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The Expenses Every Hospital CEO is Worried About

Lauren Ruef

The Expenses Every Hospital CEO is Worried About

Most people think a hospital CEO's number one concern is the impending shakeup of the Affordable Care Act and its impact on the health care industry.

While government mandates for healthcare are important, they fall second on the list of concerns ranked highest on a hospital executive's mind.

What's in the number one spot?

Financial challenges.

The American College of Healthcare Executives' (ACHE) annual survey of hospital CEOs found that for the 13th year in a row, hospital executives ranked "financial challenges" as their number one concern. If you're hospital staff, this probably isn't surprising. 

According to the ACHE, the concern revolves around three things: Medicaid reimbursement, rising costs for staff and supplies, and the effort to reduce operational costs.

 

Medicaid reimbursement

To understand these challenges, let's find out what happened in the wake of the Affordable Care Act (ACA) legislation. The ACA, passed in 2010, had the primary goal of reducing the number of uninsured and reducing healthcare costs nationwide.

The ACA achieved this by rewarding hospitals that met value-based care criteria for Medicaid reimbursement. By reimbursing hospitals based on patient satisfaction, rather than volume of services provided, the ACA turned many principles of patient care on its head.

Hospitals were unprepared for the ramifications this transition would have on their revenue.

Those changing requirements for how hospitals receive Medicaid reimbursement had executives scrambling to do more with less money. This caused a shockwave within hospital budgets as they juggled the realignment with lower margins. 

Adhering to ACA's value-based care criteria for Medicaid reimbursements meant one thing for hospitals—less capital upfront to invest in other areas. This added pressure on bottom lines for many health care providers.

With this in mind, let's explore the other two reasons hospital CEOs named as cause for concern.

 

Increasing costs for staff, supplies, etc.

Being understaffed is a chronic problem for most hospitals. But, quality of patient care is dependent upon the availability of good staff that the hospital may or may not be financially prepared to hire. With this added pressure to the budget, hiring freezes can create even more tension for a hospital already operating on a shoestring budget.

Supply-costs add another dynamic to the problem. Many hospital supply chains are not automated, meaning there is excessive waste or expiration of products as medical supplies are not tracked closely. Lacking visibility, healthcare providers will simply overbuy in attempts to cover their bases when favorite supplies are looking scarce.  

On the logistics side, this creates a visibility nightmare as it's impossible to know what number of supplies are in real-time circulation within hospital walls.

 

Reducing operating costs

For any business, reducing overhead is essential to staying profitable. This means taking a second look at forgotten areas of the hospital that are overdue for automation or are stuck with inefficient and costly legacy processes.

One of these places is the hospital back office.

Alongside getting paper check payments to suppliers, many hospitals are dealing with processing patient reimbursements on top of regular tasks. Here's how it plays into the larger scope of the problem:

Quality of patient care suffers when hospitals are not operating at maximum efficiency. When the back office is in disarray or needs to hire additional AP staff to process payments manually, other areas of the hospital that directly serve patients, suffer. And when supplier relationships are compromised after payments are delayed or missed, the best quality medical supplies move out of reach when suppliers find a customer who pays them faster. In the end, the entire hospital loses out.

 

Why automation in hospital AP departments is long overdue

Admittedly, the back office is the last place hospitals look to automate. With competing budget allocations for life-saving emergency equipment or hiring budgets for more nurses, who could make the argument?

The thing is, supplier payment automation isn't just the short game. It keeps generating new revenue (with card rebates earned over time) so that the hospital can make continued investments in automation. Need that life-saving new rapid blood transfusion technology in the Emergency Room or more beds in your Labor and Delivery unit? A little extra cash can make a big impact on hospital units that serve the most patients.

Like the supply chain, back office operations touch crucial relationships with hospital suppliers, ensuring these relationships are supported so doctors and nurses have the best possible supplies to care for patients.

Not to mention, paper checks aren't something that would just be nice to get rid of, it's actually costing the hospital extra money in bank fees to process check payments and the inaccuracy of manual errors.

Payment automation moves willing suppliers to credit card payments, ensuring suppliers are paid on-time, payments are made securely, and payment data is available digitally for audits or verification purposes.

 

Not your average bank card program

A payments automation provider can do more in reducing costs and generating revenue in your hospital back office than a traditional bank card program, if you have one. Here are the differences between a bank card program and a full-service payment automation provider.

 

Some vs. All suppliers enabled for electronic payment

While only some suppliers are enrolled to receive credit card payments with standard bank credit card programs, with an automation provider, you have the added benefit of 100 percent supplier enrollment in some form of electronic payment.

This means no maintenance of payment types or housing supplier data in-house. It's all outsourced to the automation provider who handles incoming questions related to payment.

 

Earn rebates annually after reaching payment spent threshold vs. Generating monthly rebates without the fine print

Many bank card programs operate on a tiered rebate structure, meaning that you only earn rebates after a certain payment spend threshold is reached. With a full-service automation provider, you can earn rebates without waiting until the end of the year.

 

Managing separate payment workflows vs. sending one file with all payment types

When you enroll in a bank card program, the AP department is still responsible for processing card payments and supplier follow-up after payment is made. With each payment type requiring a different workflow, this can consume a massive amount of time in the back office.

Also, if the supplier is waiting to receive payment via card, the supplier must call to receive the rest of the card numbers to process each payment, turning into an unwanted game of phone tag,

With payment automation, hospitals have access to a network of suppliers already enabled for electronic payment and can include all payment types within a single unified payment file. No divergent workflows for credit card payments or manually tracking down paper checks.

The financial challenges of hospitals requires staying lean. How can the hospital transform manual processes into revenue generating opportunities that serve the greater purpose of better patient care?

The answer lies right beneath most CEO's noses. Many don't see the connection with streamlining operational processes and serving patients more efficiently. But it takes a bit of digging to discover that the more automation a hospital embraces, the more competitive it will stay in the current healthcare climate.

 

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