Assessing financial strength as hospitals migrate away from fee-for-service

When examining the financial strength of hospitals and health systems there are new factors influencing how stable an organization is.

The shift from fee-for-service can present challenges for organizations of all sizes, as the value-based environment requires more than looking at financial ratios, "it requires thinking strategically," said Mark D. Tambussi, senior vice president and national manager of healthcare equipment finance at PNC Equipment Finance, during a panel discussion on benchmarking and determining the financial strength of a hospital at Becker's Hospital Review 6th Annual Meeting in Chicago.

One of the challenges the panel discussed was the shift in the balance between inpatient and outpatient care. Gregory Jelinek, executive vice president and national sales director at PNC Healthcare said, "20 years ago 75 percent of admissions were inpatient and now it's about a 50/50 split between inpatient and outpatient." Therefore, whether a hospital or system has a strong outpatient presence is going to have a more significant effect on their finances than in the past.

Like Mr. Jelinek, Clermont, Fla.-based South Lake Hospital CFO Lance Sewell understands the importance of outpatient care. "The millennials are looking at how quickly and conveniently they can get care, which has caused us to look more at outpatient," he said.

The panelists also discussed how population health management has caused hospitals and systems to develop new benchmarking metrics. "From a population health standpoint we're looking at readmissions, county health needs assessment, and more," said Mr. Sewell. By examining that information, South Lake Hospital can identify the information it needs to get out to its community.

Although there are numerous factors to consider as the industry migrates away from fee-for-service, David Ertel, CFO of Einstein Healthcare Network in Philadelphia, said the most important factor is having enough scale to manage in a value-based world. "Many smaller institutions are challenged with what they're going to do moving forward," he said.

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