4 Ways To Maximize Healthcare Margins
By Ken Congdon, editor in chief, Health IT Outcomes
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Healthcare facilities today face unprecedented financial pressures. Whether it’s Medicare/Medicaid reimbursement cuts, coverage shifts, federally mandated IT investments, or patient population growth, most hospitals and physician practices I speak with cite increasing, and sometimes debilitating, financial challenges. Now more than ever, it’s important for a healthcare facility to run a tight ship to stay in the black. The following are a few tips that can not only help you keep your head above water, but actually increase your profit margins.
1. Revenue Cycle Management Tools — The first step to maximizing margins is ensuring you collect what you’ve already earned. Several revenue cycle management solutions exist that allow healthcare providers to not only accurately track what is owed them, but also trigger and automate collection efforts. These tools include (but are not limited to), claims scrubbing software, patient eligibility/insurance verification solutions, claims processing software, and e-billing/e-payment solutions. These tools can be instrumental in reducing your AR days outstanding, optimizing charges, and increasing your payor and self-pay yield.
2. Go Lean — Oftentimes, existing organizational processes and corporate cultures result wasteful behavior. Adopting a lean methodology, such as Six Sigma or Kaizen, will focus your healthcare facility on continuous process improvement to eliminate this waste.
For example, Kaizen is built upon the belief that the real experts in any organization are those that actually do the work each day. These employees should be empowered to improve their own workflows rather than wait for directives to be handed down by upper management.
According to Mark Graban, author of the book Healthcare Kaizen, Kaizen can be applied to healthcare settings in several ways. For example, an ER nurse may notice that one of the reasons for discharge delays is that physicians batch the orders they send to the lab. This often forces the first patient seen to wait around for another four or five patients to be evaluated before any of their paperwork is processed.
In a Kaizen environment, this nurse could point out this problem and, together with their supervisor, suggest and implement an alternate workflow where physicians chart each individual patient immediately following their visit. The entire ER team would then evaluate whether or not the new workflow helped reduce discharge delays. More information on Kaizen can be found in my 5/2/12 article Kaizen: The Key To Lean Healthcare?
3. Workforce Optimization — For most healthcare providers, more than 60% of overall costs are attributed to labor expenses. Managing your human capital more efficiently could lead to significant cost savings. For example, adopting a workforce optimization solution that provides tools such as time and attendance management, online scheduling, predictive scheduling, open shift management, caregiver credentialing, and patient classification can ensure you have not only the appropriate number of staff members on hand, but also the employees with the best skill sets to address patient demands at any given point in time. Workforce optimization technologies can also provide enhanced visibility into employee hours, allowing you to more effectively manage your staff and reduce reliance on expensive temporary clinical labor.
4. Materials Management — Ensuring you maximize your purchasing power and effectively manage your supply usage is also an important step to maximizing margins. Be sure to maximize GPO (group purchasing organization) relationships and deploy automated procurement, supply chain, and contract management tools. Also, properly leveraging vendor relationships is another key step to getting more for less.
Materials management doesn’t only apply to pharmaceuticals, surgical supplies, and other healthcare consumables. It also applies to your health IT investments. For example, premier computing vendors, such as Dell, and third-party organizations, such as VPS (Virtual Procurement Services), offer services that consolidate and renegotiate the existing maintenance contracts on your servers, storage devices, networking equipment, and operating system software. These efforts can provide your healthcare facility with significant discounts on the maintenance of its IT infrastructure throughout its life cycle. More information on these services can be found in my 2010 article Are You Paying Too Much For Health IT Maintenance?