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It’s a question that’s likely on the minds of many health system executives—from CEOs to physicians to supply chain managers.
Unfortunately, the answer for many of these leaders may be “no,” according to data from the American Hospital Association (“The Fragile State of Hospital Finances”). For some, barely breaking even under Medicare, the largest payer to just about every hospital in the United States, may be equivalent to success these days.
With sequestration, Affordable Care Act (ACA) changes, and other payment cuts, Medicare payment to hospitals has been sliced by more than $270 billion since October 2010. That’s on top of the fact that Medicare underpays the cost of delivering care by 6 percent, according to the Medicare Payment Advisory Commission. And all of these circumstances are occurring at a time when private payers provided only marginal 2014 rate increases (Evans, M., “Outlook 2014: Not-for-Profit Hospitals,” Modern Healthcare, Jan. 4, 2014)) and health plans sold on ACA exchanges are estimated to pay hospitals 20 to 30 percent less than other commercial plans.
It explains why Fitch Ratings lowered its outlook on not-for-profit hospitals to negative for the first time in five years. And not since 2008 have not-for-profit hospital expenses outpaced revenues, according to Moody's Investors Service. Looking toward 2014, Standard & Poor's predicted that “all but the strongest hospitals will see margins shrink.”
Taking all of this into account makes you wonder if the question really should be, “How in the world can we break even on Medicare margins!?”
But a number of health systems are no longer asking questions. Instead, they’re making a statement: “We will break even on Medicare margins.”
Take the Cincinnati-based Catholic Health Partners (CHP).
Rebecca Sykes, CHP’s senior vice president of resource management and CIO, summed it up well when she said “If we can’t make money on the Medicare population—or at least breakeven— we don’t have a sustainable business model.”
So Sykes and her team decided to face the situation head-on. First, they set a goal of reducing weighted equivalent inpatient admissions by $25 per discharge. A diverse team composed of subject matter specialists, project managers, and analysts was deployed to work with CHP clinicians and physicians. Their target: reducing unjustified variation by ensuring appropriate use of the right products and procedures, at the right price, place and time.
Together, the teams set targets in areas of clinical utilization with high variance, including:
The teams designed and helped implement processes to reduce unjustified utilization across CHP’s 23 hospitals. Central to all of this effort was the use of quality and cost data to benchmark against top performing peers, identify opportunities, and drive and monitor improved performance.
The result: More than $22 million in identified clinical variation, and a savings of about $9 million in 2013, with much more on the way.
Upstate in Akron, Ohio, Summa Health System targeted a $5 million to $10 million reduction in operational costs. Summa also addressed clinical variation through process improvements. Now, they’re implementing $10 million in labor productivity, revenue cycle, and supply chain opportunities. Their ultimate goal is to align with their three-year strategic targets to streamline and shore up processes that improve the patient experience and create value.
Fairview Health Services in Minneapolis is taking a more unique approach to addressing supply chain costs, partnering with suppliers to go “at risk” on commodities products.
“As the Affordable Care Act gained momentum several years ago, it made us think differently about care delivery in this new environment,” says LeAnn Born, Fairview’s vice president of supply chain. “In turn, I began reaching out to suppliers to test the waters on which suppliers are really ready to try something new.”
As a result Fairview’s supply chain team will begin a pilot program with Covidien later this year that changes supplier sales representatives into “utilization managers,” paid a percentage of shared savings from resource utilization improvement. Fairview aims to save $200,000 to $300,000 in the first year of the program.
One of my colleagues recently referred to breaking even on Medicare as “a mindset or rallying cry for hospitals and health systems.”
A number of providers have taken this to heart. They’ve stopping asking questions, and are working with physicians, supply chain managers, and CEOs to come up with systemwide solutions. By doing so they’re making a statement around reducing clinical variation across healthcare settings. And they’re seeing the successes first hand.
Because when it comes to making a statement, results speak louder than words.
Michael J. Alkire is COO, Premier healthcare alliance, Charlotte, N.C.
Publication Date: Tuesday, March 11, 2014
A leader from McKesson discusses how healthcare reform is forcing hospitals and health systems to take a different approach to capacity management and patient flow.
Patient financial engagement is more challenging than ever – and more critical. With patient responsibility as a percentage of revenue on the rise, providers have seen their billing-related costs and accounts receivable levels increase. If increasing collection yield and reducing costs are a priority for your organization, the metrics outlined in this presentation will provide the framework you need to understand what’s working and what’s not, in order to guide your overall patient financial engagement initiatives and optimize results.
Emad Rizk, MD, president and CEO of Accretive Health, discusses the uncertainty facing hospitals and the transitions affecting revenue cycle management.
No two patients are the same. Each has a very personal healthcare experience, and each has distinct financial needs and preferences that have an impact on how, when and if they chose to pay their healthcare bill. It’s no longer effective to apply static billing techniques to solve the complex challenge of collecting balances from patients. The need to tailor financial conversations and payment options to individual needs and preferences is critical. This presentation provides 10 recommendations that will not only help you improve payment performance through a more tailored approach, but take control of rising collection costs.
Jim Bohnsack, vice president, solution & corporate development for Conifer Health Solutions, explains how the company helps healthcare providers leverage data to deliver better outcomes while optimizing reimbursement for all payment arrangements.
This white paper, written by Apex Vice President of Solutions and Services, Carrie Romandine, discusses the importance of patient segmentation and messaging specifically related to the patient revenue cycle. Applying strategic messaging that is tailored to each patient type will not only better educate consumers on payment options specific to their billing needs, but it will maximize the amount collected before sending to collections. Further, targeted messaging should be applied across all points of patient interaction (i.e. point of service, customer service, patient statements) and analyzed regularly for maximized results.
Steve Scibetta, senior director of channel sales for Ontario Systems' healthcare product line, shares insights into effectively managing receivables.
This white paper, written by Apex President Patrick Maurer, discusses methods to increase patient adoption of online payments. Providers are now seeking ways to incrementally collect more payments due from patients as well as speeding up the rate of collections. This white paper shows why patient-centric approaches to online payment portals are important complements to traditional provider-centric approaches.
Elena White, vice president of risk, quality, and network solutions for Optum, discusses how healthcare providers can leverage data and technology as they enable risk in their organization.
Increased electronic engagement between healthcare providers and patients provides significant opportunities for improving revenue cycle metrics and encouraging patients to access EHRs. This article, written by Apex Founder and CEO Brian Kueppers, explores a number of strategies to create synergy between patient billing, online payment portals and electronic health record (EHR) software to realize a high ROI in speed to payment, patient satisfaction and portal adoption for meaningful use.
Somnia President and CEO Marc Koch, MD, MBA, explains how hospitals can drive transformative change in the perioperative experience for outstanding clinical and financial outcomes.
Faced with a rising tide of bad debt, a large Southeastern healthcare system was seeing a sharp decline in net patient revenues. The need to improve collections was dire. By integrating critical tools and processes, the health system was able to increase online payments and improve its financial position. Taking a holistic approach increased overall collection yield by 10% while costs came down because the number of statements sent to patients fell by 10%, which equated to a $1.3M annualized improvement in patient cash over a six-month period. This case study explains how.
PMMC President Roger L. Shaul discusses the effects of healthcare reform on revenue cycle management and how PMMC's products help clients adapt to a changing financial environment.
With the ICD10 deadline quickly approaching and daily responsibilities not slowing down, final preparations for October 1 require strategic prioritization and laser focus.
Greg Burgess, Founder and Chief Product Officer at Burgess Group shares insights and opportunities for payment integrity in the rapidly changing healthcare IT landscape.
Read how Gwinnett Medical Center provides clear connections to financial information, offers multiple payment options for patients, and gives onsite staff the ability to collect payments at multiple points throughout the care process.
Read how Orlando Health was able to perform deeper dives into claims data to help the health system see claim rejections more quickly–even on the front end–and reduce A/R days.
To maintain fiscal fitness and boost patient satisfaction and loyalty, healthcare providers need visibility into when and how much they will be paid–by whom–and the ability to better navigate obstacles to payment. They need payment clarity. This whitepaper illuminates this concept that is winning fans at forward-thinking hospitals.
Financial services staff are always looking for ways to improve the verification, billing and collections processes, and Munson Healthcare is no different. Read about how they streamlined the billing process to produce cleaner bills on the front end and helped financial services staff collect more than $1 million in additional upfront annual revenue in one year.
Effective revenue cycle management can be a challenge for any hospital, but for smaller providers it is even tougher. Read how Wallace Thomson identified unreimbursed procedures, streamlined claims management, and improved its ability to determine charity eligibility.
Before launching an energy-efficiency initiative, it’s important to build a solid business case and understand the funding options and potential incentives that are available. Healthcare leaders should consider taking the steps outlined in the whitepaper to ease the process of gaining approval, piloting, implementing, and supporting sustainability projects. You will find that investing in sustainability and energy efficiency helps hospitals add cash to their bottom line. Discover how hospitals and health systems have various options for funding energy-efficient and renewable-energy initiatives, depending on their current financial structure and strategy.
Health care is a dynamic mergers and acquisitions market with numerous hospitals and health systems contemplating or pursuing formal arrangements with other entities. These relationships often pose a strategic benefit, such as enhancing competencies across the continuum, facilitating economies of scale, or giving the participants a competitive advantage in a crowded market. Underpinning any profitable acquisition is a robust capital planning strategy that ensures an organization reserves sufficient funds and efficiently onboards partners that advance the enterprise mission and values.
The success of healthcare mergers, acquisitions, and other affiliations is predicated in part on available capital, and the need for and sources of funding are considerations present throughout the partnering process, from choosing a partner to evaluating an arrangement’s capital needs to selecting an integration model to finding the right money source to finance the deal. This whitepaper offers several strategies that health system leaders have used to assess and manage capital needs for their growing networks.
Copyright 2016, Healthcare Financial Management Association.
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