Getting Ready for Healthcare Reform

As a healthcare professional, you would have to be living under a rock not to have heard about “bending the cost curve” as an integral part of healthcare reform.  But have you thought about what that might mean in your state, in your organization?

Anything that reduces the cost to deliver a unit of service, the total number of units required to treat an illness successfully, or the amount of other, more expensive services will bend the cost curve.  There has been much early attention on changes to reimbursement structures to change the production driven incentives that currently exist in fee-for-service models.  Hopefully, the reform legislation will create a fertile environment for demonstration projects that will find viable alternatives to the current reimbursement structures.

But any reimbursement model will still include benefits for provider cost efficiencies in delivering services.  Low cost providers will have competitive advantages for years to come, and will be able to have the financial margins to invest in technologies or creative delivery system ventures that position the organization for long-term success.  Low unit costs are also imperative to surviving the current environment of state budget crises and the near term future prior to the arrival of more thoughtful reimbursement mechanisms.

One of the most important aspects of managing costs is to ensure staff are producing reasonable levels of billable units—achieving targeted productivity levels.  Managing productivity is one of the most challenging aspects of provider operations.  As a manager, as soon as you take your eye off the ball, productivity is likely to fall.  And it falls much faster than it rises!

Consider the following example—For an organization with 55 FTEs who deliver services at an average rate of $100/hour, a 1% productivity improvement will yield nearly $100,000 in additional revenues (FFS billing), or reduce the staff needed to produce the same volume of services by 0.5 FTEs (capped reimbursement).  If this organization had been operating at breakeven, a 1% productivity improvement yields a 2% reduction in costs per hour.  You just can’t afford to ignore productivity as a healthcare provider.

We can all hope that there will be additional future revenue streams that reward clinical effectiveness as well as cost effectiveness.  In the meantime, those providers who manage staff productivity effectively are going to be in the best position to be successful in both the short and long term.

Stayed tuned for future entries on provider cost effectiveness and productivity.  Comments with proven strategies to improve staff productivity are invited!