4 Most Common Strategies to Combat Financial Pressures

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Margins are getting tighter for U.S. hospitals today, especially for those with higher levels of Medicare and Medicaid patients, meaning hospital executives are turning to tried-and-true strategies to combat those fiscal pressures.

According to an L.E.K. Consulting survey of 150 hospital CEOs and other top leaders, hospitals are turning to four broad measures to improve profitability while maintaining care quality.

1. Consolidation. The hospital merger and acquisition market continues to be active, with healthcare leaders justifying the moves as a way to increase scale, spread costs and improve leverage with payers and suppliers. L.E.K. analysts estimate by 2020, the top 100 hospital systems will account for more than 60 percent of hospital spending, compared with 40 percent in 2008.

2. Integration. In addition to hospital-to-hospital or system-to-system deals, providers are investing in alternate site facilities like physician practices, ambulatory surgery centers and long-term care facilities. According to L.E.K.'s survey, hospital leaders are aggressively pursuing this strategy because they are a "very popular way for hospitals to secure sources of referral traffic" and they allow hospitals to set up a full continuum of care.

3. Accountability. Survey respondents said they are taking on increased levels of accountability, such as posting quality rates and patient satisfaction scores, because new reimbursement models reward efficiency and improved outcomes.

4. Centralization. About 90 percent of survey respondents said reducing costs is among their top five most-pressing needs, which will lead many to better centralize and coordinate their supply chains.

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