HELP WHERE HOSPITALS NEED IT ®
HELP WHERE HOSPITALS NEED IT ®
Community Hospital Blog
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.
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:
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.
By Jill Bayless, CHC SVP Clinical Services
Improving a hospital’s financial performance seems relatively simple – it’s driven by decreasing costs and increasing revenue. In reality it’s quite complicated to optimize these factors while keeping quality care top of mind. One of the biggest challenges for hospitals is managing staff productivity, which means maintaining the right number and mix of clinical staff based on patient diagnoses and volume. Optimizing productivity is critically important because the cost of labor is the greatest expense for a hospital.
In our experience, almost every hospital has some room to improve staffing productivity. Here are some top-line recommendations to help a hospital department run more like a successful business.
Some additional tips on staffing and productivity:
CHC offers a comprehensive assessment to help clients take an in-depth look at productivity and staffing concerns. Learn more about CHC Operational Assessment Services.
They say challenge is just another word for opportunity. That’s certainly how CHC views the challenges faced by many community hospitals today. When hospitals enlist CHC’s assistance, “We go in and look at opportunities they can focus on to become more successful,” says President and CEO Mike Williams in a new video describing the company’s operational assessment process.
An operational assessment evaluates strengths and opportunities for improvement in five areas:
Based on the assessment as well as input from hospital leaders and board members, an action plan is set in motion and a brighter future comes into focus. This brief video provides more information and a success story.
Many New Year's resolutions fail not due to lack of resolve but to lack of resources. Many hospitals fall on hard times for the same reason, but help is at hand if hospital leaders know where to reach.
On the brink of closure in 2013, a long-term acute care hospital (LTACH) in rural Kentucky tapped CHC’s resources and in 12 months made a complete turnaround. Under CHC ContinueCARE’s unique ownership model, the LTACH reopened as ContinueCARE Hospital at Baptist Health Corbin and is now regarded as an LTACH industry leader. The model allows host hospitals to receive financial distributions from their LTACHs via a not-for-profit operating company.
CHC’s turnaround strategists help ailing LTACHs like Corbin’s as well as traditional acute care facilities when financial and performance problems become dire. Our turnaround services go deeper than a traditional operational assessment designed for hospitals that are struggling but not yet sinking, and they involve much more than cutting costs — for example, revisting marketing and referral development efforts in the case of ContinueCARE Hospital at Baptist Health Corbin.
The entire turnaround process for any given hospital typically takes 12 to 24 months to see full benefits, but that time prepares the hospital to be a community resource for years to come. At its completion, CHC can stand by you to make sure things go as planned through continued consulting services, a management contract or an ownership model. Or we can equip you with tools and strategies to succeed confidently on your own.
Read about CHC's turnaround programs, including signs that your hospital may be a candidate.
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