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Hospitals must re-examine their operating models

Hospitalist Leadership Connection, June 13, 2007

Many hospitals are at a breaking point with regard to their financial health. Even with stable or increased volumes, many cannot continue on operating income alone. The future does not look rosy, either: In 2006, hospital price inflation outpaced all other goods and services.

If hospitals are divided into thirds, only those in the top third are making significant financial returns that will position them for the future. The bottom two-thirds have too much debt and not enough profitability to access capital.

Due to market changes, many hospitals' current operating models have become outdated. The historical operating model included powerful technologies, skilled physicians, compassionate caregivers, and a volume of patients sufficient to leverage enormous fixed costs, all under one roof. The market then evolved to focus on customer. This focus pressures hospitals to gather information from both payers and consumers on pricing, quality and services. The equation has changed, however, and a transformation is required.

To access the full article, go to www.healthleadersmedia.com/view_feature.cfm?content_id=90150.

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