What is the business of hospitals today? Why are they in the business of providing excellent healthcare facilities? Why do payers get away with only paying 30% of every dollar earned? Would receiving 100% of what they earn on every procedure, diagnosis and treatment be mythical? Do hospitals truly earn the amount they charge?
These basic questions have been the foundation for getting into the hospital business, and they are the basis for reevaluating whether to stay in the hospital business today. If you were seeking an investment that would deliver good ROI, would you choose a hospital knowing that they would only likely receive 30% of every dollar earned, and only after fighting tooth and nail for it?
Would you be more inclined to invest if you learned that what they bill is sometimes 20 times higher than what it costs? Hospital executives are a shrewd bunch. They know they have to operate profitably in order to ensure they’ll have access to capital for the new equipment, talent and facilities they must build.
Improving their financial position comes in two flavors:
- Keeping as much of what they earn.
- Earning more as a result of improved cash flow and new revenue streams.
Many financial healthcare consultants focus on the first one, helping to infuse processes that eek out as much lemon juice from the current lemons, er, um, ...billed amounts. Collections is a very active business to be in today. At a recent healthcare conference I noted that 70% of all the exhibitors were offering some sort of factoring play. “Give us your receivables over 90 days and we’ll guarantee 30% today!”
It seems far fewer creative consultants are in the development side of revenues. What can hospital decision-makers do to improve their revenue production? How about adding products and services that patients would willingly pay for out-of-pocket? How about new service lines that leverage the hospitals’ current assets such as digital imaging and lab equipment? How about programs that bring in the community to achieve better health while fostering a collaborative and engaging environment that puts patients in a position to choose your hospital the next time they are in immediate need. How about creating a loyal base of physicians and patients that produce ongoing work as per the continuum of care they’ll need for the rest of their lives.
We in the current healthcare management system need to cease reacting to every change thrust upon us by competitive and regulatory market forces swimming around us. We need to take charge of our destinies by innovating the business of healthcare. We need to ensure a healthy financial and service environment by experimenting with new ways to deliver care, and equally important, the message of well-delivered care. We need to continually ask: Are there other revenue streams we haven’t considered that offer opportunities for the organization to grow?
As it turns out, there are hundreds. As a business consultant to healthcare organizations looking to grow their organic revenue, we have found scores of opportunities to help our clients grow the number of revenue streams and the flow of cash within existing revenue streams. The successes continue to mount because each health organization is a different mix of assets, customers, and competitors. It is the evaluation of each of these that produces the most traction to grow their serving opportunities, and realize them with significance and sustainability.
Examples of these successes include learning how to connect directly with fee-paying consumers, dramatically ramping high-margin revenue producing activity by all physicians, and offering a complete selection of goods that can be purchased through the hospital’s DME product inventories, including, strangely enough, impulse-buy items that speak to patients’ sense of immediate gratification.
Each innovation in revenue production is unique. Each launch must be carefully matched to the current service line mix and to the potential for continuum of care services offered by the institution and its team of medical professionals. We believe in launching pilot programs to test marketability and preferences when assessing a new revenue opportunity. Each pilot is carefully packaged to meet expectations of the market, and to mirror the branding the hospital currently enjoys with its existing customers.
And we learn from each experiment what will work and what won’t. The point is that hospitals must begin to position themselves for new ways to serve and deliver the best of American healthcare, and they must begin today. Staying with the status quo is a recipe for the demise of American healthcare superiority and for the demise of your health organization along with it.
-----Michael
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