competitive and regulatory times—I think of performance as the constructive strengthening of our financial belt, rather than a painful tightening of it. Doing so will provide essential support to maintain and enhance Johns Hopkins Medicine’s tripartite mission of health care, research and education.

Only by implementing continuous performance improvements—becoming more efficient in our activities and being more streamlined and cost-conscious in how we buy all the “stuff” that we purchase, from towels to test tubes—can we create the sustainable financial success we need to support the other five strategic priorities.

These include attracting and developing the best people for our staff, becoming an exemplary model for biomedical research, being the national leader in patient- and family-centered care, leading the world in educating and training physicians and biomedical scientists, and becoming the model for an integrated health care delivery and financing system.

Achieving these goals requires a steadily improving flow of revenues. That is proving to be increasingly difficult due to substantially reduced or stagnant federal government support, both from the Centers of Medicare and Medicaid Services and the National Institutes of Health.

For example, the care we provide to patients on Medicare now comprises nearly 30 percent of our clinical activity. The federal government has made Medicare a target of its cost-cutting efforts, basically shaving 2 percent off reimbursements provided to hospitals and physicians.

The reality we face is that our traditional sources of revenue are going to be constrained for years to come. We are going to have to adopt new measures and seek new opportunities just to maintain the minimal margin of 3 to 3.5 percent of revenues in excess of expenditures that we need to sustain our mission.

I’m happy to report that we appear to be on the right track. Our fiscal year 2014 goal was to identify $50 million in performance improvement opportunities, including increased revenues from clinical work. We’re now halfway through fiscal year 2014, and Johns Hopkins Medicine is doing slightly better than planned. We’re going to have to keep up that pace, not just for this fiscal year but also for the foreseeable future.