The mistakes your hospital is making now may cripple its chances of thriving under healthcare reform and future care delivery requirements. Many of these blunders stem from a lack of urgency to impending policies and penalties. For instance, reform will alter the way a hospital needs to evaluate and forecast financially, along with how physicians, administrators and staff need to interact. Here are eight mistakes your hospital should prevent or repair — stat.
1. Not forecasting correctly. One of the biggest mistakes hospitals can make is to forecast or evaluate incorrectly. In the wake of reform, hospitals should be applying both historical evaluations and forecasts of future financial and care delivery innovations to understand where service demand is headed. "Hospitals will need to evaluate historical trends as well as understand where care delivery is going as they move forward to measure broader utilization and cost of care," says Steve Miff, PhD, VP & General Manager of Clinical Performance Management at Sg2, a healthcare analytics company in Skokie, Ill. With a focus on preventive care and reduced readmissions, hospitals need to reconfigure utilization and cost components, particularly since nearly 75 percent of costs are associated with inpatient stay, according to Dr. Miff.
The development of ACOs and episode-based bundled payments builds on the hospital's need to understand inpatient and outpatient utilization for services. Technology (such as electronic health records), readmission reductions and outpatient disease management programs also need to be factored in to a hospital's utilization and financial forecast. Hospitals should modify their evaluation models since traditional forecast models will not reveal the best opportunities for cost savings. Comprehensive forecasting models can be utilized to plan future facility and staffing requirements and analyze what services to contract for population and/or disease management models.
Typically, the vice president of strategic planning is responsible for the forecasting. "We anticipate they will consult and increasingly incorporate a clinical partner as well, like the chief medical officer," says Dr. Miff. "If you're trying to evaluate initiatives like reducing readmissions, you need insight from clinical partners to make those decisions."
2. Not focusing on readmissions. Under healthcare reform, Medicare is deploying financial penalties for low-performance, unnecessary readmissions within 30 days after a congestive heart failure, pneumonia or heart attack admission. Four more diseases will be added to the roster in 2014. It's easy for hospitals to have a false sense of reality or lack of urgency about how quickly these Medicare readmission penalties go into effect.
Dr. Miff, however, broke it down: the penalties go into effect in 2013, but they will actually begin in Oct. 2012 due to the fiscal year. The penalties will also be based on retrospective data from Oct. 2011. "So, all of a sudden, many hospitals are thinking, 'Oh wow, we have 10 months to get this right," says Dr. Miff. In itself, it’s a mistake to have a diminished sense of urgency but particularly around the topic of readmissions since the penalties will be 1 percent of total Medicare reimbursement. This may cost anywhere from $600,000 to $1.2 million in the first year for an average-sized hospital, along with damage to its reputation. "I don't think a lot of folks have really appreciated the complexity and urgency of it," says Dr. Miff.
3. Not fully understanding the utilization, quality and cost of post-acute care environments. Post-acute care environments — such as skilled nursing homes, rehabilitation centers, home health services or discharge to home with outpatient physical therapy — need to be weighed and evaluated for their clinical worth as well as their cost, according to Dr. Miff. "Another question to ask is, once you send the patient to one of these centers, how many are coming back and how many are going home?" Unplanned patient returns may double your cost, according to Dr. Miff. The clinical component and cost of each option will become increasingly important as hospitals structure bundled payment programs or ACOs. "If you're not fully understanding the options or quality providers in that space, you won't be able to manage it or have quality," says Dr. Miff.
4. Ignoring the financial and operational implications of hospital-acquired conditions. HACs clearly have a clinical impact, but their operational and financial implications should not be ignored. A recent study found an average of 25 patient injuries per 100 admissions, including hospital-acquired infections and other preventable harms. For cost-reduction purposes, hospitals should keep a close eye on their rates of HACs. The cost of patients with an HAC is anywhere between 100 and 200 percent more, according to Dr. Miff. Additionally, their length of stay tends to double.
5. Not balancing performance across multiple metrics. If performance isn't balanced across multiple metrics, more problems may be created rather than solved. "More often than not, what we see is a strong initiative in one area only to negatively impact something else," says Dr. Miff. An example of this imbalance is a hospital initiative to reduce staffing costs. Staffing costs may go down, but length of stay may spike and patient satisfaction may decline as a result.
Another initiative may be the reduction of length of stay. When this is executed without considering the impact to other hospital departments, readmissions may increase, which reflects improper management of coordinated care. "When you focus on the direct cost reduction elements, don't ignore the impact it may have on the other clinical, operational or financial metrics," says Dr. Miff.
6. Not focusing on the entire continuum of care — whether your hospital owns it or not. Most hospitals do not own every single piece involved in the continuum of care, but at same time, they need to manage it. Hospitals need to understand their utilization, help patients navigate the maze of care and focus on patient and disease coordination.
"Everybody is either being asked or is looking to take on more accountability. This can come in different flavors and sizes, with ACOs being the most complex and all-encompassing. But if you think about accountability in broader terms, such as bundled payments or medical home models, most health programs are taking on additional accountability. It's relevant to everybody," says Dr. Miff.
7. Tense relationships with physicians. The best way for hospitals to profit under ACO principles is by keeping people healthy, and hospitals need to have the efficiencies necessary to offer the best quality and results at a low cost. This requires hospital-physician relationships to become more cooperative. Hospitals also need to put effort into the recruitment of specialists, who can assist primary care delivery by ensuring the right diagnosis the first time, says Timothy Hobbs, MD, CEO of Community Physicians of Indiana in Indianapolis. Dr. Hobbs, who oversees a physician group consisting of more than 200 physicians in more than 70 practices, says specialists help eliminate misdiagnosis and unnecessary care.
Accountabilities are going to develop between physicians, meaning hospitals will need extremely cooperative, team-oriented physicians. "If you bring on a physician who is highly intelligent and skilled but extremely autonomous and won't work with groups, that's a disadvantage. What you want to do is find the best and brightest who will help you build your team," says Dr. Hobbs.
8. Not addressing healthcare reform from the cultural perspective. A hospital may form the most intelligent, detailed plan to deal with healthcare reform, but culture may still eat strategy for lunch, according to Dr. Hobbs. With the focus shifted to healthcare continuums and accountability, hospitals will struggle if unable to execute teamwork with flying colors.
It sounds deceivingly simple in theory, since cooperation was a skill many mastered in grade school, but changing a stubborn hospital culture may prove to be one of the most difficult parts of healthcare reform. Hospital administrators need to team up with physicians and other clinicians to establish shared leadership. "I can't overemphasize this enough," says Dr. Hobbs. "When you build teams to provide certain levels of care, there is a skill to that kind of teambuilding in itself. Teams don't just happen."
Learn more about Sg2.
Learn more about Community Physicians of Indiana.
Read more best practices to prepare for healthcare reform
- 7 Ways for a Hospital to Align with Physicians
- 7 Ways to Improve Your Revenue Cycle
- 3 Predictions for Hospitals in 2011
1. Not forecasting correctly. One of the biggest mistakes hospitals can make is to forecast or evaluate incorrectly. In the wake of reform, hospitals should be applying both historical evaluations and forecasts of future financial and care delivery innovations to understand where service demand is headed. "Hospitals will need to evaluate historical trends as well as understand where care delivery is going as they move forward to measure broader utilization and cost of care," says Steve Miff, PhD, VP & General Manager of Clinical Performance Management at Sg2, a healthcare analytics company in Skokie, Ill. With a focus on preventive care and reduced readmissions, hospitals need to reconfigure utilization and cost components, particularly since nearly 75 percent of costs are associated with inpatient stay, according to Dr. Miff.
The development of ACOs and episode-based bundled payments builds on the hospital's need to understand inpatient and outpatient utilization for services. Technology (such as electronic health records), readmission reductions and outpatient disease management programs also need to be factored in to a hospital's utilization and financial forecast. Hospitals should modify their evaluation models since traditional forecast models will not reveal the best opportunities for cost savings. Comprehensive forecasting models can be utilized to plan future facility and staffing requirements and analyze what services to contract for population and/or disease management models.
Typically, the vice president of strategic planning is responsible for the forecasting. "We anticipate they will consult and increasingly incorporate a clinical partner as well, like the chief medical officer," says Dr. Miff. "If you're trying to evaluate initiatives like reducing readmissions, you need insight from clinical partners to make those decisions."
2. Not focusing on readmissions. Under healthcare reform, Medicare is deploying financial penalties for low-performance, unnecessary readmissions within 30 days after a congestive heart failure, pneumonia or heart attack admission. Four more diseases will be added to the roster in 2014. It's easy for hospitals to have a false sense of reality or lack of urgency about how quickly these Medicare readmission penalties go into effect.
Dr. Miff, however, broke it down: the penalties go into effect in 2013, but they will actually begin in Oct. 2012 due to the fiscal year. The penalties will also be based on retrospective data from Oct. 2011. "So, all of a sudden, many hospitals are thinking, 'Oh wow, we have 10 months to get this right," says Dr. Miff. In itself, it’s a mistake to have a diminished sense of urgency but particularly around the topic of readmissions since the penalties will be 1 percent of total Medicare reimbursement. This may cost anywhere from $600,000 to $1.2 million in the first year for an average-sized hospital, along with damage to its reputation. "I don't think a lot of folks have really appreciated the complexity and urgency of it," says Dr. Miff.
3. Not fully understanding the utilization, quality and cost of post-acute care environments. Post-acute care environments — such as skilled nursing homes, rehabilitation centers, home health services or discharge to home with outpatient physical therapy — need to be weighed and evaluated for their clinical worth as well as their cost, according to Dr. Miff. "Another question to ask is, once you send the patient to one of these centers, how many are coming back and how many are going home?" Unplanned patient returns may double your cost, according to Dr. Miff. The clinical component and cost of each option will become increasingly important as hospitals structure bundled payment programs or ACOs. "If you're not fully understanding the options or quality providers in that space, you won't be able to manage it or have quality," says Dr. Miff.
4. Ignoring the financial and operational implications of hospital-acquired conditions. HACs clearly have a clinical impact, but their operational and financial implications should not be ignored. A recent study found an average of 25 patient injuries per 100 admissions, including hospital-acquired infections and other preventable harms. For cost-reduction purposes, hospitals should keep a close eye on their rates of HACs. The cost of patients with an HAC is anywhere between 100 and 200 percent more, according to Dr. Miff. Additionally, their length of stay tends to double.
5. Not balancing performance across multiple metrics. If performance isn't balanced across multiple metrics, more problems may be created rather than solved. "More often than not, what we see is a strong initiative in one area only to negatively impact something else," says Dr. Miff. An example of this imbalance is a hospital initiative to reduce staffing costs. Staffing costs may go down, but length of stay may spike and patient satisfaction may decline as a result.
Another initiative may be the reduction of length of stay. When this is executed without considering the impact to other hospital departments, readmissions may increase, which reflects improper management of coordinated care. "When you focus on the direct cost reduction elements, don't ignore the impact it may have on the other clinical, operational or financial metrics," says Dr. Miff.
6. Not focusing on the entire continuum of care — whether your hospital owns it or not. Most hospitals do not own every single piece involved in the continuum of care, but at same time, they need to manage it. Hospitals need to understand their utilization, help patients navigate the maze of care and focus on patient and disease coordination.
"Everybody is either being asked or is looking to take on more accountability. This can come in different flavors and sizes, with ACOs being the most complex and all-encompassing. But if you think about accountability in broader terms, such as bundled payments or medical home models, most health programs are taking on additional accountability. It's relevant to everybody," says Dr. Miff.
7. Tense relationships with physicians. The best way for hospitals to profit under ACO principles is by keeping people healthy, and hospitals need to have the efficiencies necessary to offer the best quality and results at a low cost. This requires hospital-physician relationships to become more cooperative. Hospitals also need to put effort into the recruitment of specialists, who can assist primary care delivery by ensuring the right diagnosis the first time, says Timothy Hobbs, MD, CEO of Community Physicians of Indiana in Indianapolis. Dr. Hobbs, who oversees a physician group consisting of more than 200 physicians in more than 70 practices, says specialists help eliminate misdiagnosis and unnecessary care.
Accountabilities are going to develop between physicians, meaning hospitals will need extremely cooperative, team-oriented physicians. "If you bring on a physician who is highly intelligent and skilled but extremely autonomous and won't work with groups, that's a disadvantage. What you want to do is find the best and brightest who will help you build your team," says Dr. Hobbs.
8. Not addressing healthcare reform from the cultural perspective. A hospital may form the most intelligent, detailed plan to deal with healthcare reform, but culture may still eat strategy for lunch, according to Dr. Hobbs. With the focus shifted to healthcare continuums and accountability, hospitals will struggle if unable to execute teamwork with flying colors.
It sounds deceivingly simple in theory, since cooperation was a skill many mastered in grade school, but changing a stubborn hospital culture may prove to be one of the most difficult parts of healthcare reform. Hospital administrators need to team up with physicians and other clinicians to establish shared leadership. "I can't overemphasize this enough," says Dr. Hobbs. "When you build teams to provide certain levels of care, there is a skill to that kind of teambuilding in itself. Teams don't just happen."
Learn more about Sg2.
Learn more about Community Physicians of Indiana.
Read more best practices to prepare for healthcare reform
- 7 Ways for a Hospital to Align with Physicians
- 7 Ways to Improve Your Revenue Cycle
- 3 Predictions for Hospitals in 2011