Metrics and analytics pose different challenges for rural hospitals

April 07th, 2015

Lower revenue makes tracking costs more important for smaller healthcare facilities.

Citizens Memorial Hospital, photo from FacebookCitizens Memorial Hospital, photo from Facebook

Rural hospitals must track many of the same business metrics as their suburban and urban cousins, although there are a few key issues of more significance to healthcare facilities in less populated areas.

“Like larger community hospitals, days cash on hand and keeping both gross and net days in accounts receivable at 45 days or less is crucial,” said Eric K. Shell, director at Stroudwater Associates in Portland, Maine. “These measures become especially important as we straddle two payment systems, making the transition from fee-for-service to population-based reimbursements.”

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Most rural hospitals are generally smaller facilities with lower revenue than those in larger population centers, Shell said, but they still have fixed costs similar to community and suburban facilities. This makes tracking revenue markers more critical if they are to keep the doors open.

I have to make a budget based on my best guess about what the House and Senate will decide

“In rural areas hospitals tend to serve older and less well off populations,” said Tim Wolters, director ofreimbursement at Citizens Memorial, a 72-bed hospital in Bolivar, Missouri. “We are much more reliant on governmental programs, so we have to spend time focusing on the unique aspects of these programs and have a much smaller margin of error.”

This dependence on Medicare and Medicaid reimbursement suggests that a financial criterion somewhat unique to rural healthcare facilities does exist. These facilities must closely follow the actions of Congress.

[Also: 45 rural hospitals losing critical access status]

“Congress is currently thinking about extending some rural hospital-related programs,” said Wolters. “Those are getting caught up in the physician payment legislation and we don’t know if they will be extended or allowed to expire in March. I have to make a budget based on my best guess about what the House and Senate will decide.”

These concerns make control of cash, as well as costs, vitally important, yet very hard to do over the long term.

The Affordable Care Act and changes in reimbursement systems mean that rural hospitals may have a new metric to track and leverage to their benefit. This is known as “attributable life.”

“Many rural hospitals are based largely on a primary care delivery system and don’t have the high-margin specialties that make money under fee-for-service,” said Shell. “Going forward, revenue will be derived not from fees for specific services, but from attributed lives for each facility.”

Generally, patients are attributed, or linked, to a primary care physician. This plays to the strengths of rural hospitals. With the current average per capita cost for healthcare at $9,200, a busy PCP office serving 2,000 lives has a future population-based value over $18 million.

“A rural hospital aligned with their PCPs has significant value relative to their direct cost as the payment system transitions,” said Shell. “One measure that will start to have more importance will be this count of lives attributed to their aligned primary care doctors.”

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