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WReferral networks, stopping leakage and technology investments: 5 top revenue generation strategies for CFOs

Written by Emily Rappleye (Twitter | Google+) | May 19, 2015

In the new value-based health economy, hospitals and health systems are turning to new strategies to drive revenue growth. Organizations are employing new technologies, developing strategic partnerships with community providers and looking for new ways to coordinate care and improve efficiency.

In a Becker’s Hospital Review webinar led by Scott Becker, JD, publisher of Becker’s Healthcare, and sponsored by SCI Solutions, a Campbell, Calif.-based healthcare software company, Joel French, CEO of SCI Solutions, and Lynn Torossian, CEO of Henry Ford West Bloomfield (Mich.) Hospital, identified some of these new strategies used by hospital and health system CFOs to generate revenue.

“If anybody believes they can be successful in seven or 10 years by doing what they have done in the past, they’re wrong,” said Mr. French. “There are disruptive business models, disruptive technologies, that are fundamentally reordering value chains that have pervaded for 40 and 50 years in our industry. We only need to look as far as the retail bookstore or the local taxi cab to know if it’s still around now; it won’t be very much longer.”

Mr. French and Ms. Torossian shared the following strategies hospital and health system CFOs and executives can use to generate revenue amidst fundamental change.

1. Build a strong referral network to fuel outpatient growth.
In a recent survey of hospital and health system CFOs and other finance executives, only 22 percent said they would acquire independent physician practices to grow their revenue. Instead, organizations are focusing on growing outpatient revenue based on referrals and orders from independent providers. According to Mr. French, 57 percent of survey respondents are using this strategy to drive revenue growth.

“Physician acquisitions ended up generating a lot of losses. Health systems generally don’t know how to profitably operate physician practices and there are a lot of complications,” Ms. Torossian said.

Henry Ford Health System is not looking to employ physician practices to increase revenue growth, according to Ms. Torossian. Instead, Henry Ford Health finds a large integrated network of physicians is beneficial. One of its four acute-care hospitals is a closed-network hospital and relies entirely on the medical group, but the other three rely on relationships with private practice physicians, Ms. Torossian said. Rather than acquiring new practices, the system is seeking to partner with physician practices, either by adding them to the medical group or through unique partnerships, in order to drive revenue growth and allow the physicians to maintain autonomy.

However, Mr. French noted that not all health systems are as mature as Henry Ford Health in terms of their ability to leverage physicians in the community. Data suggests that hospital employment is actually up from a few years ago, Mr. French said, though employment trends are market-dependent. “One of the reasons we believe that health systems are pursuing physician employment is to lock in the referral networks,” said Mr. French.

2. Reduce and capture network leakage.
Between 24 and 30 percent of referrals leak out of network, Mr. French estimated, and this is generally thought of as a negative thing for health systems, and even more so for those engaged in risk-based arrangements. “In a risk-based construct the problem has worsened because the providers are accountable for the cost of care for their attributed patients even if they seek it elsewhere,” he said.

However, many health systems are looking at leakage — those patient referrals or orders diverted outside of the provider network — as an opportunity for revenue growth. In fact, in the CFO survey, 51 percent of respondents said they were focusing on leakage as an opportunity to generate revenue.

“I look at it as a tremendous opportunity if we can do something better,” said Ms. Torossian. “Anyone that is sending someone someplace else is an opportunity for me as a hospital CEO to go grab that business.”

“I’m also looking at it from the patient-centric model,” she said. “If I’m getting less than 100 percent of that patient’s care, then that’s leakage from somewhere else.” So for example, if someone is coming to Henry Ford Health System for eyeglasses, they are a leaked patient from somewhere else, and an opportunity for Henry Ford Health to capture.

3. Gain visibility into referral patterns across a community.
Trying to change a physician’s referral patterns, after they become employed or are acquired, can be incredibly difficult.

“Whether joining a medical group, or becoming employed by practice acquisition, it’s really a matter of finding a way to provide benefit to them that reduces their burden,” Ms. Torossian said. For example, she said, physicians who have referred to Dr. Jones forever are not likely to refer to a new Dr. Smith unless a health system can reduce their burden and make it very simple to do so.

“Practice patterns are huge,” she said. “It really is relationships. These physicians want to know that they can establish relationships and look in the eye of the physicians that they are going to be referring to, know who they are and have an easy way to get patients to them.”

4. Create the best patient access experience to become a preferred referral destination.
“Finding out what you’re really good at and where you’re really good at it,” is one of the ways hospitals and health systems can make vast improvements in a short period of time in terms of revenue and volume, Ms. Torossian said. A good strategy for a healthcare organization with multiple sites is to determine which locations excel in particular services, and direct all that type of care to those locations, she said.

“It’s equally important to know where it is that physicians are willing to send business to,” she said. Becoming a preferred referral destination is another instance of benefit over burden, for both physicians and consumers, according to Ms. Torossian.

“If you have something that you do well and you make it easy to access, people are going to generally want to use those services. But if you have a competitor doing it for 50 percent of your price, that’s the service you will drive business to,” she said.

It’s also important to identify the things your system is not the best at so the operating investment in those lines can be reduced. Hospitals cannot continue anymore to carry every service, whether they excel at them or not. “We just won’t be able to do it in this new world,” Ms. Torossian said.

5. Leverage new technology to fill the care coordination gaps EHRs cannot address.
Despite expectations, most CFOs don’t see a return on investment with their EHR. More than anything, implementing an EHR was a move from manual to digital, and it added a level of safety and efficiency, but it didn’t add much value beyond that, according to Mr. French.

“When volume is moving outside to lower cost, lower acuity settings, technology has to go with it, and EHRs aren’t designed to do that,” he said.

Nonetheless, EHRs are a sunk cost, so health systems need to look forward and see how they can digitally leverage EHRs to manage care more effectively, capture revenue more fully and deliver a better patient experience. According to Mr. French, this will need to be done with new tools, likely a network-level technology that can connect physicians and other clinicians and enable communication and transitions. A network-level mechanism can help physicians coordinate care, whether they are not part of the hospital or not.

Although the financial benefits of EHRs have not been as great as initially expected, it’s not all doom and gloom. “From a patient perspective, there has been some real true benefit from EHRs,” Ms. Torossian said. For example, Henry Ford Health has been able to exchange more than 1 million patient records from almost every state in the country, she said. This means someone who is on vacation in Florida from Detroit that needs medical care can go to the hospital or physician’s office and those providers can still access their patient record if they use the same system.