3 ways hospitals can increase profitability in 2016

While 2016 appears to be a grim time for some hospitals, especially smaller rural facilities that would be happy with a break-even balance sheet, there are steps hospitals and health systems of all sizes can take to boost their finances this year.

1. Improve reputation. Without a good reputation a hospital will not achieve success financially or otherwise. Reputation is complex, fragile and built on perceived truth of the people both inside and outside an organization, according to Paul Keckley, PhD, managing director of Navigant Center for Healthcare Research and Policy Analysis. Dr. Keckley wrote in "Pulse Weekly," a newsletter on health reform, that reputation can seriously impact the bottom line.

A 2012 World Economic Forum study found on average more than a quarter of a company's market value is directly attributable to its reputation. That number is likely even greater today, according to a study by Deloitte.

For smaller hospitals, reputation could be the factor that keeps the doors open or leads to financial failure. Many small hospitals are financially stressed due to community members straying from the hospital to seek care at a larger facility. However, community hospitals should not make any assumptions as to why patients head elsewhere for care. "It may be a matter of reputation," said Kelly Arduino, a partner in Wipfli's healthcare practice. "It could be as simple as someone got a bad bill and talked about it all over town." To solve this problem, Ms. Arduino recommends hospitals use a community engagement survey to find out what local residents really think.

It's also important to understand that reputation is different than branding. Unlike branding, reputation can't be cooked up by a PR and marketing team, according to Dr. Keckley. Glossy ads in airline magazines and "Top 100" titles can't stand up to what real people say about an organization and how it impacts its community.

2. Revamp billing and collections. Confusing medical bills and frustrating collections processes can have a negative effect on patient experience and a hospital's bottom line. If patients don't understand their financial responsibilities they are less likely to pay on time or at all. As more consumers enroll in high-deductible health plans, in which they are responsible for a significantly greater share of their healthcare costs, effective billing and collections processes are essential to a hospital's financial success.

Rick Baker, regional CEO of revenue cycle services at Parallon, a subsidiary of Nashville, Tenn.-based HCA, said transparency is crucial in this new healthcare environment where patients are key decision-makers. "We want to make sure we give patients clarity as soon as possible about what they owe," he said.

According to a 2014 TransUnion study, 80 percent of respondents said receiving pre-treatment cost estimates and pre-treatment coverage estimates would be helpful in managing medical costs. However, only about 25 percent of the respondents had received treatment cost estimates from providers. There is also room for a great deal of improvement regarding the clarity of hospital bills, as the TransUnion survey found 54 percent of insured consumers are either sometimes or always confused by them.

Once patients receive their medical bills, they want a seamless payment process in place. Patient portals are increasingly used by hospitals to allow patients to view and pay their bill online, which is something patients want, according to a 2014 Intuit study. The vast majority (77 percent) of patients would pay medical bills online if the option was made available to them, according to the study. However, communication is vital to ensuring patients know they have the option of making a payment via a patient portal.

3. Focus on communication strategy. Communication has become the link between clinical efficiency and the patient experience as healthcare moves from the hospital, to the primary care physician's office, to the outpatient clinic and even into patients' homes. Not only does it drive outcomes — 69 percent of hospital-based accidental deaths and injuries can be traced back to communication failures — but it also impacts a hospital's bottom line.

Breakdowns in communication account for approximately $12 billion in annual waste in U.S. hospitals, according to Vocera Communications. Brent Lang, president and CEO of Vocera, said failed communication contributes to clinicians' inability to respond to urgent issues in a timely manner, increased rates of infections and falls, increased lengths of stay and higher rates of medication errors, among other concerns.

Although there are several obstacles to improving communication, such as lacking the capital needed to invest in new technology and tools, changes to a hospital's communication strategy can have a positive effect on its bottom line.

More articles on healthcare finance:

Tenet posts $140M net loss in 2015: 6 things to know
Highmark Health to slash physician reimbursement to contain ACA losses
UPMC gets financial boost from 20% spike in health plan membership

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