Change in the healthcare industry is rapid and continuous. Although it's impossible to predict what healthcare will look like five or 10 years down the road, experts have identified the disrupters and trends causing the industry to change form.
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Various trends, including the rise of patient consumerism, advanced technology and increased focus on outpatient care, are changing the dynamics in hospital leadership. Hospital and health system CFOs must not only ensure their organizations are financially stable and serve as ambassadors to the financial side of the business, but they must also stay ahead of change and adopt a patient-focused perspective to develop creative and flexible approaches to strategic challenges.
Becker's Hospital Review caught up with CFOs from three hospitals and health systems to discuss the healthcare industry disrupters they believe are here to stay, trends they see on the horizon and how their role is changing as the industry shifts toward value-based care.
Participants include:
- Aaron Eichorn, CFO of University Health System (Shreveport, La.)
- Stephen Forney, CFO of Verity Health (Redwood City, Calif.)
- Troy Hammet, CFO of CHI Memorial Hospital (Chattanooga, Tenn.)
Question: With increased patient liability, what demands do you see being placed on the system from patients, the regulatory environment and/or the market as a whole?
Aaron Eichorn: As the burden of paying for healthcare services shifts more to patients, the patients will certainly evaluate the cost/benefit and financial implications of seeking healthcare services. While in many cases this may actually be good for the system, such as patients who will now choose to go to an urgent care center rather than an ED, there may be unintended consequences. Patients with limited financial resources may choose to defer care, which could exacerbate existing health conditions. Not only would this increase costs for the system, but this could have health consequences on the very people who made the financial effort to purchase health insurance plans in the first place.
Stephen Forney: The increase in patient liability over the last several years has created a profound shift in what we would have traditionally looked at as bad debt. Bad debt used to be patients who were strictly self pay. It is now made up of patients who have insurance whose deductibles have been increasing and pay less than owed. These individuals by and large have jobs and means to pay. The patients, because they're paying more themselves, want to make sure charges are calculated correctly. This puts more pressure on the organizations to provide that information upfront and to follow up with patients afterward.
Troy Hammett: With the increasing number of patients with high-deductible plans, there is greater pressure on healthcare providers to perform financial counseling and collect more during the pre-registration process or at the time of service. To be successful, providers need a process to make timely and accurate estimates of each patient's liability. Regulators and patients are requiring more transparency as it relates to anticipated charges and payments for services rendered.
Q: With declining reimbursements, how do you measure and maximize your payer/payment mix?
AE: It is critical to consistently measure payer mix by volume and charges. Declining reimbursement from governmental payers will continue to pressure hospital systems to improve their payer mix by attracting more commercially insured patients. While capital investment in new programs, services and infrastructure are viewed by many [as] necessary to attract commercial volume, there are other tactics healthcare systems can utilize to improve their payer mix. By providing a superior patient experience, and high-quality patient care, hospitals can attract a better payer mix, which will support continued growth.
SF: We've invested in the necessary software tools to adjudicate payments and make sure we're getting paid correctly. That gives us insight into what the payer mix is and allows us to better understand the profitability of our service lines. In our case, when we see systemic decline, we try to offset it by adding or improving current service lines.
TH: From a revenue cycle standpoint, we monitor actual payments by payer against anticipated payments to ensure we are paid according to each participating provider agreement. It is critical that we follow up on any payment variances with the payers. On the front end of the billing process, we can optimize our DRG reimbursement by enhancing our clinical documentation and coding practices. Under our value-based arrangements, we implemented changes to clinical operations and processes that resulted in enhanced quality scores and incentive payments.
Q: How do you work with your broader organization to address and manage leakage within the system?
AE: Hospital leaders need to compile, monitor and track physician volume by type of service and payer. One of the key management philosophies that I adhere to is that "you can't manage what you can't measure." If leakage is identified, hospital leadership needs to be actively involved in meeting with the physicians to understand why the leakage occurred and what steps, if any, leadership can take in conjunction with the physicians to eliminate the leakage.
SF: We try to measure leakage the best that we can to understand who is being diverted out of network. That information can be difficult to get. The most direct way is to look at your own patient population where you have full capitation, at-risk lives. We look at the reasons why they're being diverted and then try to have a customized solution around each of the root causes. There's nothing easy about it, and it requires diligence.
TH: Honestly, this is an area of opportunity that we just started to focus on for our health system. The first step in the process is to analyze existing physician referral patterns at a service level to identify where leakage is occurring. While acknowledging it is a challenge to change existing referral patterns, sharing this information with the physicians and identifying the reason for leakage is an important next step. Organizations may succeed in keeping more patients in the system if we can show the physician that we can eliminate any operational barriers, provide them with a more efficient workplace, and provide higher quality and a better patient experience than our competitors.
Q: What role does the CFO play in contributing to strategic decisions around broadening integrated delivery networks and/or entering value-based reimbursement models?
AE: The role of the CFO has changed over the years; from simply managing and accurately accounting for the financial resources of an organization to more of a strategist involved in proactively identifying growth and new revenue opportunities. Once new opportunities are identified, the CFO is critical in scoring the impact of the new initiatives and more importantly is best positioned within the organization to understand the ripple effect these decisions will have on the organization's finances. I've always felt that the CFO has dual roles. On one hand, the CFO needs to ensure that the finances of the organization run smoothly, [accounts receivable] is collected, employees get paid, vendor payments are processed, etc., yet they also need to constantly think of ways to innovate and be thought leaders in identifying new sources of growth and revenue for their organizations.
SF: The CFO needs to focus on what it means to be an integrated delivery network. In the '90s, when risk became a popular topic, many organizations didn't pay attention and were damaged as a result. Now the reimbursement models are more complicated. This requires very sophisticated modeling and the financial aspects of the organization to be tuned into the risk and rewards of the models.
TH: While it is still very important for the CFO to have efficient and effective financial operations, the role of today's CFO is evolving as the leader for business operations, performance improvement, and strategic growth. This is particularly important in a healthcare industry experiencing constant regulatory change and consolidation. As the strategic advisor to the CEO, the CFO must be focused on growing market share organically and through M&A activities as well as increasing the number of covered lives managed through its clinically integrated network or accountable care organization.
Q: What are the biggest disrupters in the healthcare industry that you feel are here to stay?
AE: The increasing role that managed care organizations will have with Medicaid and Medicare cannot be underestimated in terms of the additional requirements imposed on healthcare systems. But, while we are familiar with those requirements, there are other disrupters that many other systems have not yet embraced. For example, the use of technology and smart phones for access, scheduling, follow up, prescription refills and bill paying seems to expand every day. At a recent conference that I attended, I saw a dozen different vendors offering apps that will integrate with EMR systems and allow patients the friendly access they are used to seeing from their banks. This will raise the service level that patients expect to receive from their providers. Healthcare systems will need to find a way to cater to these increased demands to attract customers.
SF: I think disrupters continue to be smaller more retail-oriented organizations like ASCs, urgent care centers and radiology centers. Those organizations have for a very long time been able to take away business from larger organizations because of their convenience and ability to provide a quality service quicker and at a lower cost. They're also attractive to insurance companies. Those will continue to be disrupters in the industry. I don't see them going anywhere.
TH: The continuous attempts by federal and state governments to reform the healthcare provider and insurance industry segments to improve quality and lower costs.
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