10 Strategies That Can Improve Your Hospital’s Finances in Just a Few Months
While many people appreciate hospitals for the work they do in saving lives, most fail to recognize that they are also businesses. Staying profitable and viable in the healthcare business is, most times, a game of fine margins. Hospitals often have to operate on fine margins to be able to keep the lights on.
With increasing healthcare costs and the volume of sick patients becoming the norm, hospital administrators are always searching for ways to improve their margins. Reducing overhead expenses is one of the most popular policies that administrators are looking to engage in. Overhead costs are a significant part of the business model and can be complicated to deal with.
In this article, we’ll be looking at strategies that can be applied to bolster a hospital’s chances of financial stability. These strategies can be implemented independently of one another. However, the common factor to all of them is that they help to create a more efficient system when applied. Here they are:
1. Have airtight records for costs.
Information is critical to decision-making, and when it comes to improving hospital finances, it’s no different. All costs have to be noted and classified appropriately to help you accurately evaluate what your organization is doing right and wrong. Simply analyzing your organization’s expenses can reveal the parts of your business model that require the most finances.
One important classification to make is clinical vs. non-clinical costs. Hospitals accrue a lot of bills that have little to do with the core service they offer. While some of these costs are nonetheless essential for the well-being of both the employees and patients, others can be cut down on with minimal effect on the overall offering.
2. Reduce non-clinical overhead costs.
As mentioned in the previous section, non-clinical overhead costs can account for a significant amount of the budget. When looking to cut down on cost, that's the first area that administrators should focus on. Overhead costs should be treated as economic burdens that must be lessened unless they contribute to the quality of care in the facility.
Cuts to administration costs should be considered when reducing overhead costs. Consolidating several concurrent departments, centralizing functions, and automating where possible are all viable options when cutting down on administration costs.
Cost on non-essentials like lighting should also be monitored for possible cuts. Investing in more efficient alternatives to certain equipment and tools can lead to a significant drop in cost.
Hospitals might also be able to make useful savings by renegotiating with key partners, especially in their supply chain. Every little thing counts when trying to reduce overhead costs. Small gains add up to form big ones eventually.
3. Outsource non-essential jobs.
Outsourcing has been used by hospitals to reduce costs for many years now. It allows hospitals to focus on what they’re good at – offering clinical services to patients, while their partners take care of the rest. The range of services that can be outsourced range from clinical to non-clinical. However, most hospitals stick to outsourcing just non-clinical services.
Services like information technology, billings, and payments, creating electronic healthcare records, managing hospital infrastructure, and laboratory services can conveniently be outsourced to organizations that specialize in dealing with such. In many cases, even sensitive jobs like disposal of biohazardous material can be outsourced, as can be found here: https://www.medprodisposal.com/biohazard-waste-disposal/
Aside from helping with reducing costs, outsourcing, when done right, can help improve the quality of work done in the hospital.
4. Employ automation where possible.
Recent advances in technology keep improving the prospect of automation for businesses, including healthcare organizations. Hospitals gather and keep sizeable amounts of data. Being able to understand and utilize the data is key to helping hospitals meet the demand for better holistic care.
Hospital management systems can help improve operations in a hospital. They can perform multiple functions like denial management, revenue management, organizing information, validating patients’ data, and even generating their bills.
Implementation of technological solutions that can help with automation ultimately lighten the workload for workers and the overhead cost of the company. It also helps to keep your hospital competitive.
5. Minimize bureaucracy.
Having a system of checks and balances can be good for preventing unnecessary errors (and potential lawsuits) in a hospital, but it may also significantly add to your overhead. Having a very bureaucratic system means you have more people and lengthy paper or phone trail involved in simple decision-making.
In the US, according to the AMA, one in five claims processed in the country are done inaccurately. The chief reason for the mix-ups is the long bureaucratic chain before the claims get to the final decision-makers.
Automation does a fine job of reducing bureaucracy in certain areas of the hospital, but there’s always more to be done.
6. Reduce preventable readmissions.
On the patient end, readmissions are quite expensive for hospitals. Some patients are genuinely predisposed to readmission due to the nature of their condition. However, when preventable readmissions become all too common, it should raise a red flag. Apart from the high cost associated with the readmissions, they also rub off badly on the reputation of your facility.
Reducing patient readmission requires some tact. You can encourage patients to schedule a seven-day follow-up after their discharge from the hospital. Studies suggest that patients that see their doctors within seven days of discharge from the hospital have a significantly smaller chance of being readmitted.
Using telemonitoring technology to check up on patients is also a great idea for keeping non-urgent cases from getting readmitted.
7. Improve emergency room deficiencies.
Emergency rooms (ER) are the beating heart of most hospitals. Several patients come into the emergency rooms needing instant help because they are in unstable conditions. ERs are, by nature, chaotic, inefficiently run, and a nightmare for budgeting efforts by administrators.
An essential challenge of ERs is that uninsured people can come in to get treated without having the ability to pay for the care. More often than not, the administrator in charge only finds out after the person has been treated. Although they may not be able to afford it, most of those patients are typically covered under one publicly funded program or the other. Hospitals can put systems in place to help the patients apply for these programs.
8. Increase the use of diagnostic imaging and reduce the use of laboratory testing.
Diagnostic imaging and laboratory testing are immensely useful for figuring out what's wrong with patients, but while the first is underutilized, the latter is overexploited. Laboratory testing has been estimated to waste up to $200 billion every year in the US. They consume both the hospital and the patient’s time. Although they can still be beneficial, hospital workers have to be more prudent when ordering tests.
Diagnostic imaging, on the other hand, generates enormous volumes of data, but the bulk of it is typically unused. This has led to a startling lack of efficiency in hospitals. Facilities have to analyze the operational data on their diagnostic centers and to know how efficiently they’re using their equipment.
9. Create a wellness program for your staff.
A system is only as strong as the people in it. Hospitals can suffer from inefficiencies due to poor health and stress toll on their staff. To curb that, they can encourage their employees to take care of themselves by creating wellness programs.
As you help your staff live better lives, the hospital can benefit financially from it, too. If the wellness program is one that provides financial incentives, e.g., lower health insurance premiums, it could help you save up a ton of money every year.
You'll be improving your employees' lives, sustaining their productivity, and saving money in one swoop.
10. Keep your staff in the know-how.
If your company is going through a rough patch where you need to go lean and make changes to remain profitable, it’s important to communicate that with your employees. Engaging the staff in the process makes it a more collaborative and involved affair.
There’s typically a lot of fear and rumor-mongering that comes when companies are cutting costs. Using open communication with your administrative and clinical staff, you can help squash all rumors of layoffs and reduce the associated fear and stress.
Rising healthcare costs mean that improving a hospital’s financial performance is more challenging than ever. It’s a task that requires the collaborative efforts of multiple parties. Administrators, managers, nurses, doctors, support staff, and every other associated person will have to chip their respective efforts.
Going lean, much like physically, will require some level of discomfort, and the people will have to be prepared for it. Keeping costs down will be central to whatever strategy you eventually decide to go with. However, the most important thing is to know what your current expenditure is in the first place. Once you have that figured out, you can go through the list of strategies again for the best fit for your situation.