8 key strategies for improving a hospital's margins

Allen Miller, CEO, COPE Health Solutions -

As healthcare shifts toward value-based care, hospitals are looking for new ways to improve quality without unnecessarily increasing the cost of care.

"We think less about cost cutting and more about margin improvement," says Allen Miller, CEO of COPE Health Solutions. "Folks are going to be more successful taking a strategic approach and focusing on improving margins by taking risks and building the type of infrastructure that will support value based contracts through which they take financial risk instead of the traditional cost-cutting approach."

Here are some key strategies for financial success:

1. Know your key priorities for improvement and reporting. Consistently track key metrics on dashboards to make sure your hospital's financials are in order. The most important metrics include hospital safety, readmissions, admits/ED visits per 1000, customer satisfaction and staffing. You can't just focus on sending out claims and collecting on the returns. "What are you doing now to manage care better and increase quality?" says Mr. Miller. "Hospitals and health systems are being asked to manage their populations and reduce readmissions. That's a big shift in healthcare."

2. Ensure your that you are able to collect and report data and track patient and hospital benchmarks from your EMR and those of key contacted partners. Know what metrics you're accountable for in any network you're involved in, whether it's an ACO or another type of risk-sharing financial contract. "Understand throughout your organization where the data is collected and reported," says Mr. Miller. "Hospitals represent the smallest part of the experience people have in healthcare. You have to figure out what roles you want to plan in the continuum of care. Either focus on being less expensive, or a high quality facility where everyone wants to get care, or partner with the right physician groups and surgical nursing facilities to provide care."

3. The Medicare Access and CHIP Reauthorization Act and the Merit-based Incentive Payment Program are incentivizing hospitals to increase quality, but progressive hospitals are looking for opportunities with similar incentives in the non-managed care patients to take on risk and provide better care at a lower cost. "Think about your strategic future in a market where you are at risk," says Mr. Miller. "Consistently know your data and cost, and focus on building out your network and understanding about how to be a good partner to reduce hospitalization."

4. Move away from “heads in beds” to population health management through these key initiatives:

• Physician alignment, ambulatory expansion and overall network development based on population needs
• Development of a population health management/care management capability and resources
• Entering into managed care risk contracts

"Too many hospitals are failing to focus strategically on the fact that all markets are moving rapidly to capitation at the health plan level," says Mr. Miller. "With the pressure on from CMS, states and large employers to make substantial improvements in cutting global costs, health plans are looking for providers to manage and take risk successfully. If the hospital can expand the ambulatory and long-term care to manage populations within their networks, or become part of network that is managing their dollar, there are opportunities for financial growth."

5. Increase your ability to attract the premium dollar by promoting your hospital's brand and delivering quality outcomes. "Most healthcare across the country is managed care and Medicare Advantage is growing quickly," says Mr. Miller. "At the top, premium dollar is impacted more by customer satisfaction scores than acquiring new physician groups. Really look at ways to increase market coverage and patient capture overall."

6. Engage your workforce and talk with physicians openly about financials. "Physicians' biggest complaints are that the hospital isn't honest about where the finances go," says Mr. Miller. "Run a financial pro forma for your risk dollars by managed care contract and line of business and share that with your physicians. Everyone should understand what the costs are and how they impact the dollar."

7. Deliver the right diagnosis and treatment at the right time; this includes making sure patients receive the right medications and nurses are moving patients through the hospital and educating them about their medication regimen before discharge.

8. Before bringing the consultants in to “cut costs,” speak with staff members about their ideas on performance improvement. There are a lot of opportunities that your own folks will be aware of and probably waiting for permission to pursue related to your OR patient flow/scheduling, narrowing of devices/implants used and ability to get tests and placement issues solved for timely discharge. If you do bring in consultants, don't trust a consultant's word for it — make sure you understand how they calculate savings before allowing them to take accountability for any changes.

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