Becker's Hospital Review

Sign up for the COMPLIMENTARY Becker's Hospital Review CEO Report & CFO Report E-Weeklies at www.BeckersHospitalReview.com or call (800) 417-2035 ership. It's not about a relationship with a medical device company or a pharmaceutical company. It's about the physicians' relationship with the hospital where they provide care to patients. This is another step in this pavement that's being laid down for evidence-based care." 4. Conduct rigorous benchmarking of salaries, wages and scheduling. Labor costs, as most know, constitute anywhere from 45 to 60 percent of a hospital's operating budget on average. While layoffs are seen as an immediate short-term gain, they can be a net-negative for hospitals, both financially and from a cultural standpoint. Instead, hospitals can optimize the labor they do have by investing in the right human resources software and conducting consistent benchmarking of the essential labor metrics. "One thing I've noticed that is important is paying attention to every detail," SLUH's Mr. Alvey says of managing labor costs. "We conduct daily productive analyses, but we've also standardized pay practices. In the nursing department, for example, we ask how many RNs, care partners and others are needed based on average census, and the software helps describe what is optimal staffing." 5. Review all contracts — from big-ticket items down to bottled water. The idiom "A penny saved is a penny earned" rings true for every hospital and health system CFO, and that directly applies to all vendor contracts, in particular. Mr. Rico says hospital executives must dust-off all of their contracts, no matter how expensive or seemingly trivial, and rethink the value and worth of those contracts. If possible, renegotiate items with vendors, and in some instances, hospitals may be able to drop obsolete contracts altogether. "You have to ask yourself, 'Do you really need that service?', even if it's small dollars," Mr. Rico says. "Do you need bottled water? Look at contracts, and see if it is something we can get away with not having. And if you do need it, get a lower rate by talking to vendor." The suggestion of looking at other vendors, in particular, could spur more effective conversations and lowered contract rates. "With the economy as bad as it is, companies are hungry," Mr. Rico says. "Even companies that are the current contractors are afraid someone will undercut them. That's one of the few good things about a bad economy." 6. Pay attention to quality incentive programs and other healthcare reform measures. The Patient Protection and Affordable Care Act places most of its emphasis on transitioning from a fee-for-service system to a value-based system — while improving healthcare quality along the way. For hospitals, this means care must be efficiently delivered at the right place at the right time at a low cost with the highest standards of quality in mind. This also means hospitals will be penalized if, for example, quality lags, patient satisfaction is not up to snuff or readmissions are too high. Hospitals have already started to see financial ramifications of these types of quality and value-based programs, such as Medicare's Readmissions Reduction Program, and there must be a shift in mindset. "You're not getting a bonus for doing well — you're just not getting cut," Mr. Alvey says. "To maintain those payments, you have to keep quality up. Standardize processes and procedures to meet those targets." The time is now for hospitals to latch onto these priorities. While adhering to quality programs and shifting to value-based care may not advance profitability, those measures will help maintain it — and it will help improve the U.S. healthcare system, which is notoriously poor among other industrialized nations in terms of quality. "The stage is really set within healthcare reform to transition in a thoughtful way to quality-based and clinically relevant cost reduction," Dr. Fera of Ernst & Young says. "It's about really taking advantage of quality incentives — SCIP and other commercial partnerships or potential partnerships — and having the mentality of going from fee-for-serve to value-based. Pay attention to those programs." 7. Invest in electronic health records, and take advantage of meaningful use funds while they still exist. For Medicareeligible providers, 2013 is the second-to-last year to receive meaningful use funds for certified EHRs, while Medicaid EHRs still have several more years of incentive payments. Mr. Alvey says Saint Louis University Hospital just went live with its EHR system in June, a project he admits was "incredibly expensive." However, his hospital received meaningful use funds topping $1 million, and he says he does not know if the hospital would have gone live with its EHR system if the incentive program wasn't there. 19 Time is running out for providers to at least partially offset the costly process of digitizing medical records. Mr. Alvey encourages hospitals to pursue EHRs aggressively in 2013 because they will help hospitals and physicians in the long run. "There's no question in my mind that portable electronic medical records could save tons of money through access to information, not duplicating tests, the ability of physicians to look at the whole patient record," Mr. Alvey says. "That will be money well-spent in the future." Dr. Fera concurs, saying hospitals will see future financial gains of EHRs if they rally behind the "spirit" of the government's meaningful use program. "If you do meaningful use correctly, you're setting yourself up to do better reporting and analytics where you track patients and manage transitions of care better," Dr. Fera says. "To be successful, you have to go beyond the letter of the law and get into the spirit of the program. You're making money now for the qualifying incentives, but you'll set yourself up for future success, too." 8. Invest in "green" projects and sustainability measures for energy savings. If there were ever a time for a hospital to start going "green," 2013 would be it. Becoming an environmentally friendly organization has the obvious perks of cultural sustainability and a community-centric focus. Hospital CFOs should also realize going green directly saves money on the bottom line. Gundersen Lutheran Health System in La Crosse, Wis., is one example of a health system that is formulating a new, progressive sustainability plan. For the past four years, the health system has implemented a program called Envision, which will eventually put Gundersen Lutheran at 100 percent energy independence by 2014 — meaning it will be completely self-sufficient on all energy needs. Mr. Rico says Sky Lakes Medical Center has also implemented some simple energy savings projects through retrocommissioning lighting fixtures Subscribe Today! 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