In: Economics
The health care organization you are an administrator for is seeing a continual drop in operating income for the last 5 years. What steps would you take to analyze the situation in order to develop a strategic plan to address the drop in operating income? Remember that operating income considers both revenue and expenses.
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strategic plan to address the drop in operating income
Abstract
Hospitals today face many challenges including an economic recession, increases in uninsured care and growing competition for outpatient services. However, there are still many steps hospitals can take to increase their profitability amid these economic conditions.
1. Reduce staffing costs by using data to drive staffing decisions
Because labor is the largest single expense for hospitals, it is critical that hospitals are not over- or under- staffing their facilities.Hospitals leaders can consider the use of flexible staffing, such as part-time or hourly employees, and adjust staffing based on patient census data. Leaders should also monitor the efficiency of this staffing by continuously reviewing benchmarking data such as hours worked per case.
Flexible staffing is especially useful for OR nursing staff. OR managers should review clock-in times versus surgery-start times and determine if their staff is consistently arriving before a surgery actually begins. If this is the case, mangers can utilize flexible staffing to allow nursing staff to arrive later so that when surgeries run over, no overtime expenses are incurred
2. Reduce supply costs by better managing vendors.
Hospital leaders can reduce supply costs by working with vendors to improve contracts and encouraging physicians to make fiscally responsible supply decisions.Hospital leaders should not shy away from approaching vendors for discounts.Hospitals can also reduce supply costs be reducing the number of vendors. Goshen, for example, is in the process of reducing the number of vendors in its surgical suite and aims to eventually scale the vendors down to 4-6 companies.
3.Ensure that your OR is utilized by physicians efficiently
All hospitals can benefit from tightening up the efficiency of their operating rooms, but it is especially critical that less busy facilities ensure that their ORs are used as efficiently as possible.
"When physicians' schedules create gaps in the OR schedule, it effects a hospital's ability to staff effectively, which can create significant labor costs for the hospital"
4. Involve physicians in cost reduction efforts.
Hospitals should work to encourage physicians to become more concerned about the costs of supplies and other activities, such as unnecessary tests and inefficient coding processes that may drive up hospital costs.
Hospitals can encourage the use of products from vendors that are cost-effective, but still high quality, especially in areas such as orthopedic implants, which can be considerably costly for hospitals
5. Consider outsourcing the management of some services
During tough economic times, some hospitals may benefit from outsourcing or partnering with other organizations for certain services, such as food and laundry services, and even, in some cases, clinical services
6. Consider partnering with local physicians to reduce competition for outpatient cases
An increasing number of hospitals are joint venturing with local physicians and surgery center management companies to offer outpatient services through the development of a surgery center. hospitals are beginning to focus on the need for a comprehensive outpatient strategy and recognizing the need to partner with doctors to effectively execute on this strategy.
7. Grow case volume by attracting new physicians to your facility
Identifying and attracting additional physicians to bring cases to your hospital is another way that hospital leaders can increase profits. Physician-owned hospitals can bring in additional physicians as partners, while other types of facilities can recruit new physicians who are willing to perform cases at their hospitals.
8. Consider adding profitable service lines
Hospitals may also be able to grow case volume and profits by adding new service lines. However, hospitals need to be careful to do their homework on the expected profitability and ROI for any new lines added, especially in a market where access to the funds required to invest in new service lines may be tight.
9. Consider hiring hospitalist to manage inpatient care.
Hospitals that use hospitalist to care for patients can benefit from the more efficient care and better documentation that specialized hospitalist can potentially provide.Hospitalists may be the most reliable and cost-effective means available for hospital leaders to transform medical delivery in their health system
10. Renegotiate managed care contract
One of the most important ways that hospitals can improve their profitability is by continually evaluating and renegotiating their managed care contracts. Hospitals must demand their fair share of premiums from third-party players in order to subsidize the underpayment of Medicare and Medicaid,
Looking forward
Hospitals that focus on enacting these best practices are likely to
see improvements in their profitability; however, hospitals can
also benefit by using today's economic conditions as an opportunity
to improve their overarching approach to business, creating a more
sustainable organization in the future.
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