Revenue is not a goal; it is an outcome.
Healthcare providers, hospitals and other services, have struggled for the last decade to maintain sustainable revenue for survival. This has been exacerbated by the pandemic changing borderline net revenue to worsening losses. Many have instituted new practices to acquire more revenue not realizing increased revenue is not a goal, it is an outcome.
In today’s healthcare world, it seems to be all about revenue. Hospitals and healthcare systems and all the other ancillary services operate at such a slim profit margin. As a matter of fact, healthcare consulting firm Kaufman Hall has said that hospital operating margins remained narrow in March, at 1.4 percent, not including federal relief aid. The median hospital operating margin was 2 percent. Jim Blake, managing director at Kaufman Hall, stated that “over the course of 2021, however, we project hospital margins could be down as much as 80 percent, and revenues down as much as $122 billion compared to pre-pandemic levels, as hospitals continue to feel the dire repercussions of COVID-19.”
As a result, there is a need, a desire, to increase revenue for survival. This also includes physician practices, labs, dental and ophthalmologic offices, chiropractors, and the entire gamut of anything considered part of healthcare. Yet, if one asks who is responsible to gain this revenue, there is a lack of ownership; no one feels that it is up to them. That is part of the problem.
The natural response is to find ways to increase revenue, and this would typically fall under the realm of revenue cycle. Yet, is increased revenue a goal, or the result, as an outcome? Revenue cycle is a broad, overarching department. If all the various areas of healthcare, hospitals and non-hospitals alike, took a hard look at their processes, they could definitely identify areas that would provide the outcome of increasing revenue. In addition, clinical revenue cycle – a subset of revenue cycle that includes utilization review, case management, clinical documentation integrity (CDI), physician advisors, and coding – is an extremely variable component, and plays a major revenue role. Let’s simplify this working concept and then consider a real example.
If one focuses only on the result of cash, they will never get there. What is the activity needed to get there? Activity breeds results? That activity involves a process. A “process” is a series of events that lead to a desired result. If you have a bad process, you will get bad results. And if you automate the bad process, you will get bad results faster. Whatever the process, it must be visualized and committed to. Hence, the first step is to make a decision and commit to it. That’s the hardest part.
This may seem like an oversimplification, but why complicate it? The more complicated one makes it, the more complicated the process. But it is not just a matter of saying “we need to increase revenue.” One must think about what needs to be put in place to achieve that outcome, or, said in one word, “how?” Let’s take a look at a simple example, getting to Disney World from where you live. Disney World is not really the goal; it is the outcome, the result, of the process, the planning, the “how” do we get there.
How does one commit to the process? It is by asking some questions. Here are five basic questions to ask in order to get started. Understand that these are only general principles to consider, because every institution that is looking for change is unique, with their own set of challenges. Even a system with multiple facilities will have unique challenges .
What are the pain points? What keeps you awake at night? These are key questions.
We have all heard the expression “the devil is in the details.” What does that really mean? According to its accepted definition, the phrase is an idiom that refers to a catch or mysterious element hidden in the details, meaning something that might seem simple at first glance, but will take more time and effort to complete than expected. Whether you are in training, new to your position, seasoned at your role, or otherwise, you are always faced with the challenge of increasing revenue. In deciding what you want to accomplish, there are two aspects that must be taken into the equation:
It is important to understand the difference between the two, as it can have a profound effect on the outcome, the results. We have all heard the expression that “perception is reality,” yet not everyone involved in a situation will have the same perception, as their view is based on their own experience. Here are some definitions:
According to Jim Zelem, a process improvement coach, “experience is one of the best teachers there is. We learn so much from our experiences, regardless of whether they are good or bad. We will remember a bad experience and make sure we don’t duplicate it. Yet, when applicable, remember the lesson. On the other hand, we incorporate the good ones in our life.”
“Perception acts as a lens through which we view reality,” Zelem said. “Our perceptions influence how we focus on, process, remember, interpret, understand, synthesize, decide about, and act on reality. In doing so, our tendency is to assume that how we perceive reality is an accurate representation of what reality truly is.”
Why is this distinction important? Your decision on what you want to accomplish must be based in fact, not perceptions. Your perception may be that the entire route to Disney World should be easy to travel. Experience will tell you that there may be areas of unknown construction, the weather may change, and other unknown factors may arise.
Chances are, you are not going to make major changes in these uncertain times, but look at improving processes, and eliminating bottlenecks and constraints. Will you be adding new services, changing your payor mix? Probably not, but is your present framework running on all cylinders?
Think about direct versus indirect costs. In today’s world, with COVID-19, needs of patients have drastically evolved, and the demands on healthcare have been immense. These circumstances may be in place for now, but as our population ages, how much will be needed to rely on available resources? Other factors to consider are the cost of repairing or replacing older equipment, new medications, treatments, decreasing payor reimbursement, and more.
It has been said by many in the industry that the healthcare system is so complicated and broken, with so many variabilities, that preventing problems is almost impossible. Healthcare providers are constantly working on correcting problems instead of preventing their occurrence. A corrective action will fix the undesirable event after it has already occurred; however, it rarely gets to the root cause. Prevention, on the other hand, gets to the root cause.
Is it really that complicated to prevent challenges in healthcare? Other industries facing similar challenges seem to have done it successfully.
The bottom line is: you should know your why’s.
This is really fairly simple to think about. Whether you are new to an organization or fully entrenched, there should be information available to provide background, along with results, of previous efforts. What needs to be asked is: did it work? If yes, continue that process with review and modification. If not, why didn’t it? Find the answer to that question and re-evaluate.
Remember these three principles:
This is not an option. Goals should be SMART:
Indicators of success will reflect your SMART goals. A great way to achieve this is to set up a dashboard. Your car has a dashboard that measures very specific functions; hence, your specific goals for your process and projects must be outlined. You must be able to measure where you are, compared to where you started and where you want to be. Your car dashboard also has the ability to provide warnings, such as when there is engine trouble, gas is low, or the engine is overheating. So too you should have warnings in your dashboard: parameters that you can set ahead of time. When it comes to improving revenue, depending on what you are trying to achieve, what can you measure and get warnings on, when it comes to direct and indirect costs? Here are a few examples:
Are you meeting your timelines? Why or why not?
Conclusions
All healthcare providers are facing unprecedented times, with decreased profit margins, for a multitude of reasons. This is not just limited to hospitals, healthcare systems, and direct patient care. It encompasses the entire healthcare delivery system. There is an overwhelming need for maintaining sustainable revenue for survival. There is no single cause to this, and therefore, there are no single or simple solutions. Every industry goes through this at some point. I guess it’s our turn. Why can some companies fix it, but the healthcare industry claims it’s too complicated? The one difference is the mindset. It’s not part of the system. Realize that these recommendations are scary, but the only way you get better is practice, practice, practice. There will be hiccups, like with any change, but you need to practice and embrace the need for change.
Change is inevitable and needed. Just remember this:
Revenue, cash, is not a goal; it is an outcome. Presented here were some basic questions you can ask yourself to find your solutions. Are you willing to take the high road?
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