The top 8 takeaways from HFMA's 2016 National Institute

When close to 5,000 healthcare professionals get together to talk numbers, it's worth paying attention. 

The Healthcare Finance Management Association Annual National Institute took place in Las Vegas this week. Given the seismic changes in motion relative to the business model of hospitals and healthcare delivery networks, this is likely (and perhaps surprisingly) one of the more important and interesting conferences that will take place in healthcare this year.

In the $3 trillion market which is healthcare, roughly $1 trillion flows directly through hospitals. But the story isn't what you think it is, as average operating margins are only 2 percent and inpatient volumes have been declining at a rate of close to 2 percent annually for the last few years. With margins that small, volume declining, and this much at stake, clearly the game is going to change in a big way.

The bottom line is there is a truly stunning shift in focus taking place in finance, and that was evident at the HMFA conference this year. Here are my top eight takeaways:

1. Revenue cycle management is not the talk of the town anymore. While close to 70 percent of the vendors at the conference were revenue cycle companies, less than 20 percent of the sessions at the conference focused on this topic. This is reflective of the changing conversation taking place as providers shift their focus from focusing strictly on the top line to taking a broader, more strategic view of where to take their business in the future. So what topics were they were talking about? Good question, see the other seven below.

2. Better care costs less and is more profitable. This may sound intuitive, but it has never actually been proven, until now. Yale New Haven Health shared its unique approach of quantifying the cost of harm. They found harmful events cost the hospital four times more than when a patient doesn't have that type of incident. This data point is a major headline in healthcare. While there doesn't need to be financial motivation to deliver better care, it is important for administrators and clinicians to understand there is also a significant financial return, as it will help drive more investment in doing what's right.

3. Margins matter and cost accounting is now cool. With bundled, capitated and risk-based contracts setting a fixed top line, there is a scramble in motion to understand cost and therefore margins. This requires a major shift in the skill sets and tool sets required to excel in this environment. With advanced cost accounting (non-RCC based methodologies, costing across the entire continuum, etc.) in place at less than 10 percent of hospitals, getting cost accounting in place has become "cool" and many of the sessions focused on understanding real cost, not just charges. "No margin, no mission" is no longer just a mantra, it is a business imperative.

4. Cost management as a continuous process. Traditionally, gaps in the budget have been managed via major internal initiatives to drive out cost or by simply calling in a consulting firm to do the work. However, according to recent survey of 100 healthcare delivery systems by Strata Decision Technology, only 17 percent of these initiatives actually hit their target. One of the hot topics at HFMA was how to make cost and margin management a continuous, collaborative process with physicians — which leads to the next point below.

5. Physician alignment and engagement. One of the shocking data points shared is close to 225,000 physicians are now directly employed by hospitals. While wrapping in affiliated physicians is still in the mix, it is clear that job No. 1 is cracking the code on how to align with physicians who are already on the team. On this topic, the results vary dramatically and the 'X factor' in all the examples shared at the conference is executive and physician leadership. HFMA is not a conference that typically had any clinicians attend in the past, but this year there was a noticeable shift as many physicians were on stage sharing their stories.

6. Physician compensation. As more physicians move into the employed model, one topic of ongoing debate is how to set up physician compensation that is fair, manageable and motivating. It is not business as usual, especially in organizations that are trying to put in thoughtful structures around value-based care that take patient experience and clinical outcomes into account. Some organizations have direct gain-sharing arrangements in place, while others are posting patient satisfaction ratings and commentary directly to the individual physician's pages on their websites as motivation. While there are many other models in motion, it is clear that this is an area where there will be many changes in the near future.

7. More dynamic approaches to planning and budgeting. As this is a healthcare finance conference, much of the discussion was about the basic command and control systems required to create an accurate long-range plan, and setting up and effectively managing operating and capital budgets. Surprisingly, this is an area of perhaps the greatest innovation in healthcare finance. Close to 30 percent of hospitals are now using or assessing a rolling approach to forecasting and budgeting. The long slog, resource drain and limited shelf life of a traditional budget process is being reassessed, and organizations are putting processes and systems in place to focus on driving performance every day for their team vs. developing a one-time budget for their board.

8. Consumerism. While pricing transparency is one hot topic that falls into this category, hospitals fully understand it is only one part of a Rubik's Cube. As hospitals have been built by serving what comes through the door and utilizing more of a transactional model, you can see and feel them struggle just to say the word 'consumer' versus 'patient'. Investments centered on building a brand vs. building a building are new and uncomfortable. Spending on the service experience vs. buying a new piece of equipment requires a different conversation. There was a lot of conversation at the conference related to the point of view and the idea that population health is a process, not a complete strategy by itself. Clearly this is the biggest black box for healthcare providers and an area of growth for everyone at the table.

This is a landscape view of some of the hot topics, but I think the bottom line is there has never been a better time for new ideas and true collaboration relative to solving healthcare's most fundamental puzzle — figuring out how to deliver the best and most cost effective care possible to everyone, every day, in every community.

There is a line in a song from the musical Hamilton that says "Look around, look around, how lucky we are to be alive right now." I think that captures the mindset we need from every stakeholder at the table right now. This is a great time to be in healthcare, perhaps the best.

 

Dan Michelson is the Chief Executive Officer of Chicago-based Strata Decision Technology.

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