In August, Standard and Poor's Rating Agency (S&P) indicated that providers' costs are generally rising while revenue is falling. Not a good scenario given the aging population and the increase of individuals utilizing providers' services.
One S&P analyst indicated, "[t]he 2012 medians reflect a continuation of the peak in metrics reached in 2011, but we expect ratios to soften gradually in the next one to two years as incremental pressures persist and even intensify amid industry changes related to healthcare reform."
Recently, providers have been able to compensate for reductions in revenues through reducing readmission rates, participating in the federal EHR meaningful use program, and other cost-savings initiatives. With the potential changes to the Medicare Sustainable Growth Rate (SGR) formula on the horizon and inpatient prospective payment system (IPPS) payments, providers should closely scrutinize operational efficiencies in order to capitalize on small changes that can make a significant impact.
As a recent article in HealthLeaders Media relayed, "Some places have had reductions in force, or they're not filling vacant positions, or there is a real focus on full-time employee management and making sure that hospitals are efficiently flexing their variable staff to volume trends. Those aren't really new to the healthcare industry. Folks have been doing that for a long time and continue to do that … in addition to some of the non-salary things like renegotiating your supply contracts or different vendor contracts."
With value-based purchasing and other initiatives, providers should evaluate how a workforce reduction may impact patient care and in turn patient satisfaction, which is having an increasing impact as a factor impacting provider reimbursement. Therefore, balancing the short-term situation with long-term consequences is essential.