When every penny counts: Financial optimization for healthcare

8/6/2020
When every penny counts: Financial optimization for healthcare

As patient volumes fall and sources of revenue dry up, how can hospitals stay solvent?

For large health systems and community hospitals alike, cash flow might not present an existential crisis quite yet. But as COVID-19 efforts recently have absorbed much of their resources and some elective procedures have been put on hold for months now, there’s a real concern that lower patient volumes over the long haul will create a major financial crunch for a lot of them.

According to a Crowe analysis, except for New York and San Francisco, patient volume in U.S. health systems decreased by more than half between March 1 and April 15, producing a net revenue decline equivalent to more than $1.4 billion per day during that time span for all hospitals with more than 100 beds.

In a normal environment, hospitals that need a financial boost can explore adding or expanding service lines, concentrate on revenue collection, and look at opportunities on the cost-containment side. With uncertainty still surrounding COVID-19, changing service lines isn’t really an option for most hospitals right now, so the short-term focus likely will be on keeping expenses down and bringing in cash from existing services.

 
Cash flow and liquidity
Protect revenues, control expenses, and keep your operations up and running.

Financial optimization can provide a great deal of bottom-line value in these areas for healthcare organizations of all kinds. This isn’t just the usual cutting of discretionary costs, nor is it simple head count reductions. It’s a fundamental rethinking of how resources are allocated, what can be automated, and how net revenue is analyzed and optimized.

On the asset side of the equation, the pandemic provides an opportunity to assess possible cost reductions by eliminating excess nonproductive capacity. These often include high-cost imaging and surgical assets that have low utilization and financial performance and carry large, margin-crushing cost structures (such as lease, depreciation, maintenance, supplies, and staffing).

On the cash side, it’s no secret that many hospitals still rely on labor-intensive methods of managing functions such as cash reconciliations. This is slower, less accurate, and more expensive than it needs to be. With automation and centralization delivering better outcomes, staff might be redirected to areas requiring more critical thinking.

These capabilities can help:

  • Drive operational efficiencies
  • Streamline and reduce risks with financial and administrative processes
  • Provide information to make better-informed decisions

On the analytics front, ask yourself how well you are interpreting the slew of data your organizations generate on a daily basis.  Do you understand net revenue each month, or do you tend to run out of month before running out of explanations? The ability to analyze and interpret the mountains of data being collected is no longer a luxury.

If you foresee fiscal challenges, get ahead of them with technologies designed to drive financial optimization. It’s not as difficult as you might think, and it can position you for success in the new reality.

Discover more opportunities at Crowe Healthcare Summit 2020.

Want to learn more about financial optimization? Want to discuss key healthcare industry trends with your peers? Attend this virtual edition of our popular conference, taking place Sept. 21-24.

Make every penny of revenue count.

Our team of healthcare finance specialists can help you figure out ways to quickly reduce your costs and help you make more informed asset management decisions.
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Bryan Rector