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At the Margins

Our latest insight into health care margin improvement efforts

Your approach to cost could be costing you narrow network contracts

John Johnston September 30, 2014

I was recently talking to the CEO of a regional health system in the Southeast (the largest system in his market) who was shocked to have lost a narrow network bid from the region’s largest payer.

The shock came in part because the health system had just undergone a huge financial improvement effort, which positively impacted the system’s margins by over $100 million. The effort included reducing staffing levels, lowering supply costs, and improving the revenue cycle. You would think that this health system would be well-positioned to win a narrow network contract.

So where did they go wrong? They weren’t looking at cost improvement from the payer’s perspective. They corrected supply and labor costs, as well as revenue. However, the payer’s priorities included utilization and variation in practice, continuum of care resources, and care management capabilities, and none of these priorities were addressed in the $100 million improvement effort.

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What sets the top 10% of documentation programs apart?

Robin Brand September 25, 2014

Are you part of the 10%?

Recent Financial Leadership Council research found that while 8 out of 10 hospitals have a clinical documentation improvement program, only 10% are operating at best practice.

So what sets this 10% apart from the rest? I sat down with Advisory Board documentation expert Ed Hock to find out what he’s learned from talking with hospital executives across the country, and why it’s so important for hospital executives to “gather around the table” to improve documentation.

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Survey: What are the biggest IT cost-drivers at your organization?

Robin Brand , Jim Adams September 22, 2014

Over the last few years, providers have dedicated a larger percentage of capital and operating budgets to IT. The roll-out of EMRs and the demand for improved clinical and financial analytics have led CFOs and CIOs to work together closely to ensure IT spending satisfies organizational priorities.

We’ve developed a survey for CFOs and CIOs to understand exactly what contributes to IT costs, how much organizations are spending, and what steps organizations are taking to better manage costs. Take our short, five-minute survey to help us provide a picture of how health care providers are managing IT spend nationally.

Take Survey

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Keep your ‘golden child’ golden: Two ways to market-proof surgical services

Yaw Fellin September 16, 2014

Do you ever find yourself thinking about how great it would be to pare down your volumes of cardiac, orthopedic, or spine surgeries? Probably not. But it is likely you’ll be revisiting some basic assumptions about your procedural business in the near future—including whether or not more procedures are always a good thing.

The reason? Contracting models are exposing hospitals to new levels of performance scrutiny and risk. In today’s post, I’ll be looking at what these trends mean for the long-standing golden child of hospitals’ offerings—surgical services.

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Would you buy hip implants from your surgeons?

Brian Pellegrini September 11, 2014

Lots of CFOs I meet with worry about expensive supplies they’re buying for their surgeons. Not so many talk about supplies they’re buying from their surgeons. But this may change if a new form of physician entrepreneurship takes off. In what follows I’ll offer a quick overview and some examples of an emerging phenomenon known as the physician-owned distributorship, or POD.

Over the years I’ve seen some pretty interesting examples of legal workarounds for aligning physician and hospital incentives. Usually these deals promise improved cost performance; often they also draw scrutiny from the Office of the Inspector General (OIG). The same is true of PODs—companies with physician investors, often spine or orthopedic surgeons, that sell medical supplies to hospitals.

There are two important things to understand about PODs. First, the hospitals they sell to are often the same hospitals where their physician-investors practice. Second, POD physicians are often in a position to specify the very same supplies they’re selling.

Even though PODs need to clear challenging legal hurdles to operate lawfully, they do exist out in the real world. And if one does happen to appear in market, you’ll want to be prepared. By way of preview—and without pretense to judgment or recommendation—I thought I’d share with you some stories of how a handful of hospitals have responded.

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8 strategies to protect your margins, ranked by difficulty and impact

Robin Brand September 5, 2014

With pricing pressures, transitions in patient coverage, and the emergence of new competitors, your margins are more vulnerable than ever. Financial health depends on your performance in eight areas, from charity care to documentation.

So what’s an easy win versus a long-term goal?

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Rethinking charity care? Tightening your policies may not be a simple solution.

September 2, 2014

Nearly one year after consumers gained access to expanded health coverage under Medicaid and the public exchanges, many hospitals are questioning whether patients who refuse to purchase insurance coverage should be eligible to receive charitable discounts on their care.

A recent article published by Kaiser Health News notes that most hospital leaders across the country are considering whether their charity care policies should be tightened as a result of patients’ increased access to more affordable coverage options. One New Hampshire hospital profiled in the article has completely excluded from charity care eligibility all patients who qualify for, yet refuse to purchase, health coverage.

While restructuring eligibility criteria for charity care programs may seem like a natural response to an expansion in insurance coverage, our research suggests that the costs of a tighter charity care policy may outweigh the benefits.

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Focus on quality to protect your revenue: The evolving role of CDI

Samantha Hauger August 26, 2014

It’s a common theme in my discussions with CFOs and CEOs across the country: health care is moving from fee-for-service, volume-based reimbursement to quality-based reimbursement. The days of higher volumes equating to more revenue will soon be fully in our rear-view mirror.

This change may already be having a huge impact on your reimbursement. And if it hasn’t yet, it likely will soon: 75% of hospitals polled in a recent Advisory Board study expect to have shared savings contracts in place by 2017.

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