2019’s high hospital closure rate is an alarming trend for America’s healthcare system. Twenty-seven states have seen over 100 of their hospitals close since 2010 and the numbers are not slowing down. Now more than ever it’s important to leverage cost-cutting strategies for hospitals to avoid closure.
According to a recent study by management consultancy firm Navigant, 1 in 5 rural hospitals is at high risk of closing due to financial issues. Another study by Morgan Stanley reported that of the 6,000-plus hospitals in the US, 8% are high-risk and another 10% are on shaky ground.
With the threat of mass closure, it’s not surprising that a lot of medical facilities are looking for creative ways to stay afloat. Common problems that force closure include operating margins and debt-to-capitalization ratio, making financial growth and better budgeting a top concern.
Here are our top three cost-cutting methods you should consider putting in place at your own facility.
1. Reduce Expenditures with Innovative Cost Savings
One of the easiest ways to reduce your facility’s expenditure is by sourcing expenses more strategically:
Capital assets — Replacing new capital, such as medical equipment, with refurbished versions can offer an average savings of 45-60%, with equal clinical results.
From clinical to HR, financial, and admin support, facilities need a lot of resources to stay open. Look at all purchased services to determine how you can reduce your overhead and eliminate inefficiencies for a more streamlined workflow.
Medical and Surgical Consumables and Supplies
It may not be possible to cut down on these supplies, but by consolidating vendor contracts, your facility may be able to negotiate better volume pricing discounts.
Capital Equipment Service Contracts
As with consumables, consolidating contracts under one vendor is idea. Move your service contracts to a third party rather than the OEM, and verify the accuracy of your inventory to ensure you’re only paying for service on equipment you actually own.
2. Avoid Unplanned Capital Equipment Costs
Inefficient systems and processes lead to additional costs. The good news is, they are largely avoidable with proper planning. Common costs to look out for include:
Fines Resulting from Compliance Issues
Stay on track using software and services that condense contracts and compliance requirements in one place.
Unintended Renewals and Fees as a Result of Poor Contract Lifecycle Management
In addition to avoiding fines due to non-compliance, condensing contracts in one place helps avoid surprise renewals.
Unforeseen Costs Due to Inadequate Capital Replacement Planning
Having a roadmap for capital equipment acquisition and disposition means avoiding extra costs from fire sales or last-minute purchases. It also ensures a balanced budget, considering both the cost of purchases and recovered value from retired assets.
3. Explore Non-Traditional Revenue Sources for Your Hospital
It’s easy to assume that hospitals have limited potential sources for revenue, but that is simply not the case. Here are a few ideas for alternative revenue streams:
Maximize reimbursement rates with access to the same clinical evidence as Payers.
Expedite payments for provider services by shortening the insurance credentialing process.
Increase returns from trade-ins and retired medical equipment by leveraging fair market values.
Take Control of Your Hospital’s Finances
While it’s clear many facilities are facing closure, there are more opportunities now than ever before to explore innovative alternatives. Hospitals can remain financially stable by implementing cost-cutting these strategies. Cutting expenses, preventing unexpected costs, and exploring alternative income sources can be key to avoiding bankruptcy.
At BidMed, we are committed to helping healthcare facilities improve their bottom line through innovative solutions. Contact us today to learn more about how we can help your facility thrive in these challenging times.
Interested in cost-cutting options to improve hospital budgets?
Contact BidMed for a consultation or schedule a demo of our software today.