d The Referral Rainmaker for Hospitals – Napier Healthcare

The Referral Rainmaker for Hospitals

KarthikBlogApril22_2015_3rdPicNow is the time to reset the $$ Rainmaker $$ for your practice
In my discussions with CFOs and CIOs I have yet to come across anyone who doesn’t lament the lack of revenue velocity. Simply put-more is always less and yet there is an overwhelming majority out there who will not work towards that goal. Decisive leadership is needed from C suite business leaders to align incentives to the resolution of this problem. The management of referral business should just not be left to functional heads. This has to be driven from the top because a robust referral mechanism not only helps meet the MU2 stipulation but also acts as a $$ Rainmaker $$ for the business.

There is certainly a crying need for revenues to go up.
It has been shown that:

1) For hospital sales/acquisitions occurring in 2012, the average price-to-EBITDA multiple was 9.5x, and the average price-to-revenue multiple was 0.76x, according to Irving Levin Associates. And for distressed or bankrupt hospitals, the average price-to-revenue multiple ranged from 0.3x to 0.4x. For a distressed hospital, this means every revenue dollar increase correspondingly improves valuation by at least 40 cents and double that for profitable hospital.

2) Hospitals are labor intensive: annual revenue per employee is around US$125,000*

3) A typical large hospital may have 300 beds and annual revenue of US$100 million; community hospitals generally have fewer than 100 beds*. This puts average revenue per bed per year at US$300,000.

4) Occupancy rates have declined from the 1970s at 76.7% to 66.5% in 2011.

When you look at the financial health of hospitals, the key levers are beds, productivity per employee and occupancy rates. If the figures above are considered, barring productivity none of these parameters contribute favorably to revenue growth. Acute care facilities are limited by the nature of their costs and their physicality-the number of available beds. The only lever available to shore up valuation then is a revenue increase as there is only so much cost that can be squeezed out.

And that revenue boost comes from having a robust referral management process.

Targeted Referral Rainmaking

Done right and in a targeted manner, referral management can drive high revenue and incur minimal costs. For instance, when adding a new service line that is typically profitable such as orthopedics. This is especially crucial for practices in rural areas where community demographics dictate a service line, and where the Critical Access Hospitals (CAH) and Community Hospitals operating in these areas need to know competitive offerings but more importantly what services stand to gain the most referrals. In this regard generating referrals electronically is the least expensive way to add revenue. Of course, they must identify and act on the right targets.

Reduce Out-of-Network Revenue Leakage

Electronic referral management makes healthier bottom lines by stemming out-of-network leakage, which has been one of the biggest drains on revenue in the business. Someone out there is taking away your rightful revenue because of systemic inefficiency. Most EHRs provide clinical documentation features and capabilities required to coordinate care across a clinically integrated network. However, none of them address the problem of simplifying front-end revenue functions, such as ordering tests and patient scheduling. The advice is to use tools such as those – don’t leave that money on the table.

A 360 degree Loop is needed to facilitate this flow of information and simple Cloud-based, web accessible tools are the need of the hour. A 360 degree referral platform that operates on the periphery of IT systems and activated with a matter of days is a quick cure to referral management woes. The analytics from the dashboard can easily pick out the friendly physician practices that are most loyal to you (using a Loyalty Index score). Coupled with a robust marketing function referral rainmaking will then just be a matter of days.


-By Karthik Tirupathi

The author is the CEO of Napier Healthcare, a leading provider of Cloud-based referral management Loop technology that is revolutionizing the way hospitals seek, secure and retain referrals.

The images used in this post have been sourced from multiple websites. He acknowledges and expresses thankfulness to the original sources.


* Source: 2009, First Research, Inc.

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