3 Statistics All Hospital Finance Directors Need to Know

March 17, 2016 David Beto
3 Statistics All Hospital Finance Directors Need to Know

Hospital financial and clinical leaders must know how these 3 statistics affect healthcare cost and quality of patient care

Originally published published on March 17, 2016 by David Beto

The line between clinical operations and hospital finance is blurring. In this market environment, alignment between the clinical side and the revenue cycle side is critical.

Why? Because patients are increasingly under financial pressures that are preventing them from seeking, complying with or paying for their share of care. Cost shifting and consumerization aren't easing those financial pressures; it could be argued, in fact, that they are (at least in the short-term) exacerbating the problem. That has a negative impact on patients' health outcomes.

In an era when health outcomes are key determinants of whether we will be appropriately reimbursed by third parties like Medicare, Medicaid, or private health insurers, we can't afford to provide care that our patients can't afford.

"Historically, the healthcare industry has done a good job advocating for patients in a clinical setting, and helping the patient understand what to expect during treatment. But the financial side of the healthcare industry has not kept pace with the clinical side," Jeff Hurst, senior vice president of finance at Adventist Health System's Florida Hospital, told Healthcare Finance.

"Our job from a revenue cycle standpoint is to help the patient navigate the financial intricacies of the healthcare system," he said. "We must be sensitive to the individual needs of each patient, and offer payment options that are tailored to specific patients, as opposed to a one-size fits all approach. Because healthcare financing can be so complex, we must try to simplify as much as possible, to make it easier for patients to understand everything."

Simply put: patients are increasingly caught between an illness rock and a financial hard place. And that trend could place irresistible downward pressure on two pillars of the revenue cycle — collected patient responsibilities and payer reimbursement rates.

Is there a way out?

Will consumers ultimately be able to absorb the cost shifts associated with our move toward demand-driven health care? Are we in danger, in our response to that shift, of placing so much upward pressure on pricing that we'll crash the demand side? But if we don't place any upward pressure on pricing, can we afford to operate? Are there ways providers and payors could work in tandem to relieve pressures on supply and demand and achieve a new equilibrium in care delivery that satisfies most stakeholders?

Those are all excellent macro scale questions that keep hospital executives and health policy wonks awake at night. In lieu of ready answers, it will be helpful to look at can be done right now to positively impact the market at the micro scale.

There are actions that hospital finance directors and clinical managers can take to ensure patients receive care they can afford, and that we can afford to provide. Let's take a look at 3 hospital finance statistics you should be paying close attention to, and discuss some of the measures you could employ to positively influence them.

1. Percentage of potential revenue lost to readmission penalties

Hospitals already face CMS reimbursement penalties for readmission rates deemed unacceptable by the federal government and states. There may be no more natural dovetail between clinical and finance's interests than in reducing readmission rates.

Hospital finance directors need to collaborate closely with clinical directors, the physician staff, nursing staff, primary care practices, social workers, case managers and community health partners to identify the causes of readmissions — by consumer segment — and map out ways to mitigate those causes.

Are hospital-acquired infections driving readmissions up? Are those infections associated with a particular ward, service line, or provider? Identifying the pathogens and acquisition/transmission points involved, then simply working with the area or provider involved to improve infection control measures (it could be as simple as a bit of coaching or retraining), could save your hospital big money.

Is your hospital's readmission rate being negatively affected by patients with a particular diagnosis code? For example, let's imagine that patients with diabetes diagnoses are being repeatedly readmitted for management of acute exacerbations.

Dig into factors that may explain why those diabetes patients aren't well-maintained outside of the acute care setting. Are financial pressures, ingrained behaviors, or barriers to treatment preventing them from adhering to diet restrictions or regular blood sugar checks? Are there ways to increase engagement with them to ensure treatment compliance and promote lifestyle changes?

Or, you could take a psychographic approach to population management. Are there beliefs, prejudices or communication preferences common to the patients who are driving readmissions up? Maybe your hospital could discover those and adjust its messaging to better engage them.

2. Cost per visit

Calculate the average costs per visit, broken down by diagnosis code. Then dive deeper into your data to analyze the average patient responsibility for each, broken down by acuity level and insurance carried. Once you have these figures, explore ways that you may be able to work with the clinical team to reduce the amount your facility needs to charge.

Could clinical waste be reduced by changing a protocol, coaching providers and staff or maintaining more control over access to medical supplies? Could some charges be averaged and bundled, to allow better estimations of cost? Is your hospital's chargemaster an accurate reflection of current costs, or has it not been updated regularly? Are there ways to develop real-time intelligence about your costs, from supply chain to the wards themselves, and develop a way to update the chargemaster as costs change?

Look at things from the patient's perspective. How can you increase price transparency and better facilitate healthcare consumers' ability to shop their care? Price transparency shouldn't scare you — it is, in fact, an opportunity to find out where and how your hospital is competitive.

That's especially important as costs are shifted over to patient consumers. The problem with cost-shifting is that, in many cases, billed charges aren't really translating into collected revenues.

For example, Hurst noted, the average patient responsibility at Florida Hospital increased 17 percent between 2010 and 2013. But his facility was able to collect only 20 percent of that from patients. The vast majority of additional patient responsibility charges — 80 percent — went either to financial assistance write-offs or bad debt. So, counterintuitively, shifting costs to the patients ended up costing the hospital more.

3. Throughput

The cost of the time a patient spends in the hospital can now be quantified. That means that a bottleneck on the ward or in the emergency department runs up the costs-per-patient for every patient in the department when that bottleneck occurs.

Given what we know from the above — that increasing a patient's financial responsibility can decrease the percentage of revenue collected — it is imperative to move individual patients along as expeditiously as possible.

We also know that long wait times translate into missed revenue opportunities. The longer the wait time to be seen in the ED, the more likely a patient will give up and go elsewhere or go home. That can, in turn, lead to more serious, harder-to-manage patient encounters when their conditions deteriorate.

Bottlenecks place undue psychological stress on physicians and nurses, making medical mistakes more likely as care becomes rushed and systematic chaos increases. Again, we can see how low throughput levels can translate into increased costs to treat — medical misses increase morbidity and mortality, lower reimbursement rates and result in poor consumer word-of-mouth.

Hospital finance directors, then, have a demonstrable interest in working with staff on the clinical side to reduce barriers to throughput and, thereby, decrease cost-per-patient while increasing patient volume.

Hospital finance and clinical operations aren't strange bedfellows anymore.

The more communication and collaboration finance directors can foster with clinical staffers, the better. Use the 3 key metrics above to develop a framework for communication with your clinical counterparts. Show them how clinical statistics are indeed finance statistics. Then, work together adopt more sustainable, cost-effective methods of providing care.

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