How to Break Even on Medicare Reimbursements

Karen Minich-Pourshadi, for HealthLeaders Media , February 28, 2011

1. Adopt Process Efficiency. If you want to be profitable, you have no choice but to get a grip on your processes. Doing so goes beyond looking at your supply change and understanding expense management and Lean and Six Sigma process improvement programs.

“We find with hospitals that there’s a real desire to focus on supplies [to cut costs] because there’s always something there and it’s relatively easy pickings,” said Gift. “When you do expense management, you dig into labor, supplies, discretionary expenses, and everything else. You make incremental improvements on cost and cost structure by improving your labor and efficiency.”

While many organizations have added process improvement initiatives to select areas, for instance looking at their back office or nurse scheduling, for the most part Lean and Six Sigma remains confined to those areas.

The American Society for Quality conducted a study of 77 hospitals and found that 53% of hospitals have some type of Lean initiative and 42% are using Six Sigma. However, the same study reported that only 4% of hospitals have full deployment of Lean. A full-scale roll-out of this type of process improvement program may be in order, if you haven’t considered it.

Healthcare facilities that have successfully employed Lean and Six Sigma initiatives, such as Virginia Mason Medical Center and St. Vincent Mercy Medical Center, collectively agree that in order for process improvement initiatives to be fully effective they must be driven by a unified team mindset in all departments—everyone has to believe and act Lean. Unfortunately the study found that 30% of hospitals are still lacking leadership buy-in, while 59% are lacking resources to pursue such an effort. For a more in depth look at Lean and Six Sigma, watch for the April issue of HealthLeaders Magazine.

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3 comments on "How to Break Even on Medicare Reimbursements"

Tim McVey (3/1/2011 at 10:40 PM)
For those of us whose Medicare DRG Reimbursement includes a significant DSH add-on, we'll be challenged to break even in 2014 and beyond, after the Health Care Reform cut-backs to DSH reimbursement begin. Theoretically, the DSH reimbursement shortfalls should be offset by the revenues from the newly-insured, but in certain markets that won't always be true [INVALID] particularly in markets along the Border where undocumented individuals won't be eligible for the new low-cost insurance coverage.

Scott (2/28/2011 at 3:15 PM)
I saw the headline of this article and thought that there would be some unique insight or ideas mentioned. This article said nothing that wasn't already known. The end result is that I will never be able to reclaim the 5 minutes that I wasted in reading this!

John Stanton (2/28/2011 at 2:35 PM)
Part of the analysis process must involve the FTE's involved in the revenue collection cycle. As painful as it might be, adopting [INVALID]d technology can reduce staffing costs while improving the quality of daily posting files. If you currently employ data entry staff that key from paper EOB's or images, you are way behind the curve. Likewise, if you have one FTE sitting in front of 2 computer screens for data entry, you are wasting time and money. If you know you need to improve your revenue collection process, but don't want to go through the RFP process, email me at and we'll get you started in the right direction.




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