The Importance of Community Hospitals

Whether it is delivering babies, dealing with acute illness or serving on the front lines of public health surveillance, community hospitals are there for millions of people in the US. Community hospitals are also the engines of local economies, providing quality employment in the communities they serve.

But we know that this mission is at risk. When the hospital payment system changed to diagnosis-related groups (or DRGs) in the 1980’s, hundreds of hospitals were not able to survive and closed their doors. And now, with Medicare reimbursements declining as the number of Medicare beneficiaries increases, hundreds of more hospitals are now at risk today.

Big or small, all hospitals are required to do more with less. Economies of scale may favor the largest hospitals and systems, but all are looking at the primary drivers of cost: labor and supplies. Immediate initiatives often include staff reductions and alliances with Group Purchasing Organizations (GPOs). After that, a close look at pharmacy costs is warranted and eventually, there is a close review of all supplier contracts as opportunities to simplify and maximize value come into play.

No Margin, No Mission

After all that is complete, profitability is still in the single digits and remains on a downward trajectory as reimbursements decline. As we have all heard, “no margin, no mission.” And all of that must be done by ensuring high-quality clinical care and good patient experience.

That’s not a job that can be owned by consultants. It requires the commitment of the hospital team, unified to meet the mission to the community. After optimization of staffing levels, renegotiation and scrutinization of contracts, the hospital team has to be united and engaged in creating a high performing system. The front-line staff knows where improvements can be made and will have visibility and perspective into the business that leadership can only see the faint outlines of.

In many hospitals, most of the obvious cost cuts have already been made and in many cases, staff can feel overwhelmed and less engaged. What has to happen is to bring staff into a conversation about efficiency and cost savings. Done with care, the potential value is unlocked, and employees are re-energized at the same time.

And when operations are optimized, hospitals and systems can start to focus on the next part of the journey: new models of care, value-based contracts, and a shift to a more rewarding approach to care for patients, payers and providers.

Sense Corp has been a partner to all stakeholders in this journey for 20 years. From aligning data to aligning teams, we’re here to see your organization succeed in the future.

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