Healthcare Pendulum, Has It Swung Too Far?

Does your healthcare system have a balanced approach to cost containment versus revenue capture?

If the pendulum swings too much in either direction, the viability of the healthcare organization is at stake. We are just now dipping our toes in the water as we begin to experience the changes that healthcare reform has brought to us. In 2013, hospital executives and CFOs must be more vigilant than ever in their efforts to reduce hospital costs and capture every dollar of reimbursement possible.

Becker’s Hospital Review highlighted an article sharing the insights from a very successful CFO at the Boston Academic Medical Center. Chibueze Okey Agba, who as CFO has been instrumental in improving the financial outlook of the Medical Center by orchestrating an impressive financial turnaround.

While flat volume growth spanned across the city, net income at the Medical Center increased by 46 percent, or $25.3 million. The organization achieved a reasonable margin by focusing on cost containment, Agba explains.

Agba highlights two ways to reduce hospital costs and improve a hospital’s financial foundation.

Focus on what you can measure: To reduce hospital costs and improve revenue, CFOs need to focus on areas they can measure and affect. Leaders must be able to measure to know that they’ve succeeded. For Agba, he focused on working with clinical leaders to provide care at the most efficient cost.

Improve cash flow: The medical center Agba works at achieved 85 days cash on hand in 2012. It’s a sign that the hospital is receiving money faster and paying money slower, but still on time. That’s what increases your days with cash on hand.

Cost cutting and expense reduction are key buzz words when hospital CFO’s talk about building a solid financial foundation for their organization. That said, in order to operate in today’s era of healthcare reform, hospital executives and CFOs must also consider the revenue generation side of the business. CFO’s need to look toward new technologies that focus on identifying missed revenue capture dollars.

Stretching the envelope and leveraging every untapped source to increase revenue collection hasn’t been a healthcare finance and revenue cycle executives first priority. Now, with our current economic environment, identifying every possible missed collection opportunity is critical. Often, reducing costs is as easy figuring out which numbers on the P&L to eliminate. Identifying hidden revenue sources is not as clear cut.

Agba’s perspective on healthcare’s future – the most challenging time is yet to come.”I believe 2013 is just the beginning of an even more challenging period for healthcare. The impact of the Affordable Care Act and the fiscal cliff-related measures Congress enacted will be significant to AMCs”. Today’s hospital CFOs are going to have to continue to focus on measurable efficiency in order to meet those the financial challenges in the coming years.

Source: Becker’s Hospital Review, January 2013

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