Medicare and Healthcare Administration CFOS

With four out of every ten hospital stays covered by Medicare, and almost half of hospitals’ overall revenue, Medicare cost strategies are critical for healthcare financial management (Herman, 2012). In “7 Strategies to Help Hospitals Break Even on Medicare,” Herman (2012) discusses ways hospital administrators can better manage their Medicare strategy. Hospitals do not break even on Medicare unless they implement proactive strategies for addressing potential shortfalls. Short of advocating for political reform of Medicare policies and programs, Herman (2012) claims that hospital CFOs can actually develop methods of financial management that minimize losses and ensure solvency. Herman (2012) offers seven suggestions to hospital administrators and CFOs, the most important of which is forming strategic alliances and partnerships.
Strategic partnerships are important to hospitals not just for Medicare cost structuring but for overall cost-effectiveness. Pooling resources allows all partners to benefit from their relationships, while also improving the quality of healthcare services. When it comes to forming strategic partnerships that are immediately related to Medicare, hospitals need to think locally, regionally, and perhaps even internationally. Mergers and acquisitions are upper-tier methods of managing Medicare costs. Most hospital administrators will not have access to or the ability to influence strategies like mergers or acquisitions. Nevertheless, Herman (2012) does explicate the importance of business strategies like mergers and acquisitions in light of Medicare challenges.
Mergers and acquisitions imply transfers of ownership, which in turn could entail dramatic shifts in organizational culture and overall fiscal strategies. Changes of ownership could also radically alter approaches to healthcare, such as changing the mode, method, and manner of service delivery. Some institutions might opt out of treating Medicare patients entirely, whereas others will remain committed to the sector that relies on Medicare while better managing costs or integrating other services into their overall portfolio. As Herman (2012) points out, one of the reasons why some healthcare institutions enter into partnerships, or pursue mergers and acquisitions, is to reduce administrative costs. Administrative costs may be one of the most challenging aspects of Medicare cost management, making bundled care options critical (Kivlahan, Orlowski, Pearce, et al, 2016).
Herman (2012) mentions the matter of not filling beds, but this will not be an issue for some institutions that focus on patient populations relying on Medicare. When hospitals are filling beds but have other problems like understaffing, mergers, acquisitions, and strategic partnerships alleviate resource burdens. Distributing responsibilities among different healthcare partners, the organization can reduce financial strain without compromising the quality of care. Unfortunately, Herman (2012) fails to let readers know specifically which strategies might be implemented and how. Administrators will gain much from reading Herman’s (2012) seven points, but will do better to further investigate concrete and evidence-based management strategies.
It is also important to link the concept of strategic partnership with bundling. Bundled payments are similar to strategic alliances in that they help to defray or redistribute costs. Similarly, hospitals and other institutions can form strategic partnerships that better manage resources. As important as strategic alliances are to managing costs associated with Medicare patients, hospitals also need to pay close attention to another one of Herman’s (2012) suggestions, which is to better understand and acknowledge Medicare data and related metrics. Without benchmarking and metrics, a hospital cannot begin to have an effective financial management strategy. Once the numbers have been correctly analyzed, then the CFO can work with administrators to cogently form strategic partnerships.





References

Herman, B. (2012). 7 Strategies to Help Hospitals Break Even on Medicare.
Kivlahan, C., Orlowski, J. M., Pearce, J., Walradt, J., Baker, M. & Kirch, D. (2016). Taking Risk: Early Results From Teaching Hospitals’ Participation in the Center for Medicare and Medicaid Innovation Bundled Payments for Care Improvement Initiative. Academic Medicine 91(7): 936-942.