7 stats impacting the financial health of community hospitals

  • Author: McKesson
7 stats impacting the financial health of community hospitals
7 stats impacting the financial health of community hospitals

Eighty-six percent of rural Kansas hospitals operate at a negative margin.1 You don’t have to live in Kansas to find that statistic alarming. In rural areas, hospitals serve not only as centers of care, but also as the economic backbone of the community, providing jobs to residents and catalyzing new businesses.
So when one hospital closes, it can have a significant impact on the community. In today’s market, many of these small hospitals fight a day-to-day battle to stay afloat and deliver the care their community so desperately needs. Part of that fight happens in the lab, where decreasing reimbursements, misdiagnoses, and inefficient processes can impact financial health. Here are a few stats that should give lab leaders pause:

  • The average cost per medical error is $13K (Source: The Economic Measurement of Medical Errors, Jon Shreve, et al.)
  • PAMA resulted in a decrease in reimbursement for approximately 75 percent of lab tests Source: CMS)
  • Medicare’s new clinical laboratory fee schedule has reduced test reimbursement by 40 to 50 percent (Source: Impact Advisors)
  • As of 2017, roughly 30 percent of hospitals were losing money (Source: HIDA, 2018 Laboratory Market Report)
  • 64 percent of high financial risk rural hospitals are considered essential to their communities (Source: Navigant)
  • 430 rural hospitals in 43 states are at high risk of closing (Source: Navigant)
  • 1 in 5 hospitals is at high risk of closing (Source: Navigant)
With Medicare reimbursement cuts and increasing health care costs, it’s no wonder rural hospitals are feeling the heat. According to the Centers for Disease Control, Medicare Part B fee cuts totaled $400 million in 2018. At the same time, avoidable misdiagnoses are costing hospitals $900 million per year.2 Add in inefficient workflows that increase labor costs and account for 25 percent of total spending3 and you’ve got a recipe for financial loss.
Lab leaders are being asked to help stem the tide when it comes to revenue loss. As one lab manager in Iowa explains, “My biggest challenge is cost to overcome Medicare reimbursement cuts. We are constantly challenged to get the most bang for our buck.”
This “all hands on deck” approach within hospitals should extend to outside partners as well. For example, some of the greatest efficiencies can be impacted by your supply chain. A good supply chain partner should be able to deliver:
  • Best-in-class distribution of equipment and supplies at a competitive price
  • Wide selection of equipment and diagnostics technology
  • Outreach strategies to optimize reimbursements and revenue
  • Inventory management to cut time and costs
Lab leaders should also look for a partner with close alignment to leading GPOs, discount and financing programs, and analytics to help manage costs and find opportunities to save.
By leveraging the power of your supply chain, you can optimize operations, reduce financial stresses, and improve the health of your hospital, your patients, and your community.
Find out more information about how McKesson lab solutions can address your challenges.
NRHA commissioned the above piece from McKesson, a trusted NRHA partner, for publication within the Association’s Rural Health Voices blog