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September 20, 2018

Why Cost Cutting Simply Isn’t Enough for Not-For-Profit Health Systems

For not-for-profit hospitals, the balance between lowering expenses while also increasing revenue can be tricky. Modern Healthcare reports that reducing costs may not be enough to save an organization. In 2017, even though the median annual expense growth rate fell nearly 1.5% since 2016 to 5.7%, the growth of median annual revenue dropped even more quickly, demonstrating the shifting atmosphere of not-for-profit hospitals. 

In today’s ever-changing world of healthcare, simple cost-cutting has proven to be ineffective at keeping not-for-profit hospitals afloat. Things like the shift to outpatient care, competition, especially in ambulatory services, and low reimbursement rates have shocked non-for-profit hospitals and health systems. The American Hospital Association cited the lower numbers of inpatient volume as one of the main reasons hospitals have been closing more frequently.

While cutting costs is still important in managing the balance between revenue and expenses, it needs to be calculated. For example, your organization may decide to cut costs by shutting down a unit or hospital. Without enough data, you could risk losing resources that have potential for growth. Deciding where to cut costs needs to be educated and deliberate. Having enough data and enough administrative organization can help your health system make educated decisions to help better reallocate resources. It is also important to remember that just eliminating costs in this way will not save your organization; you must also begin to adapt how you approach providing care, not just the volume. 

Rita Sverdlik, a Moody’s Investors Service analyst, said, "Reversing sluggish volume trends and growing profitable service lines will be critical to improving the sector's financial trajectory over the near-term as most hospitals continue to operate in a fee-for-service environment." This highlights an important trend happening throughout the healthcare sector. While fee-for-service remains the traditional model, value-based care systems are growing in popularity. 

For your organization to reverse this downward trend, you may need to look beyond cutting costs to incorporating more managed-care plans. For example, taking on higher risk contracts may increase reimbursement rates. Consider starting a disease management program to ensure compliance and quality for a managed population. Begin educating and onboarding physicians into tracking and reporting the required patient data. To succeed in a value-based care health care system, a not-for-profit health organization may need to approach the way they’ve done things differently.

Change is inevitable in healthcare and simply cutting costs will not save your organization from falling revenue rates. Thinking outside the box, homing in on data available, and embracing new approaches to care and administration will prove to be more valuable than simply cutting costs. 

To learn more about value-based care and our customized plans for case, quality and data management, contact Boncura.

 About Boncura Health Solutions
Since 2011, Boncura Health Solutions has remained a dynamic organization aimed at improving patient outcomes, efficiently managing at-risk populations to reduce unnecessary healthcare costs, delivering services in a cost-effective manner, and providing unique and convenient ways for patients, providers, and clients to access key support services. Founded by physicians, Boncura’s expertise allows hospitals and health systems, independent physician groups, and accountable care organizations to provide value-based care through efficient and intelligent administrative and clinical services. Today, Boncura serves more than 7,000 physician providers and partners, managing upwards of 450,000 lives, and processing more than eight million claims annually.