South Florida Hospital News
Saturday July 11, 2020

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October 2015 - Volume 12 - Issue 4


Could Your Organization Survive if Medicare Was Your Best Payer?

Achieving Medicare profitability through strategic decision-making

As healthcare reform revolutionizes the payment model to include penalties for poor quality, bundled payments, and at-risk capitation reimbursement, providers must implement significant operational and organizational improvements to be profitable at Medicare reimbursement rates. Most providers will need to reduce expenses by 20% to 30% to break even. It sounds daunting, but there are three reliable strategies to get there:
1. Labor and Supply Chain Cost Reduction
Labor and supply chain represent over 70% of a hospital’s expense, and savings need to start here. The best way to gain labor efficiencies is redesigning work methods and processes, especially in patient and clinical services. Right-sizing staffing levels to match capacity, reducing clinical supply utilization, and implementing advanced contracting strategies can yield huge savings.
2. Clinical Performance Improvement
Care variation is a frequently untapped source of savings and is key to improving quality and safety for patients. Physicians should lead these efforts. Plus, improvement in any clinical area creates capacity and brings important new opportunities.
3. Service Line Rationalization and Right-Sizing
Your organization can’t offer every service line, which can be a startling realization for providers whose longstanding culture dictates they do everything for patients. Service line rationalization requires difficult decisions and significant physician alignment and leadership, but it can deliver double-digit savings.
Carson City Hospital achieved profitability under Medicare in less than two years by reducing staff, closing its mental health program and working with other hospitals to increase state reimbursement for OB patients. “I advise other hospital leaders to get aggressive in implementing change,” says CEO Matt Thompson, a Prism Healthcare Partners client. “Find an experienced partner with expertise and credibility, and be ready to accept their recommendations.”
The road to Medicare profitability is not easy, but it can be smoother for leaders who commit to making smart strategic decisions.

George Whetsell and Brad Fetters are Managing Partners at Prism Healthcare Partners LTD. For more information, e-mail or call (954) 200-7050.

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