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.

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

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 multi‐hospital systems. We are here to help.

by Michael Morgan, Director of Due Diligence and Strategic Analysis, CHC

An array of issues – from increasing charity care, bad debt and declining reimbursement rates to negative profit margins – create financial distress for rural hospitals. Despite today’s challenging operating environment, many rural hospitals across the country are using a practical approach to grow revenues and control costs.

Step 1: AWARENESS

Know the signs and symptoms of declining financial health

How does a hospital reach the point of “no return” where closure becomes inevitable? Were there warning signs along the way? Were they missed? Would the outcome have been different if danger signals had been noted and addressed?

Discussions around performance, growth and capital stewardship are at the heart of strategic planning for most health care organizations, and even though financial indicators are a harbinger of financial health, “finance” is often considered the responsibility of the chief financial officer or other “financial” folks. Budgeting is usually department-specific.

Like car dashboard warning lights, financial warning signs mean it’s time to sit up and take notice. A regular review of the most important indicators related to an organization’s financial health should be a shared responsibility for the entire health care team. Data points to focus in on include:

• Look at aggregate volume and provider utilization trends. This data can offer a big-picture perspective to leaders and managers across departments.
• Share operating ratios, including expenses as a percent of net operating revenue focusing on labor, supplies, and purchased services.
• Examine labor costs relative to volumes. Is the hospital meeting productivity goals? Look at FTE staffing per adjusted occupied bed targets.
• Review patient revenue indicators including bad debt percentage and net to gross percentage by payor class. Are there shifts in payor mix that need to be addressed?
• Study liquidity ratios, such as net days in patient accounts receivable and cash collections as a percentage of net revenue minus bad debts. What steps can be taken to improve cash flow?

Step 2: INFORMATION GATHERING

Identify and assess significant financial indicators

Operational best practices include a monthly review by hospital leadership of key measures, many of which are listed above. Procedures should be put in place by the hospital’s finance department, with input from department managers, to produce accurate monthly stats and financial performance metrics to facilitate these periodic reviews. A closer look at financial indicators also should be part of the annual review and planning process. A key to financial improvement for hospitals is clear communication of expectations and goals across the leadership spectrum in order to accomplish desired changes.  

Step 3: ANALYSIS & ACTION

Connect the dots for sustainability

Once data is available to everyone, the next step is to analyze the root cause. For instance, if inpatient admission volumes are down significantly in a current month compared to the same month in the previous year, the conclusion might be, “We think it went down because there were fewer flu cases this year compared to last year.” That may be true, but speculation can be risky. Do a deep data dive and take the guesswork out of the equation. What were the primary diagnoses of the admitted patients for each time period? Were there any abnormal physician trends? How do observation days this month compare? Understanding the trends and their causes is the key to creating actionable solutions.

Regular reviews of key financial indicators can identify operational best practices, support strategic planning efforts, enhance understanding and create accountability. These reviews can confirm or redirect efforts aimed at sustainability. The most critical element of the entire process is answering “why.” Only then can the team develop solutions to improve operating margins and avoid financial distress.

Learn more about CHC's Financial Improvement services.

By Cindy Matthews, Executive VP, CHC.

“Strategic planning” usually isn’t the issue. According to the Harvard Business Review, it’s how the process is developed and managed to support ongoing decision making. Here are some guidelines to restructure and facilitate the strategic planning process to make it more effective and relevant to your hospital’s daily operations.

(1) Assemble key stakeholders to create a clear vision for the future. The first step is to bring everyone to the table to discuss how the hospital can move forward effectively —board members, medical staff and hospital leadership. Explore your desired future state, asking questions such as “Where do we want to be, what’s helping or hindering us from moving forward, and how can we get there?” Talk about the hospital’s strengths and weaknesses too, internal and external. And don’t forget education as a component of the conversation. Share information on the hospital’s service area and patient demographics, market share, the Affordable Care Act and how it may be impacting patient volumes, and more. This visioning process is integral to effective planning.

(2) Identify strategies to support attainment of the vision. How will you achieve your desired outcome? Outline key operational, physician, employee, financial, technological and growth strategies for the next three years to help turn vision into reality.

(3) Develop action plans for implementation. Now that strategies are defined, the next step is to identify key tactics and measurements for each initiative. Be sure to document plans with timelines and accountability. Engage departments and staff in the strategy execution process. A disciplined approach helps everyone be accountable. A related note: make strategy development continuous, spreading strategy reviews throughout the year to focus on a single issue at a time. Don’t limit reviews to a two- or three-month time period.

(4) Align business planning with strategic planning processes. Business-unit focused plans related to 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 closely with hospital managers to ensure department and service line business plans and budgets align with hospital strategic planning efforts.

When we’re caught up in day-to-day operations, planning can become an afterthought or an exercise in futility. Reconfigure the process to clarify a shared vision, advance stakeholder collaboration, define responsibility and improve decision making.

Learn more about CHC Strategy and Vision Planning services.