Cardiovascular Center of Excellence Accreditation as Strategy
In a previous blog, I posted about the new opportunities for hospital cardiovascular programs to...
The last few years have been financially devastating for the hospital industry. COVID-19 and its variants have plunged the industry into financial chaos, with long-lasting impact on healthcare focused on, but far beyond, mere finances. Consider these sobering facts from 2021 and early 2022 (see here and here):
The overall financial health of the healthcare industry raises questions relevant to all service-line administrators. How do I justify budget increases when my hospital’s operating margins are low or in a deficit, and how do I keep up with the constant changes in technology which are necessary to compete in increasingly complex local and regional markets? Further, how do I expand new service offerings (frequently dependent on new and expensive clinical technology) in the face of deficits, labor shortages, changes in average patient acuity, and an uncertain future? The cardiovascular service-line administrator (CVSLA) faces this conundrum more than most others. Given that patient volumes have or are returning to pre-pandemic levels (although fundamentally changing), the CVSLA must successfully address the current operations of the services while planning for a less than certain future. Remember, failure to make adequate progress does not just mean keeping up with the competition, it actually constitutes regression!
CFA has worked with countless hospitals to prepare and justify budgets over the years. Remember, budget justification is a categorical narrative description of the proposed costs. Generally, it explains staffing and supply/service consumption patterns, the methods used to estimate/calculate (including escalation or inflation factors) and other details such as lists of items that make up the total costs for a category. While challenging even in secure economic times, budget justification needs to consider the following action items in this less secure, post-pandemic world along with the more historically relevant budgetary factors.
Obtaining complete, up-to-date financial information is often fraught with problems, including timeliness, the methodology for the allocation of overhead, the potential “downstream” revenue CV patients can accrue over time, and associated physician costs (particularly for employed physicians). At a minimum, the pro forma must include all relevant costs and revenues, exclusive of allocated overhead, which is often as much a political as it is a financial calculation. If you know your overhead allocation, and the consensus is that it is reasonable, by all means, include it for the truest picture of total performance. But remember, the SLA has little ability to impact allocated overhead; and physicians have virtually none. This is critical information, not only to pinpoint managerial issues, reconfigure resource allocation, and head-off problems, but to inform any budgetary justification that may be needed for a particular expenditure, project or function. Simply put, the more financially impactful the CVSL is to the hospital, the stronger your capital budget negotiating position – all other issues being similar.
The post-pandemic environment is shaping the budget justification process to a high degree, and this will likely continue for some time. When money is tight, the justification process becomes critical, sometimes more political and highly competitive. Given the relative importance of the CV Service-Line, the CVSLA is in an advantageous position to justify increases in expenditures and budget, but must recognize that such justification has to be considered in a new and challenging environment fundamentally different from the pre-pandemic past.
If you are interested in learning more about cardiac services strategic development, service expansion and/or other programmatic needs for cardiovascular or other services, please contact CFA at (949) 443-4005 or by e-mail at firstname.lastname@example.org.
In the previous blog post (refer to Rethinking Ambulatory Cardiovascular Strategy: Part One – The...