At the Margins

Our latest insight into health care margin improvement efforts

How to build a revenue cycle that works for your patients

James Green August 29, 2016

Let’s think about your hospital’s revenue cycle for a moment. Was it designed to get work done as efficiently and cost-effectively as possible? I suppose most of you would say yes. Would most of you also agree that it was designed with the highest regard for the patient financial experience?

It’s no surprise that most hospitals have designed their revenue cycle to fit their own workflows. But making things easy for ourselves is no longer enough. Patients find our "efficient" workflows frustrating and confusing. In fact, clumsy billing and collections processes may ruin their overall experience, regardless of our clinical excellence.

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Are your surgeons using a $500 item when a $140 item will do?

Rebecca Beattie August 15, 2016

As your hospital faces declining reimbursement and shrinking margins, you can’t afford to waste money buying more expensive supplies that don’t translate to better outcomes.

However, few surgeons even consider costs when selecting preference items, largely because they are unaware what the costs are. A recent survey of orthopedic surgeons found that only 21% were able to estimate their implant costs with +/- 20% accuracy. If your surgeons fall into the “unaware” category, simply sharing cost information with them can be a great place to start.

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The credit ratings factor CFOs often miss

Trevor Goldsmith August 12, 2016

Hospital credit ratings evaluate the likelihood that a hospital will repay its creditors. Maintaining an excellent credit rating is essential for securing access to capital at favorable interest rates.

Most finance executives are already familiar with the quantitative metrics connected to a good credit rating such as days cash on hand and revenue growth rate. But CFOs should also be aware that credit scoring methodology includes qualitative components and that rating analysts exercise an important degree of professional discretion in judging these components. CFOs should prioritize creating healthy and transparent relationships with ratings analysts in order to leverage qualitative factors.

To learn more about the qualitative aspects of the credit rating process, we recently sat down with two leaders who have extensive experience in advising hospitals on debt management: Pierre Bogacz and Bruce Deskin, managing directors at HFA Partners, an independent registered municipal advisory (IRMA) firm for hospitals and health systems. Here are three key lessons we gathered from our conversation.

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Why IT is crucial in managing risk of Medicare Advantage plans

John Kontor, MD August 4, 2016

Provider organizations that take on financial risk know margins depend on accurately accounting for patient complexity. However, monitoring that complexity is starting to play an important role for individuals and organizations with almost any kind of relationship with Medicare.

Skimping on the effort it takes to accurately account for patient complexity leads to what most providers simply can’t afford: inadequate reimbursement for the services they deliver to the sickest patients.

Centers for Medicare and Medicaid Services uses a method of accounting for complexity called Hierarchical Condition Categories (HCC) to adjust payments for services provided to Medicare Advantage (MA) beneficiaries. HCC codes correspond to billed diagnoses and their projected treatment costs.

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How to navigate—and budget for—a new frontier of hospital staffing

John Johnston, CPA, MHA August 1, 2016

There was a time when hospital departments, from the operating room (OR) to intensive care, could follow some basic rules to staff effectively according to industry benchmarks.

But hospitals that have been on workforce “autopilot” these past few years are finding that benchmarks have become more aggressive. Moreover, hospitals are faced with a new set of clinical and administrative roles that simply don’t fit the old model of “worked hours per unit of service.” All of this adds up to new challenges for maintaining a sustainable cost level for a hospital’s biggest expense and most valuable asset.

To get that discipline back and design a labor strategy that accounts for a changing workforce, hospitals should consider the following recommendations.

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Why the consumer experience includes the financial experience

James Green July 27, 2016

As payment models change and high-deductible health plans (HDHPs) become more prevalent, hospitals must evolve from solely serving legacy payers to serving a new and growing payer: their patients. This past March, the Kaiser Family Foundation found that only 49% of households with a private health insurance plan have enough liquid assets to cover a higher-range annual deductible, defined as $2,500 for an individual or $5,000 for a family.

The emergence of the patient as payer makes it critical for hospitals to provide a seamless financial experience for consumers.

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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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