3 Steps To Help Hospitals Improve Financial Health During The COVID Pandemic And Beyond
By Barry Dyer, Senior Vice President, Professional Services at TractManager
Healthcare organizations around the country are struggling financially as a result of the COVID-19 pandemic. According to the American Hospital Association (AHA), projected total losses for the nation’s hospitals and health systems are estimated to be at least $323.1 billion in 2020. While it may be difficult to focus on finances during this unprecedented health crisis, it is imperative to do so. Figuring out where to start on the path to financial wellness is the hardest part.
The Path To Financial Wellness
Data holds the key to measuring and understanding the drivers of financial health—and illness. This means having a full grasp on operational data and knowing how to effectively centralize, standardize, and optimize all these invaluable data stores—including the integration of clinical, financial, and operational data.
In theory, maintaining health system financial wellness seems relatively simple.
- Generate, gather, and standardize reliable data in one central location.
- Use well-selected technology to transform this data into genuine insight.
- Leverage insight to hire or retrain the right people to design and implement innovative, scalable processes.
- Establish collaboration and real accountability to drive and support change.
While hospitals and health systems understand these concepts, effective execution is often easier said than done. This is especially true without a data-driven platform that bridges existing ERP and EHR systems with other data systems. An integrated platform such as this is vital as it enables health systems to source, budget, and plan with confidence, knowing that their conclusions are derived from reliably assimilated data such as cost, regulatory compliance, contract terms, and clinical efficacy.
It’s also crucial to blend financial approaches to wellness with clinical perspectives. Merging clinical and financial perspectives creates synergies in patient care, data management, and operational decision making that lead to health-fostering impacts for patients, physicians, and the health system alike. Equally important is leveraging the insight gained from data to implement and manage necessary changes to improve a healthcare organization’s processes, systems, and bottom line.
A Data-Driven Approach
Building a data-driven platform does not happen overnight. While it is usually a journey of two to five years, savings and improvements occur incrementally along the way. In fact, this gradual optimization is precisely what justifies the case for such an approach. If that is not motivation enough, consider that without improved operational management, hospitals will either continue to struggle or fail because they will not have what they need to properly invest in engaging patients and providers to deliver more efficient, higher-quality care.
To get started on the path to financial wellness, consider these initial steps.
- Understand And Treat Contracts As The System’s Heartbeat
Effective contract life cycle management is essential to maintain efficient clinical operations and to improve margins for future investments in saving lives. This imperative may seem odd, as health systems have long viewed contracts as a necessary evil in doing business. However, the era of paper-based, manually managed contracts has passed. Due to their critical role in health system financial wellness, new systems are being instituted that bring together people, process, and technology to help deliver sound contract management.
Contracts drive everything from the attraction and retention of the best clinical talent through reimbursement for services, investments in appropriate medical equipment, and efficient management of ancillary services. And as contracting teams are being asked to take on and manage much more, they are being provided less support to do so. Innovative solutions are necessary to persevere through these challenges. A comprehensive database with full visibility into every contract and multi-tiered analytics provide the much-needed insight to make critical business decisions that have a powerful effect on a health system’s margins.
- Implement Evidence-Based Strategic Sourcing
Health system purchasing is complicated. Executives must balance sticker price with providers’ perspectives, clinical efficacy, data about how long certain equipment lasts, and expectations about how the technology will change. Strategic sourcing efforts are essential to deliver the best value and outcomes for an advantageous price. While strategic sourcing is imperative for all hospitals—there is an added urgency for hospitals with margins that have been decimated by COVID-19.
Consider the expansion of a facility’s radiology department, which is an expensive but necessary component of any hospital’s clinical service. Too often, organizations approach this decision from one or two angles—clinical preference and price. Meanwhile, there is a wealth of additional data available about a given technology that involves engaging a team of researchers to evaluate specific imaging technology for a given population and application. There is useful data relative to vendor reputation, user satisfaction ratings, pricing, impacts upon measurable improvement in care, comparative devices, total cost of ownership, and payer reimbursement Having all this data in one place is rare. Integrating these findings into a database accessible to experts who can synthesize, analyze, and deliver a strategic recommendation to purchase one model versus another is even more valuable in keeping a project on budget and on time. It is too easy to end up in a service contract that is much higher than current market value or to be invoiced for med-surg components that were not previously included in the vendor estimates. Every dollar counts in an effective financial wellness model.
Outsourced services, which is often the largest category of non-labor spending for a health system, is another area where costs can quickly go sideways. These contracts can be hyper-local, and because most of the costs are based on time, it’s easy to overspend with little measure of quality or value to show. Effective spend management helps a health system better understand where and to whom its dollars go. This ensures less waste and improved service-level agreements. And, once contracts are signed, spend data empowers CFOs to manage the process of reconciling accounts payable more effectively and accounts receivable with original contracts to guard against price gouging, leakage, and off-contract spend.
- Improve Provider Management
Improved data and processes can help streamline provider management and contracting; and can identify abuses and loopholes, such as those associated with value-based care, so health systems can quickly respond to new regulations or changes to existing regulations.
Equally important, data-driven provider management can accelerate the ROI for provider hires by expediting contracting, enrollment, credentialing, and privileging processes. Provider management solutions have been proven to speed time-to-revenue and time-to-care resulting in hundreds of thousands of dollars in new revenue. The importance of agility in provider management is particularly key today. Although state and federal agencies have enabled health systems to fast track the provider onboarding process to respond to COVID-19, those measures will be lifted when the national emergency is suspended. Meaning, many providers may need to be re-onboarded to provide patient care. This may ultimately strain the traditionally manual, paper-based processes currently in place at many health systems.
Moreover, once a physician contract is in the centralized system, managers can track payments—salary, directorships, gifts, or payments from outside industry—to ensure that alignment with contracts stay within Fair Market Value and maintain compliance with regulatory concerns. This type of tracking has the added advantage of freeing up an organization’s personnel resources to work on other urgent issues.
Finally, such systems can have a remarkably positive effect on clinician engagement. After all, one of the best ways to engage a workforce to deliver better care is to create a trusting relationship from the outset. Reducing onerous paperwork, speeding enrollment, and credentialing and creating salary transparency within HR guidelines all contribute to an atmosphere of trust.
Real Healthcare Experience Eases The Journey
Health system financial wellness—just like wellness for individuals—has remained elusive because of difficulties in changing long-ingrained ways of thinking and behaving. It is especially difficult at a time when so many forces are aligned that challenge health systems’ ability to change. Constantly in reactive mode, most health systems have struggled to thoughtfully map out a path to wellness, much fewer ways to ensure they methodically pursue that path.
Change almost always begins with organizations finding the right mix of data, technology, people, and processes for effective change management. But the changes are further complicated by the absence of a one-size-fits-all solution. Rather, organizations, like individuals, must honestly assess what is getting in the way of achieving wellness and then slowly implement changes that build on themselves and motivate further change.
As organizations pursue these changes to achieve true financial health, they should maintain awareness of why big, systemic healthcare changes fail. For example, the first generation of EHRs failed because they were largely the vision of technologists with only minimal, last-minute input from clinical professionals. The first generation of disease management often failed because the general principles did not consider individual concerns and the social determinants of health.
Solutions, in short, must be informed by in-depth, real-world healthcare experience and by a willingness to learn from past mistakes. If a hospital or health system can fully commit and identify where to start building its solutions, it will have taken the critical first step on a successful journey to financial wellness.