One in three rural hospitals may be forced to close their doors in the next decade.2 With guidance from an experienced healthcare financial consulting partner, it doesn’t have to be yours.
While only 83 rural hospitals in the U.S. have closed since 2010,1 nearly 700 more face the same possibility. You know the reasons: lower reimbursements, rising bad debt, worker shortages and competition from newer regional facilities, to name a few. Most likely, you feel the pain of some or all these issues in your own organization.
While business as usual is not an option, many rural hospital executives simply don’t know where to turn for help. They often assume financial consultants are cost-prohibitive, don’t understand healthcare and certainly can’t relate to a small-town hospital’s daily challenges. The truth is, the right financial consultant can help rescue rural hospitals and communities they serve.
Just as hospitals’ problems and needs have changed dramatically in recent years, so has one consulting company’s approach. Warbird Consulting Partners is different because it’s made up of people who have been where you are and faced the same problems you face. Their consultants are former CEOs, CFOs, CIOs, revenue cycle directors, AR managers and other key players in hospitals of all sizes. They know the issues, they speak your language and they know what to do to get you back on track.
Warbird’s other big difference is cost. They know cash-strapped hospitals can’t afford big consulting fees. On performance improvement engagements, they provide flexible pricing options including charging a percentage of the results they deliver. By sharing in the upside, Warbird has skin in the game. If they don’t deliver, you don’t pay.
One in three rural hospitals may be forced to close their doors in the next decade.2 With guidance from an experienced healthcare financial consulting partner, it doesn’t have to be yours.
Contact us today to see how we can help you.
Contact Info
Michael Draa, CEO
404-496-5230
mdraa@warbirdcp.com
Doug Fenstermaker, Senior CFO
404-496-5230
dfenstermaker@warbirdcp.com
[1]Ellison, Ayla. “State-by-state breakdown of 83 rural hospital closures,” Becker’s Hospital CFO Report, January 26, 2018.
[2]“New report indicates 1 in 3 rural hospitals at risk,” National Rural Health Association, February 2, 2016.
“I would highly recommend Warbird to any organization seeking project or comprehensive engagement to improve financial performance,” said the hospital’s CEO. “Their contribution will deliver a positive return on investment and you will have lifelong colleagues who will always be there for you.”
Bankruptcy filings by U.S. hospitals and medical companies more than tripled in 2017, hitting an alarming high in a multiyear trend. Since 2010, Chapter 11 filings by healthcare companies with more than $1 million in assets rose 123%, even as filings in the broader economy fell 58%.1 With the healthcare industry’s financial woes expected to continue, hospital executives know things can go downhill quickly. Many are scrutinizing every corner of their operations to help ensure they survive and thrive.
The president and chief executive officer (CEO) at a mid-Atlantic community hospital proved the efforts pay off. While her hospital had a long track record of healthy margins, she became concerned when performance declined sharply in first quarter 2016. Rather than waiting to see if things would improve, she responded immediately, bringing in Warbird Consulting Partners to analyze the situation, pinpoint underlying issues and execute a plan of action.
The hospital CEO and Warbird agreed there would be “no stone left unturned.” The Warbird consultant, who has more than 30 years’ experience as a healthcare chief financial officer (CFO), looked at every line on the financial statement including supply expenses, services contracts, depreciation expense and labor costs. As interim CFO, he worked closely with the hospital CEO and chief operating officer to quickly develop revenue cycle objectives, establish a budget and assign executive sponsors to each performance improvement initiative. He positively influenced the operational culture, helping hospital teams move from analysis to action and instilling a sense of urgency and confidence to deliver on big promises.
The results speak for themselves. The organization was at breakeven by the end of second quarter 2016, profitable in third and fourth quarters and ended the year with a 3.8% operating margin, substantially better than the 2016 hospital median of 2.21%.2 Salaries and wages went from 42.8% of net revenue to 39.7%, saving $9 million; and other expenses decreased from 57.5% of net revenue to 56.6%, for $3 million in savings. Annualized savings totaled more than $20 million and exceeded seven percent of operating expenses. Warbird met its guaranteed return on investment for the engagement, delivering significantly more value to the community hospital than what they paid in fees.
“I would highly recommend Warbird to any organization seeking project or comprehensive engagement to improve financial performance,” said the hospital’s CEO. “Their contribution will deliver a positive return on investment and you will have lifelong colleagues who will always be there for you.”
Contact us today to see how we can help you.
Contact Info
Michael Draa, CEO
404-496-5230
mdraa@warbirdcp.com
Doug Fenstermaker, Senior CFO
404-496-5230
dfenstermaker@warbirdcp.com
[1]Kary, Tiffany. “Next U.S. Restructuring Epidemic: Health-Care Companies,” Bloomberg, November 27, 2017.
[2]Hospital Medians, Merritt Research Services.
Academic medical centers face unique financial vulnerabilities. The right healthcare consulting partner, like Warbird Consulting Partners, can help them manage these challenges and maintain their status as the centerpieces of the American healthcare system.
Academic medical centers (AMCs) have long been positioned at the top of the healthcare provider pyramid. But behind the prestigious brands and flawless reputations, financial threats loom. Declining reimbursements, narrowing healthcare exchange networks and dwindling research funds are among the market dynamics forcing AMCs to reevaluate their missions and strategies.
As margins shrink, AMCs are trying to shore up performance, exploring everything from simple cost-cutting measures to technology investments to partnerships and acquisitions. Most AMC executives, however, don’t have the bandwidth to lead major operational or revenue cycle initiatives. They’re there to teach and care for patients, not worry about making money. So where can they turn for help?
Business consultants are an option, but they tend to bring a corporate or traditional health system perspective that frankly doesn’t apply to the academic environment. What AMCs need are healthcare experts who understand the culture, governance processes, reimbursement mechanisms, referral flows and other forces unique to academic medical center operations.
Equally important in sizing up healthcare consultants is their hands-on experience. AMCs should look for practitioner consultants who have actually done the work they recommend, whether it’s planning strategy, troubleshooting technology or building spreadsheets.
The final consideration in hiring a healthcare practitioner consultant, of course, is cost. It doesn’t make sense to pay high fees when expense control and margin improvement are primary objectives. A good healthcare consulting firm has the confidence to charge a percentage of the results they deliver. If they don’t turn things around as agreed, the AMC doesn’t pay.
Academic medical centers face unique financial vulnerabilities. The right healthcare consulting partner, like Warbird Consulting Partners, can help them manage these challenges and maintain their status as the centerpieces of the American healthcare system.
Contact us today to see how we can help you.
Contact Info
Michael Draa, CEO
404-496-5230
mdraa@warbirdcp.com
Doug Fenstermaker, Senior CFO
404-496-5230
dfenstermaker@warbirdcp.com
The Warbird approach produced a quick win and ongoing performance improvement. In two short months, the hospital’s denials went down, revenue went up and cash collection improved by $3.2 million with $2.2 million pending.
If you’re feeling pressure from tight margins and sluggish cash flow, you’re not alone. Almost half of rural hospitals lost money in 2017,1 making it tough to manage cash for everything from day-to-day operating expenses to long-term lending requirements and capital plans. Given today’s reimbursement uncertainties, days cash on hand is a critical measure for every hospital.
Many hospitals lack the resources to pinpoint and fix their cash flow problems, putting themselves at financial risk. A smart alternative is to bring in third-party consultants who can objectively assess the situation and implement solutions the hospital can sustain long after the consultants are gone.
A southern U.S. hospital with fewer than 65 beds did just that, hiring Warbird Consulting Partners to help address bad debt, slow cash collection and increased accounts receivable (AR), especially those 90 days and greater. Warbird, whose consultants all have hands-on experience in healthcare finance, revenue cycle and IT, brought in AR specialists to review, correct and resubmit claims to payers to accelerate reimbursement. The Warbird team identified denial trends by payer, type and hospital department to pinpoint root causes and documented denials tracking and appeal processes. Finally, they trained the hospital staff to do the work themselves to sustain positive results.
The Warbird approach produced a quick win and ongoing performance improvement. In two short months, the hospital’s denials went down, revenue went up and cash collection improved by $3.2 million with $2.2 million pending. The denials backlog shrunk, reducing AR inventory by 34.6%. The ratio of project cost versus return, based on $3.2 million, was one to five, proving that regardless of size, hospitals have the potential for a big payback using the right partner and approach.
Contact us today to see how we can help you.
Contact Info
Michael Draa, CEO
404-496-5230
mdraa@warbirdcp.com
Doug Fenstermaker, Senior CFO
404-496-5230
dfenstermaker@warbirdcp.com
[1]“New Data Reveals More Rural Hospitals Losing Money,” The Hospital & Healthsystem Association of Pennsylvania, February 7, 2018.
Overall outlook for Healthcare changed from stable to negative; 2014 will be at a “tipping point”
- Negative Pressures are accelerating:
- Ability to contract for revenue increases and the ability to make major cost deductions is becoming harder
- We are dealing with physician cost and capital cost pressures.
- State Medicaid is growing as a percentage of the payer mix: unknown whether the ACA subsidies will really help the hospitals
- If the Balance Sheet is weak now, it may be too late to improve it to a sufficient degree.
- However, on the positive side, many hospitals are showing good strength in cash position built over the last few years.
- Equal number of upgrades as downgrades in 2013. Likely to shift to more downgrades than upgrades in 2014. Nearly 400 rating affirmations in 2013.
- Will CFOs be able to discern real P&L benefits from the massive IT investments being made? Theoretically yes in the longer term, but really unknown.
What are your thoughts on CFOs discerning real P&L benefits from IT investments?
Today, virtually all health care CFOs appreciate the need for their organization to demonstrate value. It’s no longer as simple as chanting the mantra “volume is everything”, like many of us have for so many years. Not only are we in a delivery cost crisis, we are in an insurance crisis. Now is the time for hospitals and physicians to integrate economically and clinically and focus on the efficacy of care. Now is the time to align economic incentives among the providers. Now is the time to figure out the economics of the transformation we are in. We aren’t quite ready to kiss employer sponsored health care goodbye. But most of us know we can’t ignore insurance exchanges, co-ops and consumer transparency. The good news is we have some time to pilot innovation – but it is not unlimited. The bad news is we must get started now as the transformation from volume to value and related cost-management takes time and effort.
Following is a quick quiz to see how your organization is progressing toward the value-based payment and care world ahead:
- Have you defined the size and scope of your primary care network and laid out the plan to develop it?
- Can you and your physicians demonstrate with practical, real life examples how your organization is helping to bend the cost curve and why this is good economically for them and the hospital?
- How does Wall Street view your strategy to accept “payment risk” – is it a credit strength or negative outlook in your credit report?
- Do we engage our members/patients with outreach and medical management programs that help mitigate population based payment risk?
Warbird Consulting Partners has partnered with Valence Health of Chicago, a leader in value-based care analytics and payment model innovation, to help address these strategic financial and operational challenges. Lower fees for service payments and deteriorating volume is accelerating around the country. We think now is the time for carefully experimenting with new payment arrangements, risk arrangements, “bundling” and forecasting the potential impacts on your P&L. Take a look at population health and risk through a financial lens and plan your forward thinking strategies accordingly.
David Kirshner, Healthcare Director and Sr. CFO Consultant, Warbird Consulting Partners
Information System costs have increased significantly as the industry has expanded its primary focus beyond the acute aspects of healthcare into the physician, outpatient and risk arenas. Costs have also been significantly impacted by the number of applications. The computer has become an integral part of business and clinical processes rather than primarily financial applications limited to a small number of users.
Although the size of an organization can result in some economies of scale the basic number of applications does not increase proportionately with organizational size. In addition, the more integrated solutions can be more cost effective than a “best of breed” approach.
The biggest factor impacting IT costs is the number of “bolt-ons” and the degree of customization made to the solutions provided by the vendors. Organizations need to periodically assess the functionality of their applications to determine if the functionality of a core application has matured to a point where the bolt-ons may no longer be needed and determine when a core application is functionally good enough. Avoiding idealism and thoughts of “the system needs to do it the way we have always done it” are key to optimizing the cost effectiveness of IT solutions. Workflow should be reviewed in the light of the approach designed into the application.
To sort these questions and arrive at a cost effective IT solution requires a mature IT governance and oversight processes. The governance process should reflect the overall strategy and culture of the health system, provide value, manage risk and result in measurable performance. Guiding this process should be a senior IT governance committee that has clear oversight of the capital and operating budget with authority to allocate funds to the various projects and initiatives within parameters set by the board and/or executive team. Major projects over a certain dollar amount should be specifically authorized by the board and/or the senior executive team and reported back on a regular basis to those forums. This oversight committee should be chaired by a key executive such as the COO and have a membership representing the customer base. Finally, process should also incorporate PMO best practices and reporting.
This all comes together via an IT strategy that has a 5-year, 3-year and 12-18 month perspective. The alignment with the organization’s strategic plan should be robust enough to be directionally correct so as to not have significant changes in IT priorities in a 12-18 month period.
An in depth understanding of the IT costs, optimizing each application, focusing on integrated solutions and avoiding idealism are key factors in optimizing a cost effective IT solution. This requires a mature IT governance process led by a dedicated leader with membership representing the customers of information systems to guide the Chief Information Officer and his/her team.
Jim Gravell, Director & Sr. CFO Consultant
Currently in healthcare, everything that you read and hear is focused on providing higher value, being paid for outcomes, and aligning incentives across away healthcare. The question is no longer, “are we going to move away from being paid for more activity” but “how far and how fast will we move?” As we manage this transition to multiple forms of payments and incentives it is important for us to select strategies that will provide value in multiple environments. These critical attributes could include strategies that improve patient outcomes, create operational improvements across acute continuum of care, decrease total cost of care, and increase cash flows. However, it is rare to see current strategies that actually accomplish all of these outcomes.
Expansion into ambulatory pharmacy management and specialty medication management is an example of a service strategy that meets all of the criteria above. Health systems have the opportunity to implement “point of care” pharmacy management that integrates pharmacy skills into the physician clinic setting to provide better specialty medication management for complex patients. These specialty medications cost $10,000 to $100,000+ annually and are growing at a fast rate. According to Drug Trend Report, these prescriptions represent less than 1% of prescriptions written, represent 25% of total prescription spending, and are growing at 17% to 19% annually. For example, in Minneapolis, and Detroit, where Fairview Pharmacy Services partners with the University Medical Center, Fairview and Henry Ford Health System, have demonstrated the ability to manage these medications quicker in alignment with physician care in an ambulatory setting. The results have shown improvement in patient outcomes, reduced total cost of care, and increased profits.
As the transition to more ambulatory care happens there will be less fees for service payments, and re will be a need for higher value CFOs. These CFOs will need to look at more services outside of the old normal to adjust to the changing industry.
What are your thoughts on current strategies on multiple forms of payments and incentives?
Jim Fox, Director & Sr. CFO Consultant