Becker's Hospital Review

Finance, Revenue Cycle & ICD-10 Issues 35 How Did Hospitals Post Positive Fiscal Years in 2012? FEature 5 Hospital CFOs Respond By Bob Herman I n fiscal year 2011, the median operating margin for non-profit hospitals, according to Moody's Investors Service, was 2.5 percent. The Medicare Payment Advisory Commission has posted similar numbers since 1999: Most hospitals lose money on Medicare, and overall margins hover between 3 percent and 5 percent. Compared with most other industries, those are pretty slim margins, and in today's current healthcare environment, attaining those figures is not always a given. services. Several years ago, MemorialCare Health System and its six hospitals and outpatient facilities began focusing on four areas to manage our costs. Called PLUC, it stands for productivity and labor management, Lean systems, utilization management, and care model redesign. Our Lean system initiatives, for example, helped us to identify non-value added processes. We also used labor and supply benchmarking tools to help identify opportunities. Question: How was your organization able to achieve a profitable and successful 2012, and what were the main issues you worked on diligently? An additional area of success is related to our "productivity collaborative." Across MemorialCare, we've asked teams of managers to come together to compare labor cost on a per unit of service basis both internally and compared to other hospitals around the country. We're able to externally benchmark our performance to learn more about our performance. In many cases we are already performing in the highest quartile as measured by the national database. In other areas, we have access to give our leaders context with the best performers in the data set, so they can gather ideas to enhance performance. John Bishop, CFO of Long Beach (Calif.) Memorial Medical Center, Miller Children's Hospital Long Beach and Community Hospital Long Beach: In fiscal year 2012, we had a net income of $42.9 million, which was an operating margin of 4.5 percent. We were able to maintain our bottom line despite shrinking reimbursement through aggressively controlling our expenses, primarily labor, supplies and purchased Another example has been the work of our VATs, or value-added teams of representatives from throughout the healthcare system, who work with our physicians to further assess and evaluate supply purchases for numerous clinical and support services. Every little, and not so little, bit counts. And  that's all without impacting quality, physicians or patients — simply from better purchasing coordination and collaboration. Here, five hospital and health system CFOs from all across the country explain how their organizations fared in FY 2012, what financial challenges they faced and what strategies contributed to their positive bottom lines. John Bishop Mark Bogen

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