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May 2, 2011

Profitable vs. Non-Profitable

In a tumultuous field like healthcare, there are no givens, especially when it comes to profits and losses.  Can any one department of a hospital qualify as a financial thoroughbred, a surefire profit-maker?  Conversely, does any one department consistently under-perform year after year, decade after decade, in all hospitals, in all demographic areas?

Double-Edged Departments

Adam Higman, a consultant at Soyring Consulting names three profit-makers, saying that if not run correctly, all three can lose money.  “Number one, the OR.  Number two, the cath lab.  And three, I would say the ED – less because it brings in money and more because it brings in lots of patients.  Today, EDs can bring in up to 70 percent of total admissions.  Many are not just admitted to med/surg units.  They are also getting diagnostics and more profitable services while at your hospital.  They may need surgery.”

Of course, EDs in poor demographic areas, taking in lots of uninsured patients, are not profitable, Higman acknowledged.  “You can’t control that,” he said.  “If you’re a hospital in inner-city Detroit, you are struggling to make a profit even if you run a perfect hospital.  If you’re in metropolitan D.C., it’s much easier.”

On the other hand, EDs with lots of self-paying or well-insured patients might find it easier to make a profit but must work harder to satisfy those patients.  “Well-heeled patients are usually more demanding,” Higman pointed out.

Cath labs have gained prominence, unfortunately, due to Americans’ fatty diets.  “We are an obese country and more people have heart issues,” Higman noted.  “Reimbursement runs pretty high, historically.  But cath labs are also very expensive to run because of the high-priced products they use and the well-trained people on staff.  If they are not run efficiently, it’s easy to lose money on them.”

Personnel, Equipment Key to Profits

Match utilization with staffing in areas such as the OR, Higman advised.  “Those are highly-paid individuals in the OR,” he said.  “You need to make sure you schedule surgeries wisely so you don’t have these expensive staff members sitting around.  You need to have some hard conversations with physicians who refer and physicians who practice at your facility so you have appropriate ratios of staff members to patients.”

Also, review your product utilization, Higman continued.  “If you look at specific types of procedures, you might be losing $40,000 from the types of products you are using,” he said.  “Some procedures may never make you money because of the nature of reimbursement but, depending on what your product usage is, focus on how much capital you expend on products.”

Maintain control over your vendors, particularly providers of high-priced products, Higman stressed.  “Make sure vendors for expensive items like implants are not just walking things in the door,” he said.  “You need an approval process, a value-analysis committee in place to review all products coming in.  Does this product make good clinical sense?  Does it make sense in terms of cost to the facility?”

Read the full article from Executive Insight.

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