Simply breaking even with day-to-day operations can be challenging for small hospitals. Deciding where to invest capital for greatest return is particularly difficult. The August 2006 issue of HFMA's new newsletter, Big Business for Not-So-Big Hospitals, offers suggestions on the five areas where small hospitals need to consider investing time and money in order to improve their financial security.
Information Technology
The key here is not overdoing it. Sure, all the latest bells and whistles may look tempting, but a better strategy is to assess your needs and figure out what makes sense for your organization. "A lot of hospitals will invest in more IT horsepower than they might truly need, and get a system that they will probably have a hard time paying for," says Tim Wolters, a partner with BKD, LLP, a CPA and advisory firm based in Springfield, Mo. "It really is an issue of trying to decide how much IT capacity you need. How many of the various options do you need, and what makes sense with regards to the overall health care in the community?"
It's good to remember that IT can do more than just reduce paperwork and improve efficiency. "At what point do we think of IT as a market share driver," asks Eric Shell, a principal with Stroudwater Associates, a healthcare consulting firm in Portland, Maine. "In the very near term, we're going to have to start competing on quality and patient safety. IT is going to be a key driver in this. The right IT solution can help hospitals document quality, improve quality, and market and communicate quality outcomes to patients and the community."
Physician and Workforce Recruitment
The nursing shortage has been around for a while, but physicians are or soon will be in demand, too. "Rural hospitals are dependent on their medical staff. One physician leaving can just devastate a hospital," Wolters says. "If hospitals don't have a strategy for replacing those physicians, they can really fall on hard times." Hospitals need to consider how to recruit physicians—and how to keep them, says Wolters. Do you employ them? Do you offer them some sort of guarantee?
Shell advocates the use of entrepreneurial models that create opportunities for physicians, rather than foster competition. "Having every one work together for the good of the rural community is something that's important." Likewise, Shell says it's important to invest in your workforce through education and training to get employees in the game of learning and improving. Creating a fair compensation system that rewards productivity, rather than longevity, is also key.
"This is a knowledge-based industry," he says. "As we get competitive, and as we have to become more efficient, we have to start paying and investing in our workforce and using models that reward extraordinary performance. We haven't done a lot of that yet."
Quality and Patient Safety
Rural—as well as urban—hospitals need to make quality and patient safety a priority, especially in light of the Institute of Medicine reports, To Err Is Human and Crossing the Quality Chasm, says Jackie Huck, RN, director of the Rural Healthcare Quality Network in Seattle. "If we cannot deliver safe, high-quality care, communities will seek care elsewhere," says Huck.
Huck says rural hospitals should be able to demonstrate that they provide safe and effective care through objective measurement, as urban hospitals do. "Rural hospitals should be prepared to publicly report on how they are performing on nationally accepted clinical quality indicators. They also need to include outcome percentages on quality, safety, and patient satisfaction as part of a balanced scorecard that they can share with their communities," she says.
Business Processes
One area where small hospitals haven't been investing enough is revenue cycle, says Wolters. An example is with managed care contracts. "Are hospitals really monitoring how they're paid? Do they have contract management software available that helps them make sure that they're getting paid accurately?"
Another area is pricing for services. Because of the national focus on what hospitals are charging, some hospitals have been a little shy the last couple of years about keeping their charges up to date, says Wolters. "Hospitals should not be bashful about charging for the services they're providing," he says.
Wolters adds that small hospitals need to make sure that they are applying for all the special Medicare payment they are eligible for to positively affect reimbursement, such as sole community hospital or Medicare-dependent hospital programs. Critical access hospitals need to make sure that their cost reports properly claim the reimbursement they have earned during the year. "I think each hospital needs to make sure it is not missing out on these opportunities—that it is taking advantage of whatever it can," he says.
Plant and Facilities
Aging infrastructures are a common problem for small hospitals. "Hospitals are trying to fit or expand services into their existing space, and it's just not fitting very well," says Wolters. "We have facilities issues," concurs Shell, who has conducted studies on the impact of new or renovated facilities on the operations of CAHs. The studies show that investing in bricks and mortar can have a major and positive affect on patient volumes, quality of care, recruitment, and process efficiencies.
For example, 18 of the 19 CAHs surveyed as part of a Stroudwater Associates' replacement facility study reported a direct positive impact on recruitment of medical staff, including primary care providers and specialists. "Several of the hospitals noted that visiting specialists were now looking to expand or begin office hours at the renovated hospitals," says Shell.
The CAHs also reported positive outcomes with staff recruitment after renovations were complete, says Shell. Comments from hospital administrators included: "the lowest turnover rate in the region" and "the highest employee satisfaction in the system."
SOURCE: Where Should Smaller Hospitals Invest Their Resources?, August 2006 Big Business for Not-So-Big Hospitals Newsletter
Additional Resources
If you have questions or comments about HFMA Wants You to Know, contact editor Maxine Harrison.
HFMA Wants You to Know ISSN: 1540-0697. Volume V, Issue 22. Copyright 2006, Healthcare Financial Management Association. All rights reserved.