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6 Hospital Tips to Survive Healthcare Reform

Wes Champion, for HealthLeaders Media, January 21, 2011

Despite the recent election and campaign promises to repeal and replace, there is one area of health reform that is not up for debate: payments to providers will be dramatically reduced.

Over the next 10 years, providers are facing up to $200 billion in reimbursement cuts, penalties for failing to demonstrate "meaningful use" of health information technology and continued coding adjustments (known as the "behavioral offset") that will claw back payments made during the transition to the MS-DRG system. Taken together, analysis indicates that hospitals will need to cut expenses, conservatively, by 10% just to preserve today's already slim margins. 

Providers that survive and thrive in this challenging environment will be those that address payment cuts and change their operating models by implementing sustainable, systematic transformation to bend the healthcare cost curve, not by implementing short-term incremental change. This transformation requires focus not only on eliminating expense and maximizing revenue but also on quality improvements that avoid payment penalties.

Following are key opportunity areas that will help providers to better "manage to Medicare" and achieve the cost savings and revenue enhancements to offset reimbursement cuts:

1. Optimize clinical practice and care delivery:

Under health reform, up to 8% of total payments made to hospitals will be tied to quality improvements based on a provider's ability to adhere to evidence-based care measures under value-based purchasing, reduce readmission rates and prevent hospital acquired conditions. To prevent losing billions in payment, providers must focus on clinical practice in order to reduce variability, improve quality and enhance the care model. Since penalties will be assessed based on hospital performance relative to others, providers should strive to bring mortality and HAC rates in line with top performing hospital benchmarks, and consider the implementation of clinical education processes with nursing and physician staff focused on quality improvement.

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