Becker's Hospital Review

49 Executive Briefing: Turnaround Strategies Sponsored by: How to Position Community Hospitals for Future Success A s a community hospital in Meridian, Miss., Anderson Re- gional Medical Center's priority, like many community hospitals across the country, is to ensure healthcare is made easily available to the community it serves. Unfortunately, ARMC found itself in some financial difficulty recently, what CEO Ray Humphreys calls a "cash flow challenge." The 400-bed hos- pital in eastern Mississippi feared whether it could pay bills and meet payroll in 2011. The issues stemmed from a variety of factors, the primary one being the decision to expand using cash reserves as opposed to using long term debt options. The major contributing expan- sion decision was to purchase the other hospitals in town from Naples, Fla.-based Health Management Associates. So, in 2012, Mr. Humphreys and the hospital's board called in outside help. "We needed to have a full, organizationwide assessment to see where the inefficiencies were," he explains. This isn't an unusual situation for small or midsize, rural hospitals, especially in today's environment of staggering change in the in- dustry. "A lot of the small to midsize hospitals have less margin for error," Wilson Weber, executive vice president and COO of Community Hospital Corp., says. "They are more vulnerable in a lot of ways." It is especially important for hospitals to look at their operations now, as changes related to healthcare reform and population health management start kicking in — most notably lower reim- bursements and utilization. "In order to optimally perform, every component has to be tightly focused on and managed," Mr. We- ber says. And even if a hospital isn't feeling downward pressure in those areas currently, it's smart to look ahead. "The most prudent [hospitals] get ahead of the curve." Operational assessment To get a better look at how things are running and where opportu- nities for improvements lie, Mr. Weber recommends hospitals per- form a full operational assessment, or a deep-dive into all aspects of the facility's operations. ARMC underwent a full operational assessment with Community Hospital Corp. in 2012. "They did a marvelous job bringing in a team of people who went into every aspect of our organization and the financial activities," Mr. Humphreys says. The process included interviewing several members of the medical staff and other employees as well. The following are some of the main areas to focus on during an operational assessment. labor management. Traditionally, about half of a hospital's budget goes toward its workforce, so hospitals need "discipline around managing labor," Mr. Weber says. Through assessing its labor productivity and adjusting staffing levels and its benefit pro- gram, ARMC was able to achieve $3 million in savings. Supply costs. Another large expense for hospitals is supplies, so closely examining supply chain spend can lead to major savings. This includes looking into getting the best pricing available — pos- sibly considering joining a group purchasing organization — and also rightsizing inventory levels. "Excess inventory is cash that could be redeployed into the hospital for strategic purposes," Mr. Weber explains. By examining and changing its supply chain fac- tors, ARMC saved more than $1.5 million. An operational assessment can put a hospital in good financial standing, but in order to be successful... hospitals should also reevaluate what they provide to their community and how to remain viable in the future. "in order to optimally perform, every component has to be tightly focused on and managed." — Wilson Weber, COO, Community Hospital Corp.

• Cover