At the Margins

Our latest insight into health care margin improvement efforts

Why Medicare's PACT policy may cost you more than P4P

by Eric Fontana and Lulis Navarro June 16, 2017

Although the average hospital foregoes more revenue due to Medicare's Post-Acute Care Transfer (PACT) policy than its pay-for-performance programs, hospital finance teams rarely pay PACT the attention it deserves.

PACT reduces Medicare inpatient reimbursement whenever patients assigned to any of 280 separate MS-DRGs are discharged to qualifying post-acute care settings more than one day earlier than the national average. The policy was introduced nearly two decades ago to constrain Medicare spending growth as hospitals shifted patient care to the post-acute space. Our analysis of the most recent Medicare data indicates that 6% of Medicare discharges trigger such a payment reduction.

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Putting workforce productivity in perspective: Are you taking what matters into account?

John Johnston, CPA, MHA June 14, 2017

John Johnston, CPA, MHA

It seems barely a week goes by in the news lately without a story of a health system announcing they need to cut labor costs—and significantly.

Even in the absence of dire immediate financial circumstances, executives are anticipating the need to shore up margins as a hedge against an uncertain future. At roughly half or more of the typical hospital's total operating budget, workforce constitutes by far the largest expense category, so the road to significant cost reduction will inevitably lead to workforce expenditures.

With staffing levels already leaner than in previous eras of cost reduction, this is a challenge; very little low-hanging fruit remains. Maximizing the efficiency of clinical and non-clinical staff is at center stage and with it the imperative to set—and meet—productivity targets that optimize the output of our most valuable and most expensive asset: our people.

Progressive organizations are working to develop productivity targets that are ambitious yet sustainable by taking a multidimensional approach that answers three questions:

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3 hospital 'big wins' that could net millions in new revenue

June 13, 2017

The Daily Briefing's Josh Zeitlin sat down with James Green, a National Partner within Advisory Board's Revenue Cycle Management Division, to discuss how hospitals should respond to financial headwinds.

Question: James, hospital budgets are tightening—according to Moody's latest report, expenses are growing faster than revenue, a big reversal from last year. What do hospital leaders need to know?

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Map: What the AHCA could mean for your hospital's finances

Eric Fontana June 2, 2017

Amid the new Congressional Budget Office (CBO) analysis of the House-passed American Health Care Act (AHCA) and the Senate's ongoing health care discussions, we've received many questions from our members about how insurance coverage and hospital financial performance have changed since the passage of the Affordable Care Act.

Many are anxious to see how key hospital financial metrics may be impacted if Medicaid expansion is rolled back and commercial insurance coverage declines, as would be expected if the AHCA becomes law.

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How 2 decades of for-profit experience helped this CFO turn rev cycle around at Missouri Delta

by Eric Fontana and Jordan Kreke May 30, 2017

Millions of Americans depend on independent rural hospitals for health care, but these providers often face significant financial challenges. After more than 20 years in the for-profit hospital sector, Gregory Carda joined Missouri Delta as Chief Financial Officer in 2015. We recently sat down with him to discuss how he and his team have used their experience at larger organizations to rationalize financial operations and improve margin performance.

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Surprising service line consequences of the new inpatient proposed rule for 2018

by Eric Fontana and Trevor Goldsmith May 18, 2017

We continue to analyze and assess CMS's Inpatient Prospective Payment System Proposed Rule for FY 2018 and just completed our webconference on the proposal which is available on-demand. We wanted to pull up for a moment to offer some early commentary on updates to the payment rates as outlined in the proposal, as we've already received several questions from members looking for clarity.

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Taking stock of surgery: Is it time to revisit your assumptions?

John Johnston, CPA, MHA May 3, 2017

Health system leaders have long known the financial importance of strong surgery volume. Through the years, most hospitals not only have streamlined operations within the operating room (OR) to maximize throughput, grow capacity, and attract new business but also have expanded their reach in the market. The question facing hospitals today is: Has our approach to surgery kept up with the new reality? 

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What your CFO needs to know about risk adjustment

Brad Howard, MD, MBA April 27, 2017

If you've joined any one of our recent Health Care Advisory Board National meetings, you've heard exactly why figuring out your Medicare risk strategy is critical to value-based reimbursement. In addition to forming an effective Medicare risk strategy, CFOs of health care organizations with risk-based contracts need to be paying close attention to risk adjustment.

In my experience leading our Clinovations consulting work that helps organizations more accurately document risk, I find most CFOs don't clearly understand the impact accurate risk adjustment has on their financial performance under risk-based payment models. But once the CFO truly understands the potentially far-reaching benefits of accurate risk documentation and capture, risk adjustment often becomes a top organizational priority.

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