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Mother Nature teaches hospitals of the need for self-care


Early in May when a mile-wide tornado ripped through Greensburg, Kan., killing nine people, 25-bed Kiowa County Memorial Hospital crumbled along with the town of about 1,500 people.

Within 20 minutes of the twister, Ron Tucker said he rushed to help some neighbors get out of their house, then rushed to the hospital to help with the calming and then safe evacuation of about 20 patients, including 10 psychiatric patients, from the hospital's basement to other facilities.

Coming up into the darkness from the basement after six hours, he was overwhelmed to see 15 ambulances from all over the state as well as several from Oklahoma parked in the driveway. The hospital building was for all intents and purposes destroyed, and Mr. Tucker's real work as the hospital's chief financial officer was just beginning.

"The first thing was to make sure everybody was OK, then what are you going to do and when are you going to do it," he said. "Now decisions have to be made. We are trying to get some idea of what the new norm is."

Like all accredited hospitals in the country, Kiowa had a general, hospitalwide disaster plan in place, "but basically you throw it out the window and do what you can," Mr. Tucker said. Just from his casual observations of the recovery efforts at New Orleans hospitals in the wake of Hurricane Katrina, Mr. Tucker said he knows "that there are going to be a lot more questions than answers (about the rebuilding process), and it is going to take a lot longer than anyone wants to think about" to recover.

Digging out is one thing; recouping expenses is another. Roger John, president and chief executive officer of Great Plains Health Alliance of Phillipsburg, Kan., which leases Kiowa from the county, said very little was salvaged from the building. Officials have already settled with the insurance company and will receive about $4.3 million, but the building was grossly underinsured, he said. The Federal Emergency Management Agency will pay up to 75% of the difference between what the insurance will pay and the cost of rebuilding, and the state of Kansas will pick up another 10%, "so we'll have to find another way to finance 15% of the building," Mr. John said.

Based on the experience of health care providers in New Orleans after the devastation of 2005, it could take months or years for Kiowa to become financially whole again. In Louisiana, the process has been excruciatingly slow, especially in recovering sheltering costs from FEMA, which has to go over every claim in detail, said a spokeswoman for the Louisiana Hospital Assn. Of 28 hospitals that submitted reimbursement claim forms through the LHA for a total of $6.6 million in expenses, 15 of those hospitals as of March received approval, and only 11 hospitals have received any payment: approximately $138,000 in total, she said.

What's more, in April, doctors at the 362-bed West Jefferson Medical Center in Marrero, La., sued the state and health department for $100 million to be reimbursed for caring for displaced poor and uninsured patients in the wake of Katrina. The doctors reportedly said in the lawsuit that they had not received any money for their work.

Hospitals around the country are nervously taking note, imagining their own worst-case scenarios, financially planning for them as best they can and applying for a small nest egg of federal funding that became available for hospital disaster preparedness in the eye-opening, hospital-changing aftermath of the Sept. 11, 2001, attacks.

In the six fiscal years since 2002, Congress has appropriated approximately $2.6 billion for national hospital bioterrorism preparedness, said Roslyne Schulman, senior associate director for policy at the American Hospital Assn. The $135 million appropriated the first year "didn't take us very far," and even the roughly $450 million average in the years since then "is hardly enough to pay for one additional staff person" at each hospital, she said.

"I have to say certainly hospital preparedness has improved, but it is important to keep in mind that preparedness is not a final state," Ms. Schulman said. "It has to be done constantly. There are always new threats...and equipment and supplies become obsolete. So one thing we have said consistently is that there has to be sustained investment in hospital disaster preparedness."

The five employees who report to Mr. Tucker have been able to work only intermittently because of their own personal responsibilities and because of a lack of computer access. Mr. Tucker personally recovered a bag of clothes from his home, which was destroyed. He, his family and his insurance company are deciding if they can rebuild.

Recently, Mr. Tucker recounted the Kiowa story from what he described as something similar to a Mobile Army Surgical Hospital tent. There are plans to bring in a mobile building to house the hospital's laboratory. The emergency room was basically the only service still running; a portable X-ray machine was brought in to assist with care. Several days later, a modular building was brought in to operate a rural health clinic, he said. In the meantime, the closest hospital, the 85-bed Pratt (Kan.) Regional Medical Center, is about 30 miles away.

In terms of business interruption, "We had sufficient money to meet the main payroll and we'll just have to see what happens from what we had on hand and what we are able to collect," Mr. Tucker said. Going forward, "I think you can never have too much detail for the government agencies, for example on equipment. It's not enough to just have a description of the equipment (that was destroyed). They want serial numbers and detailed records you may or may not have. It's kind of the basic recording of information in a situation like this that becomes terribly important."

Most of the hospital's financial data were backed up at a centralized data repository 100 miles away, and luckily, Kiowa's information technology expert grabbed the hospital's internal server before the tornado hit, Mr. Tucker said. As a result, no information was lost, but it was quite a while before computers could be hooked up again. If it were not for a light fixture that fell on top of his laptop computer during the tornado, shielding it from getting wet, Mr. Tucker would not have had a computer to work on. As it was, for about two weeks his laptop was understandably a coveted piece of equipment, which he shared with other office workers.

"You take it one day at a time and realize it's going to be a long road, but you will eventually dig out," Mr. Tucker said.

When officials at Scripps Health in San Diego volunteered their services for the Katrina recovery efforts, they unexpectedly got a crash course in a type of disaster for which the four-hospital system had not prepared, said A. Brent Eastman, senior vp and chief medical officer of Scripps Health, and N. Paul Whittier, chairman of trauma services at 346-bed Scripps Memorial Hospital-La Jolla. Scripps sent a team to Houston's convention center to relieve exhausted workers from 760-bed Memorial Hermann Texas Medical Center. A 65-member multidisciplinary team of doctors, nurses and administrators from Scripps stayed about three weeks. Rather than trauma patients, Mr. Eastman said the team wound up caring for displaced survivors with chronic illnesses, upward of 1,000 patients a day.

Secondary effects

Last fall, Mr. Eastman was part of a panel of health care executives at a conference in New Orleans discussing the financial challenges resulting from a disaster. The discussion ranged from the effects on hospitals whose businesses were basically paralyzed by the hurricane as well as "the financial implications of that secondary effect on hospitals in adjacent areas of a disaster that have to rise to the occasion to care for those displaced," he said. That led to a discussion on the importance for hospitals in preparing their budgets to work out contingency plans for disasters, he said.

"I think one of the main bullet points I came away with from the meeting is how critical it is in the event of disaster to document everything you do because without documentation you won't be eligible for subsequent reimbursement. Conversely, well-documented people who did that in Katrina did well in terms of reimbursement," Mr. Eastman said.

Scripps estimates that it contributed nearly $266,000 to the Katrina effort, including payroll and incidental costs and costs for replacement employees for those who traveled to Houston. But it wasn't about the money, Mr. Eastman said, and there were some tough lessons learned.

"We never thought about the concept of a lifeboat (preparedness model), but that impacted our own planning as we contemplate disaster preparedness in San Diego," Mr. Eastman said. For example, Scripps is now preparing for its role as a health care provider in the event that an earthquake devastates Los Angeles. And with 1 million people just across the border from Scripps in Tijuana, Mexico, the system is also working out a "lifeboat concept" in the event of a tragedy there. Hospital personnel are considering other scenarios besides earthquakes, such as levees breaking in Northern California. Wildfires are another potential danger that San Diego residents live with constantly, he noted.

Patty Skoglund, Scripps' administrative director of disaster preparedness, said budgeting for a disaster is difficult for one hospital to do alone. Scripps is encouraging the county to work with groups in the community to stockpile food, water and equipment. One of the key pieces to financial budgeting is making certain that hospitals have sufficient cash on hand to meet payroll and pay vendors, she said.

As a result of discussions with its CFO, Scripps has determined it would need about $50,000 in cash "to manage vendor support," Ms. Skoglund said. And based on the Katrina experience, Scripps now requires all employees to have direct deposit. But rather than budgeting money specifically for disaster preparedness, the system is "paying more attention to processes for documenting our costs," Mr. Eastman added.

Budgeting for disasters even without firsthand experience in dealing with one is a high priority for hospitals across the country. At the 123-bed Stillwater Medical Center in Oklahoma, officials have been slowly piecing together a program with federal grants that were previously awarded by the Health Resources and Services Administration until last January when the program was moved to Health and Human Services Department. Under the HRSA, which had cooperative agreements with each state, the program each year set benchmarks and goals for hospitals, Ms. Schulman said.

Stillwater's only recent disaster scare was an unknown white powder found in an envelope in the community that required about four hours of staff time before it was analyzed and determined to be harmless, said Denise Webber, the hospital's assistant administrator. But the hospital is nevertheless preparing for chemical spills, tornadoes and pandemic flu. Beginning in 2004, the hospital has applied for HRSA grants each year through the Oklahoma state health department. The funding has paid for everything from personal protection equipment to enhanced communication satellite phones, she said. Stillwater also has stockpiled antibiotics thanks to the federal program, receiving approximately $173,000 in funding since 2004.

The federal grants have helped, Ms. Webber said. Stillwater doesn't really budget for disasters directly although it has spent its money for things such as staff training. It also covers the expenses of its participation in communitywide disaster drills, including an annual flu vaccination drive, she said.

But the hospital is not there yet. "We're as prepared as we can be at this point, and we are constantly looking at disasters and trying to increase our preparedness. But we're not fully funded for anything to happen. If a disaster were to come along, it could put us in a bind," Ms. Webber said. "Part of our mission is to make sure we can continue providing care. Any more grants from the federal and state government would be put to good use."

Every year the hospital's disaster planning committee talks about what is needed immediately and "what would be great to have," and each year the hospital applies for funding, Ms. Webber said. At least two remaining items on the Stillwater wish list for funding: additional backup water supplies and energy needs. "So we hope we will continue to get funding, but without this grant, we wouldn't be as prepared as we are today," she said.

The federal program will change slightly this year in light of the Pandemic and All-Hazards Preparedness Act passed by Congress in December 2006, Ms. Schulman said. Under the new law, there are now two streams of funding: cooperative agreements between HHS and state health departments and also a competitive grant program in which the federal government will fund partnerships consisting of one or more hospitals and another health organization such as a primary-care center, Ms. Schulman said. The details of that program are still unknown. "It gives HHS another optional approach to strengthen hospitals and other health care providers. I think it's important to allow that kind of leverage in the health care system," Ms. Schulman said.

Chief disaster-planning officer

At the 11-hospital St. Luke's Health System in Kansas City, Mo., Chuck Robb, senior vp and CFO, serves as the system coordinator of all disaster preparedness efforts. "I don't think it's unusual (having a CFO in charge of disaster preparedness) because a big piece of what could happen in a true disaster is figuring out how you are going to pay employees and get supplies down," he said. Mr. Robb leads the team in deciding what supplies and equipment need to be onsite and what can easily be obtained from vendors in the event of an emergency. "We know where to get a bulldozer if we need one. I don't know why we might need a bulldozer, but we might have to have one," he said.

All facilities throughout the system are represented on the multidisciplinary team that meets quarterly to talk about the strategic plan to prepare St. Luke's for a disaster response, Mr. Robb said. Perhaps because he is the CFO and in charge of the program, early on St. Luke's "set up a separate cost center for disaster preparedness so we could clearly track any outside funding and document on the front end what we were going to use it for," he said.

St. Luke's is preparing for all sorts of disasters. Most recently, it staged a "virtual drill" on the Internet with the entire community and other Kansas City hospitals earlier this month in the possible event of a pandemic. Mainly an exercise in communication procedures at its command center, the primary cost of the drill would be staff time, he said. The command center procedures actually were invoked once when a water main broke at the hospital "so there are uses for these kinds of initiatives in your regular business," Mr. Robb said.

St. Luke's relies on the federal funding for its disaster preparedness plan but it also allocates money out of its operating budget, he said. This year, the system expects to budget approximately $200,000 for the effort. The system is also receiving about $50,000 in HRSA funding through Kansas and Missouri agencies. Like Stillwater, St. Luke's is spending funds on a variety of things such as upgrading communications and hazardous substance cleanup capabilities. "These are long-term things, and it's a long-term process, particularly when you are coordinating 11 hospitals," Mr. Robb said. Long-term means "it is forever that people are thinking about these things," he said.

Prompted by the New Orleans experience, the Healthcare Financial Management Assn. published in November 2005 a disaster planning checklist for CFOs of health care organizations. The list is based on the 10 most common problems or errors with emergency response plans according to the National Safety Council.

Richard Gundling, the HFMA's vp of product development, said Katrina was the catalyst for many hospitals' disaster planning initiatives. The clinical response is of course key in any hospital's plan, but "the other big part is just the business continuity: How do you get the funds and the payroll done and all those immediate steps that need to happen?" he said. "It's a very important part because it's the part that keeps the funds coming into an organization."

Hospitals that have been through disasters have a different issue, and that is how to make up for the loss of revenue as an organization tries to get back on its feet, the AHA's Ms. Schulman said. Those hospitals "would like to see some sort of recognition of the economic costs of disaster," she said. Hospitals can apply for and receive funding for damages directly related to disasters and evacuation expenses, she noted.

Officials at FEMA did not respond to a request for the amount of money that has been distributed to New Orleans-area hospitals in the wake of Katrina.

Business interruption cover

Mr. Tucker of Kiowa County Memorial said, based on his experience, hospitals "might want to consider purchasing business interruption insurance--something we would have been happy with if we had had it. I don't know the cost of it, but I can tell you in a situation like this, it would be great to have."

Kiowa officials have not even begun to figure out the cost of rebuilding. "We're probably in the first month of a two-year digging-out process," Mr. Tucker said. "I think we have learned a lot, but I think we have a lot left to learn. It is not something you would wish on anybody, but we will get through it in the long run and we will possibly be better off then than we were before, but it's surviving that transition that is going to be hard."

Cinda Becker is a reporter for Modern Healthcare, a sister publication of Business Insurance.