Community Hospital Uses Service-Line Profitability Reporting to Drive Margin

December 7, 2021

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Thin Margins Have Made Community Hospitals Vulnerable to Acquisition 

Following the global pandemic of COVID-19, hospitals and health systems across the country have had to reassess and seek out new strategies for improving margin. At community, critical access and rural hospitals whose goal is to remain independent, these efforts have gained urgency and importance with the impending possibility of acquisition by larger health systems. Even with the saving grace of government relief funds, the future of community hospitals continues to rely on maintaining margin to remain independent. 

At this northeastern community hospital, leaders felt their organization was at a crossroads. Following the height of the COVID-19 pandemic, they would need to improve their margins to remain independent. However, with the next nearest hospital being over an hour away for many of their patients, they also understand the real importance of making their services available for their community. 

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Identify and Grow Key Service Offerings Using Service-Line Profitability

This organization partnered with Strata Decision Technology and leveraged their advanced costing tool to move forward from this crossroads. They utilized StrataJazz^® Decision Support to dig into their service-line encounter and cost data and determine which areas to invest or shrink based on performance.  

Each month, applicable leadership meet to review and prioritize services going forward. With the data in hand, they are armed with the information needed to discuss and decide which service-lines to grow based on margin performance. They can also identify which service lines are heavily resourced with limited contribution to margin. By identifying service-line programs to grow or shrink, the organization is now in a much better position to remain independent. 

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Detailed Service-Line Analysis Drives Margin Recovery Strategy 

This community hospital has established a more stable, accurate process by focusing on service-line analysis instead of only department-level. They can now identify both high- and low-performing service lines and engage the applicable teams to take action. In one instance, they needed to review their orthopedics department which was historically profitable but had begun operating at break-even. Leveraging StrataJazz and consulting their surgeon group to determine whether this was a coding or case issue, the organization dug into data to determine the need to improve the performance of one provider.  

Today, they use this reporting to determine the health of whole service lines and identify the best way to move forward, whether by taking action to increase volumes and profitability in that service line or by outsourcing to specialized community partners better suited to serve in those areas. In the wake of COVID-19 and the height of its impact on the hospital, leaders are confident they can continue to remain independent and drive high quality programs for their community. Analyzing service-line performance has led this hospital to make more strategic decisions, reduce their risk of being acquired and drive financial recovery for their organization.