At the Margins

Our latest insight into health care margin improvement efforts

4 ways to integrate post-acute care into your bundled payment strategy

Monica Westhead July 14, 2016

If you have taken on voluntary risk through bundled payments—or if you’re in a CJR (Comprehensive Care for Joint Replacement) market—your organization is financially accountable for patient outcomes that occur long after discharge. Controlling costs within your four walls is challenging enough, but how can you reduce spending after patients leave your purview?

Many health systems have begun to focus on post-acute care as a source of cost variation, and an opportunity to lower episodic spending. However, determining the right strategy for reducing post-acute costs can be challenging. Common strategies, such as placing patients in lower-cost, lower-acuity settings, can backfire in the form of increased readmissions if not undertaken carefully. Such across-the-board cuts, then, are not the answer.

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Early impressions: CMS's CY 2017 outpatient proposed rule

by Kenna Hawes July 8, 2016

Right on schedule, CMS released its outpatient payment proposal for FY 2017 in the first week of July. As we always do, we’ll be reviewing the 764-page regulation and laying out the key proposals in a webconference on August 1. In the meantime, read on for our initial impressions of this year’s Hospital Outpatient Prospective Payment System (HOPPS) and Ambulatory Surgical Center (ASC) proposed rule.

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Alternative payment models are now common—but when will more revenue be at risk?

Rebecca Gerr June 28, 2016

The pacing of the health care industry’s transition to risk has been a hotly debated topic over the past several years. We recently wrapped up our analysis of our Accountable Payment Survey—a survey of 102 hospitals and health systems nationwide that provides data on health care providers’ transition to risk-based payments, challenges, and financial projections.

The environment is significantly different today than it was when we previously fielded this survey in 2013. CMS has recently explicitly laid out the proportion of payments expected to flow through alternative payment models. Note that what CMS counts as “risk” is mostly non-downside. But, what they are saying still represents the most definite benchmark to date of where we expect to be and how the industry will move forward.

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Supply cost efforts stalling? Think beyond price.

by Lulis Navarro June 9, 2016

Supply purchasing is certainly not a new topic; it has been a target for cost reduction for many years. However, the rise of value-based payment programs is pushing hospital leaders to rethink ways to achieve internal cost savings and boost overall margin performance. Since supply purchasing remains a rapidly growing spending category, optimizing the current approach could make a difference for hospitals’ finances.

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To grow your hospital, think micro

by Kalyn Saulsberry May 20, 2016

As hospitals and health systems consider growth opportunities, we’ve increasingly heard from our members that traditional facility options such as ambulatory centers, urgent care sites, and freestanding EDs are not always sufficient. Most ambulatory centers don’t offer a complete breadth of services while full-scale hospitals often offer more than the community needs. Micro-hospitals are emerging as a middle ground.

Micro-hospitals are 24/7, small-scale inpatient facilities—around 15,000 to 50,000 square feet—with between eight and ten inpatient beds for observation and short-stay use. No two micro-hospitals are exactly the same in their design or service mix, but one trend is becoming clear. Most health systems are using them as entry points into markets where demand would not be able to support a full-scale hospital.

Here are answers to questions we get frequently asked about investing in a micro-hospital.

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Why you should tackle supply chain early on in the path toward systemness

by Elizabeth Goodman-Bacon May 13, 2016

As an increasingly competitive marketplace pushes health systems to prove their value, many executives are prioritizing integration to become more strategically nimble. The goal is to act cohesively and achieve “systemness” to improve cost, quality, and patient experience.

Though pursuing integration is a huge undertaking that involves initiatives of all types, in a recent survey of over 150 organizations, 9 out of 10 executives told us that centralizing their internal purchasing functions is an important step to delivering on their integration goals.

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How to turn CJR from a challenge to a catalyst for documentation change

Rebecca Beattie May 5, 2016

The Comprehensive Care for Joint Replacement (CJR) Final Rule, which impacts two of the most common surgical procedures, hip and knee replacement surgeries, took effect on April 1 for hospitals in target regions.

Though CJR presents a distinct challenge for many providers, it can also serve as a catalyst to transform clinical and financial processes and ramp up the transition to risk. To meet the targets mandated by CJR, providers must decrease the cost of joint procedures—but cost is only half of the equation. Quality performance thresholds are equally important to receive reconciliation payment. Hospitals must reach the 30th percentile on Total Hip Arthroplasty and Total Knee Arthroplasty (THA/TKA) readmissions, THA/TKA complications, and HCAHPS scores to qualify for reconciliation.

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Need funds? Check your energy use.

by Kalyn Saulsberry April 26, 2016

Inpatient health care facilities are the second-most energy-intensive commercial facility type in the country. The average inpatient hospital spends about $1.75 million a year on energy, or between 1% and 4% of total operating expenses. Energy cost savings can be a source of previously untapped financial opportunity for providers looking to offset the costs of strategic initiatives such as population health and care management infrastructure.

Recent Financial Leadership Council research identified key strategies to maximize each aspect of your energy management plan. Here are three key lessons for health care leaders as they develop strategies to reduce energy costs.

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