How Children's Mercy Kansas City increased its bond rating through the pandemic
The pediatric hospital stayed the course and followed a strategic plan implemented just as COVID-19 took hold.
Children's Mercy Kansas City CEO and President Paul Kempinski
Photo: Courtesy Children's Mercy Kansas City
The COVID-19 pandemic, followed by continued workforce and inflationary costs, has financially strained hospitals and health systems.
Children's Mercy Kansas City is no exception, but it managed to increase its credit rating, something that hasn't happened for the pediatric medical center in 24 years. In June, S&P Global Ratings increased the credit score for Children's Mercy Kansas City from A+ to AA-.
Every hospital situation is different and the market is different, according to Paul Kempinski, who has served as president and CEO of Children's Mercy Kansas City for four years.
What worked for Children's Mercy Kansas City was staying the course and following a strategic plan developed three-and-a-half years ago and implemented just as COVID-19 took hold.
"The board had just approved the strategic plan in March 2020, and four days later we went into shutdown mode," Kempinski said. "We determined the plan was still critically important for us. We needed to lead towards the future vision of the organization. It was full speed ahead, even during the pandemic."
WHY THIS MATTERS
The challenges were many for the 386-bed comprehensive pediatric medical center in Kansas City, Missouri.
The first was one most hospitals faced: declining patient volumes and the resulting financial losses, necessitating furloughs for staff.
"When COVID hit, the health system went into shutdown mode," Kempinski said. "It had an incredible financial impact. The good news is we had a strong foundation."
Furloughing staff was a difficult decision, he said.
Staff has since been brought back. The hospital has also since recovered from a volume and a revenue-cycle perspective, he said. Cerner EHR technology and revenue-cycle updates, which have been ongoing for the past three to five years, aided in that recovery.
"Our volumes have remained strong," Kempinski said. "As a result, we've generated operating margins that have allowed us to invest in people and strategies."
And the debt position was good.
Another challenge was the hospital's large primary service area, which covers a 150-county area in Missouri and Kansas.
A third is the hospital's payer mix. While having a focus on only one population – children – helped, according to Kempinski, children's hospitals have a significant portion of their payer mix fueled by Medicaid.
In the case of Children's Mercy Kansas City, Medicaid accounts for at least 50% of its reimbursement. In its favor, the hospital has a large portion of that reimbursement in value-based managed Medicaid.
The strategic plan brought all elements together. It rested on five pillars: engaging its 8,500 people; growth from referrals all over the country and world; a continued focus on the community, mental health, disparity issues and healthcare access; its research efforts and the ability to take new discoveries to the bedside; and value and affordability.
These pillars ensure long-term sustainability, Kempinksi said.
Bond ratings reflect an organization's ability to meet financial commitments. S&P evaluated the hospital's financial structure as well as its strategic direction.
The bond rating increase, said Kempinksi, "gives confidence to the lenders who are considering providing us dollars."
This, in turn, helps to fund their strategic plan.
THE LARGER TREND
Children's Mercy Kansas City is among 30 independent children's hospitals in the United States. There are two hospitals and 20 sites of care, employing more than 8,000 people to provide 51 pediatric specialties.
Its research institute is among the first pediatric genomic programs in the country, Kempinski said.
Twitter: @SusanJMorse
Email the writer: SMorse@himss.org
