From the June 2021 issue of HealthCare Business News magazine
By Kermit S. Randa
More than one year into the pandemic, healthcare organizations’ expenses have continued to climb and revenues have not yet recovered from 2020 lows.
While building agility for the road ahead is top of mind for healthcare leaders, increasing care costs, mounting pressures to improve profitability, and declining volumes across emergency departments, operating rooms and other areas present major challenges that finance teams must address to pave the road ahead.
While improving performance with the help of CARES aid and expanding access to vaccinations offer some hope for recovery, organizations cannot passively wait for things to improve. Healthcare finance leaders can act today to drive financial and operational performance improvement in the future.
Effective cost management in the COVID-19 era
Numed, a well established company in business since 1975 provides a wide range of service options including time & material service, PM only contracts, full service contracts, labor only contracts & system relocation. Call 800 96 Numed for more info.
The median hospital Operating Margin dropped precipitously in the early months of the pandemic, hitting a low of -8% in April and May. Excluding federal funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act, Operating Margins remained below 2019 levels for much of 2020.
According to Syntellis’ Healthcare Financial Trends Report, 82% of respondents cited cost management and reductions as very important to course-correcting the impacts of COVID-19. However, accurately capturing, assessing, and modeling the costs related to ongoing COVID-19 requires advanced costing methods that are both methodical and forward-thinking. Consider the following approach to a long-term costing configuration:
● Take inventory of the changes made in source systems, so these modifications can be addressed within the structure of the cost model.
● Identify areas where new cost categories may be required. Common examples include PPE tracking or other revenue offsets.
● Review the clinical criteria to identify COVID-19 cases to enable the alignment of specific cost-of-care expenses to the cases, where appropriate. This alignment may include targeting COVID-19 cases with the increased costs or deciding to allow a broader group of cases to absorb the cost based on the organizational view on how to reflect the increased cost.
● Consider the best source of reporting for COVID-19 tracking and whether reporting will be sourced from general ledger, clinical source systems, and/or service line analysis.
● Review the clinical coding and service line mappings to understand how these cases will be captured in service line reporting. Consider the impact of breaking out COVID-19 cases from the traditional service lines.