Margin crunch? Opportunities for clinical engineering to cut expenses and grow revenue

Margin crunch? Opportunities for clinical engineering to cut expenses and grow revenue

August 20, 2019
From the August 2019 issue of HealthCare Business News magazine

By Samantha Jacques

Hospitals and health systems today continue to be under enormous financial pressure.
Aging populations combined with declining Medicare/Medicaid reimbursements have impacted hospital top line revenue. This pressure, in addition to rising personnel costs, increasing commodity prices, software, and service costs as well as tariffs, have increased expenses.

January 1, 2019 also brought the new hospital price transparency policy. If you haven’t heard of this yet, it’s where hospitals and health systems have to publicly publish their prices for procedures. This transparency has improved consumerism on the part of the patients, putting different pressure on hospitals to lower their costs and/or improve their services.

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No matter which equation you look at, the resulting margin crunch has organizations looking at old and new ways of cutting expenses and growing revenue.

Pitfalls, dangers, and consequences
When hospitals are focused on the bottom line, it may be easy to fall into the trap of focusing on the wrong goals leading to negative impacts on the department and organization. For example, it may seem easy, when cost reductions are announced, that the first areas reviewed are staff reductions and contract cancelations. Without careful consideration, implementing reductions in either area results in changes that may actually increase downtime. Staff reductions may lead to increased response time, and without proper training, staff may be left supporting unfamiliar devices. Similarly, without proper training and support, reducing contracts may also lead to increases in downtime. Staff unfamiliar with equipment previously under contract may take a longer time to troubleshoot, obtain parts, and repair the equipment. These increases in downtime may actually decrease the number of patients able to be seen in the organization, leading to a decrease in revenue. If the training issues aren’t quickly resolved this loop can reinforce itself as decreased revenue and can lead organizations to drive even more cost reductions starting the loop again.

Changing the ‘cost reduction’ conversation
Instead of focusing on the requested/required cost reduction as a solution, clinical engineering departments should instead focus on enhancing the value of their department. The two main ways to enhance value are to improve patient safety and satisfaction. Departments need to ask themselves how can they affect/increase patient safety and satisfaction — and the two main ways are to improve standardization and review their contracts/in-house services and align them more fully to the needs of the organization.

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