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Top Concerns of Community Hospital CEOs

By Craig Sims, CHC SVP Hospital Operations

 

Asked to rank their most pressing concerns, most hospital CEOs and leaders put financial challenges at the top of the list, followed by governmental mandates and personnel shortages. In deeper discussions, though, it is clear that their most concerning issues intertwine in complex ways. While there are no simple solutions, this interconnection means that improvements in one area often bring about improvements in other areas. Faced with market- and reform-driven changes, wise leaders consider each challenge in its broader context for effective planning that takes all relevant factors into account.

 

Quality Improvements and Cost Reduction

 

CEOs are grappling with how to balance cost and quality imperatives. Quality improvements and cost reduction aren’t mutually exclusive and can, in fact, occur simultaneously. While this has always been the case, it’s especially apparent since Affordable Care Act provisions and value-based care models link reimbursements to quality of care.

 

Personnel and Populations

 

Affecting a hospital’s ability to provide quality care is appropriate staffing. To start with, hospital leaders should make certain that labor—typically a hospital’s greatest expense—is managed and monitored. It’s a best practice to use a productivity tool for accountability and the right staffing mix. Equally important is overcoming recruitment challenges and addressing personnel shortages. The national nursing and physician shortages are especially concerning in rural America, where more than 20 percent of the population resides but only 10 percent of physicians practice, according to the American Academy of Family Physicians. Disproportionately, the rural population is aging and may require care from specialists at a life stage when driving long distances is not a safe option. Community hospital CEOs are therefore concerned whether their facilities can adapt to meet the needs of their patient populations.

 

Service Lines and Revenue Streams

 

Concerned about costs as well as the community, hospital CEOs are evaluating existing service lines to make sure they help enhance revenue while supporting specific community needs. A common redundancy is home healthcare, for example. Many community hospitals still operate home health programs as loss leaders even though several other providers have sprung up in their area. In that case, it might make sense to discontinue the service line. On the other hand, if a hospital’s unprofitable home health program is the only one in a hundred-mile radius, discontinuing it may not be an option.

 

More than ever, hospital CEOs are challenged with making difficult decisions for the greater good of preserving the hospital’s financial health.

 

Wiser CEOs realize that long-term success depends on top-line growth, not just cost reduction, and are looking to add value and deliver needed healthcare service for their community. This brings us back full circle to quality care and how it connects to financial health. When CEOs keep patient safety and care in focus, it’s easier to gain clarity around other concerns the hospital faces.

Tags: Hospital Management, Hospital Performance Improvement, Operational Improvement, Rural hospitals, Turnaround
Hospital Business Planning Best Practices

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:

  • Vision, mission statements and an environmental analysis
  • Strategies for growth, including but not limited to:
    • Operational effectiveness
    • Partnership opportunities
    • Physician recruitment needs
    • Expenses, revenue dollars and cash flow expectations
    • Operational improvement opportunities
    • Employee talent and culture
    • Quality initiatives
    • Community initiatives

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.

Tags: Business Plan, Hospital Performance Improvement, Operational Improvement, Strategic Direction
The Far-reaching Impact of Your Hospital’s Cost Report

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.

  • Examine your systems. Are they programmed correctly? Do they receive complete and accurate information on a daily or regularly scheduled basis to prevent lost data or data pile-up resulting in data entry mistakes and potential lost reimbursement?
  • Convene an all-hands staff meeting to explain the importance of the cost report. Establish a service line suggestion box and ask employees for ideas to improve the data collection process. Consider offering an award for the best suggestion.
  • Conduct an information check list of cost report-related activities well in advance and compare to current system data reports. Establish new data collection categories and/or system enhancements or corrections as required.
  • Prepare an internal-use-only quarterly report that mirrors your annual cost report to avoid year-end surprises.
Tags: Compliance, Cost Report, Hospital Performance Improvement, Operational Improvement
Physician-Hospital Engagement and Alignment: Healthy Practices

by Stephanie Hobson, CHC Director of Physician Recruitment

 

Community hospitals can strengthen bonds with physicians through proactive engagement that is genuine and mutually beneficial. Foremost, it’s optimal to consider the physician point of view, from their clinical practice and other commitments, to perks that may drive growth strategies long-term for all parties.

 

When physicians understand how working together with the hospital can help them provide better care for their patients, it’s a win-win. Among the benefits cited by physicians and healthcare system leaders in a HealthLeaders survey on physician alignment, positive outcomes can be:

  • Greater confidence in hospital leadership
  • An increased rate of “buy-in” and support from providers overall
  • Improved physician retention
  • Quality and financial gains
  • Care redesign  
  • A spirit of partnership caring for community residents fostering continued collaboration.

Physician engagement recommendations

Here are some fundamental ideas on how to create a physician-friendly environment leading to quantifiable results.

 

First, take every opportunity to educate your providers on the hospital’s strategic initiatives. Secondly, diversify the group of physician champions that support your hospital. Whether they are independent practitioners or employed physicians, virtually every healthcare organization can name their “physician champions,” individuals who are positive supporters of the hospital and routinely take on a variety of roles even as they strive to manage their own clinical and personal responsibilities. Consider expanding the number of providers on your medical staff as supporters and advocates; recruit untapped physicians to committees, task forces, and strategic planning teams. Their perspectives and involvement can enhance buy-in to shared goals – the very initiatives they help create.

 

Reinforce the significance of physician-hospital collaboration in strategy development with data. Provide market-specific information, statistics and facts to support SMART goal setting. Communicate progress and results regularly. Actionable data creates behavioral change. As always, respect everyone’s time and priorities.

 

Another key to facilitating physician alignment and hospital engagement is to recognize the role of physicians in planning efforts, being mindful of their demanding schedules. Consider meetings outside of clinical time. Develop and schedule a retreat to accomplish objectives. Offer complimentary lunch-and-learn programs. Perhaps send a gift basket to physicians as a thank-you for taking part in discussions and meetings. Physician engagement and alignment enhances the symbiotic relationship between the hospital and provider, achieving positive outcomes that benefit the community they serve.

 

For a hospital just beginning physician alignment efforts, think about bringing in a consultant to facilitate the planning process to ensure adoption, implementation and success the first time around, creating a roadmap for future projects. For more information, see CHC Physician Alignment Strategies.

Tags: Hospital-Physician Alignment
Turn Around Efforts Start with a Look at Operations

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:

  • Have managed care contracts been updated or renegotiated?
  • Compare charges to reimbursement. Although you may be charging for an item at a fixed cost, it doesn’t necessarily mean that you will be reimbursed at that level. Depending on the managed care plan, or Medicare or Medicaid, reimbursement could equate to 25 cents on the dollar. 

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.

 

Tags: Hospital Performance Improvement, Operational Assessment , Operational Improvement, Productivity Assessment, Revenue Cycle, Supply Chain, Supply Spending, Turnaround

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