HELP WHERE HOSPITALS NEED IT ®
HELP WHERE HOSPITALS NEED IT ®
Community Hospital Blog
By Cindy Matthews, CHC Executive Vice President
Vital to an organization’s future, a business plan is a framework outlining the steps for financial and operational success. For many hospitals, this process has occurred at five-year intervals tied to strategic planning efforts. However, in today’s healthcare environment marked by ongoing industry, reimbursement, and market shifts, development of an annual business plan offers leaders a greater measure of security and flexibility to manage change.
Best practices for your hospital’s business planning include:
Align business planning efforts with strategic initiatives
Getting started, associate business planning efforts with strategic goals and objectives. Some hospitals benefit by having a board-level strategic planning committee to identify overarching strategic initiatives. The business-unit focused plans you develop for service line growth, physician alignment, operational efficiency, clinical quality and patient engagement/satisfaction must be consistent with the organization’s strategic objectives. Leaders should work with hospital managers to ensure department and service line business plans and budgets align with hospital strategic initiatives.
Conduct a market assessment prior to starting the business plan
A snapshot of your environment—such as demographics, patient origin and market share—will serve as the foundation of your business plan. For example, evaluate volumes coming into the hospital broken down by zip code and/or service line. Who are your competitors in the marketplace? What opportunities are available to stem outmigration?
Draft your business plan concentrating on measurable results; develop an action plan
Incorporate these areas of focus:
Each stated strategy should have a measurable metric. What does the term “enhance” mean, for example? Be specific. Do you anticipate an increase in the number of orthopedic surgical procedures? How would you get there and what are the associated revenue goals?
An integral component is a detailed action plan with tactics to achieve the desired results. Identify who is responsible for achieving a stated goal, and the timeline (a date or quarter) for completion.
Involve Stakeholders in plan development
Although the hospital CEO is ultimately responsible for the business plan, hospital Board members and medical staff members should be included in the planning process, in addition to other C-suite leaders including a marketing representative if available.
Input from Board members can be advantageous particularly at the beginning of the planning process; some hospitals engage Board representatives as part of a pre-planning process, and others have a strategic committee to assist with business plan development.
Stakeholders including physicians are also essential planning process team members. The hospital’s medical staff plan should drive physician recruitment efforts; regular physician-CEO communication integrates valuable physician input into the plan.
A process timeline
Although planning is often viewed as a task or event, something with a timetable marked with a beginning and an end, it’s an ongoing process. “Always be planning and implementing” should be the mindset.
The timeline you develop for the business planning process should
integrate with the hospital’s fiscal plan and associated deadlines. For hospitals with a fiscal plan year running from July 1 to June 30, completing a market assessment in the fall provides much-needed data for business plan development due in January. Next, plans can be presented to respective hospital Boards for approval in February or March —a precursor to development of the annual budget with accompanying action plans. Be certain to allocate additional time if needed depending on the level of Board involvement.
A well-crafted business plan identifies the steps for financial and operational success. Also, the plan places your organization in a position of strength to grow regionally or get ready for a partnership, if desired.
For more information on business planning, see CHC Consulting Annual Business Planning and Budgeting.
Guest blog by Chuck Green, Principal, Healthcare Reimbursement Partners
Ever-expanding in complexity, cost reports influence current and future reimbursement levels for your hospital. Think of a cost report as an annual report with numbers instead of words. Far-reaching in scope, mistakes can result in lost revenue that may profoundly affect your hospital’s sustainability and ability to effectively serve patients.
The Center for Medicare and Medicaid Services (CMS) requires Medicare certified hospitals and other Medicare reimbursable provider facilities to file cost reports annually that identify the costs and charges related to facility Medicare reimbursable activities. Acting as annual reconciliations, these financial reports disclose whether a facility has been underpaid or overpaid for reimbursable services.
Cost reports are filed with one of 12 third-party CMS-approved claims processors known as Medicare Administrative Contractors or MACS. It must be submitted 150 days after the hospital’s Medicare year concludes. Late and/or inaccurate filings can result in penalties.
Service Line Considerations
A cost report almost microscopically examines a facility’s service line and cost center charges throughout the care continuum. When compared with Medicare reimbursement, the hospital can determine a service line’s financial impact versus its community need and/or desirability.
From a business planning perspective, the cost report helps determine the financial consequence of offering a new service, continuing or expanding an existing one, or discontinuing one that is underused and/or unprofitable. Meanwhile, assigning a less profitable service to another hospital area allowing greater reimbursement may be a profitable option, whereas instituting an uncommonly large service increase could trigger a payment penalty.
Preparing an Accurate Report
The comprehensive patient treatment and financial data contained in the annual cost report, collected from multiple hospital-specific financial and operational reporting systems, must accurately mirror the hospital’s current performance. Cost reports are only as accurate as the information provided by each hospital’s system.
Who Should Prepare your Cost Report?
You may need expertise beyond your in-house financial team or CPA. Experienced consultants monitor ongoing changes in government reimbursement, keep your hospital on a timeline, assist with appeals and help ensure your hospital receives the most advantageous allowable Medicare reimbursement.
Example: In one instance, a cost report consultant enabled a hospital to recoup a $2 million MAC underpayment because he spotted a .02 percent rather than a .2 percent reimbursement calculation in the MAC’s compensation system.
Successful Steps to Gainful Cost Reporting
These pro-active, best-practices could help ensure a hassle-free and profitable process and gainful Medicare reimbursement.
by Wilson Weber, CHC Executive VP and COO
Hospital leaders may recognize the need for improvement but may not know where to turn. Even before a hospital shows signs of financial distress, the responsible action is to take a close look at areas of operations. Since operations span the entire hospital, a head-to-toe operational assessment may be warranted to fully address financial and performance issues.
Taking a thorough look at operations may seem daunting. Consider starting with an evaluation of outsourced contracts; some may have been in place for years and can be renegotiated or even eliminated. Below are high-level best practice tips that serve as cost-reduction and revenue enhancement strategies, and can help redirect an ailing situation toward a partial or full turnaround.
Evaluate labor and its costs.
Labor costs typically account for 50 to 60 percent of a hospital’s operating revenue, so a thorough review of productivity is critical. While a productivity tool can help to set productivity targets, it also integrates a level of accountability toward helping to control labor expenses. Productivity evaluation can also indicate the right level of staffing by shift and day. Productivity standards, manager involvement, and executive oversight will move you toward your goals of greater efficiency while reducing labor costs.
Analyze supply costs.
Second only to labor costs, supply spend represents significant expense for hospitals. Often, small hospitals don’t have the negotiating power, so look to the expertise of a group purchasing organization (GPO), or evaluate whether you have the right GPO with your interests in mind. From our experience, the right GPO relationship can mean supply savings from 10 to 14 percent.
One key area to look at is your supply inventory. Have quantities been adjusted based on volumes, or types of procedures such as those performed in orthopedics or the cath lab? It may be possible to work with vendors to be charged for supplies when they’re needed (just-in-time delivery) versus overstocking for procedures that may be scheduled; this practice helps to free up dollars for other purposes. Also examine inventory “turns,” the number of times per year that supplies are being replaced. Based on our experience, a reasonable level of inventory turn is 9 to 12 times per year. This examination could indicate unnecessary items in your inventory.
Examine revenue cycle management.
Because the revenue cycle is a complex function, points in the process may be overlooked or broken. Your hospital may also face common challenges such as keeping your chargemaster current and competitively priced, and keeping up with each payer’s unique rates and payment methodology.
Additional areas to evaluate and address:
Move ahead with greater confidence.
Your overall action plans should identify who is responsible and accountable for each area of evaluation and opportunity. The discipline of frequent review helps to ensure that you are not drifting off the plan and that progress is occurring across all areas. A new level of accountability across team members is one indication that you have arrived. Be mindful that it does take time and diligence to impact turnaround efforts.
By Doug Kent, CHC VP Internal Audit/Compliance Officer
As healthcare becomes more complex, there is also more emphasis being placed on financial considerations, and on preventing and detecting violations of state and federal healthcare laws. What can your hospital do? Start by creating a compliance program to self-police your hospital and staff activities.
Since its inception in 1976, the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services (HHS) has led the charge to fight waste, fraud, and abuse in Medicare, Medicaid, and more than 100 other HHS programs. In 2010, as part of the Affordable Care Act, OIG mandated that all healthcare providers have a Corporate Compliance Program in place as a condition of enrollment for Medicare, Medicaid, and Children’s Health Insurance reimbursement.
Along with assuring that needed dollars go to patient care, compliance programs serve to engage and inform employees and community members that your hospital is committed to “doing the right thing.” It’s also key to have compliance policies in place should you ever face regulatory review or inquiry.
Here are some best practice recommendations to develop or enhance your hospital compliance program.
1. Assemble a compliance committee representing a cross-section of employees. Compliance “belongs” to everyone. It’s a team effort and extends beyond the role of the designated compliance manager or leader. C-suite members, case management, revenue cycle, IT/security, and other employee representatives should serve on your compliance committee. Establish a group charter, meet at least quarterly, and ensure confidentiality of information shared with this group.
2. Develop a robust education and training program. Provide compliance education/information as part of new employee orientation. Offer online education courses to meet yearly training requirements on topics including billing and collections, Medicare rules, HIPAA, compliance issues, EMTALA, and conflicts of interest.
3. Establish a compliance hotline. Make sure employees know the hotline is an anonymous reporting system assuring the confidentiality and protection of individuals who may come forward; communicate the purpose of this hotline (it’s not an employee “complaint” line).
4. Include sanction screenings in your compliance plan. The hospital is required to check state and federal exclusion lists monthly to identify if employees, contractors or third-party vendors have had adverse actions taken against them by federally funded programs. Screenings demonstrate you have a routine process in place to monitor potential compliance issues.
5. Define and document conflicts of interest. To protect patients’ well-being and ensure public trust, board and management team members should sign a conflict of interest statement as part of the compliance plan. Keep these documents on file.
6. Manage compliance risk issues through ongoing monitoring and auditing. Make sure your compliance work plan includes a continuous control process to keep current on changes in rules, regulations and laws. Your work plan should outline internal controls to comply with these guidelines. For auditing, the approach is more proactive. Steps could incorporate chart review to examine how codes are being used and applied, or charge tracking for certain procedures or supplies.
7. Measuring compliance programs. It’s important to measure the effectiveness of your existing hospital compliance program. Authorities recommend that you conduct an internal evaluation yearly to assess your program’s effectiveness, and an external audit every other year with a report back to you that outlines program improvements.
For additional compliance education materials see the OIG Compliance 101 resources.
by Philip Trent, VP of Business Development, CHC Supply Trust
Many rural hospitals today — health care providers whose mission is to serve their community’s health care needs — are apprehensive about their own financial health. Increasing expenses, decreasing reimbursement and declining patient populations and hospital admissions place these hospitals at risk, threatening financial viability.
Behind salaries, supplies are the second-highest expense for hospitals. By reducing supply costs and better managing the supply chain, a hospital can move its savings margin from good to great.
CHC Supply Trust, the supply chain services arm of Community Hospital Consulting, works with hospitals to help them evaluate potential savings opportunities by uncovering “hidden” dollars to offset shortfalls due to reimbursement cuts and reduced payments. Unlocking supply chain savings can support mission-critical objectives such as equipment upgrades, development projects or hiring additional staff as necessary.
Supply chain support services to help hospitals reduce costs while prioritizing clinical quality and patient safety through CHC Supply Trust include:
CHC Supply Trust delivers access, savings, and support
Teaming up with community hospitals, CHC Supply Trust offers a Complimentary Supply Spend Analysis. Whereas annual savings have averaged greater than 10 percent, recent CHC supply spend analyses have identified savings opportunities reaching 15 to 20 percent. Along with 100 percent of GPO rebates returned to participating facilities, CHC Supply Trust hospitals can keep their bottom lines healthy.
For example, 25-bed Community Hospital in McCook, Nebraska previously bought its supplies and services from a nationwide hospital network. As part of the network’s supply contracting company and GPO, Community Hospital was subject to volume-based tier pricing and paid approximately 35 percent more than larger hospitals for orthopedic implants. By purchasing those same items through CHC Supply Trust in FY 2013, savings on orthopedic implants alone totaled $334,000. Today Community Hospital continues to see approximately 18 percent savings annually on its supply spend.
About the Supply Spend Analysis process
It’s easy to get started on your Complimentary Supply Spend Analysis. Follow these simple steps:
With this information, CHC Supply Trust will conduct your Complimentary Spend Analysis and calculate how much your hospital can save by accessing preferred pricing through our GPO for the exact same items you already buy. No MMIS mining is required. We will provide you with a letter template requesting your pharmaceutical wholesalers’ and med/surg distributors’ reports, which can be generated with a few mouse clicks.
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