Hospitals must kick fee-for-service 'addiction,' CFOs say

At a time when many health systems are experiencing significant operating losses, others are looking to make lemonade out of lemons by leaning on top revenue-generating services for their hospitals to improve operations and increase revenue.

In fact, cardiology (interventional) specialties continue to be the number one revenue driver for hospitals, with an average hospital annual net revenue of $3.48 million, according to a Merrit Hawkins analysis. 

Orthopedic surgery followed as a close second at $3.29 million, with gastroenterology in third at $2.97 million, family medicine at $2.11 million and OB-GYN services at $2.02 in generated revenue.

From investing in collaborations between clinical and nonclinical areas to exploring other avenues for alternative revenue, Becker's connected with two health system leaders to discuss how their organizations are successfully increasing hospital revenue and to get advice on how other health systems and hospitals can follow suit. 

Editor's note: Responses were lightly edited for length and clarity.

Question: Cardiology, spine, orthopedics and gastroenterology are among the top revenue-generating services for hospitals. What has your health system done to expand or increase the revenue from such services at a time when many organizations continue to report operating losses?

Alice Pope, Executive Vice President, CFO of Novant Health (Charlotte, N.C.): As we've worked to reimagine healthcare, we've found that some of our most successful initiatives have been a product of collaboration. 

Our clinical and non-clinical leaders work across their respective areas to identify opportunities to create remarkable experiences for our patients through increased access to leading-edge, high-quality care while also generating revenue for the health system. In the orthopedics space, our institute leadership partnered with our marketing team to begin offering and promoting same-day appointments and walk-in care across 32 of our orthopedic clinics for new and existing patients. 

This expanded access led to a 10% increase in patients seeking orthopedic care at Novant Health and a 10% increase in patient experience scores. We also brought together our orthopedic and surgical institute leadership teams to maximize operating room usage and schedule 12% more cases. 

Kevin Mahoney, CEO of University of Pennsylvania Health System (Philadelphia): Cancer is something that we do really well. From research to bedside, back to research, back to bedside. FDA approvals of new drugs and treatments. The world's largest proton therapy center.

I think the trick in the revenue generation is not to stick to the way it was, but the way it's going to be. We're 60% outpatient despite our ordinary bed towers. The sick of the sick come to us, but things are deconstructed to the outpatient side.

My revenue generation is advanced medicine, because that's still where you get paid the biggest margins. That's still where you generate most of your revenue. So how do I increase the CMI in my hospital? Part is by attracting great talent, part is by developing clinical programs that people will fly to, not just drive to.

Q: What advice do you have for CFOs looking to do the same at their hospitals or health systems?

AP: For CFOs looking to implement similar initiatives, I recommend fostering collaboration across domains, including service line leadership, scheduling, billing, supply chain and more. Once teams are aligned, it is much easier to identify opportunities for revenue generation, increased access to care and a better patient experience.

KM: We have to get off of our addiction to fee for service medicine. Many of us, Penn included, have moved into value-based care.

The country hasn't moved that way, still 90 plus percent fee for service. Our Medicare rate increase is roughly 2.5% next year, far below what our nurses are getting paid and our doctors and electricity, gas. Two and a half  is not enough. 

Our specialty pharmacy is doing great work, net promoter score is in the 90s, drug adherence is quite high, and it produces a very positive margin. 

Are there other areas that we should be getting into alternative revenue? I think that's an untapped part of acute care medicine that we haven't explored deeply enough.

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