How teaching hospitals can recover fiscal fitness
Two-fifths of leaders at academic medical centers, 41%, see reducing average length of patient stay as far and away the No. 1 “most untapped” strategy to turn around falling operating margins.
In fact, length of stay almost doubles the No. 2 low-hanging fruit that’s ripe for picking, physician productivity (22%).
The figures are from a survey of more than 100 academic hospital leaders conducted by the global consultancy McKinsey.
In the survey report, authored by four McKinsey physicians, Edward Levine, MD, and colleagues note that academic medical centers have enjoyed revenue growth while suffering margin drops in the wake of the COVID-19 era.
In 2022 the average margin was 1.5%, they point out. The widely cited figure for maintaining enough margin to pay the bills is 3%.
Rallying the troops on LOS
The McKinsey analysts suggest offering change-resistant care teams a “patient-centric” motive for working toward reductions in length of stay (LOS).
“We often see executives focus on the potential financial value associated with reducing length of stay or increasing physician productivity; however, this reasoning can ring hollow for clinicians and team members,” Levine and co-authors write. “In comparison, leaders who emphasize improving capacity and care access within their communities have more success aligning clinicians and other stakeholders on the overall goal, even though the underlying tactics and potential financial impact remain the same.”
The report, released April 4, includes case studies to support the authors’ advisements.
In one, they describe an academic hospital with more than 700 beds that had a poor LOS record despite pouring much time, effort and money into turning it around.
The hospital finally hit the right notes after undertaking a “structured yearlong effort.” This consisted of measures like expanding capacity for weekend services, creating a team to assist with complex patients who have longer stays, and announcing their intent to expand care-coordination resources.
“As a result of the changes, the academic medical center reduced average patient length of stay by 13%, enabling a 10% increase in admissions,” Levine et al. report. “Notably, it achieved these results while also improving clinician satisfaction.”
Programmatic physician productivity
Another academic hospital improved physician productivity with multilevel measures such as plans with set deadlines, ownership assignments and performance metrics.
“They also reinforced full-time-equivalent allocation policies to ensure physicians were dedicating sufficient time to clinical work and linked hiring of additional clinical support staff to adherence with groupwide standards,” the McKinsey physicians write. “As a result, this academic medical center increased faculty physician productivity by approximately 25% over a two-year period and reached the 75th-percentile benchmark.”
The report also looks at challenges and opportunities in revenue cycle management and other topics germane to financial health for academic healthcare institutions.
Levine and colleagues wrap their discussion as follows:
‘Academic medical centers play a vital role in healthcare delivery, education and discovery, and improving their operational effectiveness is crucially important to the healthcare system overall. By taking a holistic and structured approach to performance transformation, academic medical center leaders can ensure financial sustainability for generations to come, and continue to improve care access, quality and outcomes.’
Dave P. has worked in journalism, marketing and public relations for more than 30 years, frequently concentrating on hospitals, healthcare technology and Catholic communications. He has also specialized in fundraising communications, ghostwriting for CEOs of local, national and global charities, nonprofits and foundations.