Welcome to Module 8, Session 1 of the Cardiovascular Program Coordinator course. This module is Financial Management with content provided by Beverly Bouady-Lindsay, Ginger Beesbrock, and Carrie Morris. The learning objectives for this module are review financial management concepts critical to the accreditation and certification process, perform a cost savings analysis for your accreditation process, leverage financial data to support the value of the accreditation process. The agenda for this presentation is divided into three concentrations. In the first session, we will cover cardiovascular revenue background, and then in the following two sessions, we will cover hospital response to change and the value proposition of accreditation or certification. With hospitals' limited resources, our role at the ACC is to share and assist you in implementing the latest guidelines. As you work through the accreditation and certification tools, the guidelines are embedded in the essential components. Often when we talk with customers, they believe they are using the most current evidence-based practice. Once the gap analysis is complete and we begin evaluating their processes, frequently we uncover areas where they are not in compliance with the standards. Given most hospitals' limited resources, our role is to share and assist with implementing the latest guidelines and directives. Despite concerted efforts to control costs, hospital margins continue to deteriorate and there's no end in sight, especially in light of the recent pandemic. The way hospitals and health systems respond to accelerations in disruption, outsourcing, and active referral steerage will be complicated by the financial realities facing most provider organizations today. According to the Moody's report, median operating margins at not-for-profit hospitals in fiscal year 2019 hit an all-time low of 0.5% after operating expense growth outpaced operating revenue growth for the second consecutive year. The operating flow margin was 6.7%, which was down from 8.4% in 2019. Hospitals' expenses grew at a rate of 4.7%, showing some improvement over the previous year. There remains an imbalance between cost and revenue growth. This ongoing margin decline is especially concerning because it occurred despite a hospital's success in slowing the rate of expense growth in recent years. Hospitals' cost savings haven't been enough to keep up with the rapid slowdown in revenue growth. Leaders must simultaneously control expenses and grow revenue to attain sustainable margins. Hospitals will survive if they continue to grow their top-line revenue, which in most cases is its cardiology and oncology services. Hospitals can then meet their margin goals by slowing cost growth rather than resorting to budget cuts in absolute terms. Based on its projected revenue growth, hospitals need to contain their cost avoidance over several years. These cost savings represent roughly 55% of the total margin improvement goal. Hospitals crafting a margin management strategy around cost avoidance is possible only if hospitals and health systems maintain enough revenue growth. Otherwise, absolute spending cuts would be necessary. While no expenses are immune to scrutiny, leaders should establish a new base external spending before confronting labor costs. Hospitals and health systems need to find savings across all expense categories to meet their cost avoidance goals. However, leaders should focus on strategies that evaluate cost and produce increasing dividends over time. As the single largest source of operating expense, labor may seem like an obvious place to start. However, it is also one of the most difficult expense categories to adjust. Conversely, external spending on things such as supplies, pharmaceuticals, and purchase services accounts for a smaller but very significant portion of total spending and is a prime target for a thorough evaluation. Most organizations already manage these costs, but given the compounding effect of increasing external spending, it's worthwhile to accelerate these efforts. Every cost avoidance strategies vary in degree of difficulty. Precise pharmaceutical utilization management is extremely important. The escalating cost of pharmaceuticals and other related supplies must be managed and standardized. Strong contract negotiations can reduce your costs significantly. Hardwired escalation policy for local supply sections within your market are key. Working within your hospital systems to determine what supplies you will use and identifying vendors to negotiate pricing are key. System-level purchase services contracting, physician engagement, and working with teams across the systems to come to consensus on what types of supplies they will use can provide significant savings across the board for all hospitals. Strategic outsourcing of function services that are not core to your operations can also be a way to control escalating costs. In contrast, savings in labor should primarily come from slowing workforce growth rather than decreasing it in absolute terms. Hospitals and health systems should avoid undesirable tactics such as mass reductions in workforce and instead ground efforts in labor market realities. For example, employers cannot and should not push away talented employees by reducing compensation or cutting benefits. Protecting employee engagement through margin management efforts is paramount. Primary cost avoidance levers are selective service line rationalization, review of nursing and technical positions, length of stay driven labor demand, physician and other clinicians, and scale administrative roles and responsibilities that are non-clinical in nature. Long-term sustainability is the goal of senior leaders. Organizations cannot become truly disciplined without direct and active intervention from the C-suite. Cost discipline and low-cost growth relative to revenue growth over time is a priority by focusing on the desired budget and cost targets. This can be achieved by being responsive to the frontline staff that are providing direct care to patients. By avoiding large swings in expense growth, hospitals are able to inflect desired control of expenses with precision. With limited ability to increase prices, leaders must reduce avoidable revenue erosion through better revenue cycle management. It is important for hospitals to evaluate strategic technology investments to ensure that the return on investment over an established period of time will be recognized. Prepare to win market share. Meeting revenue goals will require winning increased market share even in service lines with healthy organic growth. After reducing avoidable revenue decline, growth ambition must be to increase patient volumes in both the inpatient and outpatient settings. Simply maintaining your current market share even with organic growth on the outpatient side may fall short of meeting its total revenue goal. While hospital and health system leaders will ultimately need to pursue specific and potentially distinct tactics to grow inpatient versus outpatient share, they must first address a set of overarching strategic questions about how they will effectively grow net share of consumer wallet agnostic of the setting. So here are a few questions your hospital should be asking and your leadership should have clear answers for. Why should consumers choose to seek care with your hospital? How can we get consumers to return for a second visit? How do we keep our physicians consistently loyal? What do our payers need from us? The demand for inpatient services looks different. The national five-year growth projections for all payers from 2017 to 2022 from the advisory cardiovascular market trends reflect a 9% decrease in PCI, flatline for open heart surgery, a 14% increase in catheter ablation, 51% in ventricular assisted device or heart transplant and 81% increase in TAVR. Cardiovascular revenue is threatened in today's healthcare environment. The effects are felt from CV volume dynamics, threatened by out migration of procedures to outpatient, lower procedural demands due to improved medical management, heightened emphasis on disease prevention and an aging patient population with increased comorbidities. Also direct pricing threats by Medicare productivity adjustments, site neutral payments and high deductible plans. These plans have limited the ability for many patients to have procedures performed due to the high out-of-pocket cost that many families and particularly seniors on fixed incomes are unable to pay. And then finally, payment reform has also affected hospitals. Pay for performance where hospitals must show improved patient outcomes is becoming important in every quality and safety plan within hospitals. CMS episodes of care models known as bundled payments, these are influencing hospitals to prepare for the shift in the reimbursement from payment for volume to payment for value. Growth and downside risk ACOs or accountable care organizations and MACRA, the Medicare Access and CHIP Reauthorization Act are also a continued threat. Here's an important factor to consider. Variation in care is often costly and deadly. There are over 250,000 deaths per year attributed to medication errors. Many of these deaths lead to costly litigation. Unwarranted variation is endemic in healthcare. Developing consensus protocols that streamline the delivery of medicine and reduce variability can improve quality and lower costs in healthcare. This is from Dr. Martin McCary, Professor of Surgery at Johns Hopkins University School of Medicine. We know from this standardization of patient care and following evidence-based guidelines can reduce variation and reduce the risk of death and costly litigation that affects the reputation of your hospital and threatens revenue growth for your organization. Hospitals need to respond to the changes occurring in healthcare, especially those that directly impact hospitals and your sustainability. There will continue to be a shift from inpatient to outpatient to reduce costs and improve patient satisfaction. You will continue to see more complex patients that will be cared for across the continuum of care. Consumerism continues to grow as patients will have more choices and are comparing prices for services. As CV volume continues to grow in some areas and diminish in others, all organizations need to avoid redundancy in the services they provide. To avoid pricing threats, it is important that you improve efficiencies and at the same time continue to focus on cost avoidance. Be proactive when it comes to payment reform and focus your energy on value-based initiatives and improving patient care and outcomes. The ACC accreditations and certifications can give you the edge as you navigate these initiatives. You can find benefit in reducing variations in care by standardizing order sets, processes, and procedures. You can improve margins by engaging physicians and your care teams in developing processes that reduce redundancy, looking closely at supplies and the resources you need to provide care. Improve your patient experience by improving patient outcomes, reducing length of stay, communicating effectively with the patient and their family, preparing the patient better for discharge and the ability to care for themselves when they return home, avoiding cost at every turn in the process to care for patients, addressing medication costs, equipment needed to provide safe care for the patients, inventory management so patients are not exposed to defective or expired supplies, and then many of the other dynamics we've discussed previously. There are many challenges facing hospitals that we need to dissect as well as the impact on those challenges. Accreditation will assist you with the use of our tools and navigation process to address these challenging issues. We are here to help you achieve the needed results to ensure your viability. This concludes Module 8, Session 1 of the Cardiovascular Program Coordinator course.

Financial Management

Cost control

Revenue growth

Expense management

Accreditation