HELP WHERE HOSPITALS NEED IT ®
HELP WHERE HOSPITALS NEED IT ®
Community Hospital Blog
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.
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 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:
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.
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.
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