Skip to main content

Top 6 Financial Game Changers for Hospitals

 |  By kminich-pourshadi@healthleadersmedia.com  
   December 06, 2010

The past year proved to be a very busy one for healthcare financial leaders. More than a few stories kept everyone abuzz wondering how new laws and mandates would affect their organizations' bottom line. So much happened this year, in fact, that it was challenging for me to decide which areas affected financial leaders most in 2010 and which will continue to affect them in 2011. Here’s a look at my top six choices for financial game-changers:

  1. Healthcare Reform. For years to come healthcare reform will sit atop everyone’s list of game-changers for the industry. For several years hospital administrators won’t know the full extent the legislation will have on their bottom line. What financial leaders do know is that they will likely have more patients coming through their doors, though they will also likely not have enough physicians to meet the demand.

    Then again, others in healthcare argue that reform may just be the bottom line boost of which CFOs dream. Though reductions in Medicare are anticipated, they may be offset by an influx of self-paying patients. While government payments to hospitals that take a disproportionate number of uninsured, low-income patients will be cut, there will be less of these types of patients—so less charity care.
  1. Cost Cutting. Let’s face it, the economic recession has been very painful for healthcare, not just for the banking industry. This year found CFOs really digging in to find the areas they needed to cut. The goal was not to lay off any more members of their staff in 2010 (kudos to most hospitals for succeeding at that). Financial leaders took up the torch for many cost cutting initiatives ranging from predictive modeling to automating their supply chains. One healthcare leader went so far as to shave his head when his hospital employees helped the organization cut $7 million in costs. Financial leaders got creative and frugal, then just when the government declared the economic recession officially finished, CFOs were hit with another blow: reimbursement cuts.
  1. Changes in Reimbursement. For years Medicare reimbursement cuts have been proposed and ultimately blocked. And although there was a last minute delay on the cuts that were supposed to take effect Dec. 1, it looks like Medicare reimbursement cuts may become a reality for diagnostic imaging and the like. After President Obama described Medicare Advantage as a "waste" and Congress agreed, $132 billion worth of cuts to the program over 10 years appeared in the health reform package—with the first payment cuts expected to occur in 2011.

    Of course, when Medicare reimbursement rates decrease, the commercial payers tend to fall in line with similarly reduced payments. Not to mention that the medical loss ratio portion of the reform bill will take effect in 2011 for payers will likely trickle out and be reflected in more stringent contract negotiations between providers and payers. After all, payers don’t want to lose money either.
  2. Business-Expenses Rule. Did you miss this one? If the process of getting reimbursed by payers isn’t paper- and labor-intense enough for most finance department, the IRS is looking for more details on your interaction with your vendors. So, get ready for more paperwork in 2011. As of last week, the Senate failed to adopt language that would repeal the Health Care Reform Laws provision on business expense reporting. The business-expense or 1099 rule will require the annual reporting of expenses to individual vendors in excess of $600—that likely encompasses all of your vendors.  

 

  1. High Deductible Health Plans. It seems whenever payers are involved, someone, other than them, loses money. High-deductible health plans have been around for years, however, the slow economy has forced more than a few businesses nationwide to foist healthcare costs onto their already financially beleaguered employees. Lo and behold, a few years into this economic mess and more companies are using these health plans than any other. That doesn’t likely bode well for hospitals, however. Though it’s still too early to tell, you can bet that hospitals will likely take a loss on folks who have these types of plans, because many may not have the out-of-pocket deductible money readily available when illness befalls them.
    1. Mergers and Acquisitions. The healthcare landscape is changing more every day, not just because of legislation, but due to a bevy of merger and acquisition activity. For the most part, these transactions bring about a lot of positives. They help hospitals stay open in the communities they serve and they often help the purchaser grow into untapped markets. Growth equals a stronger bottom line and also gives the purchaser greater leverage with payers during contract negotiations. Expect to see more M&A activity in the coming year and be sure to watch that one of these transactions doesn’t put you at a disadvantage in your market.
  2. As 2010 draws to a close, try to keep all these challenges in perspective. No one knows what lies ahead for 2011, so the best financial leaders can do is keep informed and make educated “guess-timates” on the financial forecast for this year and beyond.

Karen Minich-Pourshadi is a Senior Editor with HealthLeaders Media.
Twitter

Tagged Under:


Get the latest on healthcare leadership in your inbox.