Under this strategy, physicians and staff become attuned to making sure the entire cost of each service must not exceed what the lowest payor, such as Medicaid, provides in payments. Services covered by all payors are then provided at that level of care.
“If a hospital doesn’t let costs rise above its lowest reimbursement, then it will be able to make money on its highest reimbursements,” Dr. Sears says. “And when higher-paying sources cut their reimbursements, the hospital will be very well positioned.”
Dr. Sears, whose Alpharetta, Ga.-based company provides software and consulting services for the hospital revenue stream, offers the following points on managing to your lowest payor.
1. Pinpoint money-losing DRGs. It’s useful to examine specific DRGs, rather than specific services, because the payment matches the DRG, not the service. Also, this approach requires the hospital examine the entire continuum of inpatient care.
2. Examine clinical processes. In the DRG for heart failure, for example, what drugs are physicians prescribing? How long is the patient kept in a high-cost ICU versus a lower-cost step-down unit?
3. Identify best-paying service lines. Based on the DRG analysis, which service lines does the lowest payor pay best? The hospital can then try build these service lines, knowing that it will get paid for them.
4. Involve physicians in the process. Since this work has to do with changing clinical processes, it is essential to involve physicians from the beginning if their interests are aligned with the hospital’s; they will write new clinical protocols reflecting a less costly approach.
5. Organize data for the physicians. Don’t just present the raw data. Cull out from the data what the variables are and present them to the physicians. Once the physician agrees on the process, the cost for the protocol can then be discussed.
6. Use evidence-based medicine. There is plenty of evidence out there for managing different disease states. Physicians are more open to this approach now because “the era of the cowboy is over,” Dr. Sears says. “You are, indeed, trying to put physicians into lockstep.”
7. Follow up. Make sure all the physicians follow the protocols they have agreed to. Also keep track of reimbursement changes and any changes in costs.
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