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Beyond COVID-19: How will Healthcare Providers Treat Their “Financial Epidemic”?

The coronavirus (COVID-19) pandemic has resulted in a chaotic and uncoordinated response, leading to a “financial epidemic” for healthcare providers who are struggling to resuscitate their rapidly declining revenue streams and margins.

Across the board, hospital revenues in March 2020 were down 13%, while EBITDA margins fell more than 100% from the same month last year.

Source: Hospitals Take Financial Hit from COVID-19 in March, Kaufman Hall

Here, you'll find a strategic and actionable 3x3 Response Matrix which if deployed and executed, can help hospitals and health systems maximize revenue realization, increase, and accelerate value-based care reimbursements, and lower operational and supply chain costs, resulting in positive impact to both the top and bottom line.

How can hospitals and health systems proactively respond to improve revenue realization, increase reimbursements, and reduce operating costs to affect margins?

1. Maximize Revenue Realization

As COVID-19 continues its spread across the world, hospitals have postponed elective surgeries (including cosmetic surgery, hernia repair, and cancer operations) and non-emergency procedures. Hospitals are down to procedures that need to be done quickly for a patient's health, such as fixing broken bones or performing appendectomies.

Key Business Processes and Use Cases to Address and Action:

  1. Accurately code COVID-19 procedures and services with the right ICD-10 codes to ensure rapid reimbursement without denials.

  2. Monitor and identify root causes and address these to minimize denials, which will accelerate revenue realization while reducing unnecessary and avoidable administrative costs.

  3. Proactively identify the most valuable elective surgeries, specialty care, routine and diagnostic services aligned with patient demand, which are also the most profitable for the organization and augment both the top and bottom line.

Strategic Readiness Questions to Inform Your Revenue Realization:

  • How accurate is your process for coding COVID-19 processes and services with the right ICD-10 codes?

  • Is the process of identifying root causes of denials and addressing them manual or automated?

  • Do you have predictive analytics to proactively identify fraud, waste, and abuse related to claims at this time?

  • Can you rank-order and prioritize the most in demand elective surgeries, specialty care, routine, and diagnostic services which also drive large volumes (revenues) and are also profitable for your organization, with predictive analytics?

2.Increase Value-Based-Care (VBC) Reimbursements

Of the $3.6 trillion in healthcare spending in the U.S. in 2018, 40% were under fee-for-service, while another 25% were fee-for-service with a value-based care component, with pay-for-reporting and/or pay-for-performance (P4P) incentive payments. The CMS has re-aligned alternative payment models (APMs) with greater accountability and downside financial risk. In these risk-based APMs, providers are accountable not only for the savings they achieve thru the model, but also the financial losses. Going forward, if providers with APMs with downside financial risk exceed their spending benchmarks, they must repay a part or all the losses to the payer.

Key Business Processes and Use Cases to Address and Action:

  1. Deliver and report on a “single version of the truth” on VBS costs, KPIs, and metrics including HEDIS measures.

  2. Enable a risk-based approach to accountable care organizations (ACOs) and population health management (PHM) to lower length of stay (LOS) and 30- and 90-day re-admission rates.

  3. Improve and report on pay-for performance (P4P) and pay-for-reporting (P4R) for higher incentive payments by integrating, blending, and prepping data from electronic health records (EHRs), revenue cycle management (RCM) and other healthcare IT systems, thru advanced self-service artificial intelligence (AI) and analytics.

Strategic Readiness Questions to Inform Your Revenue Realization:

  • Do you have a risk-based approach to patients and population health management (PHM)? How effectively can you score, segment, and stratify your patients based on their chronic conditions, co-morbidities, allergies etc.?

  • Are you using machine learning and predictive analytics to proactively identify and segment patients in the hospital based on risk and prioritize them for advanced care protocols and care coordination?

  • Do you have advanced self-service AI and analytics platforms in place which will enable automated workflows to power easy-to-consume visual analytics dashboards for your HEDIS measures as well as your pay-for-performance (P4P) and pay-for-reporting (P4R) KPIs and metrics?

3.Improve Operational Efficiency and reduce Costs

The largest area of spend involved in running a hospital is labor (human resources) followed by supply chain management (SCM). Given the financial crisis, hospitals and health systems have already addressed the former through furloughs, layoffs, and executive pay cuts, which makes operations and supply chain management (SCM) the logical targets for potential cost savings thru efficiency and productivity improvements as suggested below.

Key Business Processes and Use Cases to Address and Action:

  1. Identify and secure the most strategic locations for the next hospital, testing facility, or warehouse based on provider to patient ratios, patient demographics and distance traveled etc., to increase buffer capacity for the next epidemic or disease outbreak.

  2. Maximize ICU/ED, OR, and observation room use (the most expensive assets in any hospital) to not only improve patient throughput and satisfaction which are reflected in HCAHPS (Hospital Consumer Assessment of Healthcare Providers and Systems) scores but also augment revenues.

  3. Monitor, measure, analyze, improve, and control off-contract aka “maverick buying” of expensive drugs, devices, and equipment to save millions in avoidable costs.

  4. Dynamically re-plan for emergency response inventory (ERI) such as PPE, ventilators, N-95 masks, and balance these against the needs of “business as usual” especially as the volume of elective surgeries, specialty care, routine, and diagnostic services starts to come back and gradually increase as COVID-19 discharges increase, release cash flow from returning unused and expensive ventilators, testing kits etc., that will be unused.

Strategic Readiness Questions to Inform Your Revenue Realization:

  • Can you integrate, prep, and blend data from multiple healthcare IT (HIT) systems like ERP, EMR (Electronic Medical Records), revenue cycle management (RCM), procurement etc., without hiring a small army of consultants to do so?

  • Can you empower your supply chain analysts with accurate, reliable, and automated descriptive, spatial, predictive, and code-free visual analytics platforms and tools to enable them to accurately forecast and then position supply to respond to a rapidly changing landscape or disease outbreak?

  • Can you empower your supply chain data scientists with code-friendly, self-service AI+ analytics platforms which enable them to work with their machine learning and natural language processing (NLP) algorithms to enable robust scenario and strategic planning and what-if analysis?

  • Can you empower your C-suite and line of business (LOB) leaders with accurate, reliable, and right time decision support, enabling actionable insights for them to make critical decisions that prevent supply chain disruption and minimize financial losses?

Disclaimer: The perspective and views expressed in this blog post are my own and do not represent those of my current or previous employers.

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