Today is Cyber Monday, so don't be surprised to see a few of your staff stealthily shopping for that perfect holiday gift instead of toiling for the organization. Though it's an online retail event, Cyber Monday does offer healthcare CFOs some important reminders about their own operations.
Use technology to save money. I often interview financial leaders who talk about needing the right data to drive decision-making. If your organization hasn't bought in to the idea of using analytics for decision support, then you'll be left behind as healthcare reform hits its stride in 2014.
In the September edition of HealthLeaders magazine, Cleveland Clinic's CFO Steven Glass explained how the multispecialty academic medical center handles 4.6 million patient visits annually. Glass uses data dashboards to continually gauge how the organization is performing. He's able to look at volume, occupancy, patient satisfaction, quality metrics, utilization, cost, and numerous other areas. Cleveland Clinic deployed its first dashboards eight years ago. Today, dashboards update data every 30 minutes.
"It's critically important for executives across the organization. It is a way that, as the CFO, I know are we having a good month or a bad month," Glass told HealthLeaders Media. "Long before you see revenue numbers and expense numbers, if you really know your business and you track it pretty closely, you can see where you've got trends in different parts of your organization."
Comparison-shop. Most hospitals assess their vendor contracts periodically, but don't forget that brand loyalty isn't a bad thing—especially if you want to secure a great price.
Vendor selection should encompass numerous phases, from a spend analysis to price comparison to product efficacy, and then result in a contract. But the work doesn't stop once you sign the agreement. if you want to truly reduce your revenue cycle costs, cultivate supplier relationship management (SRM).
SRM is an approach to managing interactions with the vendors that supply goods and services by creating a common communication and goal-setting structure between the hospital and supplier. Typically, buyers and suppliers use different business practices and terminology. The objective is to increase the efficiency in acquiring goods and services, managing inventory, and processing materials for not only the hospital but also the vendor.
Intermountain Healthcare, the 22-hospital, $3.6-billion healthcare system headquartered in Salt Lake City, usesd an SRM approach in working with a sterilization vendor over a six-year period. The result was reduced costs by $2 million per year. Intermountain and the sterilization vendor were able to share information and track monthly performance metrics against annual goals.
"This trusting relationship has provided excellent benefits for both parties," said Brent Johnson, vice president of supply chain and imaging services and chief purchasing officer at Intermountain.
Negotiate a win-win. While it's important for healthcare CFOs to manage their vendor relationships, it can also be crucial to work with physicians to help them manage their vendor relationships. A tried-and-true way to keep costs down is to establish some type of gainsharing arrangement with providers.
St. Luke's Health System, a six-hospital health system based in Boise, ID, successfully used gainsharing at two of its hospitals, said Cam Marlowe, the system's director of contracting and sourcing for supply chain management. After an analysis showed that combined spending at St. Luke's for cardiology, spine implants, and total joint implants totaled $39 million, Marlowe worked with physicians to implement a gainsharing plan beginning in 2009.
After a year of trial and error and limited returns, he says, the initiative showed fruit in year two. The organization reduced the cardio, joint implant, and spine implant spend by $1.3 million for the two participating hospitals, and garnered another $450,000 in rebates from implant device vendors. By year three, St. Luke's had saved another $7.1 million, and it anticipates an estimated savings of an additional $3.7 million by the end of this year.
"We needed to reduce our costs and wanted to get the doctors involved to help us determine how we could lower our cost while maintaining or improving quality. The gainsharing program was the best way to jump-start that collaboration," says Marlowe.
Get the price right. Healthcare reform is here to stay and bundled contracts are a part of the future, although this payment model is still in its infancy.
21st Century Oncology, which provides cancer care services in 16 states and seven countries and has a network of over 250 facilities, began testing bundled payments when its leaders foresaw changes in healthcare reimbursement. "For over two years, 21st Century has felt that the payment model is going to evolve. We've been working with CMS closely to pilot this [type of payment model] in the Medicare space; we had those discussions going prior to reaching a commercial agreement," said Kurt Janavitz, senior vice president of managed care and network development.
"Rather than have this [payment] model thrust upon us and have to react to it, we decided to take a leadership position to gain the experience with it, and to use it as a differentiator for payer groups wanting to use it," Janavitz told HealthLeaders Media.
To arrive at a fair bundled price for its procedures, 21st Century Oncology had to review costs and provider utilization levels and then benchmark each organization regionally and nationally to look for possible savings in anticipation of a bundled contract.
"We're experts for treatment, so we said we should come up with the right overall [payment] rate, and then that gets the nonsense out of the process of delivering care to the patient. The cash flow is up-front as opposed to claim-by-claim. We decided to do this as a national case rate contract as opposed to doing a different contract for each of Humana's individual markets," explained Janavitz.
'Tis the season for shopping and giving, and in that spirit, CFOs should aim to give their organizations a lasting gift: a strong bottom line.
Karen Minich-Pourshadi is a Senior Editor with HealthLeaders Media.
