At the Margins

Our latest insight into health care margin improvement efforts

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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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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