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8/28/2013 12:01:00 AM
Observations: McLaren Northern Michigan - Approach to Financial Challenges

By Reezie DeVet, President and CEO

McLaren Northern Michigan

August 28, 2013

October 1 marks the start of Fiscal Year 2014 for McLaren Northern Michigan. We are at a critical juncture as we finalize budgets for the year ahead and find that financial challenges persist. While this is a shared concern among health care providers nationally, the economic conditions in Michigan and the unique characteristics of our region have added to the significance of our challenges.

What are the challenges faced by McLaren Northern Michigan?

We've seen a 12.5% shift over the past few years from inpatient care in a hospital setting, to outpatient care that requires no overnight stay. This shift will require changes to both our infrastructure and our workforce skillset.

We've seen changes in legislation that affect how we are paid. Since 68% of our reimbursement comes from the government in the form of Medicare and Medicaid, reductions in those payments have a significant effect on our bottom line.

Our northern Michigan population is shrinking, and the residents who are remaining are getting older. So not only are we serving fewer patients, those whom we are serving are presenting with more complex problems. And, due to economic factors, they may not be in a position to pay for the care they receive.

So how does a responsible health care system keep pace?

At McLaren Northern Michigan, we are investing in new strategies to prepare for the way people are now receiving their health care, while we continuously work to redesign processes and adjust our work force to meet market demands.

We have recruited new primary care providers and developed programs to manage chronic disease patients in their homes with minimal clinical visits. We have committed to continuous quality improvement by participating in national benchmarking initiatives, and are employing new colleagues skilled at driving necessary change.

Our investment in research is unwavering, and has resulted in McLaren Northern Michigan bringing non-surgical heart valve replacement to our patients before any other health care provider in northern Michigan. We continue to invest in information technology, and lead in expanding our electronic medical record for all health care partners.

And, following the completion of a recent community health assessment, we are taking an active role in addressing the areas of greatest need in the communities we serve, namely access to health care, obesity, and substance abuse.

McLaren Northern Michigan is non-profit. Why does it need to make money?

We need to realize a positive operating margin, or money in excess of our costs, in order to reinvest in our people, our services, and our facility. We cannot keep pace with research and technology without it. Likewise, the continued generosity of our donors remains as important as ever to support such reinvestment.

And, as part of McLaren Health Care, we enjoy the benefit of having joined a health system with a AA credit rating. We need to maintain a healthy operating margin in order to participate in the financial success on which this is based.

Will this be a continuous process?

Yes. We need to continually adjust to the ever-changing and evolving economic environment, and the challenges these changes pose to health care. So while changes to processes, services, and workforce continue, you can be assured that investment remains strong in those areas that represent the health care system of the future.

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