6 Measures for Retooling Your Hospital's Finance Benchmarks

March 31, 2016

Hospital finance planning

Your hospital's finance benchmarks should help you to better prepare your organization for (and navigate) healthcare reform and the advent of value-based care. But this is only possible if you are able to determine which benchmarks would best help your organization align the clinical side to the financial side of care.

Clinical-financial alignment has, historically speaking, been difficult for healthcare organizations to achieve and maintain. Hospitals have traditionally been siloed, politically-charged environments — a tradition that was solidified as medicine became increasingly specialized over the past 50 years.

Two decades ago, every medical director had what amounted to his own personal fiefdom, every financial unit manager her own way of approaching the business. And never the twain did meet. But, as we are learning, the clinical and financial experience are not separated in our patients' minds. Both inform and color his or her opinion of the care a health system provides.

Now that patient-consumers are realizing their power in the marketplace, we need to pay much closer attention to the clinical-financial continuum with the total care experience.

How do clinical and financial experiences combine to form a total care experience?

Ask Jeff Hurst. As the senior vice president of finance at Florida Hospital in Orlando, he led a major push to increase his organization's consumer outreach efforts all along the progression of care.

"One of the priorities was patient advocacy," Hurst told Healthcare Finance. "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."

If a patient receives excellent care from the clinical side of your hospital, but has a poor experience with the revenue cycle, he or she is not likely to continue seeking care from your facility. Billing problems, surly customer service or aggressive collection practices add to a recovering patient's worries at a time when he or she should be most focused on healing.

That doesn't mean healthcare providers should be giving care away — or being lax in our efforts to collect patients' financial responsibility payments. But perhaps the industry could benefit from doing a bit more "social work" within the complicated revenue cycle.

"Our job from a revenue cycle standpoint is to help the patient navigate the financial intricacies of the healthcare system," Hurst argued. "That means we need to be much more proactive."

Hospitals should be employing (and training and empowering) financial counselors to actually counsel patients. Financial counselors, for example, shouldn't be glorified charity care processors or walking, talking Medicaid application points. They should have enough knowledge about the system to be able to guide their patients toward affordable re-payment plans, community-based resources, pharmaceutical care grants, etc.

And, like social workers, they should keep case files and follow their neediest patients over the long-term — especially patients who have contributed in the past to readmission penalties. By helping patients become smarter healthcare consumers, we can allay their financial worries and serve our own cause by eliminating unnecessary care and revenue cycle inefficiency.

What 6 Benchmarks Can We Use to Understand Financial Hardship?

It can be vexing for finance directors to try to determine the factors that contribute to a slow revenue cycle, or to change consumer behaviors within the patient population, when they don't fully understand the financial experience of the patient population.

How can you, as a hospital financial officer, tell when your patients need help making payments? How can you help them to continue their treatment regimens (and thus avoid readmissions) when they are so rightfully worried about the bills they will face?

Some financial benchmarks can help take measures of the financial strain patients are under. When you see a patient-consumer slowing their care progressions, or when you see uncollected balances rising, you need to work with the clinical side and with your patients themselves to figure out why.

Are prices for some services too high? Are care plans not optimized for value? Is lack of price transparency a barrier to patients seeking care?

Here are 6 measures — some macro-level, some micro-level — that you could use to develop a better picture of your patient-consumer base's ability to consume care at your current pricing:

1. Accounts receivable.

This is a measure of the overall efficiency of your facility's revenue collections. If accounts receivable values are rising, it's a good bet that something is amiss. Is your billing department proactively working with patient-consumers to collect shared responsibility payments? What are the response rates you are seeing to your various billing communication channels?

2. Average time between claim made and claim paid (in days).

Are there particular insurers who are slow in paying claims? Are they engaging in denial brinksmanship? What percentage of your patient-consumer population is insured by problematic carriers? Are those carriers worth the hassle to contract with? What can you do to improve claims efficiency?

3. (Total charity care + total subsidized care) / total care billed.

This will give you a good measure of the total financial strain your patient population is under. Finance directors often track charity care to total billed care, but they often forget to add in subsidized care (Medicare and Medicaid, traditionally). And, now that some patients have purchased subsidized private plans made possible by the Affordable Care Act, that subsidized care base is larger than ever and partially masked.

Hospitals should be tracking the total amount they bill to skinny network plans, for example — most consumers who opt for skinny networks do so because they cannot afford the monthly premium of a more robust plan. That, in and of itself, is an indicator of financial strain.

If hospitals can get a clearer picture of their patient populations' financial health, they can adjust pricing, devise more convenient billing plans or steer patients toward financing options. They could even consider developing their own low-cost financing options — a nominal price reduction for a service could be made up in interest payments over a number of months.

4. Average patient responsibility (in dollars) per service line, per encounter, per insurer.

If you can figure out which insurers are causing the slowest revenue streams in which service lines (due to heavy shared responsibility burdens), you may be able to direct financial counselors to work directly with that carrier's patients under that service line and potentially steer them to health insurance plans that would serve their needs better.

Taking an active role in helping your patients shop for needs-appropriate coverage could have a profound impact on improving collection efficiency, reducing non-compliance and reducing readmission rates. This is especially true of patient-consumers under your organization's long-term management for chronic and serious conditions (e.g., obesity, diabetes, heart disease, cancer, neurological disorders and psychiatric disorders).

5. Average time between first notice of payment due to first payment received (in days).

Again, this is a way to develop a measure of the financial impact your hospital's services have upon your patients. If this value is creeping up, more patients are having difficulty scraping together the means to make their shared responsibility payments.

Are you timing your bills well (sending them to coincide, for example, with Social Security's monthly payouts)? Are shared responsibility payments too high for your average patient consumer? There could be something wrong with their coverage — or your pricing.

6. Would patients recommend the hospital to friends and family?

As a binary (yes or no) value, this is possibly the easiest hospital finance benchmarks for your organization to tabulate. And it is a standard question included in the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS), so it's familiar.

But it's also the most subjective. Tracking this benchmark depends upon consumers' survey participation rates, which we know typically only attract consumers with strong positive or strong negative opinions.

Still, it's not a bad ballpark measure of satisfaction with the total continuum of care that you are providing. If this value starts to trend lower, a hospital finance director knows to act quickly and work with the clinical staff to figure out what the causes are of consumers' dissatisfaction.

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