Many have described the transition from fee-for-service to fee-for-value for hospitals as crossing a “shaky bridge.” We are being asked to increase our spending to manage population health, resulting in preventing avoidable admissions that reduces per capita hospital revenue. It is no wonder that CFO’s are often reluctant to join ACOs.
The beauty of rural health is that the mission of a rural hospital CEO isn’t maximizing the daily census; it is serving the community’s health needs. Over time, most rural hospitals have acquired the majority of health services in town, including physician practices, skilled nursing, home health and hospice. The average rural hospital’s income is only 30% for inpatient care, with 70% of income coming from outpatient care. They have evolved into integrated delivery networks that provide about 70% of the total services that their community needs, although we do not capture anywhere near 100% of the market share for those services.
Rural hospitals also have small cash reserves, so any disruption in payment can be threatening to its survival. Our bridges are a bit shakier than most, and that is why the CFO and Financial Consultants are critical to the success of the transformation of rural health.
As we continue to implement our rural ACOs and study their impact on rural health systems, we have instituted a new role for the CFO and Financial Consultants in the transformation of the rural health system. We begin our monthly community steering committee meetings with a report from the CFO about the effect of the transition on the finances of the community health system. The hospital can and must control the rate of change so that the health system survives to serve its community for many years to come. If the bridge feels shaky, we can focus on quality, prevention and wellness visits until the system has time to adapt. We can work on our referral patterns to maximize the value of care given outside of the community.
We have to work on building local market share at the same time we help people manage their disease and keep them healthy. We have to increase primary care services and access, while still supporting the largely fixed costs of the hospital. Using the claims data provided for ACOs, we have to understand what services we could provide our patients that we don’t today, and how to increase our market share for the ones we do offer.
Beginning with our 2016 ACOs, we will have Financial Consultants at the table to hold the bridge steady while we cross to the new value-based payment models. Working side by side with the CFOs, we can create a better future for our communities with better quality of life and a thriving rural health system. Rural health systems are blessed with several great Financial Consulting firms, and the National Rural Accountable Care Organization will be announcing partnerships with these firms in the weeks to come.