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Managing Financial Performance: New Frameworks for Traditional Challenges

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Managing Financial Performance: New Frameworks for Traditional Challenges

Albert Einstein is reported to have said that if he only had one hour to solve a problem, he would spend 55 minutes defining the problem and the remaining five minutes solving it. That’s why the findings of a recent HealthLeaders Media Intelligence survey justify deeper examination. In the survey, HealthLeaders asked respondents to rank their top challenges impacting financial performance and to identify specific areas of concern within each of those issues.  Their top three issues were: 

  • System implementation and interoperability 
  • Recruiting and retaining talent
  • Reengineering the revenue cycle

The May survey polled 125 senior, clinical, operations, financial, marketing, and information leaders across the industry from both nonprofit and for-profit settings. The majority of respondents (71%) are from hospitals and health systems, and within that respondent group, 72% work for a nonprofit organization. 

On the surface, it’s tempting to think these findings aren’t surprising. The issues cited by respondents reflect pain points hospital executives have faced for years. Yet emerging external factors, including the cumulative effects of the HITECH Act (meaningful use), the Affordable Care Act, and an aging U.S. population, are creating new frameworks in which to view and solve these traditional problems.

Following are some key survey findings, exploration of the new frameworks, and an open, constructive discussion about strategic choices going forward. 

System implementation and interoperability

The plurality of respondents (42%) cited implementing new clinical or financial systems while maintaining current IT systems as having the biggest impact on financial performance in the next two years. Another 36% indicatedthat interoperability within the system or clinically integrated network was a top concern. 

And why not? Adopting technology that slows doctors down and impacts day-to-day operations has been one of the healthcare industry’s biggest problems for years. So has achieving system interoperability for a wide range of complex technology applications that do not talk to each other. 

New framework. When it comes to system capabilities and interoperability, federal program incentives—as well as penalties—are increasing. Simultaneously, in bracing for the unknowns of healthcare reform, everybody is merging together. Hospitals are building ambulatory clinics, and private physician practices are shifting toward hospital employment models. The result is a much more complex environment in which to implement systems across an enterprise.

Chris Taylor, president of Parallon, which sponsored the survey, says the survey findings illustrate the critical juncture providers find themselves in. “System interoperability is one of the biggest hurdles in improving the effectiveness of patient care and financial performance,” he says. “We’ve seen a lot of movement to create large hospital and physician networks, but they’re not really an integrated care system from an IT perspective.”

A variety of implementation decisions can hold back an optimized EHR. Some hospitals customize the system to meet existing workflows. Others choose to only adopt the clinical modules vs. the entire module suite. In other cases, the legacy financial system is kept intact. Another common hospital IT strategy misfire is underestimating the effort and cost required to gain data flow from ambulatory systems. 

“Getting the system live is often seen as the success point of implementation, but what is often left unmeasured is whether the new clinical technology is making the physicians and the nurses more productive and effective,” Taylor says. “When the implementation plan underestimates the impact on physicians, it can damage the EHR adoption rate within the hospital.” 

To avoid these pitfalls, Taylor recommends taking an enterprise view in crafting an IT strategy road map. Separating which systems are imperative to standardize vs. what things should, or can, remain local, will create the right balance and a natural priority list of investment and focus. Top of the list for systemwide integration is the EHR, so that “everyone is speaking the same language” from a patient care perspective. Second is the supply chain. “A standardized purchasing order system along with a centralized warehouse and distribution model can ultimately drive down inventory SKUs and costs,” he says. 

“Also, standardizing patient registration and centralizing revenue cycle functions is recommended. Standardization and centralization of registration and revenue cycle functions streamlines processes, improves revenue clearance and reduces costs,” says Taylor.

At the end of the day, what stays local is the patient care. “Health systems should take advantage of their size and scale from a system perspective, but every market is a little bit different, and the IT strategy should be determined by those unique patient, payer, and local market factors,” he notes.

Recruiting and retaining talent

If the supply chain is the second largest expense category for healthcare organizations, the largest is typically the salaries and benefits of hospital staff. This is why managing human resources has been a mainstay concern for hospital leaders. 

About a third (33%) of the respondents agree that the biggest impediment to a cost-effective, productive workforce is trouble recruiting and retaining the right talent. Almost the same number (31%) reported their biggest impediment was lack of the right technology to optimize staff productivity. 

New framework. Demand for healthcare services is expected to swell, thanks to those with new insurance from the Affordable Care Act and aging baby boomers with increased medical needs. Yet the supply of healthcare providers is predicted to fall, with shortages of 90,000 qualified physicians and nurses forecast by 2020. Plus, the majority of current healthcare workers are baby boomers themselves. Nearly half of all registered nurses will reach traditional retirement age in five years. 

Taylor advises hospital leaders to embrace technology adoption as a priority in anticipation of upcoming staffing challenges.

“A system to analyze the productivity of your workforce is the first step to planning and allocating labor resources appropriately,” he says. “Performance analysis tools enable identifying the right staff matrices by department, by shift and by day.” 

Taylor describes how in one instance, performing a nine-month labor assessment on a mid-South 100-bed hospital enabled the organization to achieve more consistent staffing levels, which in turn drove value and savings. “This type of analysis set the stage for staff right-sizing to reduce costs and avoided layoffs,” he explains. “Layoffs are a difficult course of action. It’s so disruptive to day-to-day operations and the community in general. Plus, it’s only a short-term fix.”

Hospitals should approach staffing technology in context of patient flow. “There needs to be consideration of the patient moving through the delivery system from beginning to end,” says Taylor. “For example, hospitals may want to consider how the physicians are interacting with staff and patients and factor in those touch points.”

Benchmarking data and scheduling technology also are fundamental. “Information is power. Without the benchmark information, there is no threshold to right-size,” cautions Taylor. “And the right scheduling technology tools not only reduce waste and cost, but can offer better flexibility in scheduling to enhance employee retention and subsequently enhance patient safety and satisfaction.” 

Last, accountability is a very human, but essential key element. “Leaders must be accountable for meeting their staffing targets and goals. Accountability goes hand in hand with the technology,” he emphasizes. “Without a culture of accountability, the investment in tools and information has no value.”

Reengineering the revenue cycle

The hospital revenue cycle has traditionally represented fragmentation, whether in its processes; its labor-intensive, siloed departments; or its myriad of bolt-on technologies. For the past several years, provider budget priorities have focused on clinical systems, given the opportunities and imperatives of achieving meaningful use. 

New framework. The two basic prongs of the ACA are expansion of health insurance and reform of the healthcare delivery system reimbursement model. The former is creating more insured patients, but also a rise in high-deductible health plans and a greater need to collect up-front patient payments. The latter is moving Medicare reimbursementstoward a value-based payment model, with many commercial payers following suit. 

The survey findings illustrate the ways hospital executives are contemplating their revenue cycle in light of these drivers. Thirty-nine percent of the HealthLeaders survey respondents indicated that their most difficult revenue cycle challenge is reengineering their operations to fit payment models based on fee-for-value. Almost one-third (31%) believe that collecting more copays and deductibles from patients with high-deductible health plans is their biggest revenue cycle difficulty.

According to Taylor, most providers are feeling the pressure to optimize up-front collections and prepare for value-based payments, but it’s still a very big question of priority in making those improvements. 

“Every market is a little different, and some markets aren’t being pushed to move in the fee-for-value direction at all right now,” he says. The catch-22? If a hospital moves ahead of the market demand for value-based payments, then it creates unnecessary risk. Moving too slowly toward these capabilities, meanwhile, could put the hospital at risk for losing payer partnership opportunities.

“There’s necessary and great opportunity to enhance the revenue cycle in most hospitals,” Taylor explains, “but in a world of many competing high-priority projects—ICD-10, meaningful use, to name two—it’s imperative to understand your market, your payer and patient mix, and adjust your focus and investments accordingly.” 

Enterprise view, standard vs. local, prioritization

Generally speaking, all hospitals, regardless of whether they are in a market with more risk-based payments, are going to be challenged to make their cost structure more efficient to be successful in the future healthcare marketplace.

“My recommendation is to bring a third party in to strategize,” advises Taylor. “Whether it’s IT, recruitment, or reimbursement, transitioning the organization and its functions doesn’t happen overnight, and it requires planning and expertise. Bringing on a strategic advisor to flesh out informed enterprise views, identify standardization opportunities, and to help prioritize projects may require some investment initially, but it will likely reduce cost overruns down the line.” 

In conclusion, as hospitals consider various ways to strengthen their financial performance, they should beware focusing on all the right problems while overlooking the current frameworks in which to solve them.

“You have to know the regulatory impacts, where you are in the marketplace, and what current best practices look like in order to know where your opportunities live in driving value for your organization,” Taylor explains. 

“Having been a hospital operator myself, I learned the value of having a partner with deep understanding, including the supply chain, workforce management, clinical applications and workflows, and revenue cycle,” he says. “You especially want advisors who have done it before, with an organization like yours and from an operator’s perspective.” 

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Albert Einstein is reported to have said that if he only had one hour to solve a problem, he would spend 55 minutes defining the problem and the remaining five minutes solving it. That’s why the findings of a recent HealthLeaders Media Intelligence survey justify deeper examination. In the survey, HealthLeaders asked respondents to rank their top challenges impacting financial performance and to identify specific areas of concern within each of those issues.  Their top three issues were: 

  • System implementation and interoperability 
  • Recruiting and retaining talent
  • Reengineering the revenue cycle

The May survey polled 125 senior, clinical, operations, financial, marketing, and information leaders across the industry from both nonprofit and for-profit settings. The majority of respondents (71%) are from hospitals and health systems, and within that respondent group, 72% work for a nonprofit organization. 

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