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Community Hospital Blog

Rethinking Supply Costs: Good to Great

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:

  • Supply Chain Consulting
  • GPO Access Only (a GPO for community hospitals with preferred pricing formerly available only to their bigger counterparts)
  • Customized Support Services Agreement
  • Outsourced Materials Management.

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:

  1. Sign the CHC Supply Trust confidentiality agreement (we protect the confidentiality of your data).
  2. Provide 12 months of medical and surgical supply data in Excel format (easily available by contacting distributers who have this information in a standardized report already).
  3. Provide 90 days of pharmacy supply data in Excel format (from their wholesaler).

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.

Tags: Hospital Performance Improvement, Supply Chain, Supply Spending
Negotiating Health Plan Contracts: Best Practice Tips

by Dave Koford, CHC VP Health Plan Contracting

 

For hospitals, “care” typically refers to providing patient care. Yet a hospital’s financial health requires care and attention, too.

 

A sound financial strategy supports the provision of patient care and services communities need, and a significant component of healthcare organizations’ revenue frequently comes from health plan contracts.

 

So what do your health plan contracts look like? Have you reviewed them recently? Are there opportunities to modify those arrangements to maximize your reimbursement?

 

Here are some best practice tips for health plan contracting.

 

Review your health plan contracts regularly – at least every year. Place this task at the top of your to-do list to help prevent future revenue loss.

 

Request full access to Policy and Procedure Manuals for each of your contracted health plans – before you “sign off” on those contracts. Your signature reflects your agreement with the current policy and procedure manual, but plans can (and do) change their policies. You’ll want to stay abreast of changes to make contract adjustments when necessary.

 

Know the health plan options offered by the largest employers in your community. In addition to the hospital, sizeable employers in a service area often include the school district and the city. Have these employers changed their health plans recently? For instance, has the local school district switched from a lower-paying plan option available to employees to one offering more favorable compensation or the reverse? Monitor these activities and changes. Keep information up to date.

 

Analyze reimbursement rates by payer. Are you receiving the appropriate compensation for the care you provide? Here are some factors to consider.

How does reimbursement for your commercial health plans compare to Medicare rates? Comparing one health plan’s reimbursement to another’s makes good sense. However, all health plan rates should be measured against Medicare. Plans with rates below Medicare could compromise the hospital’s financial health.

 

Unearth internal claims data. Review claims history before negotiating with an existing payer. Study how much revenue the payer brings to your hospital by service line. This reimbursement data could significantly influence the negotiation process since patient care and service lines are always changing.

 

Evaluate fixed rates and patient deductibles in rate negotiation to maximize revenue reimbursement. Hospital compensation under many health plan contracts features a fixed rate. Although this provides a level of predictability for the payer, fixed rates aren’t always the hospital’s best reimbursement option (and at a minimum, fixed rates should be adjusted up each year due to inflation, supply costs, etc.).

 

Also, for high-deductible health plans (HDHP), consider how easy will it be for a hospital to collect patient charges before a patient’s deductible has been met? HDHPs benefit the employer and the health plan, not necessarily the hospital.

Assess your payer-provider relationships. Look beyond the rates.

Establish or nurture long-term payer-provider partnerships, particularly when health plan payers represent a significant portion of your revenue. Are there new product offerings or risk-sharing models? Enhance positive working relationships to facilitate communication and negotiation.

 

What’s the revenue cycle telling you? Evaluate the processes associated with claims processing, payment and revenue generation. Are there opportunities for improvement to more effectively support the billing and collection efforts? (See a related CHC blog post for more on this topic.)

 

Keep up with health insurance changes for consumers covered through the Affordable Care Act (ACA). Many health plans have left the ACA marketplace and others are raising premiums and narrowing provider networks. What percent of patients do you see through the ACA? What impact do their high deductibles have on your collections? Under the new U.S. Administration, it is unclear how changes to the ACA or proposed health reform would impact care delivery – so staying abreast of what’s known will help your hospital going forward.

 

Learn more about the CHC Health plan evaluation process to review health plan relationships resulting in improved contract terms and reimbursements.

Tags: Affordable Care Act, Health Plan Contracting, Operational Improvement, Revenue Cycle
Billing and Collections: Whether or Not to Outsource

by Alice Fleetwood, CHC VP Revenue Cycle

 

Many rural hospitals find it a struggle to achieve positive cash flow and maintain enough days cash on hand to meet their capital and operational needs. This intensifies the importance of ensuring that patient accounting processes, especially billing and collection, are performing at optimal levels.

 

One option many turn to for managing this process is to outsource billing and collections functions. This effort may be seen as a way to improve accurate and timely billing of patient accounts, lower costs, and improve collections. The CHC Consulting Revenue Cycle team is often called upon to evaluate the pros and cons of outsourcing compared to maintaining a hospital-based employed business office.

 

CHC’s experienced staff has assisted hospitals in improving the entire Revenue Cycle process by helping to determine the best solution, avoid common pitfalls, and achieve a hospital’s cash goals. Here are some insights and best practice tips for evaluating whether outsourcing is right for your facility.

 

Define the Need.

 

Based on your business needs and in-house capabilities, determine what can be improved and maintained internally and what would benefit from outsourcing. For instance, evaluate each of the following functions:

  • Billing 
  • Cash posting
  • Account Follow-up
  • Appeals
  • Patient balances
  • Credit balances

Assess Departmental Billing Skills.

 

A keen understanding of Medicare and Medicaid billing requirements is essential, supported by regular claims management system edits. Having an experienced and strong Medicare biller is essential.

 

Review your organization’s billing and collections functions – determine which tasks could benefit from outsourcing.

 

  • Examine insurance balances. Go over payments and payer mix, starting with Medicare and Medicaid A/R to assess the percentage of payments made in less than 30 days. Because these payers are prompt when billing is handled correctly, timely collection is a good indicator of your hospital’s internal capabilities.
  • Appeals. Will you handle the first appeal in-house? For a second appeal, could an outsourcing group provide services not offered locally, such as an attorney or clinical services support?
  • Which categories of A/R might be the most appropriate to subcontract? Motor vehicle accidents (MVAs) for patients without a third-party payer, or workers’ compensation accounts with pending legal concerns are often outsourced due to legal filing and state compensation laws.
  • How long will you need outsourcing services and why? Do staffing concerns or system conversions make outsourcing selected services a reasonable alternative for a specified period?
  • Consider the responsibilities, which will remain at the hospital level. Some of the most common needs for outsourcing include support for customer service, financial counseling, scanning and managing correspondence, and coordination with other departments to resolve concerns.

Evaluate Results.

 

Managing your vendor extends beyond relationship management. Measure the results. Is your outsourcing partner collecting the needed cash? They should be accountable for all accounts you’ve agreed on — not just the “easy” ones. — Follow up through tracking metrics, audits and surprise on-site visits.

 

Consider the Cost.

 

For hospitals with strong internal resources, it’s key to weigh potential staff reduction savings against the loss of revenue the hospital will experience with outsourced collections. Compensation arrangements vary and may include:

  • A percent of total collections. These are typically based on the age of the account and the effort needed to achieve collection.
  • The number of accounts. A fee based on the number of accounts worked (not often preferred by vendors).
  • Hourly rates. The challenge with this method is in assessing and evaluating effectiveness of collections vs. cost.

Choosing the “right” outsourcing partner is rooted in trust. Select a team who understands your needs – ; an organization committed to a shared relationship. Discuss the scope of the outsourcing and define specific Revenue Cycle metrics with your contractor. They must be able to meet or exceed the stated goals, including cash targets and A/R aging metrics.

 

Learn more about CHC Financial Improvement Services including assistance with outsourcing.

Tags: Hospital Performance Improvement, Outsourcing, Revenue Cycle
Assessing Community Needs

by Lisette Hudson, CHC VP of Planning

 

The Patient Protection and Affordable Care Act requires not-for-profit hospitals to conduct a Community Health Needs Assessment (CHNA) once every three years – and develop an implementation plan to meet community health needs. Finalized in 2014, the requirements surrounding a CHNA are very specific.

 

Whether or not your hospital has 501(c)(3) status – which triggers the need to complete a CHNA – conducting an assessment of the existing health needs within your community is a best practice both for your hospital and for the patient population you serve. The following recommendations are designed to help you get organized, go through the development process, and produce an implementation plan.

 

The CHNA Development Process

 

Define and map your service area. To start, identify the geographic area you serve. Review patient origin data. Are there other available data sources that could help you more clearly define your area? At this stage, it’s important to identify the area based on where your patients currently reside.

 

Collect and analyze data. Assess your study area, including demographics and health status. What is the age and ethnic make-up of your service area? What about population growth? Are more families moving into your area, or is the population declining? Investigate mortality data, chronic disease categories and health behaviors. Identify minority populations and evaluate access to healthcare services.

 

Reach out to gather community input. You may be surprised about what your community really needs. Seek feedback from leaders and groups who represent broad community interests. Consider state and local governmental public health departments, members of medically underserved populations and minority populations, or even written comments received on your hospital’s most recently completed CHNA. Beyond these groups, input from other individuals and groups — including community leaders, local school districts and universities, health care consumer advocates, health insurance and managed care experts, or local Federally Qualified Health Centers (FQHCs) or Rural Health Clinics (RHCs) — could also be relevant.

 

Document and communicate results. Now it’s time to pull together and organize all the data you’ve collected for the CHNA, documenting:

  • A definition of the community you serve; your hospital’s mission, vision and values and study area demographics
  • Methodology and sources of data
  • Community input, health status of the area, collaboration with other organizations
  • A prioritized list of significant community health needs with an evaluation of the impact of any actions taken since completion of the previous CHNA
  • Description of how to provide feedback to the facility

Be Prepared for an Audit

Lastly – and important to keep in mind – some hospitals that are required to conduct a CHNA are now being audited. This applies to small or rural hospitals as well as larger systems. Here are a few things to keep in mind that regulators are looking for:

  • Whether your CHNA prioritizes community needs
  • Which needs your hospital will address
  • If the full CHNA report is prominently posted on your hospital website with access from your homepage
  • Documentation that your CHNA has been adopted by your hospital board

Need More Information?

You can learn more about CHC’s Community Health Needs Assessment and Implementation Strategy services – even download our CHNA process document -- or reach out to us. We have completed CHNAs and Implementation Plans for more than 70 hospitals across many states – from community health centers and critical access hospitals to specialty hospitals and large multiā€hospital systems. We are here to help.

Tags: Affordable Care Act, Community Health Needs Assessment, Community Service
Ways to Improve Rural Healthcare Delivery in Challenging Times

by Jim Coleman, CHC SVP of Southeast Hospital Operations

 

Rural and community hospital leaders – at the forefront in meeting community healthcare needs – frequently encounter challenges that may significantly impact operations and an organization’s long-term financial viability. From variations in patient mix to marketplace mergers and legislative reform, the environment continues to change.

 

To better position your facility for success, here are some best practice tips to strengthen access to care and delivery of services. Market customization, operational performance, and collaboration opportunities should be at the top of the list.

 

Customize your hospital’s action plan to your market

 

Use market demographics and payer mix data to think “outside the box” – every community is different. What works for one hospital may not be right for another. Adopt a strategic approach to evaluating new services and programs. Here are a few specific ideas that have worked for several CHC Consulting clients:

  • For markets with a high percentage of Medicare beneficiaries, heart disease, diabetes, and pulmonary conditions are highly prevalent, and a majority of those beneficiaries have multiple chronic conditions. If your market includes a high percentage of older adults with diabetes, a wound care program could be an appropriate service offering. To help keep more elderly patients with heart and lung conditions healthy and active, cardiac and pulmonary rehabilitation services may be the answer.
  • For an aging demographic, depression and age-related illnesses often amplify the need for older adults and their families to seek specialized geropsychology care. Consider providing these services in both inpatient and outpatient settings
  • For rural hospitals seeking to increase the frequency and speed of specialty services, telemedicine technology provides clinical healthcare to many remote communities. Telemedicine extends specialized physician care to areas without the need for an onsite physical presence. Telemedicine can be particularly helpful for stroke patients who need prompt neurology services in order to achieve the best possible outcome.

Plan for the future

 

Annual strategic planning is vital to long-term success. The process should include an environmental assessment reviewing marketplace health needs along with medical staff planning. Proactive retention, succession planning and recruitment efforts are especially important in smaller markets where it can take longer to fill vacant positions.

 

Improve operational performance

 

Labor is the largest portion of a hospital’s budget. This means it’s critical to closely monitor and manage labor. Analyze staffing and match your workforce to the services needed; research scheduling options and cross-training opportunities to capitalize on efficiency. Could nurse practitioners, physician extenders or others benefit the hospital or community? In addition to labor, supply costs are one of the fastest-growing hospital cost centers. Carefully review your facility’s potential for savings on supplies and pharmaceuticals through a group purchasing organization (GPO) that specializes in community hospitals. Also, look closely at your revenue cycle for opportunities to improve revenue capture and collections.

 

Team up with area providers and agencies to meet community needs

 

Collaborative efforts including clinical affiliations with other hospitals or systems can improve population health management and care delivery. For instance, an affiliation agreement could bring a needed physician specialist to your community, a reasonable alternative to recruiting and supporting a medical practitioner on a full-time basis.

 

Government support can also improve access to community-based health care to broaden the services you provide. State and federal grant dollars support clinical and preventive services such as mammograms; funding is available for telemedicine services and health information technology as well.

 

Learn more about CHC Consulting solutions including CHC Hospital Operations Services, CHC Strategy Services, and CHC Supply Trust, a GPO just for community hospitals.

Tags: Community Health Needs Assessment, Hospital Management, Hospital Performance Improvement, Operational Assessment , Operational Improvement, Productivity Assessment, Supply Chain

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