An interview with Jim Staten

Jim Staten is YNHHS executive vice president and chief financial officer

What should employees know about Yale New Haven Health System's finances?

Most employees need to know how much our operating gain is and that it is used to make facility improvements, buy equipment and fund our employee pension plans. But they should also know that there are major changes occurring in health care that will affect the way we do our jobs. The 5,000 stand-alone hospitals in this country are quickly joining health systems. In the next five or six years, health care in the United States will likely be delivered by a few hundred large health systems. YNHHS would like to be one of these systems.

Is that the sort of thing that keeps you up at night, as chief financial officer?

No, because I am confident that we are on the path to becoming one of those 200 to 400 health systems. What I do worry about is that our employees have the tools to face the coming transitions with enthusiasm and success.

Why is health care changing and does it really need to?

It absolutely needs to change. Health care in this country is too expensive, federal and state governments are facing financial crises and the population is aging.

How are we preparing for these changes?

Our relationship with Tenet Healthcare is one way. It will help us expand our clinical reach, and bring access to some of our unique specialty services to other parts of the state, without YNHHS having to make major investments in hospitals in Connecticut that are facing financial challenges.

What else has YNHHS done to prepare for healthcare changes?

One thing we have recently done is form what is called an "obligated group," in which we are viewed as a single organization to make borrowing money less expensive and more accessible. We are excited to be completing YNHHS' first obligated group bond transaction of just under $1 billion in June 2014. Right now the obligated group includes Yale-New Haven and Bridgeport hospitals, Northeast Medical Group and the Health Services Corporation. Greenwich Hospital does not currently need to access capital through an obligated group, but we are working with that important component of our health system to hopefully join a future obligated group financial transaction.

What does it mean that we are a not-for-profit?

The term "not-for-profit" really refers to what a company does with its operating gain, not whether it makes an operating gain or not. Most for-profit companies use earnings to pay their shareholders or investors. Yale New Haven Health does not have shareholders or investors. We usually make a modest operating gain, compared to for-profit companies like the suppliers we buy from and the commercial insurers that pay us. The margin YNHHS makes helps us pay for charity care, pay competitive salaries and benefits, fund employees' pension plans and keep facilities and equipment up to date.

Do we get a financial break as a not-for-profit?

We are exempt from paying real estate taxes, sales taxes and income taxes. In return, we offer free and reduced-price care to those who can't pay for care and those who are covered by the government through Medicare and Medicaid. But what we give far outweighs the benefits we get. As a for-profit company we would probably pay about $50 million in real estate taxes a year. As a not-for-profit, mission-driven organization, we spend about $550 million a year on free and charity care, bad debt and underpayments from the government. We strive to administer these programs fairly and we believe wholeheartedly that it is the right thing to do.

How is the current fiscal year looking so far?

FY 2014 is shaping up similarly to last year, when we had a 4.2 percent operating margin. In large part, this is due to the success of our cost and value positioning efforts, our continued growth throughout Connecticut and our successful revenue cycle management strategies.

What does our financial future look like?

Our number one goal for the next year — and beyond — is to bring costs down. We are too expensive and we have to become more competitive. Cost and value positioning helps us lower our costs per patient discharge and keeps us focused on providing value to patients and families. Another way to lower our costs is to grow business — which is why we are aligning with other organizations that share our values.

How can employees help?

We ask employees to embrace change, work efficiently and speak their minds. Employees can make great contributions to this system — they have ideas about working smart, saving money through clinical redesign or making operational changes that will be more cost effective and better for patients. We each have a responsibility to stay true to our core values in the execution of all business strategies and in our day-to-day behaviors. We can also be aware of always being accountable, respecting and always keeping patients and their families first in our minds.