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An Operational Assessment Provides Hospitals with a Roadmap to Long-term Sustainability

By , SVP of Business Development February 13, 2024 Operational Improvement, Hospital Turnaround

Hospitals nationwide are reckoning with financial difficulties, echoed by the American Hospital Association’s statement to Congress detailing the “unprecedented challenges” faced by rural and community hospitals post-pandemic. 

These include ongoing and worsening problems that resurfaced after COVID-19 relief funds dried out, including dire workplace shortages, crippled supply chains, overwhelming regulatory requirements, and severe underpayment by Medicare and Medicaid.

Awakening from the fleeting sense of stability offered in 2021 and 2022, hospitals must now reassess their financial standing and position themselves to withstand an uncertain future. The first step often comes in the form of an operational assessment, which provides a clear picture of current hospital performance and identifies opportunities to decrease expenses, improve cash collections and enhance patient care. Resulting in a step-by-step performance optimization plan, an operational assessment puts a hospital on the path to sustainability.  

Identifying Opportunities for Improvement

Performed by CHC in partnership with hospital leaders, operational assessments involve reviewing and assessing several key areas to identify opportunities to improve financial performance. These areas include:

  • Strategy. Financial difficulties obviously affect growth, but even hospitals in survival mode need a business plan. An operational assessment looks beyond solvency as the main objective and positions a hospital for growth by analyzing the market for opportunities to expand services and increase market share.  
  • Operations. According to a 2023 study, a full one-third of expenditures on healthcare delivery is “waste,” defined as “any activity or resource in an organization that does not add value to the external customer.” With mounting pressure regarding healthcare costs, an operational assessment can uncover ways to shave expenses without compromising quality of care. 
  • Staffing. A worsening labor shortage and overreliance on contract labor continue to drive up costs in this area. A productivity evaluation, as part of an operational assessment, can help keep controllable costs in check, while a revamped recruitment and retention strategy that addresses the rising incidence of healthcare worker burnout can reduce turnover. As far as medical staff composition, identifying gaps in physician specialty coverage can increase hospital utilization for services targeted for growth.
  • Supply chain. Second only to labor costs, supply spend is a significant expense but also an area where optimization yields substantial savings. Due to the pandemic’s exposure of supply chain weaknesses, a robust supply chain strategy focuses on resilience without losing sight of cost-saving opportunities. 
  • Revenue cycle and finance. An operational assessment looks at revenue cycle performance from end to end. Front-end opportunities include renegotiating health plan contracts. In the mid-cycle phase, gains can be made in charge capture, medical record coding audits and chargemaster compliance. Back-end improvements include streamlining billing for faster payments. An internal audit can uncover any leaks in revenue collection and expense management. 
  • Facility leadership. A leadership assessment considers several factors, including strategic direction, resource allocation, succession planning and skill-set gaps. 
  • Information technology.  An operational assessment includes a comprehensive review of clinical, administrative and financial IT systems and addresses any security, connectivity and interoperability issues. This evaluation can help guide decisions about expenditures, including the AHA’s post-pandemic recommendation to leverage technology to support worker wellbeing. 

CHC Consulting’s operational assessments start with a thorough data and document analysis comprising these areas, along with in-depth interviews with people whose historical knowledge and perceptions of the hospital provide context for the data points. We determine not only where the hospital stands in areas critical to its overall performance, but also how it got there. 

These insights serve as the basis for a performance enhancement plan specific to that hospital and its objectives, vulnerabilities, culture, and surrounding community. CHC Consulting collaborates with hospital management to develop the plan, which provides realistic and specific recommendations for operational improvements, including their prospective financial impact. 

Paving the Way and Staying the Course 

The operational assessment process produces a report with its findings along with the performance enhancement plan. Some hospitals choose to implement the plan on their own, and others retain CHC Consulting in a consulting or hospital management role to help guide the process and provide ongoing support. Either way, hospitals that undergo an operational assessment are better equipped to withstand financial challenges that lie ahead. 

By , SVP of Business Development February 13, 2024 Operational Improvement, Hospital Turnaround
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