Moody's Still Bearish on Not-for-Profit Hospitals

John Commins, for HealthLeaders Media , January 28, 2013

"What management teams have been effective in doing is increasing productivity at a broad level, cutting expenses in departments where revenue growth hasn't been that good, managing down the number of people needed to staff a unit. Hospitals have gotten very good about doing that. But that is all in the context of fee-for-service and reducing your unit costs to match the amount you are being paid," Steingart says.

"What we need to see is this deeper dive on the expense cuts, which is managing the whole patient through-put and patient care experience to how the reimbursement contracts change," he says. "Right now that is very fluid. That is going to be a challenging area. What you are seeing is the larger systems and the better teams are experimenting with that on certain care protocols."

For example, Steingart says some more advanced health systems offer what amounts to a warranty on procedures such as hip replacement surgeries.

"They have done a very deep dive on what it takes to admit a patient, the services they utilize when they are in the hospital, all the care providers that touch that patient during their stay, and the post-acute follow up and rehab and they are trying to value engineer that," he says.

"Right now we are at the beginnings of that. You only have it with a few services from a few really good and advanced institutions. That is something that is going to have to trickle down to the rest of the industry because the payment changes are going to come over the next two are three years."

John Commins is a senior editor with HealthLeaders Media.

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