One method of acquiring and transferring knowledge used by The National Rural Health Resource Center (The Center) over the past decade has been holding national summit meetings on specific rural hospital topics. This method does not replace formal research, but instead is designed to supplement more scientific research and is usually translated into short white papers for national distribution and discussion.
This past June, The Center, with support from HRSA’s Office of Rural Health Policy, brought a small group of critical access hospital (CAH) financial experts and thought leaders together to address issues related to CAH financial performance. The meeting was prompted by the declining financial circumstances of many CAHs, as well as the new challenges presented by the Affordable Care Act.
Participants included accountants from the major accounting firms serving CAHs, rural CFOs and CEOs, researchers, state Flex program staff and federal officials. The participants did extensive pre-work and then engaged in a structured dialog designed to address the Summit goals. A white paper including the major Summit outcomes was developed and will soon be distributed nationally.
Summit participants agreed that most CAHs are not maximizing their reimbursement, due partially to the complexity of the rules and regulations and due partly to limited use of needed expertise. CAHs often turn to consulting experts for help, but when negative bottom lines become common, many hospitals seem reluctant to pay for all that is needed. There are also questions as to which CAH financial measures are most important, and which financial consultations are most productive.
The Summit participants identified the following 10 measures as most important to maintaining the financial health of CAHs:
1. Days in net accounts receivable
2. Days in gross accounts receivable
3. Days cash on hand
4. Total margin
5. Operating margin
6. Debt service coverage ratio
7. Salaries to net patient revenue
8. Payer mix percentage
9. Average age of plant
10. Long term debt to capitalization
The participants then identified the financial interventions that would have the most positive impact on the average CAH’s bottom line. These included:
· Cost report review and strategy;
· Strategic financial and operational assessments;
· Revenue cycle management; and,
· Physician practice management assessments.
The participants recommended ongoing financial education for hospital boards, mid-level managers and senior leaders. On site education was deemed to be optimal, however, there was considerable value seen in good webinar presentations that could be recorded, stored and used on-site with various shifts. Lean training was also recommended as a method of improving business processes as well as a good way of saving money.
The Summit participants concluded the meeting by noting that the American health care system is transitioning from a “Pay for Volume” system to a “Pay for Value” system. In the years ahead, CAHs will be challenged to maximize and document their value, as well as calculate where they fit into the new value-based reform models. In that regard, they will be somewhat like an intrepid explorer, going down treacherous river rapids, with one foot in one canoe (the old system), and the other foot in an accompanying canoe (the new system). At some point, they must cross over to put both feet into the new canoe, but the timing will be critical. Too early or too late a transition and they risk going under.