For most towns and cities across America, community hospitals are the nucleus of healthcare. While healthcare reform is putting many of those institutions in tough positions, there are steps that can be taken to create a stronger foundation.
At the Becker's Hospital Review 4th Annual Meeting in Chicago on May 9, Mike Williams, president and CEO of Community Hospital Corp., spoke on the different pressures affecting community hospitals and what financial metrics executives should focus on.
Mr. Williams said several new core competencies are now required of community hospitals: physician integration, becoming profitable on Medicare reimbursements, having strong financial peripherals, bolstering payor relationships, building market necessity and others.
Before hospitals can inundate themselves with those strategies, Mr. Williams said they must conduct an operational assessment, which focuses on productivity, supply chain, clinical quality analysis and general financial measures. "If you're serious about being competitive in future healthcare environment, you must complete an operational assessment," Mr. Williams said.
More specifically, Mr. Williams said there are three metrics that every community hospital C-suite member should track daily.
1. FTEs per adjusted occupied bed. Tracking full-time equivalents per adjusted occupied bed is an essential productivity measure, Mr. Williams said. Sound community hospitals will have about four FTEs per adjusted occupied bed, but critical access hospitals ought to have no more than 2.9 FTEs per adjusted occupied bed.
2. Debt-to-capital ratio. Debt-to-capital, which is a hospital's debt divided by its total capital, gives some insight into the organization's financial structure. The higher the ratio, the more debt a hospital has compared to its equity. Mr. Williams said debt-to-capital for community hospitals should not be higher than 50 percent.
3. Days cash on hand. Mr. Williams and CHC worked with a hospital system in the Southeast, and he said it was teetering on the "precipice of failure" with 3.5 days of cash on hand. Community hospitals should not have less than 120 days cash on hand to survive and thrive.
"If on a daily basis you don't understand the financial dynamics of your institution, the future is not going to be very bright," Mr. Williams said.
At the Becker's Hospital Review 4th Annual Meeting in Chicago on May 9, Mike Williams, president and CEO of Community Hospital Corp., spoke on the different pressures affecting community hospitals and what financial metrics executives should focus on.
Mr. Williams said several new core competencies are now required of community hospitals: physician integration, becoming profitable on Medicare reimbursements, having strong financial peripherals, bolstering payor relationships, building market necessity and others.
Before hospitals can inundate themselves with those strategies, Mr. Williams said they must conduct an operational assessment, which focuses on productivity, supply chain, clinical quality analysis and general financial measures. "If you're serious about being competitive in future healthcare environment, you must complete an operational assessment," Mr. Williams said.
More specifically, Mr. Williams said there are three metrics that every community hospital C-suite member should track daily.
1. FTEs per adjusted occupied bed. Tracking full-time equivalents per adjusted occupied bed is an essential productivity measure, Mr. Williams said. Sound community hospitals will have about four FTEs per adjusted occupied bed, but critical access hospitals ought to have no more than 2.9 FTEs per adjusted occupied bed.
2. Debt-to-capital ratio. Debt-to-capital, which is a hospital's debt divided by its total capital, gives some insight into the organization's financial structure. The higher the ratio, the more debt a hospital has compared to its equity. Mr. Williams said debt-to-capital for community hospitals should not be higher than 50 percent.
3. Days cash on hand. Mr. Williams and CHC worked with a hospital system in the Southeast, and he said it was teetering on the "precipice of failure" with 3.5 days of cash on hand. Community hospitals should not have less than 120 days cash on hand to survive and thrive.
"If on a daily basis you don't understand the financial dynamics of your institution, the future is not going to be very bright," Mr. Williams said.
More Articles on the Becker's Hospital Review 4th Annual Meeting:
4 Points on Benchmarking & Assessing Hospitals’ Financial Strength
Understanding How Physicians Think
5 Tips to Develop Alignment Strategies That Improve Healthcare Quality