CEOs continue to express concerns about how they can maintain financial performance in the current economic climate. Nationally, hospital census numbers have declined. Medicare has implemented a 2% reduction in payments and many state Medicaid plans have reduced reimbursement rates. Lower volumes and decreased reimbursements have hit the hospital industry hard. Proactive C-suite staff members are modeling possible solutions. One common solution is to project increased revenues through new service lines to offset the lower reimbursements. A few have considered cost cutting as the best path for their organization. Both methods can work but some are harder to achieve than others.

1. Preparing for the Future
Operations Improvement Series # 14
Did you know?
Staying Even in the Coming Years
Over the past several months several CEOs have expressed to BRHS
concerns about how they can maintain financial performance in the
current economic climate. Nationally, hospital census numbers have
declined. Medicare has implemented a 2% reduction in payments and
many state Medicaid plans have reduced reimbursement rates. Lower
volumes and decreased reimbursements have hit the hospital industry
hard.
Proactive C-suite staff members are modeling possible solutions while
others are taking a “wait and see” approach. One common solution is
to project increased revenues through new service lines to offset the
lower reimbursements. A few have considered cost cutting as the best
path for their organization. Both methods can work but some are
harder to achieve than others.
Generally, to generate one dollar ($1.00) to the bottom line from in-
creased Gross Revenues would require $100 to $150 in new reve-
nues. So if a hospital needed to make up for a $200,000 reduction in
Net Margin, it would be required to increase Gross Revenues by $10
Million to $20 Million dollars. The exact number is variable based upon
patient mix, contractuals, and bad debt.
Lowering operating costs result in a direct savings and drops almost dollar for dollar to the bottom line.
At most Not for Profit hospitals, labor costs or labor-related expenses equate to 50% or more of total
expenses. Most For Profit hospitals keep this percentage much lower, around 40%. When you reduce
operating costs (labor and other) by $200,000 the bottom line improves by a corresponding amount.
The most effective way to maintain financial performance seems to be a combination of the two meth-
ods. Internally model several financial scenarios, project your chances of success, and develop a
workable plan. All of this can be done internally, if time and manpower permits. If you do not have the
time or expertise, seek an outside firm that specializes in Performance Improvement.
THE SOLUTION
Improving operations through increased Gross Revenues and reduced operating
costs can be a complicated puzzle. However, the appropriate tools, processes and
resources can multiply your success when putting together the pieces. When you’re
ready to ramp up your performance, BRHS will work with you to create realistic
Benchmarks for sustainable results.
BRHS is a results-oriented nationwide provider of healthcare consulting and finan-
cial advisory. With over seventy (70) years of combined experience in healthcare
administration and finance, BRHS personnel have the expertise to identify critical
issues and provide real world solutions. Call us today for a no cost discussion on
Performance Improvement.
BRHS Healthcare Consulting
17778 Carol Circle Flint, Texas 75762
PH: (903) 825-6955 Email: bcharron@brhealthcare.com
BRHS is a TORCH
Endorsed Partner.