McKesson - Performance Strategies

Making Do with Less in
the Current Economy

Richard L. Clarke, DHA, FHFMA
President and CEO
Healthcare Financial Management Association (HFMA)

Taking the Pulse of the Healthcare Economy
Turmoil in the financial markets and a deepening recession have affected all sectors of the U.S. economy. Although healthcare has been described as a "recession proof" industry, the events of recent months have refuted that notion. Based on HFMA survey findings, there are several reasons this recession is different from those of the past when it comes to healthcare.

Turmoil in the financial markets. This turmoil has resulted in tightly constrained credit markets, which makes it difficult for hospitals and health systems of all sizes to access capital. In addition, declining investment portfolios are pulling down non-operational revenue from both investment income and philanthropic donations.

Lower patient volumes. Fifty-five percent of hospitals responding to our survey noted lower inpatient volumes, with 27% of these hospitals reporting declines of 2% or more.

Increasing bad debt and charity care expenses. More than 60% of our survey respondents noted that changes in bad debt and charity care expenses have had a negative impact on financial performance, with almost one in six indicating that this negative impact has been extreme.

HFMA will continue to provide information about the scope and nature of healthcare's economic health, along with specific steps healthcare organizations can take to support their missions and their competitive positions. More information on the survey is available on the HFMA Web site at www.hfma.org.

Strategies to Survive the Current Environment
Hospitals can take several steps to meet these challenges to their economic health.

1. Hospital leaders must communicate the seriousness of this
    downturn and its actual and potential impact on the
    services provided by the hospital. This message should be
    shared with hospital staff, board members and the
    surrounding community.

2. Hospitals must focus on being low-cost providers. They
    should focus on rooting out and eliminating inefficiencies
    and waste while improving the quality of patient care. This
    will require an organization-wide commitment to redesign
    care and service processes to achieve sustainable
    improvements that reduce cost and improve quality.

3. Hospitals must preserve cash to get them through difficult
    economic times. They should redouble their efforts to
    reduce denied claims, reassess their risk tolerance, and
    scrutinize capital investment plans in terms of return on
    investment and impact on patient care.

Everyone's in the Same Boat — Patient and Provider
As hospitals are called upon to make do with less, they must remember that many of their patients are in the same position. Factors that contribute to rising bad debt and charity care expenses include:

  Increasing copayments and deductibles for many patients
         fortunate enough to have employer-provided health insurance.

  Increasing numbers of the uninsured and unemployed.
         Not-for-profit hospitals must be especially sensitive to the
         needs of these patients.

Making do with less requires careful strategic planning and clear communication. It also requires a consistent focus on mission. Healthcare has gone through difficult times before and has proved to be a resilient industry. By acting wisely today, hospitals can ensure that they will survive and be able to provide even greater value and service to their communities in the future.

Dr. Richard Clarke has served as President and CEO of HFMA since June 1986. He has held executive positions at major healthcare systems in Colorado and Florida. Dr. Clarke has also served as the former chairman of the Accrediting Commission on Education in Health Administration (ACEHSA), and AHA Financial Solutions, Inc. (a wholly owned subsidiary of the American Hospital Association). He holds an adjunct faculty position in the Department of Health Systems Management at Rush University in Chicago. Dr. Clarke has been named to Modern Healthcare magazine's list of the 100 Most Powerful People each year since the list's inception.


	A November 28, 2008, article in the Washington Post reported that an initiative in Virginia's Howard County, which was established to help secure care for the needy, uncovered a surprising fact. Once the county started to enroll the residents, they discovered the residents were already eligible for assistance from federal, state or nonprofit programs. The article reports that a study by the National Institute for Health Care Management found that nationally about 12 million of the non-elderly uninsured (1 in 4) were eligible for programs, but were not enrolled. The study by the non-profit group, which is partly underwritten by insurers, found there are several reasons the eligible may not be taking advantage of coverage. In addition to not being aware they are eligible (often not realizing they are at or below the poverty line), they are discouraged by the complexity of the paperwork.or are embarrassed to apply for assistance. Read the article on the Washington Post Web site.


	To take its pre-service financial clearance processes to the next level, St. Elizabeth introduced automated insurance verification checking.

	Financial clearance tools, particularly eligibility verification, help Health Alliance improve the billing process for all — including patients.

	Mary Rutan Hospital gains benefits by quickly verifying patient eligibility on all major commercial plans, plus Medicare and Medicaid.

	With the numbers of uninsured and underinsured growing, financial clearance tools can help patients and providers know the payment picture upfront.
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