"The Ronan Report" provides insight about the activities at the Western Maryland Health System in Cumberland, Maryland, and about the changes taking place in healthcare today from a CEO's perspective.

Thursday, August 9, 2012

Hospitals are in for a Very Rough Road Ahead

As I have blogged previously, health care cannot be sustained financially primarily due to the impact of the Medicare and Medicaid programs.  Earlier this week, I watched a videoconference on "Anticipating Lower Reimbursements."  A panel of experts was predicting that if hospitals are not taking seriously the calls to get cost out of their hospitals and health systems, their boards will be looking for new CEOs.  Several years ago at WMHS, we had an expense reduction strategy and attacked all of the "low hanging fruit."  We got out a great deal of excess spending; but by comparison, that was the easy stuff.  Now, the task is much harder. 

We know that we have to reduce our spending by at least 10% to 15% over the next five years as there will no longer be rate increases only reductions in our rates.  In the videoconference, some were predicting 25% over the same period; that equates to $75 million for WMHS.  In order to get our projected 2% per year starting with this fiscal year (July 1 to June 30), organizational transformation has begun and will continue over the next four fiscal years.  

Our annualized target for FY '13 is $6 M to $8M.  We are focused on a host of initiatives including changing how we work; creating labor savings through benchmarks with other hospitals and health systems; reducing senior management by two positions; eliminating many vacant positions; filling remaining vacant positions with displaced employees; continually seeking cost saving initiatives from leadership, staff and consultants; improving collections through a renewed commitment to revenue cycle management,  renegotiating supply and service  contracts; reducing the overall cost of care; improving the quality of care, addressing unexplained / unsubstantiated clinical variation; continuing to reduce medical errors and reducing readmissions.  (Just to name a few of the many initiatives underway at WMHS.)  We have a lot of work ahead of us, but getting everyone on board from employees to physicians to board members to the community will help us survive the deceleration of Medicare and Medicaid spending a lot faster.

1 comment:

  1. Interesting article. I'm going to share this with my coworkers