Friday, July 30, 2010

Ten Aspects of Strong Leadership: Point #6

Up to this point a number of key attributes for leaders have been discussed, with yesterday's discussion on integrity being the most important one in my opinion. But integrity alone will not make you a great leader. I have seen some truly ethical and well intentioned people in a leadership position fail because they did not possess the other skills required. Today we will cover one of those skills.

6) Be transparent

This sounds easy to do, almost a passive exercise. But in reality it is a challenge for most leaders. It goes against many people's natural instincts. Some leaders, particularly insecure ones feel threatened by others. They live by the adage that "Knowledge is power". Actually this is true. But rather than empower all those around them with knowledge, some leaders feel this gives away their power. The more confident leaders tend to share information readily.

Now this can be taken too far. For example I do not agree with the speaker I alluded to in an earlier post who suggested that hospital CEOs conduct their business in the hospital lobby in front of everyone. There are sensitive and confidential issues discussed which must occur in private. But key decisions affecting the organization should be readily shared with all employees on a timely basis.

I used to hold a management meeting for all mid level managers and above the morning after each Board meeting to share all the important issues discussed and decisions made. I also met with all employees at least quarterly (this means covering three shifts) to share the organization's performance measures, both good and bad. Employees loved it. They were surprised sometimes that some not so good news was being shared. But they also took ownership in these performance metrics and improved their overall performance.

By sharing information with all employees you empower them and build their trust. A few may abuse this trust, but they probably didn't belong in your organization in the first place.

More on leadership next week.

Mark Brodeur

Thursday, July 29, 2010

Ten Aspects of Strong Leadership: Point #5

As we continue with Chuck Lauer's list of key aspects of leadership, today I want to cover the one that I consider to be the most important.

5) Demonstrate integrity

Being a strong leader requires having a number of skills but none of these mean a thing if they are not based on a foundation of solid ethical standards. How a leader acts in this regard not only directs his or her behavior but also the behavior of all those who are faithfully following. The most dangerous combination is an inspiring and charasmatic leader who pursues an unethical path to quick gains.

Successful leaders are quick to recognize that they do influence the behavior of others who are following them. With this comes an enormous responsibility. It is not alright to say that we have to bend the ethics of the organization to survive in today's environment, or that this is what the competition is doing. Being a leader means you have to stand up for what is truly ethical and setting an example for the organization.

Throughout the years I have seen a number of leaders who posess questionable ethics. They do not all crash and burn. This is not Hollywood. In real life some of these people succeed in the business world. Keep in mind that many of them possess other strong leadership skills. But they are still not doing right for their organization or the community they serve. A few end up on the cover of Modern Healthcare in handcuffs but many other operate under the radar.

At the end of the day a leader must be able to look in the mirror and ask, "Did I do the right thing?".

More on leadership tomorrow.

Mark Brodeur

Tuesday, July 27, 2010

Ten Aspects of Strong Leadership: Point #4

In the previous posts, the leadership traits have focused on the ability to interact and motivate people. But just as important for a strong leader is the ability to provide a clear direction for the organization and a sense of purpose.

4) Choose a clear mission

Healthcare is very mission oriented. In fact some organizations in the past have focused so much on mission that they did not keep the financial realities in proper perspective and threatened their organization's very existence. Obviously a balance is needed. The old adage "No money, no mission" is very true. So it is up to the strong leader to identify the proper mix of services that will support the organization while fulfilling its overall mission.

This all starts with the organization's mission statement which should be to the point and clear to everyone that reads it so that it can be internalized. I once came to an organization with a mission statement that was a page and a half long. If you read the whole thing it sounded very nice but it did not convey a clear sense of purpose to the organization. Working with the Board we shortened our mission to a single sentence that still expressed what we are about.

But the job of establishing mission awareness only starts here. Once you have a statement that will inspire and direct people, the real work is to make it a living, breathing part of the organization. Everyone from the Board members to all front line staff should not only be aware of the hospital's mission but also see it as a guiding principle for their everyday activities. I had our mission, vision and values framed and hung on the walls throughout the hospital including the Board Room. I had them laminated and put in as the first page of the Board book every month. I went to every new employee orientation and gave a 15 minute talk about what our mission, vision and values meant to us. Even with all of these efforts, there was more that could have been done to make the mission completely internalized in the hospital.

Selecting the appropriate mission that balances meeting community needs with protecting the long term financial viability of the hospital is a daunting task. Getting this mission completely internalized in the organization is even harder.

More on leadership tomorrow.

Mark Brodeur

Monday, July 26, 2010

Ten Aspects of Strong Leadership: Point #3

The third aspect of strong leadership overlaps with the second point that was covered on Friday. It addresses how effective leaders deal with employees.

3) Cherish and respect employees

The first thing that a real leader recognizes is that you can not do it all by yourself. You must rely on others and get your work done through other people. The key is how to properly motivate them. Not everybody gets it.

I once worked under someone who clearly thought that employees were an expense to the organization rather than an investment. His idea of employee loyalty was, "You work hard for me for two weeks then I give you a paycheck and we're even". That was it. No connection beyond that. This was not the enlightened thinking of a great leader. Clearly he thought that employees were totally replaceable. Even in a tough job market like today with many people looking to jobs, this is not the way to inspire employees to put their heart and soul into their work.

As Chuck Lauer says, "Employees who get respect will produce at their highest capacity and make their leader look good". My philosophy has always been to surround myself with the best people I can, Give them the resources they need to do their job and stay out of their way except to support them as needed.

As for front line staff, doing the MBWA that was covered last week is important, but not the most important thing. Letting them in on what is going on and seeking their input is invaluable. For an employee to be able to go home and tell his or her family about some new service coming to the hospital before they read about it in the paper makes them feel empowered and alligned with the organization. This is the kind of employee who will do anything to help the hospital succeed. That is a great gift. Make sure they know how much you appreciate it.

More on leadership tomorrow.

Mark Brodeur

Friday, July 23, 2010

Ten Aspects of Strong Leadership: Point #2

Continuing with commentary on Chuck Lauer's list of leadership traits, today I want to focus on being connected.

2) Don't live in a bubble.

Great leaders listen to their people to gain a variety of perspectives. Some leaders don't realize that they don't need to know everything themselves. I have seen over the years that the best leader is someone that knows what he doesn't know and is not afraid to admit it. The great leaders surround themselves with other smart people and listen to what they have to say.

But getting out of the bubble is more than just this. The great hospital leader needs to leave his office and be visible in the hospital. I heard one speaker advise that the hospital CEO should not even have an office. He should set up at a table in the hospital lobby to be visible to all. Personally I think this is going way to far. But the point is valid.

The term Management By Wandering Around (MBWA) became popular some years ago, and many CEOs spend a portion of their day making rounds to interface with employees as well as patients and visitors. But usually when schedules get busy, this is the first thing to go. Also in a large organization that operates around the clock, it is difficult to be visible to everyone. I had a Board Member once chastise me for not knowing the first name of all our employees. He knew the name of all eight employees at his bank. I reminded him that it is a little tougher with 1,200 employees, some of whom work nights and weekends only.

One final note on being visible to employees. It is not just talking in the hall about kids and grand kids. Employees want to know what is going on and want to know that their feedback about the workplace is being listened to. Making time for this is the really important thing.
Properly respecting employees will be the subject of the next post on Monday.

More on aspects of leadership next week.

Mark Brodeur

Wednesday, July 21, 2010

Ten Aspects of Strong Leadership: Point #1

In today's tough economic and competitive environment with more scrutiny from all sides than ever before, it is extremely important that hospitals have strong leadership. Just what is it that makes someone a strong leader? What qualities are necessary to be effective as a leader?

Chuck Lauer who for many years was publisher of Modern Healthcare, a prolific author, public speaker and career coach in the healthcare field, offers up his views on what it takes to be an effective and strong leader. Over the next series of posts, I will share these along with my comments based on my personal experience as a hospital leader and my observations of many in the field. Just by paying attention to others you can learn what to do but more often learn what not to do.

1) Leading is not the same as managing

We often use these terms interchangeably but they are dramatically different, just as management and administration are different things. It has often been said that leaders do the right thing while managers do things right. Management entails working within the organization doing things correctly and efficiently while leadership involves setting that course for the managers to follow. Both functions are necessary for the successful operation of a hospital. But a well managed hospital will not succeed if it is not headed in the right direction. A leader is necessary to set the strategic plan for the organization.

The other aspect of this is the ability to get others to follow you once you have set the course. This means that you must be able to inspire others to act. The willingness of others to follow you is dependent on two things: 1) the message itself must be believable and consistent with others values 2) having the charisma to properly convey the message is just as key. Strong leaders handle both of these well.

More on leadership tomorrow.

Mark Brodeur

Tuesday, July 20, 2010

Ten Practices for Increasing Hospital Profitability: Tip #10

Today we finish commentary on the list of profitability practices put together by Becker's Hospital Review. As stated in the previous posts, the list focuses heavily on physician involvement to improve your bottom line and grow business. Today's tip deals with the managed care side of the business.

Tip #10: Renegotiate managed care contracts

For many hospitals managed care patients represent a significant portion of their business or at least a significant portion of their bottom line. Even though managed care companies have become far more resistant to subsidizing the losses hospitals endure from Medicare and Medicaid, it is essential that hospitals maximize this portion of their reimbursement. Clearly there is no opportunity for improved reimbursement from Medicare and even if Medicaid improves substantially it will just decrease the loss.

As has been previously stated, hospitals must focus heavily on cost reduction. But this alone will not get you where you need to be. You also need to maximize reimbursement. According to Nate Kaufman a well recognized national speaker on this subject, hospitals should be getting 130-140% of costs from their managed care providers. If your hospital is not large enough or strong enough in the market to get these kinds of rates, then you should look at merging with a larger facility or system to improve your negotiating clout.

Managed care contracts should be looked at on a regular basis even if they are not due to expire. A profitability analysis should be conducted by payor and by procedure to find the real winners and losers from a financial perspective. Then focus on renegotiating the losers and get carve outs where needed to things such as orthopedic implants.

When you face managed care providers to improve reimbursement in certain areas do not expect a receptive audience. Despite the significant profits many of these insurers are making compared to hospitals, they will not make concessions willingly. You must know your market clout and be prepared to walk away from the table without an agreement as long as you are in a position where they need it more than you do. They will eventually return to work out a deal.

In closing this series of posts on profitability, there are many worthwhile practices on the list. In today's market it is essential that a hospital explore all possibilities. We are now longer in the era of profitability that some of us remember where sloppy practices could be tolerated and still give you a solid bottom line. Today it is clearly survival of the fittest.

More on this later.

Mark Brodeur

Monday, July 19, 2010

Ten Practices for Increasing Hospital Profitability: Tip #9

As we wrap up the list of profitability practices today and tomorrow, we once again turn to a tip involving the role of physicians. Many hospitals have turned to using hospitalists to manage a significant number of their inpatient admissions, and with great success if handled right.

Tip #9: Consider hiring hospitalists to manage inpatient care

The utilization of hospitalists has grown significantly over the last few years. At first, hospitalists were used primarily at larger institutions. Now you will find them everywhere including small community hospitals. Their use has increased because they help hospitals deal with two important issues: 1) minimizing length of stay and unnecessary testing 2) addressing lifestyle issues of primary care physicians who prefer an office only practice.

Many studies have shown that effective hospitalists can save a hospital millions in costs and generate additional revenue through their practices. Their availability inhouse helps facilitate admissions through the ED. They can significantly lower length of stay and reduce the amount of inpatient testing. Further they can enhance revenue through thorough and appropriate documentation that allows the hospital to maximize coding.

But this assumes that the hospitalist is a skilled acute care provider. I have seen hospitalist programs fail to deliver these returns because the physicians filling this role are the same inefficient providers that they were in their private practice. The point of a hospitalist program is to have the inefficient providers turn their care over to someone effective at managing acute care. Many times the physicians who seem to get lost providing inpatient care are happy to do this and appreciate the opportunity of having a hospitalist. But there are those physicians who refuse to turn over any aspect of their patient's care (inpatient or out). The only advantage of having a good hospitalist program for these physicians is that it provides a good internal benchmark for comparison. If you can show them that their case mix index is lower than the hospitalist's patients yet their length of stay and test utilization is higher, this provides a strong argument to influence their practice patterns.

The second benefit of a hospitalist program is that many of the primary care physicians, particularly the younger ones, prefer not having to deal with inpatient care. I had a family practice physician tell me that he needed only three more office patients a day to match the revenue he got by following inpatients which took over 2 1/2 hours of his day. For him, the decision to support a hospitalist program was easy. Unfortunately for me, he was also a very efficient inpatient provider. But the point is that you can generally improve the efficiency of your inpatient care while making life easier for a number of primary care physicians.

One last note, starting a hospitalist program is usually not free. Most hospitalists do not fully support themselves through billing alone, particularly in small hospitals. There is usually a subsidy involved to get the coverage needed. This must be weighed against the benefits gained to determine the financial feasibility. Most hospitals, including small ones, are finding this worthwhile.

More on the last profitability tip tomorrow.

Mark Brodeur

Friday, July 16, 2010

Ten Practices for Increasing Hospital Profitability: Tip #8

As we approach the end of the profitability practices list, today I want to focus on adding profitable service lines. The key to this is not only knowing their general profitability in most markets but also how they will perform in your particular market.

Tip #8: Consider adding profitable service lines

Building profitability is a combination of becoming more cost efficient and adding new business. You must do both if you are to succeed. Sometimes adding new business to your existing services is not a real option. In that case the only way to get additional business is to add new service lines. Any service provided by a hospital must either meet a critical community need or add to the hospital's bottom line. Ideally a service will do both. But when looking to add new service lines you must not only know that they are profitable in general, but that these needs are not already being met in your market.

Some profitable service lines like bariatric surgery, plastic surgery or hyperbaric oxygen therapy may not be seen as supporting the main hospital mission. But actually they do. It is the profit from these services that help finance those under-reimbursed core services and allow you to treat uninsured patients in your community.

When looking at new service lines, determine what the market needs and where you will get the referrals from. Again you need to be talking to your physicians about their needs and the number of cases they may be referring to the new service line.

Even in an era of shrinking reimbursement for services, there are still some service lines out there that can boost your bottom line. You may just have to look a little harder to find them.

More on profitability practices on Monday.

Mark Brodeur

Thursday, July 15, 2010

Ten Practices for Increasing Hospital Profitability: Tip #7

As we proceed through the list of profitable practices, the trend of working with physicians continues. Four out of seven practices involve physicians.

Tip #7: Grow case volume by attracting new physicians to your facility

It is fairly straightforward that new physicians will bring in more cases and grow your profits. Depending on your market this may mean attracting new physicians to live in your community or just getting existing physicians who live in your community to support your hospital rather than the competition. To accomplish this you must really impress the physician with what you can do for them and their patients.

Getting the physician loyalty is not just a matter of throwing money at them. First of course there are Stark issues with paying physicians. But even those hospitals that have directly employed physicians physicians have gotten into financial trouble by not properly structuring their employment contracts. An extreme example is the hospital that built a large hospital based physician practice paying very attractive salaries to recruit top notch physicians. This resulted in a $6 million positive bottom line for the hospital. The problem was that the separate physician practice corporation that paid all the new docs lost $11 million the same year. Needless to say, the corporate structure could not sustain the net $5 million loss and there were dramatic changes the next year.

Attracting new physicians and building their loyalty is a complex and difficult process. Not all physicians are looking for the same thing. But it is safe to say that most of them today are looking for lifestyle over money as long as the money is still well in the market range. Many physicians today also want the security of employment. They are not trained in business and don't want the headaches and uncertainties of hiring staff and doing their own billing. This is why the pendulum has now swung back to more physicians entering an employment arrangement rather than going into private practice.

There are other considerations also such as the amount of call and whether or not hospitalists are available. Again, the physician may be willing to sacrifice some income to have more evenings and weekends available for his or her family. Also do not overlook integrating the physician to the hospital and his or her family to the community. It has often been said that to recruit the physician, you must win over their spouse. You want to not only bring the new physicians to the community but keep them satisfied with their decision for years to come.

More on profitability tomorrow.

Mark Brodeur

Wednesday, July 14, 2010

Ten Practices For Increasing Hospital Profitability: Tip #6

Continuing with the commentary on Hospital Review's list of practices to increase profitability, we return for the third time to a tip involving working with physicians. I think I see a pattern here.

Tip #6: Consider partnering with local physicians to reduce competition for outpatient cases

Joint venturing with local physicians to develop a surgery center has become commonplace. If you have not done it yet, the prime opportunity has probably past. Changes in reimbursement are making these centers far less attractive financially than they have been in the past. And they have been very lucrative for investors in the past. Hospitals need to be open to sharing procedure and testing revenue with medical staff members that years ago had been exclusively the domain of the hospital. I have seen first hand the consequences of trying to keep control of these services in today's market. The physicians will open up their own center and take business away from the hospital completely. Part of something is better than all of nothing.

Hospital must develop a comprehensive outpatient strategy for all services that recognizes its physicians as key partners for its long term viability. In these lean economic times it seems contra intuitive to be sharing profitable outpatient services. This would be true if there were no alternative for competition. Unfortunately the threat of competition is real making it better for everybody including the community for hospitals and physicians to cooperate rather than compete.

More on profitability practices tomorrow.

Mark Brodeur

Monday, July 12, 2010

Ten Practices for Increasing Hospital Profitability: Tip #5

We continue this week with the discussion on practices that can make your hospital more profitable. Key areas like data based staffing decisions, managing vendors, OR utilization and physician involvement were discussed last week. Today I want to focus on the appropriate use of outsourcing or partnering for certain hospital activities.

Generally there is a reluctance to go outside for management of any area. These companies will come in and take a fee off the top to manage your area so that must be made up first before the hospital will see any financial benefit on the bottom line. Yet some of these companies can still produce a significant net increase in profitability because of the economies of scale they have particularly when dealing with smaller hospitals. I have used services like these in the past for areas such as dietary and pharmacy and have seen their benefit.

One additional motivation that drives hospitals to consider outside management is the ability to delay capital expenditures by using the management company's capital. A laundry facing the replacement of major equipment may be outsourced thus eliminating the need for new equipment. Dietary management companies have access to capital at attractive financing rates to assist with the purchase of new kitchen equipment.

With today's sluggish economy many hospitals, particularly in smaller communities, want to keep as many jobs as they can inside the hospital. Outsourcing is a last resort. Yet in some situations it may still be the best option. When considering this option it is important to make sure that each party knows why it is entering into the agreement and there is a mutual benefit. The benefit to the hospital may be directly financial through reduced cost of supplies and equipment, or it may be indirect by providing hard to recruit positions like ED physicians or anesthesiologists.

One final thought before you enter into any management agreement, make sure that you would not significantly improve the department's profitability through internal streamlining. Organizations such as Compirion have helped hospitals attain significant and sustained savings while working with existing hospital management and staff.

Outsourcing can make sense if done for the right reasons.

More on profitability practices tomorrow.

Mark Brodeur

Friday, July 9, 2010

Ten Practices For Increasing Hospital Profitability: Tip #4

Continuing the discussion on practices that will increase your hospital's profitability, today I want to comment further on physician involvement. Yesterday I talked specifically about surgeons, but you must involve all your key physicians in these areas to maximize your profitablilty.

Tip #4: Involve physicians in cost reduction efforts

There are many other areas besides surgery where physicians can play a key role in helping the hospital reduce costs. Conversely, physicians who are not at all aligned with the hospital can prove to be very costly. I have seen this more often than I care to admit throughout my career. The key is to build mutual benefits for the hospital and physician for cost saving measures. Remember that the physician's pen is the most expensive instrument used in your hospital. Efficiency in ordering tests can save millions over a year while thorough documentation to maximize coding can add millions in collections.

Many hospitals do not properly engage physicians in the cost reduction process. There may be an assumption that physicians strictly follow their own interests and will not be flexible to consider benefits to the hospital. For some physicians this may be true but it is not a valid assumption for dealing with the entire medical staff. The hospital can not make major changes in supplies and equipment without involving physicians. There may be reasons beyond the clinical ones why an orthopedic surgeon demands a particular brand of implant and changing may make great clinical sense. But it must be done with his or her involvement and eventual endorsement of the switch. It is amazing how negotiable pricing from vendors becomes if they do not have the physician lined up to boycott any product but theirs.

The same holds true for developing patient care protocols designed to standardize treatment thus benefiting the patient and saving costs from unnecessary tests. These can not be just imposed, but must be developed with the involvement of key physicians with peer review followup for those physicians who refuse to go along.

There must be incentives for the physicians beyond "this is good for the hospital". In a true partnership they will benefit as well. With the trend swinging back to more hospital employed physicians and inpatient care being done by hospitalists, it is much easier now to align incentives than it was a few years ago. Physicians are your partners. Treat them that way.

More on profitability practices on Monday.

Mark Brodeur

Thursday, July 8, 2010

Ten Practices for Increasing Hospital Profitability: Tip #3

I have been commenting this week on the 10 practices for increasing hospital productivity published by Becker's Hospital Review and adding my take on them based on my experiences as a CEO and as a consultant helping other hospitals improve operating metrics. Today I want to comment on effective OR utilization. This is a challenge faced by almost every hospital I know of.

Tip #3: Ensure that your OR is used by physicians efficiently

Boy, that seems easy enough to say yet every hospital struggles making this happen. The OR should be a profit center for the hospital and surgical patients should make up 40% of the hospital's total patient mix. But we often see that this is not the case anymore because of several factors at play.

First of all, the more profitable outpatient surgeries are now funneled off to a separate ambulatory surgery center. Only very small hospitals still do all inpatient and outpatient surgeries in one location. In most instances, the outpatient business goes to a for profit physician owned center from which the surgeons get very nice financial returns. But as one surgeon told me, the real financial benefit to him is that he can do twice as many surgeries in the same amount of time at the center versus the hospital. Time is money and OR turnaround time is key. We helped one hospital reduce its room turnaround time to 13 minutes. Now that rivals an ASC and did a lot to promote physician loyalty.

The loss of the outpatient surgery business impacts hospitals negatively in two ways. First they are losing the most profitable surgeries and second, the reduction in overall business makes many hospital ORs less efficient. It is critical that hospitals adjust to the current volume of business and do what they do efficiently. That surgeon may be taking his best business away from you, but his satisfaction with your OR for the cases he brings is critical to the hospital's success. Here are some steps to take:

1) Start your cases on time. At least 75% of first cases should be on time
2) Reduce cancelled cases. Better and timely preadmission testing can get this near 0%.
3) Reduce room turnaround time. I like 13 minutes as a goal.
4) Reduce PACU time to under 1 hour. This really saves overtime at the end of the day.
5) Improve block utilization. 70% should be you goal
6) Track and improve surgeon and surgical patient satisfaction. We have seen a hospital with a 95% satisfaction rating from their surgeons and patient satisfaction at the 94th percentile.

OR is a critical for your hospital's bottom line and is sometimes challenging to address. We at Compirion have had some significant success assisting hospitals to help themselves in this area.

More profitability tips tomorrow.

Mark Brodeur

Wednesday, July 7, 2010

Ten Practices For Increasing Hospital Profitability: Tip #2

Yesterday I began a series of posts on how to make your hospital more profitable and covered the art of making data driven staffing decisions. Today I want to move on by discussing how to reduce supply costs.

Tip: #2 Reduce supply costs by better managing vendors

Yesterday we talked about the largest expenditure that hospitals deal with, staffing. Today I want to cover another significant expenditure, supplies (particularly medical supplies). This involves not only working with vendors but also getting your physicians on board to make fiscally responsible supply choices. It has often been said that the costliest instrument to a hospital is the physician's pen. Of course that has now been replaced by his or her keystrokes on the CPOE system. Working with vendors will go just so far if they have they physicians tightly aligned with them.

In dealing with vendors, do not be shy about demanding additional discounts due to the harsh economic times the hospital is facing. Although the medical supply business is also experiencing a downturn in profits, most are still faring a lot better than hospitals. They certainly will not provide discounts you don't ask for, and probably will still be reluctant until you threaten to take your business elsewhere. Keep in mind that this threat only works if it is real. That is why you need your physicians aligned with you before you start.

Experts have always talked about a partnership with vendors and this is a laudable objective which can only be achieved with totally aligned incentives. I don't think that really exists in today's cutthroat world of medical sales. I know of too many experienced reps who have had long term relationships with physicians and hospitals compromised by corporate demands for more sales whether it is the right product or not for that patient.

Many hospitals have had success by reducing the number of vendors they deal with and limiting the variety of inventory. Again this requires physician support. Another key area is to require purchase orders 24 hours in advance for any equipment or implant that is not already covered by a negotiated written agreement. Vendors must sign a statement that if they fail to do this, the item they provided is free to the hospital. This aligns the vendor's financial incentive with yours for that partnership.

Finally, in dealing with physicians, they truly must be treated as partners. Forcing changes on them for medical supplies or equipment will just not work. They must be involved from the start and both parties must ultimately be ready to make compromises. Sometimes it is better to give in on the cost of an item if it will secure the loyalty of a physician down the road.

More on profitability practices tomorrow.

Mark Brodeur

Tuesday, July 6, 2010

Ten Practices for Increasing Hospital Profitability: Tip #1

In the webinars I present on preparing for the impact of healthcare reform and developing a highly functioning ED there is a common theme to survive in the current climate of economic recession, growing uninsured, cuts in payments and increased competition: You must focus on reducing costs AND increasing reimbursement. Over the next series of posts I will cover 10 best practices in these two areas to make your hospital stronger and more profitable.

Tip #1: Reduce staffing costs based on data driven decisions.

There is an old adage that if you can't measure it you can't manage it. Well since labor is the single largest expenditure for any hospital it is critical that it not only be measured in great detail on a timely basis, but that this information be used instantaneously to adjust staffing levels. Understaffing can be just as financially devastating in the long run as overstaffing.

Since workload in hospitals tends to be flexible in most areas, the staffing in these areas must be flexible as well. Some areas, such as the ED have some rather predictable flexibility in patient volume based on the time of day. In other areas the seasonal variation is somewhat predictable. But no matter how good a forecasting model you use for long term, you must still be prepared to make daily (or more often) adjustments. Some high performing hospitals look at their census and projected admission and discharges every 8 hours and make staffing adjustments accordingly. This may be beyond the scope of some hospitals to perform. But suffice it to say that reviewing staffing only after every pay period will not be adequate.

Flexible staffing also works very well for areas such as the OR. Look at staff starting times versus actual case start times. Also consider the typical mid-day slump for the number of cases being performed versus the staffing levels. Most ORs are busiest in the morning and late afternoon with a down time in between.

We at Compirion have found that significant salary savings can be had through improving efficiency. This does NOT mean that the staff have to do more than they are already doing. It means that you can provide better care for patients while having your staff actually do less. Increasing ED throughput, decreasing OR turnaround times and shortening length of stay are common areas that we find can be further addressed. By taking this approach rather than just laying off employees you can have the added benefits of increased employee morale, higher patient satisfaction and stronger physician support for your hospital. The key is to involve your employees and physicians in streamlining the operation.

One last warning: Do not start with the bottom line and work backward with mandatory cuts based on the savings needed. This may result in cutting necessary resources from already efficient areas while allowing inefficiently operating areas to continue that way just with less staff. Focus on the operating areas individually and streamline the procedures. We have walked into many hospitals that feel their ED throughput and LOS are as good as they can get. That seldom turns out to be true.

I stated that staffing is your greatest expense which is true. But they are also your greatest resource. So work WITH them in improving efficiency and make them part of the process.

More on profitability practices tomorrow.

Mark Brodeur

Thursday, July 1, 2010

Actuaries Speak Out On How To Reduce Healthcare Costs

Two surveys by the Society of Actuaries concerning healthcare have recently been released. One survey was of actuaries themselves, the other one was of consumers. I was anxious to find out what keen insights the actuaries might add to reducing healthcare expenditures. While some of their suggestions were fairly obvious, not all of the findings were what I would have expected.

90% of the actuaries surveyed felt that reducing the number and severity of medical errors would reduce costs. This is pretty much a no brainer and I wonder why the number isn't 100%. 88% believe that fighting fraud and abuse in the system will lower costs. Again this is an obvious conclusion. But only 8% of the actuaries recommend making quality information of provider care more available to patients. Clearly this group does not believe as I do that it is quality first then finances follow.

The major suggestion from the actuary group was that there be more transparency between providers and patients concerning cost of care and treatment options. 86% recommend making prices for treatments more available and 79% recommend educating consumers on the efficacy of care. Their conclusion is that as consumers know what the cost of treatment is, they will be less likely to utilize services at the current level. This is a good thing if you assume that there is a lot of unneeded care being delivered. But what about the studies that have shown that patients do not seek out needed care just because they can not afford it. All this does is delay care that is ultimately needed and usually results in a much costlier hospitalization down the road.

Their other suggestion was that we pay consumers to be responsible about their own health. 90% feel that offering consumers financial incentives through their insurance plan can be at least somewhat effective in helping them make better choices as patients and live healthier lifestyles. If we are talking about discounts for patients who practice good health habits, I am all for it. But if we are talking about paying patients to take their medications when prescribed (the subject of an earlier post) I object. People need to take responsibility for maintaining their own health.

Overall, I am disappointed with the insights offered from these actuaries who will certainly be playing a role in developing the healthcare reform that is underway. There are a lot of cost saving ideas that were not addressed here.

More on this later.

Mark Brodeur
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