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When Kevin Eugene Lofton came to the University of Alabama Hospital as CEO and executive director, he knew that change was necessary if the organization was to maintain its status and brave the new frontiers in health care.
With the advent of managed care, health care providers have had to shift their focus. Hospitals formerly made money via a charge-based system, since a fee was paid for every service, notes Lofton. With managed care, he continues, providers now receive fixed fees for each patient covered. Money is made by reducing expenses while trying to maintain quality.
When Lofton arrived in Birmingham in 1993, his vision was clear for the hospital, considered one of the best in the nation. “Already renowned, we had to consider the changing marketplace and begin to do things differently to remain on top,” he says. The obstacles were clear, too.
Alabama had yet to embrace managed care, especially HMOs. In 1992, Alabama had only a 13.2% HMO market penetration, compared with California which led the nation with 43%. “I felt like the town crier, explaining that if we don’t change, we’ll be lost,” recalls the 42-year- old Lofton. The sentiment at the hospital was that the institution’s reputation would safeguard it from the health care revolution. But opinions quickly changed after over 70 businesses formed the Alabama Healthcare Council to demand more options, and the state cut the hospital’s Medicaid payments by $16 million.
Lofton’s first priority was to streamline his $487 million operating budget while maintaining qualify’ within three years, he reduced expenses by $69 million. This was achieved through a broad spectrum of changes, including: restructuring management along product lines; consolidating units and beds; standardizing purchasing; and establishing a financial counseling program to assist collections. Subsequently, cost- per-case decreased over 12.4%. In 1993 the average cost-per-patient was $ 11,638. Three years later, that amount dropped to $10,191.
New competitive prices led to a 163% increase in managed care contracting. Additionally, community-based programs were made a top priority, which meant establishing five satellite clinics in Birmingham and Huntsville to bring primary care to local communities.
The Family Road Program, one of only four such programs in the country, is another innovative initiative undertaken by the hospital. The Family Road Program moves some 35 participants along a “road” dotted with information, workshops and educational seminars related to health care, including nutrition, prenatal care and financial management. As they travel this interactive trail, the participants, usually young single mothers, are rewarded with cash certificates redeemable on site for formula, clothing and other baby care products.
Every dollar invested in preventive care saves $3 in hospital care, says Lofton. “In the past, we had an illness care system. We are now moving into a true health care system, where we take responsibility for the people in our communities before they get sick,” explains Lofton, who currently serves as president of the National Association of Health Services Executives.
Lofton is no stranger to successfully changing directions. While at Boston University, he originally majored in accounting but finished