Becker's Hospital Review

23 EXECUTIVE BRIEFING EXECUTIVE BRIEFING A laser focus on margin management can generate funds for strategic investment Over an 18-month period, the health system identified and achieved over $100 million in margin improvement. According to Mr. Rogers, it's been a complete reboot for this health system. "To protect revenues, the health system wanted to ensure appropriate reimbursement for their services," Mr. Stille said. "One way the health system's leadership team made this happen is through improved coding and documentation, prior authorization processes and denials management." On the expense side, the health system set its sights on decreasing contract labor and reducing non-labor-related costs. To achieve its goals around contract labor, the health system's leaders initiated efforts for implementing a new productivity model to help with staffing and took a close look at lowering patient length of stay. The leadership team benchmarked the organization's performance against CMS length-of-stay data. They also established KPIs around utilization of post-acute assets. "By doing things like moving patients from acute settings into swing beds in critical access hospitals, the health system reduced length of stay by over one day per acute admission," Mr. Stille said. "That helped the system's leaders to right-size their census, and they cut their dependency on contract labor by about a third. That equated to around $10 million a month during the last six months of their 2023 fiscal year." To address non-labor-related costs, the health system engaged with FORVIS. Together, the health system's leaders and FORVIS intentionally launched initiatives designed for impact, which resulted in $40 million of savings for the health system. These projects ranged from implementing water conservation technology to revamping the health system's group purchasing organization relationship; reinventing complex services like dietary and housekeeping; and examining employee benefits, pharmacy and more. Though many healthcare organizations struggle to retain dietary and housekeeping staff, the health system's leaders and FORVIS were committed to finding ways to reduce costs while increasing its FTEs and improving food quality. The team also found a new GPO and re-examined the 340B program. "By working more closely with the GPO, the strategies that were incorporated saved millions of dollars," Mr. Stille said. "That has turned out to be one of the biggest areas of savings for the health system. We did the same for 340B. Benchmarking and analytics provided needed visibility into opportunities for improvement. Data really drove executive decisions on where to invest time and provided stakeholders with the facts they needed to justify changes in their management approaches." Real lessons learned & best practices for healthcare leaders "The healthcare environment is dynamic, with teams moving intentionally and in multiple directions concurrently," Ms. Solomon said. "In that atmosphere, clarity and understanding of the level of change the organization can absorb and successfully implement is critical." Leadership needs the discipline to serve its mission through the strategic plan. "We saw that with this health system's executive team," Mr. Stille said. "They ensured that all of their decisions support the three pillars of the strategic plan." To survive and thrive, hospitals and health systems also must focus on continuous improvement and be adaptable enough to react to unexpected challenges. This requires practices, competencies and structures that support continual growth. "We are seeing more organizations revisit their strategic plans on an annual basis and go after higher-margin improvement projects," Mr. Rogers said. "There's increased investment in analytics to evaluate the growth that may be possible through high-margin service lines, as well as the value of pruning service lines that aren't providing the returns needed to serve their communities best." As evidenced with this health system, successful growth goes beyond strategic planning and requires a commitment to execution. "It's not enough to just identify growth opportunities; hospital and health system leaders need the discipline to see them all the way through contract. You must get projects to paper to realize savings," Mr. Stille said. Partnering with external professionals can help amplify an organization's ability to achieve financial and operational goals in the journey to realizing its vision. "Our FORVIS team was able to quickly zero in and help the health system's leaders identify what was possible in terms of savings above the usual suspects like product standardization and orthopedic implants," Mr. Rogers said. "All of the margin improvement initiatives that the health system pursued could have been challenging for the system's leaders to do on their own, especially with limited bandwidth and resources." In addition, the health system's leaders realized margin improvements with very little change to operational practices. For example, the system's GPO savings required no material changes in products, services or vendors, but produced a significantly decreased cost as a result of data-driven decisions in collaboration with its GPO partner. Looking ahead, it will be critically important for hospitals' and health systems' leadership teams to control their financial health. Both margins and growth are inextricably linked, and investment in one will pay dividends exponentially in the other. "Leading healthcare executives who operate with bold visions and strategic directions are thinking about their organizations as value-driving machines, and higher margins are a key concept for achieving success," Mr. Stille said. "The executive team for this health system is a great illustration of that — they doubled and tripled down when they needed to and stayed focused." 2 FORVIS, LLP is a professional services firm passionate about driving healthcare organizations forward. Our healthcare practice is dedicated to providing an Unmatched Client Experience® through assurance, tax, and consulting services. And, with a healthcare client Net Promoter Score® of 92, FORVIS' purpose is to help those we serve unlock their full potential. LCR51220V01

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