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A novel idea: Spend fewer dollars

October 12, 2011
by William V. Day
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William day at the crystal conservatories
William Day at The Crystal Conservatories


For more than three decades I have heard a steady drumbeat from providers and from the healthcare associations to which they belong. Sort of a one-note samba.

“Medicaid rates are too low!”

Of course they are. State and federal governments have not and will not pay for the total costs of providing proper care for the poor. They know that the difference between reimbursements and costs will be borne by private-pay patients.

With Obamacare looming on the horizon, the cost/reimbursement gap could worsen. So, what is the solution for providers to stay in business? We should spend less than we generate!

When I was speaking at a Pittsburgh Rotary luncheon, a round of applause interrupted my prepared remarks. Business leaders were impressed that a nonprofit organization operated within its revenues. I announced that St. Barnabas Health System spends less than it generates. When I added that we do so without a dime of government subsidy, the Rotarians cheered “Here, here,” and more clapping ensued.

Why this response to a basic business principle? Is sound financial management abandoned or just unique? Unfortunately, not-for-profit operations have garnered a reputation for sticking out their hands and whining when year-end financial results are in the red. Not so at St. Barnabas Health System. And not the case for any healthcare provider planning to survive government over-regulation and decreased reimbursement during these tumultuous economic times.

St. Barnabas Health System was recently ranked the biggest senior residential care provider in western Pennsylvania by the Pittsburgh Business Times. This is significant because even though Pittsburgh's Allegheny County houses the nation's second highest percentage of elderly, healthcare providers that serve this population are closing, consolidating and reorganizing.

And, to shake things up even more, Pittsburgh's two major insurers are bailing out hospital systems and battling for market domination. The upheaval is causing commotion among physicians, hospitals, employers and patients-457,000 of them seniors.

Customers-the 65-and-older population and their children-seek stability and strength. In operation since 1900, St. Barnabas strives to offer those benefits. Our spectrum of care caters to our residents and in turn self-propels our sustainability. We have created a naturally occurring retirement community (NORC) that utilizes our services ranging from independent living to end-of-life care.

Most importantly, we believe in the merit of living within our revenues and conducting our business in such a way that we are not dependent upon the whims of government-which could change with the stroke of a pen.

Long-term care facilities should employ four key strategies to survive and thrive.

Assemble and keep a great team. Provide your employees with the best working conditions and benefits. In turn they will be loyal. Of our workforce of more than 600, 20 percent have worked for St. Barnabas for more than 10 years. Employee retention results in good customer relations.

Stick to your mission. Hopefully you have one. Ours was created 111 years ago, and we have never abandoned it. We care for people in need. We serve our customers. And we still provide nearly $5 million in free care each year. Do not lose sight of your founding purpose.

Diversify. Without growing horizontally you cannot grow vertically. Listen to your customers, including those you lost or never gained. Create services that keep them. Lessen your dependence upon government reimbursement. Invest in yourselves. Be creative. St. Barnabas also includes a community performing arts center, an automobile repair service and The Crystal Conservatories-that all raise money for our Free Care Fund-and an outpatient medical center (40,000 patients).

Operate on a sound financial basis. For too many years, LTC facilities have been one-note sambas. The tune is tired and the lyrics loony. Local, state and federal governments have spent too much money. Money that they did not and now do not have. There is little doubt that Medicare and Medicaid will be reduced. So healthcare organizations must find ways of overcoming shortfalls and grow. Consequently, we must spend less than we generate and not look for financial bailouts.

I believe in the private sector. I am a proponent of smaller government and I highly oppose Big Government. No nation in history has taxed its way into prosperity. No nation has spent or borrowed its way into prosperity. Neither will our nation. Nor our industry. High taxes and too much government are the roots of our problems. Now is the time to cut costs and operate within revenues.

Let our NORC serve as an example. That is, our seniors like to live and to stay in western Pennsylvania. We are building carriage homes and health facilities to encourage them to stay put. To “age in place.” And our region is a great place to do just that. St. Barnabas has no government subsidies. We have no debt. How do we do it? We spend fewer dollars than we receive. A novel idea these days!

William V. Day is President of St. Barnabas Health System, Gibsonia, Pa. He serves on the editorial board of

Long-Term Living and recently was named Ernst & Young-Pittsburgh's Entrepreneur of the Year. Day is one of only three St. Barnabas chief executive officers in its 111-year history and created the national Presents For Patients program. For more information, visit

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