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3 Strategies of Financially Successful CAHs

 |  By Alexandra Wilson Pecci  
   October 12, 2011

By definition critical access hospitals are isolated. But just because they're isolated geographically, doesn't mean they must be isolated from each other. When the going gets tough, CAHs can band together and teach each other a lot. And according to most forecasts, the going is getting tougher all the time.

"The stakes are going to be higher over the next three years than they ever have been before," George Pink, senior research fellow at the North Carolina Rural Health Research and Policy Analysis Center, tells HealthLeaders. "2011's going to have record merger and acquisition activity; a lot of small hospitals may disappear, or they may be absorbed into larger systems."

With such high stakes, financial viability is more important than ever, and when it comes to success factors for CAHs, who better to turn to than each other?

So the North Carolina Rural Health Research and Policy Analysis Center set out to determine why some CAHs are financially healthy. The center is sharing those success factors in an effort to improve financial viability among all hospitals.

With funding from the Office of Rural Health Policy, researchers surveyed CAHs and conducted interviews with 20 administrators whose hospitals were financially successful. Although a lot of factors go into the financial viability of a hospital, researchers were able to identify certain executive management strategies that contribute to success.

"These are things that every hospital administrator should be looking at and thinking about whether it would help them," Mark Holmes, director of the North Carolina Rural Health Research Center, tells HealthLeaders.

Here are a few success strategies that hospital executives should consider, based on the research:

1.Make the hospital board count

Hospital board members should be "active versus passive," says Pink. This means engaging in "deliberate and strategic member selection," says Holmes. All board members should have the skills, time, and commitment to make a difference in the organization. They should be knowledgeable about the hospital and healthcare, as well. According to Pink, many CEOs have comprehensive, sophisticated education sessions for new board members. These CEOs also actively utilize their board members as "emissaries to the community;" they solicit public opinion and help to educate the community about hospital initiatives.

2. Pay close attention to medical staff

The medical staff is among the most crucial determinates in the financial success of a hospital, so losing even one physician can have a huge impact financially. Pink says successful CEOs are always "making sure they have the right numbers and composition of the medical staff. A lot of them are really in constant recruitment mode to make sure that they always have the numbers they have." One hospital targets high schoolers in the community and has a budget line item for tuition, scholarships, and other funding for medical education. Pink says that there are currently eight or nine people who grew up in community, went away for training, and returned to work in the hospital.

3.Make sure department heads are financially savvy

One CFO Pink interviewed trains and educates every department head to ensure that they understand the financial workings of their department. "She brought each one of them in and said, 'Here's your financial statement for your department. Tell me what it means.' Most of the people really couldn't tell her," Pink says. That CFO follows up her training with tests every few months.

In addition to conducting research into what makes CAHs financially successful, Holmes and Pink are also part of the Flex Monitoring Team that is developing a model for hospitals to determine their risk for financial distress. By assessing their organizations using Risk of Financial Distress Among Critical Access Hospitals: A Proposed Model and implementing some of the success strategies outlined in the research, Holmes and Pink believe CAHs will have a better shot a financial viability.

"For some of them, it may be the case that they may still be at risk of distress even if they implemented all this," Holmes says. "But we certainly believe that they would be at lower risk."

Alexandra Wilson Pecci is an editor for HealthLeaders.

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