Back from the red: Experts share strategies for improving hospital finances during a fiscal crisis
University Medical Center of Southern Nevada (UMC), a nonprofit hospital, has grown considerably in the last 85 years and for many years, expenses have been outpacing revenues. But the hospital recently made some changes that have greatly improved its financial outlook.
The first step was to cut expenses. In 2014, UMC laid off close to 250 employees. “We had to make some tough decisions,” says CEO Mason VanHouweling. It also closed some clinics that weren’t profitable and made some adjustments to hospital service lines.
But UMC didn’t stop with cutting expenses. “You’re not going to cut your way to success,” says VanHouweling. The hospital invested in technology, including a new EHR and new pulmonary equipment. It also added 146 doctors to its staff. “We’ve gotten busier,” VanHouweling says. “We’re hitting record volumes in our ER and surgery departments.”
Another thing the hospital did was renegotiate some of its payer contracts, which increased its revenue from insurers.
All of these strategies have paid off. “We went from a negative income from operations margin to 7-10%, which is in line with other not-for-profit and public institutions,” says VanHouweling. As a result, UMC has been able to reduce its tax payer subsidy from the county.
The experts weigh in
For other hospitals that may be in need of a financial overhaul, here’s some additional advice from experts in the field:
- Understand financial risks and opportunities. “For many organizations, revenue is currently being managed by multiple departments making it difficult to gain key insights when needed,” says Christian Wieland, MedeAnalytics vice president, product management. “This is only further exacerbated when a hospital is in financial trouble. Providers can address these challenges by adopting a holistic approach to their entire revenue lifecycle and leveraging analytics. This will ensure that they have an integrated, unified view of the entire revenue lifecycle and thus easily identify and track all leakage points to understand where action is needed.”
- Develop a balanced plan for optimizing revenue, managing expenses and improving clinical outcomes. “The revenue optimization plan should include initiatives to reduce revenue cycle denials, improve charge capture, improve clinical documentation, improve physician productivity and improve care access,” says Daniel May, managing director, Huron Healthcare. “The expense management plan should include initiatives to effectively manage staffing levels, supply costs, 340B benefits, and human resources insurance and premium pay expenses. The clinical outcome improvement plan should include initiatives to better manage length of stay, improve quality, and improve care management.”
- Consider new services. “Reliance on inpatient revenue as the single largest [revenue] source may in fact become hospitals’ single largest downfall as the onslaught against readmissions, unnecessary admissions, and large overhead costs will continue,” says Andre L. Lee, DPA, FACHE, an adjunct faculty member at Kaplan University School of Health Sciences. Potential new services may include product manufacturing, home care, emergency ambulance services, medical transport and mobile health units to provide services to and from long-distance destinations.
- Use technology to improve capital and labor utilization. “Though many hospitals have significantly reduced their supply and labor costs, few are using modern technology like predictive analytics to improve their capital and labor utilization,” says Rich Krueger, CEO at Hospital IQ. “In fact, in most institutions, the effort to measure, plan, and manage the demand with supply is manual and resource intensive. Hospitals can significantly increase their operating margins by automating many of these manual tasks and adopting scientific approaches to improve capital and labor utilization.”