As hospitals trying to stay financially afloat shift from volume to value, a solid understanding of what factors affect the bottom line is critical, writes Andrew (Andy) Simon, Partner at Simon Associates Management Consultants, in the article “Finding new, meaningful financial metrics for hospitals post-reform,” recently published by Becker’s Hospital Review.
“Given the ongoing changes following the passing of the Patient Protection and Affordable Care Act,” Andy writes, “there has been some preliminary discussion around the need for new metrics, and contemporary best practices, as hospitals shift from volume to value. Similar to all new metrics, they can be challenging to determine. But that shouldn’t prevent people in the healthcare business from at least attempting to define early ways to measure their progress.”
Without a well-thought-out process for assigning expenses, you’ll have metrics that don’t mean much or more importantly, tell you much.
Can hospitals understand direct costs? Sure!, Andy says. But what about indirect costs? How to allocate? This is when it gets murky. With the drive to value, the cost constraints on institutions, the rise of bundled pricing and the increasingly competitive environment, he firmly believes there is a future for new costing mechanisms, leading to some substantial macro indicators.
We market differently nowadays because consumer behavior has drastically changed
As Andy explains, it is fairly simple to identify and develop metrics that are necessary to run your business and calculate ROI. Organizations like HubSpot focus on measuring the effect of inbound marketing efforts ― very important for both lead generation and patient retention. He cites two other examples: CPM HealthGrades, which provides a platform for hospitals to perform marketing activities and then measures ROI based upon their initiatives, and Truven Health Analytics, which offers methodologies that convert marketing initiatives into measurable results. In other words, the implementation of strategies and tactics into measurable metrics has become a reality, Andy emphasizes.
Amidst the coming wave of mergers, volume + value = survival
Much more knowledgeable and analytical than in the past, today’s healthcare marketing executives have become more important assets of the hospital than ever before, Andy says. And as part of their current duties, they must merge the understanding or definition of volume and value to ensure that both are aligned in the future so that their institution can remain competitive.
Andy alerts readers that many industry observers are predicting waves of mergers and consolidations in the next 10 to 15 years, and that the institutions that prove they are innovative and profitable stand the best chance of continuing to chart their own course.
To read Andrew Simon’s article in Becker’s in its entirety, click here.