Negotiations under way over hospital funding next year
Hospital maintenance and capital investment could be delayed unless the Bermuda Hospitals Board gets increased funding, according to the outgoing chief executive.
Since 2019, the BHB has been given a block grant of $322 million but negotiations between the Government and the BHB are under way about funding for the next financial year.
Recently in the House of Assembly, Kim Wilson, the Minister of Health, said the grant had been an interim measure. Earlier this year, the Government also published, and then removed, a document seeking ideas for hospital funding.
In a wide-ranging interview, the outgoing BHB chief executive and president, Michael Richmond, who is taking up a new post in Britain, said: “On a month-to-month basis, we are coping and coping well.
“We've got a good financial plan but at a point in the near future there will need to be additional revenue streams that are uncovered to allow the hospital to continue to invest in the many areas that it has to do.”
Asked if the BHB was anticipating a budget shortfall this year, Dr Richmond said: “Not in this financial year, no.”
Asked about the next financial year, he said: “Well, there hasn't been a financial settlement yet.” On whether it was still being negotiated, he replied: “At this time of year, that's the negotiation.“
Pressed on what financial settlement the BHB was hoping to get, he said: “Well, I always hope for the best and we are making a very strong case not just for our operational expenditure but for a beefing up of the capital expenditure, which currently there is a shortfall in, and the government is aware of that.”
He declined to say how much the shortfall was, adding: “I'm probably not in the best place to answer that question.”
Generally, capital expenditure are funds used by an organisation to acquire, upgrade, and maintain physical assets, such as property, plant, buildings, technology or equipment.
According to the Bermuda Hospital Board’s website, Michael Richmond was appointed chief executive officer and president on August 1, 2020, having joined BHB as chief of staff in August 2017.
Prior to joining BHB, Dr Richmond served as chief medical officer at Hamad Medical Corporation and chief executive officer of Hamad Medical Corporation’s Women’s Hospital in Qatar.
Dr Richmond obtained his medical degree from the University of Aberdeen, in Britain, and specialised in anaesthetics at the Royal College of Anaesthetists in Britain and College of Anaesthetists Ireland.
Dr Richmond said: “I believe that operationally, we will be able to cope well, but again, deferring the inevitable, which is that maintenance and upgrading of the facility will be pushed further down the road, which creates risk, if I'm honest.
“It's probably a misconception that this is money that doesn't need to be spent. It does need to be spent at some time.”
Although the acute care wing is relatively new, the general wing of the King Edward VII Memorial Hospital and the facilities at the Mid-Atlantic Wellness Institute “are not new facilities”.
On the block grant, Dr Richmond added: “The BHB is a not-for-profit organisation. We have no shareholders. We’re a national resource but the direction of travel was that healthcare spending, I think from government, was going to come under some strain and constraints had to be put in place.
“We moved from what was largely a fee-for-service model in June of 2019 into a capped budget.
“I think it’s fair to say that it was anticipated in the discussion that this was part of healthcare funding reform and there would be a transitional period as this was completed.
“We understood and agreed that we had a part to play. I think it would be fair to say that this was a collaborative discussion between the funders and the spenders and we, of course, fought our corner but we were aware that we would have to make significant savings as part of our cost improvement plan.”
Dr Richmond said that the block grant helped as Covid struck. “If we'd been on a fee-for-service basis through Covid, the hospital’s revenue may not have met its expenditure,” he added.
“So the block grant actually helped us during that storm. It was confusing as to how and who we were looking after and who we were not seeing. Our overseas revenue collapsed because we had a significant component of our income which was coming from visitors to the island.”
The Government said that the Bermuda Hospitals Board had been underfunded by about $31 million, which has now been made up, but in addition, the BHB has also made considerable savings.
He said there were efficiencies in areas including procurement, utilisation of staff in terms of rota scheduling, management of staff numbers, looking at ways to save on drug expenditure and energy costs.
He said the Government also temporarily suspended the employer portion of payroll tax roughly three years ago.
“I think it’s fair to say year-on-year we've made an excess of 6 per cent savings, which in my previous life was thought to be unsustainable.” Dr Richmond has also worked in health services in countries including Britain.
On whether the grant was going to continue, Dr Richmond said: “I would be able to say that there have been discussions and I'm not dodging the questions.
“There have been discussions and I think what is accepted is the current model is not sustainable.”
He said a hybrid might evolve where there was “a cap and a collar”, allowing some flexibility for the BHB to bill for certain key services.
He said the island had an “unbalanced funding system”.
“Within the hospital sector, there is a cap, but within the community sector, there is a fee for service,” he said.
“So when I say unbalanced, it’s not a unified methodology that plays into the overall healthcare expenditure on the island.
“It means that you’ve got, essentially, areas of conflict. You’ve got areas where maybe competition could be enhanced or maybe duplication could be avoided.”
Dr Richmond added: “If there were areas of competition that could be advanced, we would be able to compete in certain parts of the market.”
The block grant, he said, prevented the hospital from adding services. But Dr Richmond added: “I think the focus of the hospital has to be on its core services, not by income generation, and making sure that those core services are appropriately funded.
“The hospital is not in any way trying to build up a huge cash bank but it does need enough money to make sure that it can service its obligations and it can meet not just its operational expenditure, but also its capital expenditure. There's a big real estate here.”
• To listen to the interview in full, click on the audio link
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