Payment Cuts to Critical Access Hospitals 'Inevitable'

John Commins, for HealthLeaders Media , February 8, 2012

Start with understanding your current financial situation. "Most critical access hospitals have no idea about their economic performance or how dependent they are or whether they'll go out of business if the reimbursement model changes," Orlikoff says. "Or suppose they don't eliminate the reimbursement model but they cut it by 5%. Would you swing from the black to the red?"

"Understanding that leads to 'where do we tighten up? What is the most frequent Medicare diagnosis we treat in this hospital?'  Let's look at the variation there," he says. "In that one or two most frequent things we do, if we standardize to the highest quality and the lowest cost how much would that save?'"

"When you see that, you begin to realize that if standardizing is the best practice, we would have spent X dollars less. Then the leadership gets it. And you do it again and do it again," he says.

Finding the savings through improved quality and efficiency, and reduced waste is "liberating," Orlikoff says, because hospital leaders will understand that it is possible to survive—and perhaps even thrive—in an era of reduced reimbursements.

Of course, none of this can happen unless hospital governing boards acknowledge the new economic forces that are driving healthcare reform, and realize that no funding is beyond the reach of budget cuts.

"Boards are buried by curvy information and details and they aren't asking the right questions," Orlikoff says. "As the models change the questions the leaders have to ask have to change. Many of these folks are thinking the right thing but they are sucked back into the morass of old model governance."

John Commins is a senior editor with HealthLeaders Media.

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