At the Margins

Our latest insight into health care margin improvement efforts

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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Early impressions: CMS's FY 2017 inpatient proposed rule

Eric Fontana April 19, 2016

For the second year in a row, CMS dropped its weighty inpatient payment proposal in mid-April, this time for FY 2017. The good news is that we’re giving you some time back in your month by pouring through the 1,585 pages for you. Join us for our annual review of the proposal on Friday, June 3 at 3 p.m. ET. We’ll examine what’s on the table for Medicare inpatient payments in the coming fiscal year.

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Looking to protect surgical margins? A physician champion can help.

Rebecca Beattie April 8, 2016

Surgery often represents a double edged sword for finance executives. Though surgery is a major source of hospital profit, surgical supplies represent about 25% of an average hospital’s total spend. To maintain positive margins, providers need to reduce surgical costs without sacrificing quality outcomes.

As we’ve previously discussed , encouraging surgeons to use a standard set of lower-cost supplies is a great opportunity to decrease costs without sacrificing the quality of care delivered. However, many organizations struggle to get surgeons to change usage of preference items. Many surgeons our team speaks with believe that their higher costs translate to better outcomes or that reducing supply costs is more an issue of contracting than individual choice.

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Not being open about pricing? It'll cost you.

Bethany Black April 1, 2016

As high-deductible health plans become increasingly common, more and more patients are comparison shopping for health care. In fact, a recent study from Public Agenda found that 56% of Americans now actively look for pricing information before getting care.

This increase in health care shopping has significant consequences for hospital revenue. Advisory Board research found that a four-hospital system can see swings in revenue of $16 million to $40 million due to its price transparency strategy—or lack thereof.

The potential financial impact here makes it critical for providers to share concrete pricing information prior to service to steer patients away from competitors. Unfortunately, more often than not, hospitals traditionally aren’t well set up to discuss price with patients. As payment models change, hospitals must evolve from solely serving legacy payers to serving a new and growing payer: their patients.

For guidance, hospitals may want to look to ASCs and free-standing imaging centers, as they’re often ahead of the game when it comes to transparent pricing. Here is an overview of how the most progressive of these organizations have internalized patient expectations to differentiate themselves by offering price transparency as a service.

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Robots: How to get the most bang for your buck

John Johnston, CPA, MHA , Sharon Ward, RN, MS, CEN March 25, 2016

There’s a technology arms race when it comes to robotic surgery. Hospitals of all sizes worry about getting left behind, losing surgeons, or losing market share to a competitor. In response, they have invested millions in robotic surgery, including the upfront platform and ongoing maintenance. However, on a daily basis these robots are often used in surgery without fully accounting for the increase in associated costs, up to $2,000 on average per case.

Here’s what hospitals need to know to sustain this major investment and remain profitable.

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No 'I' in the OR: A team-based approach to OR—and margin—growth

John Johnston, CPA, MHA March 11, 2016

As our clients set out to increase margins, many are focused on increasing patient volumes in their most profitable service line: surgery. Hospitals with busy operating rooms often jump into adding additional beds to take on more patients—but recently my team has helped hospitals reach the same volume goals by increasing the capacity of the existing OR.

I sat down with my colleague, Sharon Ward, RN, NEA-BC, who has been on the ground with organizations working on improving OR capacity, to discuss what she’s seen. Here are a few of the best practices that she has identified.

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Need to improve margins? Try looking at your OR.

February 26, 2016

By Michele Molden, MBA and Michele Mayes

Last year, the leader of an academic medical center approached us at an event. With steep, state-wide budget cuts on the way, they needed to quickly improve profitability. After a few discussions, one area emerged as an untapped opportunity for the hospital to quickly realize returns: surgical services.

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3 must-dos for a positive patient financial experience

Cassie Wolfe February 19, 2016

A patient financial services director recently shared a quote with me from a patient describing her hospital stay: “The room was clean and the staff provided great care, but I feel like I just had a house drop on me because I got my hospital bill and cannot afford my deductible.”

This isn’t an uncommon situation, as rising insurance deductibles are increasingly becoming a source of financial anxiety for patients. This past March, the Kaiser Family Foundation found that many families don’t have enough liquid assets to cover their deductible in a private health insurance plan. Research showed 49% of households do not have enough liquid assets to cover a higher-range annual deductible, defined as $2,500 for an individual or $5,000 for a family.

Patients have their health to worry about, and medical bills only add to their stress levels. That’s why best-in-class organizations are optimizing and automating front-end technologies and processes to achieve three best practices of a positive patient financial experience.

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