Industry reform requires hospitals and health systems to build more comprehensive networks, reduce healthcare utilization and invest heavily in health information systems. At the same time, other economic factors in the market are driving down reimbursements from Medicare and commercial payers and driving up patient financial obligations.
As a result, the healthcare industry has seen an increased number of hospital and health system bankruptcies during the past four years, particularly among rural and community organizations.
Unfortunately, many financially distressed hospitals and health systems struggle to find enough resources or personnel to dedicate to financial turnaround efforts. But there are certain strategies hospital administrators can employ to give their turnaround the best chance for success.
Below are four key factors in a hospital's financial turnaround plan, according to Buffalo Business Journal.
1. For any turnaround program to be successful, it is imperative the plan is developed in consensus with both hospital governance and local stakeholders, according to the article. This ensures the best interests of all fiduciary and clinical parties are incorporated.
2. Many financially distressed healthcare organizations are a critical part of their local economy and regional healthcare delivery system. For this reason, federal, state and local political, regulatory and community business leaders are often willing to provide short-term assistance to these organizations as they restructure and respond to industry changes.
3. As board members formulate a turnaround plan, resource should be prioritized to the following areas, according to the article:
- Detailed financial analysis
- Key operating statistics and performance
- Review of physical infrastructure, IT systems and capital expenditures
- Payer revenue benchmarking and contract renegotiation
- Clinical billing operations
- Medical staff composition of the system and network
- Strategic review of the health system, service area and population needs
- Identification of supplemental funding sources
- Re-negotiation of major financial commitments and termination of underperforming contracts
4. Financial turnaround plans may include structural changes to the organization. These can include the following:
- Sale of assets
- Merger with a larger, nonprofit health system
- Affiliation with a larger health system or multiple systems
- Change in regulatory structure of system to different hospital or nonprofit model
- Development or participation in rural health networks or joint ventures
- Retention of a management services organization