5 strategies for hospital financial planning in an era of value, consumerism and growing drug costs

As hospitals more fully embrace value-based care and as patients begin to shoulder more of their own healthcare costs, traditional financial planning strategies may no longer hold.

In a panel discussion at Becker's 5th Annual CEO + CFO Roundtable in Chicago, four financial leaders and experts from the healthcare industry discussed these trends and how they have adjusted their approaches to financial planning.

Panelists included Janice James, co-founder and managing partner of Prism Healthcare Partners, Lisa Carlson, interim CFO of Chillicothe, Ohio-based Adena Health System, Dennis Hesch, executive vice president and CFO of Urbana-Ill.-based Carle Health System, and Stan Frazier, vice president of solution engineering at RelayHealth. Here are five takeaways from the discussion.

1. Focus on quality and cost improvements will follow. At this point, every hospital needs to be invested in some way in driving quality improvements. "There is a cost to quality that no one can afford not to take on," Mr. Frazier said. A focus on care standardization and providing value for patients can help drive down costs, too. "It's very important we focus on clinical quality as we move forward, and this will inevitability going to lead to discussions about cost control," Ms. James said.

2. Don't isolate financial planning. "Most of my time in healthcare you could do the accountant-in-a-dark-closet approach to financial planning and make some reasonable assumptions; know what investments are required for the status quo," Ms. Carlson said. Now these assumptions need to be rebased for the new healthcare environment, she said. Every healthcare organization is at a different point on the journey to value-based care, and sometimes departments within an organization have made varying levels of progress. "Financial planning can no longer be in those three- to five-year plan ranges," Mr. Hesch said. "It requires continual moderating."

3. Adjust revenue cycle management for the new payer — patients. Increasing out-of-pocket costs and the rise of high-deductible health plans means patients are writing their own checks. "You used to deal with 15 or 20 payers. Now you are dealing with hundreds of thousands of patients. It's much more complicated and much more labor intensive." Mr. Hesch said. Revenue cycle processes need to be sophisticated to collect from patients with any success. Mr. Frazier suggested investing in eligibility and estimation products that help pinpoint a patient's propensity to pay so providers can tailor revenue cycle strategies and efforts effectively.    

4. Invest in experts to get the most out of your data. "Data analytics is the biggest place everybody is looking to capture and drive improvement," Mr. Hesch said. But, he added, "You need actionable data at the right time to affect change." Many organizations are doing a great job collecting data, but not-so-great a job of interpreting it. This means more providers are investing in data scientists and experts who can really dive in and make data useful for their organizations.

5. Bring pharmacy in house to help control drug cost increases. "Pharmaceutical cost is one of those areas that is really escalating across the country," Mr. Hesch said. "When you are taking on risk, it's hard to control [drug costs]. You can see huge swings year to year." To help offset this swing, he said his organization brought pharmacy in-house to grow overall profitability on the drugs they prescribe and to better understand costs at a manufacturing level for prescriptions.

 

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