Facing tighter revenues, hospitals boost efficiencies

In response to the changing revenue climate, systems such as University Hospitals in Ohio are entering into accountable care organizations, expanding the use of electronic medical records and merging facilities, The Plain Dealer reported.

"We cannot predict the future, but we can prepare for it," University Hospitals CEO Thomas Zenty told the newspaper.

In addition to the cost-cutting measures, University also is upping its fundraising efforts and fine-tuning its community benefits planning, according to the article.

Non-profit systems like University are making changes given the likelihood that revenue streams will be straitened in the coming years. According to the forecast issued by Moody's Investors Service, nonprofits reported median revenue growth of 5.3 percent during 2011, up from 4.5 percent in 2010. However, the historic median annual growth rate has been about 7 percent, noted the ratings agency.

"Low revenue growth is due primarily to flat volume trends and payer pressures," Moody's analyst Sarah Vennekotter said in statement last month. "Inpatient admissions were again flat in 2011, repeating trends seen in 2009 and 2010, and will continue to be a factor in our expectations for lower-than-average revenue growth."

One of the drivers is the cancellation of elective procedures by patients, which often costs hospitals millions of dollars a year in lost revenues.

There also continues to be a revenue shift to public payers. Medicare and Medicaid now represent 56.5 percent of all gross patient revenues, according to Moody's. That compares to 53.9 percent in 2009. Both programs tend to pay at or below hospital cost for many procedures.

In response, hospital and system managers have cut expenses that have maintained profit margins, Moody's noted. Liquidity also increased as a result.

To learn more:
- read the Plain Dealer article
- here's the Moody's summary on hospital revenue