A new round of bonuses and penalties have been handed down by Medicare, raising payouts for 1,200 hospitals and cutting them for 1,400 more. The bonuses and penalties are part of a lesser-known section of the Affordable Care Act, aka Obamacare, and are overseen by Medicare.
The program, which withheld a portion of all Medicare payments across the board to build a reservoir for the rewards, is based on hospital rankings which are intensifying as the years progress. In addition to first-year measurements of adherence to standards, quality of care, and hospital-borne illness frequency, hospitals this year were graded on death rates this year. In the next few years, measurements comparing Medicare costs at each hospital and tallying medical mishaps by location will be included.
The desired outcome of this program is clear: hospitals must improve their service levels and scrutinize their spending if they do not want to see a reduction in payments. Conversely, those hospitals most in need of a service upgrade must do so with less money.
As these hospitals are upgrading food carts to eliminate squeaky wheels, buying new beds, bringing in new and additional equipment to meet the heightened standards, and bringing in quality control people to oversee these upgrades, they aren't doing it with free money. Each of these upgrades and additions comes with scrutiny and modifications to their budgets. These budgets are very likely already strained. Throw in a reduction of Medicare reimbursements, and the stage is set for a repeating cycle of unable to improve performance-penalty reduction-unable to improve performance-penalty reduction.
For hospitals, the most common method of finding savings is through a GPO. Some hospitals are members of more than one. GPOs, allowing for pooled buying of commodities at pre-negotiated or discounted rates, do allow for some savings. But purchsing through GPOs exclusively leaves money on the table.
Hospitals that have implemented strategic sourcing practices or contracted with strategic sourcing partners have realized savings far greater than those provided by GPOs. In addition to cost savings on commodities like paper towels and janitorial supplies, hospitals are also able to save in categories with cartel conditions, like blood, and capital expenditures like MRI and XRay machines. In addition to the sourcing services, companies like Source One offer optimization audits and services, eliminating wastage and unnecessary redundancies from telecom and data networks, and ongoing audits, ensuring that agreed-savings are implemented in the invoices.
Long story short: hospitals are facing increased pressure to optimize their budgets and purchase more with less. Partnering with a procurement services firm like Source One offers many healthcare agencies facing ACA and Medicare pressures some much-needed budget relief.
For an in-depth look at what Source One can do for hospitals and healthcare organizations, follow the link