Background

How the Changing Landscape of Healthcare Finance Will Affect Your Facility

How the Changing Landscape of Healthcare Finance Will Affect Your Facility

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As British prime minister, Benjamin Disraeli said “Change is inevitable. Change is constant”. Disraeli’s quote reflects the constant flux in healthcare. One of these major changes is the shift in payment models. This has affected everyone from community outpatient centers to large health systems. For the customer, new metrics mean they get a high level of care. At the same time, this has increased the pressure on hospitals with fewer resources.

Let’s turn back the clock to the year 2014, this will give a more clear idea as to what the goals for the fee for value model were: the main aim was to: “Replace the nation’s reliance on the fragmented, fee-for-serve care with comprehensive coordinated care using payment model that hold organizations accountable for cost control and quality gains”. Two things immediately stand out here. On ‘one side of the coin’, this model says it coordinates care efficiently. On the other side of the coin is the ‘price’; organizational accountability.

On the surface, is this a bad thing? Surely all organizations aim is to provide customer focused services, yet for some, meeting metrics is near impossible without a strong financial base; as we will now discuss.(https://revcycleintelligence.com/features/what-is-value-based-care-what-it-means-for-providers)

Common Issues Shared Globally by Financial Leaders

For many hospitals, improving care quality is important, yet, this is a fine balancing act. Hospitals need to maintain a solid financial standing without draining their resources. Siemens Financial Services published a global report in 2016 asking financial managers “what they found their biggest challenges were?”. The responses they got were very similar. This is especially interesting when considering these managers worked across the globe. (http://www.healthcarebusinesstech.com/financial-challenges/).

The four most common challenges faced by the financial director of health systems were:

  • Managing investment while thriving in a capital-restricted setting: Financial leaders of many hospitals face a continual dilemma. Their primary aim is to ensure the financial health of their hospitals. Secondly, they need to utilize financial resources effectively to ensure their hospitals don’t fall behind the rest. In addition to this, they face the constant pressure to reduce costs while improving patient outcomes.
    Many hospitals are now facing the pressures of cutting costs “while boosting outcomes”. This only adds restrictions on hospital spending. This means it is even more difficult to put in place quality improvement initiatives.
  • Monitoring digital and technological evolution: New medical innovations are now introduced almost daily. The problem is that hospitals are not always in the position to benefit. One reason for this is that some may not be able to afford new technology. On the other hand, many hospitals can afford the technology but are not able to implement it due to an incompatible / out-of-date IT infrastructure.
  •  Acclimatizing to market forces: Mergers are now commonplace within the healthcare industry. Larger health systems are expanding. This means hospitals working under the “same corporate umbrella”. Hospital leadership (including those working in finance) are put under pressure to ensure that “these arrangements are aboveboard”. At the same time, many patients have a need to be heard as consumers, many of whom may not be in favor of the merger. The challenge for hospitals involved in mergers is both recruiting and retaining highly talented staff.
  • Achieving regulation and compliance requirements: Hospitals and healthcare providers need to ensure they meet regulations. These guide everything from daily practice to patient confidentiality. The challenge for many hospitals is ensuring they have the financial resources to meet these conditions without ‘cutting corners.’

The Challenge for Community Health Clinics

community health centersCommunity Centers /Outpatient Clinics face a different challenge than other healthcare providers. As the primary care resource they provide services for “…approximately 24.3 million low income individuals”. Community Centers also experience a higher rate of turnover than other providers. Maria Castellucci, writing for Modernhealthcare.com says, this high level of stress is “associated with caring for complex patients on a fee-for service model”.

However, community / outpatient centers fare no better under the current fee for value system. In addition to the challenges of caring for a challenging population, that few can, they are now required to meet performance metric criterion.

Research published in Health Affairs suggests that this has contributed to further workplace dissatisfaction and burn out. Their study showed “outpatient clinician and support staff’s professional satisfaction declined as much as 10%. While burn out increased by 8%.”
(http://www.modernhealthcare.com/article/20170807/NEWS/170809913/push-for-value-based-care-fuels-burnout-at-community-health-centers) 

The Challenges for Rural Healthcare Providers

According to Randy Haught and team, deep Medicaid cuts could see funding caps for low income Americans. If these predictions are right, there will be higher rates of uncompensated care. As well as, decreased hospital operating margins. These changes will particularly affect rural hospitals and those facilities in Medicare expansion states.

On a positive note, the welcome introduction of the Fair Medicare Act has sought favor with Mississippi Senator Thad Cochran and others. Cochran says that this reform could change the current Medicaid reimbursement formula. Under the current system, an area wage index is built around area labor costs. This index decides the amount Medicare compensates hospitals for their services. Under the regime before the introduction of this reform, hospitals in larger metro areas received more than hospitals in rural communities.

rural hospitalsSenator Cochran said, “Empowering rural hospitals with the right services to treat patients in their own communities is critical to improving health care access in Mississippi,”
(https://mississippitoday.org/2017/08/09/more-medicaid-money-for-mississippi-in-new-federal-proposal/)

Beside Cochran, a host of other senators supported this act including Jonny Isakson, who said, “This legislation would address the discrepancy in payments, help to prevent future closures of hospitals in medically underserved areas, enable hospitals to boost wages in economically struggling regions, and ensure patients have access to emergency and needed care.”  (https://www.isakson.senate.gov/public/index.cfm/news-releases?ID=8C9FF727-4CE9-4F94-9869-CCCCB6390321)

In conclusion, like many other industries, the healthcare industry is driven by results. At present, providers of all sizes need to meet the steady flow of performance criteria. Under the current reimbursement conditions, healthcare providers are required to meet a seemingly never ending list of metrics. This has introduced a new set of challenges for community / outpatient centers. Not only do these providers treat a complex patient population that not many can, they also are required to meet performance criteria. As research shows, this has increased employee dissatisfaction and resulted in a higher rate of burn out.

Even though larger health systems in comparison to smaller providers have much more robust financial resources, they still have their challenges. Under the current climate, health systems are under pressure to keep up with daily innovations and cutting edge research. They are very cognizant that if their patients do not get the best value and highest quality, it is likely that they will shop elsewhere.

To end on a positive note: reimbursement conditions look like they are changing to favor smaller providers such as rural hospitals. If proposed changes are made to create “a level playing field” for rural providers, it will not just be positive news for them, but for the entire healthcare industry.

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