“No margin, no mission” is the well-known industry axiom attributed to the late Sister Irene Kraus, a health care leader who understood and was unafraid to draw a straight line between financial outcomes and clinical performance. Then, providers needed a healthy bottom line to keep patients healthy. Today, as the industry shifts to value-based reimbursement models, that connection is just as important. But now, providers need to keep patients healthy if they want a healthy bottom line.

How Health Care Providers Can Improve Their Profit Margins 1In recognition of that challenge, McKesson has published a new e-book, Focus Ahead for Better Health: Conquering Margin Improvement in a Changing Environment. The e-book gives provider executives insights on where in their organizations they can find the best opportunities to improve their profit margins. Eighteen industry experts interviewed for the report identified five areas and offered tips on mining those areas for additional revenue and lower operating expenses.

Below are pieces of strategic advice from eight McKesson reimbursement experts cited in the e-book.

Operational Efficiency and Overhead Costs

“Cost accounting in health care is complicated because it requires a layer of clinical analysis to generate an accurate accounting of costs relative to specific procedures and conditions. Knowing the full cost of all of a system’s laparoscopic cholecystectomies (for example) is not enough. A health system needs to look at differences between cases from different surgeons and facilities to identify unwarranted variation, local best practices and opportunities for improvement.”
Andrei Gonzales
Director of Value-Based Reimbursement Initiatives, McKesson Health Solutions

“An integrated capacity management strategy drives better resource management, helping organizations improve operational efficiency, reduce labor costs, improve quality outcomes and, ultimately, improve margins.”
Billie Whitehurst
Vice President and General Manager for Capacity Management, McKesson Connected Care and Analytics

“I’d encourage (physician) groups to develop a payer-contracting strategy which includes, if possible, negotiating multi-year agreements with step increases. The strategy should help also ensure they have an organized system for initiating the next round of negotiations, keeping in mind each payer’s termination deadline.”
Rob Saunders
Senior Consultant, McKesson Business Performance Services

Integrated Efforts and Collaboration

“Simply put, only do what only you can do. Outsource all non-clinical administrative functions and leverage physician time to maximize patient and facility outcomes.”
Jeff Akers
Vice President of Financial Management, McKesson Business Performance Services

Embracing the Shift from Volume to Value

“Organizations should also analyze their patient population to understand the profile of patients with the highest costs and poorest outcomes, so that improvement opportunities can be effectively prioritized.”
Suzanne Travis
Vice President of Regulatory Strategy, McKesson Corporate

How Health Care Providers Can Improve Their Profit Margins 2
Revenue Cycle Management

“For hospitals with employed physician groups, one of the greatest margin improvement opportunities is ensuring they have experts in the physician revenue cycle—from charge capture through timely filing—and timely follow-up on correct payment and denials management.”
Bess Ann Bredemeyer
Senior Director of Health Care Consulting, McKesson Business Performance Services

“More progressive (denial management) models attack denials systematically, both at their source and driven by their cost of resolution. There’s a significant opportunity to invest in tools that are preventative in nature, focused on areas like registration quality, patient coverage and eligibility, as well as clinical areas such as medical necessity and authorizations.”
David Dyke
Vice President of Product Management and Business Development, McKesson Health Solutions

Leveraging Data and Technology

“One of the greatest opportunities for margin improvement for hospitals and health systems is to use data and tools to get a deep understanding of the dynamic relationship between clinical quality and operational costs. This knowledge allows you to optimize patient care, track performance, guide program adjustments and inform contract negotiations.”
Sally Connally
Vice President of Regulatory Strategy, McKesson Corporate

To learn about how to successfully manage the financial impact of value-based reimbursement models, download McKesson’s new e-book, “ Focus Ahead for Better Health: Conquering Margin Improvement in a Changing Environment.”

McKesson

About the author

McKesson editorial staff is committed to offering innovative approaches and insights so that our customers can get the most out of the health care solutions they have and identify areas for operational improvement, revenue growth and improved patient satisfaction. If you have a suggestion for a blog topic you’d like to see covered, let us know in the comments.