Growing through Analysis
It’s a Huge Myth That Hospitals Are Making Lots of Money
If your hospital has a positive margin derived mainly from investments, fundraising and other capital sources, that’s a problem. While security investments are good, the goal for every organization is to have a positive margin from operations alone. That is key.
Balancing Optimization and Growth
Hospital margin growth is important, expansion is important but if your new service line has a minimum or even negative margin and isn’t capturing all possible opportunities it seems misplaced. When it comes to optimization versus innovation both are important, but I would rather optimize than grow a negative problem. Innovation can play a key role in reducing costs, but there has to be accountability. There’s a balance between knowing when to move on from optimization towards innovation and growth.
Regular Data Analysis of Hospital Margins Ensures Accountability
Data analytics impacts the way we analyze outcomes, from hospital discharge to readmissions, Social Determinants of Health (SDOH), and from managed care to cost. There are probably over 100 different ways data analytics can be applied to healthcare performance but in general, it is underused. I encourage hospitals to have a list of all areas they utilize data analytics capabilities.
Vendor Negotiations Have a Direct Correlation on Your Margins
A study of the Fortune 1000 companies with a systematic negotiation process versus those without found a difference in the profitability of almost 14%. Vendor negotiation directly affects your hospital’s profitability and is tied to financial outcomes. Think about the volume of contracts your hospital manages, whether related to costs, reimbursements or joint venture agreements. The more skilled you become at negotiation and implementing a vendor negotiation strategy, the higher your financial reward.