Are hospitals still feeling the budget crunch?
Written by Jay Freemont
As U.S. hospitals struggle to do more with less, a growing number of these institutions will find themselves in a budget crunch. Complicating the short-term outlook are uncertainties about how and to what extent Obamacare will affect their operations and bottom line.
Although uncertainties abound about the effects of the Affordable Care Act (ACA), one thing seems clear, according to Shelley DuBois, a staff writer for The Tennesseean in Nashville. In an article that appeared in USA Today, DuBois says that hospitals are moving into a new era in which they will be rewarded more for the quality of the care they provide than for the volume of patients that they treat.
Focus on Successful Outcomes
Of this sea-change in the way hospitals are rewarded, DuBois writes: "As this transition occurs, hospitals must live in two worlds -- one where they still earn money per procedure and another that views the treatment of patients in a more holistic way, with successful outcomes the most important measure of a hospital's performance."
One of the yardsticks for determining quality of care is built into the ACA's Readmissions Reduction Program, which will penalize hospitals that have above-average readmission rates for patients treated for heart attack, heart failure, and pneumonia.
Penalty for High Readmissions
According to an article in Gallup Business Journal, penalties for excessive readmissions for fiscal year 2013 involve reductions of 0.01 percent to a maximum of 1.0 percent of a hospital's Medicare reimbursement revenue. Penalties increase to a maximum of 2 percent for FY2014 and 3 percent for FY2015.
These changes will put additional financial stress on hospitals with dangerously thin operating margins and make it more important than ever for them to take steps to cut costs.
In an article written for Time's Health & Family section, Dr. Toby Cosgrove, president and CEO of Cleveland Clinic, said his institution, one of the most respected in America, has found an ingenious way to reduce the cost of its equipment and supplies.
Educating Staff about Costs
While the hospital continues to focus primarily on delivering the highest quality care possible, it has been able to achieve dramatic savings by making its doctors and other hospital personnel more aware of the relative cost of the materials and supplies used in their procedures.
Prior to instituting this in-house program to raise doctors' awareness about price differentials, Cosgrove wrote, "most surgeons never [knew] that the stitch costs $5 and the staple costs $400. Traditionally, knowing the costs of a stitch or a catheter or a bone screw -- or any of the thousands of other supplies used during surgeries -- hasn't been part of many doctors' medical consciousness."
Significant Savings Realized
By asking doctors to better acquaint themselves with the cost of supplies, Cleveland Clinic was able to realize savings of $100 million after 18 months and $155 million after three years, according to Cosgrove.
In an article written for Becker's Hospital Review, Bob Herman detailed some other cost-saving strategies that have worked for hospitals around the country.
On New York's Long Island, South Nassau Communities Hospital of Oceanside was able to cut $75,000 from its annual inbound shipping costs that had previously averaged $500,000 annually. The hospital was able to negotiate more financially beneficial shipping contracts by leveraging its buying power with carriers.
Health Benefits Costs Cut
At California's Community Hospital of the Monterey Peninsula, savings were achieved on the institution's health benefits plan, which was taking a rapidly growing share of the hospital's budget.
The institution moved aggressively to promote the health and welfare of its employees, offering financial incentives to employees who are active participants in the hospital's wellness program or who complete or show improvement in five main wellness categories.
The hospital also instituted programs to help employees with chronic health problems, such as diabetes and asthma, better deal with these conditions to reduce health emergencies.
Beaumont Health System in Royal Oak, Michigan, made changes to its landscaping and irrigation systems that resulted in savings.
Low-flow sprinkler heads were added to the irrigation system, and some plants, particularly those that require high amounts of water, were selectively removed from the landscaping plan.
Beaumont also achieved savings by making changes to its lighting system. Unnecessary lighting in certain areas was removed altogether, the number of bulbs in multi-light fixtures was reduced, and light switches were installed in rooms and areas where lights don't need to be on at all hours.
These are just a few of the ways in which hospitals can reduce overall costs.
Each institution should do a top-to-bottom evaluation of its expenditures to look for areas in which costs can be cut.
About the Author: Jay Fremont is a freelance author who writes extensively about a wide array of business and personal finance topics, including tips on where to access free financial software.
How healthcare can safeguard itself against cyberthreats
One of the most fundamental lessons from the COVID crisis is that health should always be a priority. In a similar fashion to the human body that frequently fights off viruses and foreign invaders that intend to cause it harm, the sector itself is now a prime target for another type of external threat: cyberattacks.
The figures speak for themselves: between December and January this year, hospitals in the UK were at 89% capacity, with 7,000 fewer available beds than there usually are. As the pandemic increased pressure on hospitals, clinics, and research facilities to create a treatment for patients globally, it has left the sector exposed to hackers who, like a virus, have been targeting it relentlessly and evolving their tactics.
From patient records being held ransom, to fake emails claiming to originate from the UN WHO, the NHS, or vaccine centres, through to attacks on the cold supply chain to find out the secret formula of the COVID vaccine, the healthcare industry is facing constant cyberattacks and struggling to cope. This threat is unlikely to go away anytime soon – and as such, the industry needs to take a proactive, preventative stance to stay safe in a dynamic digital world.
The responsive nature of healthcare – particularly of hospitals – means that efficiency is crucial to the industry’s standard operations. To support this, the sector has been embracing technological advancements that can improve the quality of work, enabling staff to meet pressing deadlines, and enhancing patient care. For example, the industry has been digitising records and improving its ways of working through digital means over the past few years.
This shift is critical to offer high quality patient care; yet, it also means the sector has become more dependent on IT, which can come with a risk if cybersecurity processes employed are deemed as inadequate.
Without the correct security measures in place, the desired efficiency gains realised, can be easily lost in a heartbeat. Simply put, an elementary glitch in the system can have a tremendous ripple effect on many areas, from accessing patient records and conducting scans, to maintaining physical security and protecting the intellectual property of experimental treatment development.
To prevent this, healthcare organisations need to ensure they’re considering cybersecurity as part of their overall digital transformation strategy – and setting the right foundations to create a culture where safety goes hand in hand with patient care.
Before implementing cybersecurity process, healthcare organisations need to assess the potential risks they face. Depending on how much confidential data the trust has, where it is stored, who has access to it and via which means, the cybersecurity strategy and associated solutions will change.
It’s fair to say that a medical device start-up where all employees have a corporate-sanctioned laptop and access data via a VPN will have radically different needs to a large hospital with hundreds of frontline workers connecting to the hospital’s Wi-Fi using their personal device.
These requirements will pale by comparison to a global pharmaceutical giant with offices in multiple locations, a large R&D department researching new treatments for complex diseases and a fully integrated supply chain. Considering the existing setup and what the organisations is looking to achieve with its digital transformation strategy will therefore have an immediate impact on the cybersecurity strategy.
Despite this, there are fundamentals that any organisation should implement:
Review and test your back-up policy to ensure it is thorough and sufficient – By checking that the organisation’s back-up is running smoothly, IT teams can limit any risks of disruption in the midst of an incident and of losing data permanently.
In our recent State of Email Security report, we found that six out of ten organisations have been victims of ransomware in 2020. As a result, afflicted organisations have lost an average of six days to downtime. One third of organisations even admitted that they failed to get their data back, despite paying the ransom. In the healthcare industry, this could mean losing valuable patient records or data related to new treatments – two areas the sector cannot afford to be cavalier about.
Conduct due diligence across the organisation’s supply chain – Healthcare organisations should review their ways of working with partners, providers and regulatory institutions they work with in order to prevent any weak link in their cybersecurity chain. Without this due diligence, organisations leave themselves exposed to the risks of third party-led incidents.
Roll out mandatory cybersecurity awareness training - Healthcare organisations shouldn’t neglect the training and awareness of their entire staff – including frontline workers who may not access the corporate network on a regular basis. According to our State of Email Security report, only one fifth of organisations carry out ongoing cyber awareness training.
This suggests it is not widely considered as a fundamental part of most organisations cyber-resilience strategy, despite the fact many employees rely on their organisation’s corporate network to work. By providing systematic training, healthcare organisations can help workers at all levels better understand the current cyberthreats they face, how they could impact their organisation, the role they play in defending the networks, and develop consistent, good cybersecurity hygiene habits to limit the risks of incidents.
Consider a degree of separation – Information and Operational Technology (IT and OT) networks should be separated.
Although mutually supported and reliance on each other, employees shouldn’t be accessing one via the other. This should be complemented by a considered tried and tested contingency and resiliency plan that allows crucial services to function unabated should there be a compromise. Similarly, admin terminals should not have internet access to afford a degree of hardening and protection for these critical accounts.
As the sector becomes a common target for fraudulent and malicious activity, putting cybersecurity at the core of the organisation’s operations is critical. It will help limit the risks of disruption due to cyberattacks, reduce time spent by the cybersecurity team to resolve easily avoidable errors, and ensure that institutions can deliver patient care, safe in the knowledge that their networks are safe.
Fighting future threats
With technology continuing to change the face of healthcare, the surface area and vectors available for attacks by malicious actors is constantly increasing. With the introduction of apps, networked monitoring devices, and a need for communication, the attack vector is ever expanding, a trend that needs to be monitored and secured against.
To prevent any damage to patients, staff, or the organisation they are responsible for, healthcare leaders must put security front and centre of their digital transformation strategy. Only then can the sector harness the full benefits of technology. Doing this should include implementing cybersecurity awareness training to challenge misconceptions around security, encourage conversation, and to ensure employee knowledge of the security basics and threats faced.
This ultimately allows healthcare organisations to do what they do best: provide the highest standard of patient care, safe in the knowledge that their operations, patients, and data are safe.