Beth Israel Deaconess sketches budget plan for next year

Beth Israel Deaconess Medical Center expects to break even at the end of the current fiscal year while it looks for leaner measures to weather the next one, according to its CEO.

In an item posted on his blog Running a Hospital early this morning, Paul Levy thanks the hospital staff for coming together to close a $20 million budget shortfall earlier this year. The effort, which reduced to 70 layoffs what could have been 600 and protected lower-paid workers, struck a chord beyond the hospital and Boston.

But Levy says the work is not done yet and what lies ahead for the fiscal year that begins Oct. 1 may be more difficult.

"There is nothing on the national or state political and economic scene to suggest that the coming years will offer good news for us and for other hospitals," he writes. "Unless we act decisively, it is reasonable to expect a slow and steady deterioration in our capital position, our ability to compete, and ultimately our ability to carry out our mission in a manner that meets the standard of excellence we demand for ourselves."

The challenges begin with reimbursements from government and private insurers that will not match medical inflation, Levy predicts, and will likely include changes in how healthcare is paid for. Rather than paying for diagnoses made or procedures performed, public and private payers may move to a per-capita payment model, which Levy explains as an annual budget per person for healthcare.

In response, he says, the hospital needs to maintain and enhance focus on safety and quality while also working with insurers to have quality and efficiency efforts recognized and rewarded in reimbursement programs. The hospital also should become leaner by improving the way its work is organized, he said, without specifying where changes may be made.

Research and education are part of the picture, too.

"Because of financial pressures on the clinical side of the house, the margins that have traditionally supported research have shrunk, and so researchers too will have to meet more explicit financial targets," Levy writes. "We will be gradually redesigning our education program so that efficiency, quality, and safety in clinical functions is more explicitly supported by our house staff, something that will also enhance the academic value of our training programs."