Are your expenses outpacing your revenue due to COVID-19? |
A Newsletter by Cara Cook Consulting |
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Our team of Healthcare Industrial Engineers created this newsletter to share the industry's best practices with leaders who can apply operational efficiencies in their daily work. |
Revenue degradation experienced due to the COVID-19 pandemic is impacting hospital finances across the country. Suspension of elective surgeries and procedures threatens the viability of many healthcare organizations. As suspensions are lifted, it is uncertain if patients will schedule elective surgeries and procedures due to their fear of contracting COVID-19. High performing hospitals find themselves looking for opportunities to reduce expenses , even if temporarily, to avoid layoffs and keep doors open to serve their communities.
After decades of experience in the for-profit sector, our team has summarized some of the top impact expense management strategies. Continue reading for a high level view and check out our article for more details. |
As each healthcare facility is unique, what might be a huge savings for one facility, could have a much smaller impact for another. Quick prioritization of your focus areas will allow you to target the strategies with the largest impact on cost savings. |
Psst... don't forget to engage an interdisciplinary team at your facility to ensure a thorough cost-benefit analysis has been completed to assess the impact to operations before implementation. |
Accounting for the New Normal – 10 Ways to Slow Spending without Impacting Care |
After decades of experience in the for-profit sector, CCC has summarized some of the top impact expense management strategies. While some tactics are easy to execute quickly, others are more strategic in nature and may take longer to implement. |
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Elective surgeries - mostly paused due to the pandemic - are critical to hospital finances |
In these times of crisis, you might expect that hospitals are raking in the profits. After all, they are, literally, on the front lines of dealing with the pandemic...The reality is far more complicated. The COVID-19 outbreak's effect on the industry has been harsh. |
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Hospital CFOs in Boston, NYC offer advice to colleagues amid pandemic |
Across organizations, executives have adjusted their strategies and operations as lower patient volumes dampen revenue streams. CFOs from hospitals and health systems in states hardest hit by the public health crisis share their top priorities and key advice. |
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TOP 10 WAYS TO SLOW SPENDING |
1) Institute a daily productivity management culture
The most important labor management strategy for any hospital is to establish a daily productivity management culture. Daily productivity management includes two primary components. The first is increased performance visibility through department-level reporting, reviewed daily by department and C-suite leaders. The second is a support and accountability structure through daily action plan creation and results monitoring. Many hospitals review productivity results on a weekly, bi-weekly, or monthly basis. High performing hospitals review productivity daily. |
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2) Align staff with workload through demand matching
Demand matching is the process of aligning staff to workload by time of day for any area where staff are organized into shifts. In order to effectively analyze demand, accurate hourly workload, or patient census, information is required. Once demand by hour is quantified, review with the department leader to compare results with their experience and brainstorm revised schedules and shifts required to meet the demand. |
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3) Ensure nurse staffing grids align with budget
Another straightforward labor expense management tactic that is commonly overlooked is nursing grid, or matrix, alignment to budget. Nursing unit grids are designed to be a staffing plan for each unit, as they assign a specific number of staff members for each patient census level. While most leaders operate under the assumption that nursing unit staffing grids are supportive of the budget, they are very commonly out of alignment. The exception would be rare cases where the facility uses an automated system that forces reconciliation to budget annually or as modifications are made.
Maximizing the effectiveness of nursing grid to budget alignment requires great attention to detail, but the impact is significant. |
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4) Analyze avoidable overtime and shift differential abuse
Identifying avoidable overtime (OT) and shift differential abuse is another top expense strategy that can provide timely bottom line relief. The first step is to establish categories for OT utilization and begin regular reporting by category. The table below is an example of categories that can be reviewed for appropriate utilization.
Developing reports for regular visibility into OT utilization by employee, as well as educating and supporting leaders to have conversations with staff, will drive timely improvement - especially if incorporated into a daily productivity management accountability structure. Trending employee occurrences on these reports will help identify frequent offenders for disciplinary action, if required. |
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5) Increase expense oversight and hardwire approval process
Mapping out the expense approval process within your organization can allow for expenses to be more controlled. The current process may provide appropriate oversight during normal operations, but in times of financial crisis, a more thorough review process may be warranted.
Some examples for tightening the process include CFO approval for all expenses over $1,000, CFO approval for all catering, CNO approval for contract labor on nursing units and CNO approval for all sitter hours. Often, heightened awareness around expense review discourages avoidable utilization of these expenses. Even though it adds review time for the C-suite, temporary high level scrutiny for expenses ensures all high-dollar expenses are thoroughly reviewed, discussed, and held if necessary. |
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6) Review off-contract expenditures and consider target area for contract review and renegotiation
Contract renegotiation opportunities hold huge potential for expense savings. Savings opportunities vary based on the size and scope of the contracts but typically 5% – 20% savings can be achieved with informed and aggressive renegotiation. Areas to consider reviewing include: Specialty Rentals, Capital equipment agreements, Plant Operations, IT&S and Telecommunications, Outsourced departments (EVS, Valet, Couriers, Lobby coffee service, Food and Nutrition, Security, and many more) |
7) Implement equipment management processes
Large equipment savings opportunities lie in establishing criteria to determine when to rent, return, or purchase equipment. Utilizing a clinical decision tree to drive specialty bed utilization can also be effective. Rental equipment needs should be based on current utilization and historical needs such as department census by month. With effective equipment management, a facility should see equipment utilization rates around 75%. |
8) Perform cost-benefit analyses for insourcing or outsourcing departments
The decision to outsource hospital functions or employ staff to provide the resources in-house can be difficult due to a variety of factors including potential damage to long-standing relationships with physicians or vendors and concern for staff impacted.
First, review low volume services and quantify the financial component, typically contribution margin. Once complete, quantify impact to operations and local intangibles like employee morale. Some have used an FMEA-like points system to prioritize areas for further discussion with the leadership team.
Discussions around insourcing and outsourcing should include representatives from all areas: finance, operations, culture, interdependent clinical programs, and more.
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9) Leverage department directors to identify additional opportunities
Your department directors are your greatest resource. Some have decades of experience in your hospital and most have significant experience on the frontline themselves. They can be aware of opportunities that may not stand out on a financial report. Ask them for ideas, with special consideration for high revenue and expense areas such as Surgical Services, Clinical Documentation Initiative (CDI), Pharmacy, Case Management, and Food and Nutrition. |
10) Review rent and lease agreements considering new opportunities to work from home
Evaluate non-essential employees for potential work from home or shared office space by reviewing job descriptions and evaluating team member needs. Alongside the employee office space needs assessment, also review owned office space availability and assess capacity. Review monthly expense and termination dates for each lease.
Finally, after weighing the cost of the lease against the needs of the staff, decide whether to continue or terminate the lease. Once complete, consider consolidation of real estate to identify office space you may not require in the future. |
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