Comment / Bermuda shorts 12: spring forward

The end of March and beginning of April saw the UK parliament holding a series of indicative votes to determine the way forward for Brexit in the absence of any consensus emerging for the government’s proposals. As a British expat, I have frequently been in the unenviable position of being asked to explain what is going on. To say this has been challenging would be an understatement.

What is clear is that the UK, like much of the developed world, is about to enter uncharted waters. How you feel about this largely depends on your political standpoint. For some, it represents a great opportunity for the UK to exploit its reputation as an innovator and world leader in trade. Alternatively, it is an unmitigated disaster as the country faces the challenge of selling its goods and services outside one of the world’s biggest markets and trading blocs.

Back in Bermuda, daylight saving came early this year on 10 March 10. This means two things. There were only three hours’ time difference between Bermuda and the UK until British Summer Time started at the end of March. And we also have longer days of winter-style weather!

March has also seen my disastrous scooter adventures continue. First, I was stopped while driving at a breathtaking 57 kilometres per hour (34 mph) which, fortunately for me, meant I got off with a caution. Second, I managed to drive off from a petrol station with the hose still attached to my bike. Blissfully unaware, I was waved down further down the street and ended up paying $300 for damage caused to the petrol pump.

Change continues to be a key feature of healthcare in Bermuda and, as mentioned in the past, we are moving to a new funding methodology for Bermuda Hospitals Board (BHB) from June 2019. This will replace fee-for-service as the method of funding for 98% of our services as we move towards a global sum or capped revenue budget.

You will all be familiar with block contracts, their advantages and drawbacks. So, it might seem an odd step to move from a well-developed revenue cycle process based on pricing for every item of service to a single payment. Fee-for-service, however, tends to drive higher utilisation rates, which, in turn, lead to high spend on healthcare as a proportion of GDP.

The truth of this can be seen when one considers that two of the highest spend per capital jurisdictions are the US, where fee for service is used, and Bermuda, where a modified version of the American Medical Association’s fee schedule operates.

Perhaps the biggest shift in mindset relates to focusing on the cost base rather than topline revenue. In any healthcare provider, there are three dynamics impacting on operational delivery: financial balance; quality of care provision; and access to care. Over the last three decades, the NHS has focused on one, two, or all three of these dynamics, with greater or less success.

Here in Bermuda, BHB has been very clear that financial balance must be maintained, the quality of care cannot be lowered and, therefore, attention must turn to access to care. This does not mean that BHB is about to move to 18 month waits for hip replacements. It could not afford to do this particularly when, in a health insurance model, any individual with major medical cover can elect to be treated by a US provider.

Rather, it may mean that access to radiology will no longer be on a 24/7 basis for outpatients. This might sound like common sense. But in a country where the employed population must purchase health insurance and average GDP per capita is close to $100,000, this will be a hugely profound change.

BHB will also be exploring the feasibility of repatriation of care currently provided overseas. Clearly, this will require a separate financial model outside the scope of fixed income and the production of a business case for each proposal. Hopefully, our clinical affiliation agreement with Johns Hopkins puts us in a stronger position than in the past to be able to facilitate such a move.

Finally, we are looking to finalise our year-end financial position and remain confident of delivery of a break-even position, albeit on a non-recurring basis. Continuation of this position without the ability to increase revenue, while familiar to many of you, is no less challenging. Our savings plan will need to be robust, allow for slippage and cover the costs of delivery.

As I move into my third year in Bermuda, I’m struck by our move away from fee-for-service to fixed income and how this is reminiscent of the way the NHS worked in the past. Perhaps there is learning for both countries in this process. I will keep you appraised as we move forward over the coming months.

Until the next time, good day!

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Bill Shields was chief financial officer at Bermuda Hospitals Board from April 2017 to November 2022. He is now chief finance officer at Devon Integrated Care Board.

All the blogs from this series can be accessed here