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At the Margins

Our latest insight into health care margin improvement efforts

Top questions from CFOs about CDI

Robin Brand October 22, 2014

With a shift toward risk-based payments and the transition to ICD-10, hospitals across the country are evaluating their clinical documentation improvement programs. When I meet with CFOs on this topic, there’s never a shortage of questions. I thought I’d share some of the most common questions I heard during the Q&A session at the recent CFO Forum:

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CDI in outpatient settings: Are you ready for the challenge?

Robert Linnander October 14, 2014

We’re starting to get a lot of interest in outpatient clinical documentation improvement programs, whether in the ED, another ambulatory setting, or in physician practices. The more we start taking on risk for managing an entire population of patients across the care continuum, the more important accurate documentation across the continuum becomes. An accurate chart inflects outcomes for patients and impacts reimbursement.

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

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Three reasons finance leaders are scaling back on GPO contracting

Harry Kirschner October 7, 2014

A lot of us have gotten used to thinking of GPOs as a safe and easy route to supply savings. But more and more hospitals are waking up to the hidden costs of putting their purchasing on autopilot.

The logic of group purchasing can seem so obviously “right” that you may never have thought to question it. But a lot of your peers are having second thoughts. By way of just one example, a recent Advisory Board poll showed more than half of CFOs reporting reduced value from their GPO contracts.

While aggregation is certainly appropriate for low-dollar, fragmented commodity purchasing, I’m seeing more hospitals than ever partnering with suppliers to self-contract on the larger, strategic portion of their spend.   I’m also seeing a lot of these partnerships produce true win-win contracts that deliver benefits well beyond price.

Just this year I’ve personally talked with executives from more than ten hospitals and health systems who are shifting big chunks of their spend to local negotiation.  And it’s not just huge organizations either.  We’re seeing all sorts of hospitals--small and large, integrated and standalone—taking a closer look at their aggregated purchasing and realizing just how much of it they can get better value on by going directly to suppliers.

Recognizing that we’re well beyond a trend, I’ve spent time asking hospital execs why they’re rethinking aggregation as their “go-to” cost lever. Here are their top three reasons:

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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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