Improve Your Hospital Financial Performance
A thorough guide on the steps your hospital can take to improve its financial performance and reduce costs.
Table of Contents:
- Focus on reducing overall spending.
- Maintain a competitive edge.
- Utilize green initiatives.
- Keep readmissions down.
- Avoid wasteful testing and supply use.
- Enhance patient satisfaction.
- Make smart investments in health IT systems.
To maintain a strong hospital financial performance, it is necessary to review and update business practices regularly.
The goal is to Improve Hospital Financial Performance through proven and innovative strategies and techniques.
This guide offers seven ways to improve hospital financial performance
1. Focus on reducing overall spending to improve your hospitals financial performance.
The key to improving the financial performance of your health system is to reduce your spend, which is easier said than done. One of the most effective ways of achieving this is to reduce the number of suppliers your hospital works with
A single hospital may often work with hundreds of different suppliers across multiple categories of hospital supplies and equipment.
Aim to reduce the number of suppliers that your hospital works with by around 20-25 percent. This should help to reduce excess buying, while standardizing vendors and purchases.
Keep in mind that inventory management and the entire purchasing process are simplified when your hospital purchases from a lower number of suppliers.
Another effective way to reduce spend is to use energy efficient light fixtures. While this might not seem like a potent strategy for reducing hospital costs, lighting amounts to more than 15 percent of a hospital’s energy costs.
A single hospital can save anywhere from $750,000-$900,000 per year by switching over to energy efficient light fixtures.
2. Maintain an “innovative” edge
Medical technology is constantly evolving, and healthcare providers must keep pace with this rapid change to ensure patient satisfaction. While the cost of initial investment for cutting edge technology can be high, it’s possible to improve your profit margin by upgrading your technology and equipment on a regular basis.
An effective method to reduce hospital service costs is to provide more outpatient care via telehealth, which is becoming increasingly popular. Telemedicine offers improved accessibility and convenience for patients, while hospitals are able to deliver more efficient care and enjoy an increase in business.
By providing services virtually, your hospital profit margin should improve over time as your expenses fall and patients are offered more options for care.
New technologies make it easier to maintain a competitive edge and reduce your service costs. Virtual clinic kiosks are a great example of this, offering the following benefits:
- Kiosks are simple to set up and relatively inexpensive.
- Placing them in multiple locations should attract more patients to your hospital services.
- Kiosks are largely designed to deliver basic patient care, ranging from surgical follow-ups to routine care.
- Patients who utilize kiosks can avoid going to the hospital. This, in turn, can lead to increased revenue.
3. Utilize green initiatives.
Introducing green initiatives within your hospital can lead to a reduction in costs. Green initiatives encompass anything from upgrading your lighting system to obtaining preventive maintenance on current systems.
A reduction of just 5-10 percent in your energy bills can reduce your hospital costs by hundreds of thousands of dollars. Click To Tweet
A reduction in energy consumption is only one way to improve your profit margin by utilizing green initiatives. Additional strategies include:
- Insulating piping and equipment for hot water systems.
- Schedule preventive maintenance regularly, to avoid costly one-off repairs.
- Install green lighting deemed to be energy efficient.
- Increase heating and cooling in rooms and areas of the hospital only when they are occupied.
- Establish a baseline for energy usage throughout the hospital.
- Install renewable energy.
All of these initiatives will help to reduce hospital costs and bolster your hospital’s financial performance. For instance, cutting energy consumption reduces utility costs and is positive for the environment.
An effective way of reducing water consumption is to maintain piping and equipment throughout the hospital to eliminate the possibility of leaks. Water leaks can potentially damage hospital equipment and structure and can be expensive.
Improving your hospital financial performance doesn’t solely rely on cost reduction. It also requires you to plan for the future by avoiding high expenses.
A commitment to sustainability is also more likely to attract potential patients.
3. Keep readmissions down.
A focus on reducing readmissions must form a part of any cost reduction initiative.
A focus on reducing readmissions must form part of any cost reduction initiative in your hospital. Find out why. Click To Tweet
Hospitals with high readmission rates are penalized by the Centers for Medicare and Medicaid Services. It is estimated that one in six patients discharged from a US hospital is readmitted within a 30 day period.
The majority of readmissions can be prevented, resulting in an improved financial performance. Some effective strategies to minimize readmissions include:
- Analyzing patient data identifies individual patient needs to enable you to provide a full continuum of care.
- Follow-up care is also simple to implement and less expensive than the cost of a readmission.
- The costs associated with telehealth services for follow-up care should be significantly less than the cost of readmission.
5. Avoid wasteful testing and supply use to improve your hospitals financial performance
Redundant and unnecessary testing results in US hospitals wasting around $5 billion every year, costs which can be avoided altogether.
Wasteful testing should be relatively simple for your hospital to eliminate. In many situations, patients request unnecessary and often costly tests. Your frontline staff can reduce the number of redundant tests by discussing individual patient healthcare needs.
As for hospital supply waste, it is common for hospital supplies to be discarded without even being used. Some may be discarded due to the potential harm they may cause to patients (for example, due to contamination). However, a high amount of supply waste is avoidable by taking the following steps:
- Ensure that the supply room is organized, and expired products are discarded
- Order new supplies only when they are needed. This is easier when a strong supply chain is in place. which is made easy with a strong supply chain in place.
- Educate all employees on the high costs of wasted hospital supplies.
- Focus on recycling usable supplies that are discarded.
These steps will help to improve your hospital’s financial performance.
6. Enhance patient satisfaction.
Higher levels of patient satisfaction equate to enhanced hospital financial performance, as patients are more likely to return to your hospital in the future.
A 2016 report suggests that hospitals which provide a better patient experience obtain profit margins around 50 percent higher than health systems which provide only an ‘’average’’ patient experience .
For hospitals struggling to reduce waste or effectively cut hospital service costs, enhancing patient satisfaction may be the ideal strategy to improve your financial performance.
7. Make smart investments in health IT systems.
Effective management of all health IT systems is essential. Making wise investments in health IT systems can improve overall efficiency.
One strategy used by an increasing number of hospitals is to implement clinical decision support systems, designed to oversee the utilization of laboratories. This step should result in a reduction of unnecessary testing throughout the hospital.
It is also important to keep in mind that specific IT systems have also been effective at reducing the rate of errors that occur when prescriptions are being made. Errors in this process mean that prescriptions must be reordered, which can be a high expense for any hospital. The elimination of these errors can save your hospital money. This is just one example of how health IT systems can improve your hospital’s financial performance.
Conclusion – Improve Hospital Financial Performance
With the right strategies in place, your hospital can significantly improve its financial performance.
Today’s hospitals face many challenges as they balance operational efficiency with the delivery of quality healthcare. One of the best ways to improve hospital financial performance is through benchmarking and analyzing your supply and service spend across several areas in the hospital.
This detailed spend analysis, performed on a consistent basis, helps administrators make key decisions that result in reducing your non-labor spend and eliminates unnecessary expenditure. This leads to enhanced patient care, while staffing and supply resources are optimized.
At VIE Healthcare®, our goal is to help hospitals reduce expenses, eliminate all unnecessary costs, deliver exceptional patient care, and save money whenever possible. Since 1999, we have partnered with healthcare organizations in non-labor expense reduction. Our team has collectively saved clients over $1 Billion through strategic cost savings and optimization processes.
Schedule a call with Lisa Miller to improve your hospital’s financial performance in 2021.