As the world struggles to manage and contain COVID-19, U.S. hospitals and health systems are finding the pandemic amplifies existing financial challenges. Compared to January-July 2019, 2020, hospital operating margins plummeted 96%, not including federal CARES funding. With the funding, operating margins are down 28% year-over-year. This is on top of the 21% decline in operating margin hospitals experienced from 2018 to 2019.
The 2020 Healthcare Financial Outlook: Performance Management Trends and Priorities identifies part of the underlying problem: More than half of hospital and health system finance leaders say they have insufficient data, benchmarking, and reporting tools to completely support efforts to lower costs without compromising the quality of care.
Healthcare leaders can turn to analytics and benchmarking tools to uncover effective strategies for reducing costs and optimizing revenue in the current environment, while building a strong business plan for the future. Here are the 3 ways you can use healthcare data and benchmarking to optimize revenue at your hospital or health system:
#1 — Maximize strengths and determine opportunities to improve
Understanding strengths and opportunities for growth is no longer a guessing game for healthcare leaders. By comparing internal data — by hospital, department, physician, treatment type, and more — to market key performance indicators (KPIs), healthcare leaders can determine which areas of their businesses and service lines drive revenue. This allows the organization to shift focus to those areas of strength and actively drive patients there, when appropriate.
Financial and strategic leaders can also drill deeper into the data to learn the root causes of their best- and lowest-performing areas, allowing them to home in on those with the most room for growth. For example, to reverse operating losses in the surgical suite, a hospital’s operating room director must create a budget based on concrete data, not assumptions. Syntellis’ Axiom™ Comparative Analytics can show the director where the organization sits compared to the market. If that data says the OR currently operates in the 90th percentile for staffing but in the 20th percentile for patient volumes, the director will know to focus improvement initiatives on patient volumes.
This type of insight can also reveal further opportunity for revenue growth in already high-performing areas. A real-world case study in Using Data and Analytics to Improve Clinical and Financial Performance shows that physician performance played a crucial role in cost savings within the knee joint replacement division of one hospital. Using enterprise performance management (EPM) software, leaders in that hospital calculated that if their lowest-performing physicians performed at the same level as their highest-performing physician, they could save nearly $10 million in this already successful area.
#2 — Make data-informed new service investments
EPM software also brings in peer data for benchmarking exercises. During the financial struggles of the pandemic, healthcare organizations should consider new investments in certain service lines to boost revenue. For organizations that still operate on a fee-for-service model, volume of services and patients is key to recovery.
Comparative analysis goes beyond standard benchmarking to show what financial success could look like before an organization makes the decision to invest. For example, data has shown that ophthalmology and dermatology have experienced a slight increase in patient volume during COVID-19. Healthcare organizations interested in investing more in one of these areas can tap into tools like Axiom™ Capital Planning, which helps an organization gain consistency, objectivity, and visibility into the entire capital management process.
Of course, determining new areas for investment is only half the battle. Strategic leaders must also get buy-in from financial and executive stakeholders. Axiom Comparative Analytics uses near real-time data from over 900 healthcare organizations to deliver insights that guide strategy and back up forecasts. This lowers investment risk and instills confidence among leaders in a way that even the most thoughtful assumptions and conversations can’t.
#3 — Measure progress and adjust accordingly
After deciding to implement performance changes or pursue new investments, healthcare organizations must continually track progress toward their desired outcomes. This, too, requires data — and lots of it. But 15% of organizations don’t use any financial benchmarking, and 41% are unhappy with how their current benchmarking guides decision-making.
The uncertain and rapidly changing reality of the pandemic makes the right software essential. A platform that’s updated monthly, like Axiom Comparative Analytics, allows for real-time analysis and agile decision-making. If an organization finds itself headed down the wrong path, financial and strategic leaders can swiftly reevaluate what the data indicates and change tactics before their first strategy reaches a dead end.
Fast, data-driven decisions during an unprecedented time
Before COVID-19 altered the U.S. healthcare system, 69% of hospital and health system finance leaders were looking to improve reporting and analysis in 2020. As the pandemic carries on and revenue continues to tumble, this sense of urgency is even greater. Internal and peer benchmarking data can help healthcare organizations take a pulse on financial losses, uncover areas of particular struggle, and pivot to new services and opportunities for revenue growth. Integrated financial performance and analytics software can help build the business case and keep new strategies in check.
To learn other ways healthcare organizations can optimize performance management, read the e-book Beyond Benchmarking: Driving Healthcare Improvement Through Comparative Analysis.