Moving on from COVID...My 2 cents.
Why do healthcare organizations focus so much on revenue growth vs cost suppression?
- Simply put…it'tougher. Almost every example of revenue growth is simple billing or documentation improvements to improve charge capture, or bolt on volume as in adding a physician or group to a service line and subsequently they bring patient volume. It requires much more work and time investment to move forward in reducing cost.
- Improving the variable cost productivity footprint and sustaining it requires a large amount of behavioral change. Changing what we do with our processes intrinsically is much more of a challenge to achieve. It almost always requires some process change and this is challenging for us. We really struggle with sustainable change. Sustainable change means we make a change and the change sticks. In healthcare we like to make a change and then forget about it. I believe in healthcare we are good at identifying what needs to change but we fall down with the management of change so that it can be sustainable. We need to improve at the maturation of our improvements and ensuring that the employee behaviors that support them change as well.
- We are attracted to revenue growth because when it happens it is typically large. However, after you net the revenues out, its about 18%-20% of the gross improvement. Even then it may be more valuable than simple cost reduction, but it’s not usually as challenging as sustainably reducing cost. Using COVID as an example, when the revenues disappear beyond our control, we must be able to fall back on cost discipline to sustain us through the challenge.
What are the opportunities to make organizations better postured for a pandemic in the future?
Leverage technology
Increase telehealth application for access especially given the impacts to the Critical Access facilities. President Trump signed an executive order on August 3rd to expand the billable services of telehealth. Centers for Medicare & Medicaid Services (CMS) added 135 services such as emergency department visits, initial inpatient and nursing facility visits, and discharge day management services, that could be paid when delivered by telehealth (1).
Improve access to business intelligence at the department level: With the advent of the Affordable Care Act and Meaningful Use, there was a race to implement EHRs in hospitals due to the significant subsidies provided. However, the technology was put in front of the process and clinical leaders are left without any intelligence to use the data that is sitting in these multi-million $ systems. Process-centered business intelligence and interoperability with the existing clinical documentation systems is the next step.
Decrease Cost Footprint
1. Workforce management (45-75% of total Op Ex)
Need a productivity system of business intelligence. There is a gap between the clinical operators of the hospital and the finance teams. Finance wants an improvement, and operators do not know how to give it to them. We have a solution for this called StaffDx which is a set of tools focused on empowering and equipping the clinical leader to be successful in managing such a large contingent of their budgets without having to be an accountant. It was built from consulting tools developed in the field working with department leaders across the country.
2. Supply Chain (23-28% of total Op Ex): Aggressively reduce variations in equipment across providers, reducing high carrying costs and leveraging consignment arrangements with suppliers.
3. Change reimbursement models that change our motivations for cost reductions.
Some states like Maryland have moved to a Global Payment Model where the hospital essentially collects a flat payment based on analysis for inpatient stays upfront at the beginning of the year. Think about how this changes the hospitals motivation and focus. This incentivizes the hospital to keep patients well in the community and not need the hospitals, reduces readmission's, reduce length of stay. After 30 months, Maryland recognized:
- 48 percent reduction in potentially preventable complications
- Readmission rate fall from 7.9 percent to 3.4 percent over the national average.
- After nearly three years of operation, $429 million in hospital savings in Medicare compared to the national rate of growth, which has translated to a $319 million total cost-of-care savings relative to national Medicare trends. (2)
Credit
1) Leventhal, R. (2020, August) Trump Administration Takes Steps to Permanently Expand Telehealth Services. Retrieved from https://www.hcinnovationgroup.com/population-health-management/telehealth/news/21148801/trump-administration-takes-steps-to-permanently-expand-telehealth-services
2) Sabatini, N, Antos, J, Haft, H, and Kinzer, D (2017, January) Maryland’s All-Payer Model—Achievements, Challenges, And Next Steps. Health Affairs. Retrieved from https://www.healthaffairs.org/do/10.1377/hblog20170131.058550/full/
Alan Dial is the President Nexus Process Engineering, LLC and Co-Founder of StaffDx. StaffDx is a clinical leader-focused workforce management suite of tools that enable intuitive productivity budget compliance.
To learn more about StaffDx, DM Alan here on LinkedIn or email him at : [email protected]