This is the second essay in a two-part series. Read part one here.
Too often healthcare providers find themselves handicapped when it comes to optimizing business processes because their primary mission is care, and business comes second. Providers will likely have to make business investments that they never have before in order to update processes and save money.
Such investments include finding the best talent available who can come in and take the lead, and rewarding those already in positions where they are implementing strategies that benefit the hospital's financial performance.
Once hospital financial performance is impacted, then its access to capital will suffer. This creates a crisis where the hospital still needs a certain amount of capital to continue operations, but does not have the credit level to access the funds. An additional concern emerges if hospitals face a situation that requires floating bonds to fund operations, creating the risk of a scenario where the necessary funds will not be entering the system. This creates additional concerns as compliance requirements, and their associated costs, grow.
For example, if a hospital has a goal to be compliant with EHR implementations in 2014, it will require money and management focus. This is happening all while faced with an environment where the hospital doesn’t have extra money to invest in compliance. The CFO who will succeed in this scenario is the person who is forward-thinking enough to identify operating efficiencies that will allow the hospital to provide a standard of care while also making investments to ensure compliance. Again, it comes back to balancing the two missions of care and business.
Healthcare needs to look at hospitals differently and acknowledge the two distinct sides of these unique businesses: First, the patient care side which runs on clinical quality, and second, the business operations, which must run with higher degrees of efficiency so quality patient care can continue. Quality of care has to be the focus, because if this fails, reimbursements are jeopardized.
Yet capital constraints require hospital executives to look at their operations using a more dimensional lens. As the new revenue model evolves, it's critical to continually balance the prioritization of business operations and goals while ensuring quality is never forgotten.
Driving New Processes
A key driver of new business processes is compliance with Stage 1 of Meaningful Use, which focuses on data capture and sharing. As provider organizations stride toward new business requirements, they can consider the supply chain as a backbone – a key component of technology infrastructure – that can help capture and share the data they need.
For example, an organization that’s capturing data about medical devices and products used during a patient procedure can then use this data to populate the same information in other locations, such as EHRs. In the future, a one-time data capture for a multitude of uses can drive much greater efficiency.
An example of this is the FDA’s long-awaited unique device identification (UDI) rule, which requires manufacturers to uniquely identify medical devices through distribution and use. A universal UDI requirement will help healthcare organizations better understand the role products play in delivering greater value and higher quality outcomes. UDIs make it easier to electronically (and in turn more accurately and easily) capture data on specific products used at the point of care, which helps providers determine total costs per procedure, increase billing accuracy and improve inventory management.
Multiple industries have adopted standards to streamline operations and identify greater value, and by taking the next step into UDI, healthcare can learn from the benefits other industries have experienced through standardization and apply it in their own organizations.
Healthcare stands at the crossroads and our business leaders must be ready to act quickly. Medicare and Medicaid disproportionate share hospital (DSH) payment cuts are looming - with Medicaid DSH payments set to be reduced by $14.1 billion between 2014 and 2019 and Medicaid DSH expenditures to decrease by more than $22.1 billion in the same timeframe.
These are nationwide numbers, but cuts to individual hospitals will be deep. UC Medical Center in Cincinnati, Ohio anticipates losing up to $5 million in DSH payments during its next revenue cycle, and Mercy Health predicts the cuts could be as high as $10 million for the hospitals in its system. With these and other significant reductions in reimbursements, hospitals are faced with less available capital, while at the same time, an increasing focus on the quality of care.
A rebalance of the cost/quality ratio is more important than ever. This is the time for healthcare to realize the financial reality, and take proactive measures to perfect the delicate balance between care and business, so our system can continue to provide the quality of and access to care that the public deserves.
It’s true that a hospital is just another type of business – but with more complexity and much more at stake than other businesses.