Strategic plans provide lasting solutions to rural crisis

Healthcare Financial Management, April, 1990 by James C. Folger

* Monitoring results. To ensure their effects are measurable, strategies should relate to quantifiable objectives. In other words, a strategic plan's goals should state specific revenue, volume, income, market share, and fund-raising targets.

On top of this, the plan should set up check points for monitoring whether the hospital is on track in meeting its goals. Adjustments may be necessary.

Solving the rural crisis

The most common strategies used to solve financial problems plaguing rural hospital include:

* Staffing adjustments. While some may argue about staffing as a strategic or an operational issue, staff reductions are a prime focus in controlling expenses. Strategic planning should involve assessing services critical to a hospital's future and the level of staff needed to support the quality of those services.

After a review of these areas, one hospital reduced its staff by 24 percent overall but added nurses in one understaffed area.

* Physician recruiting. For many rural hospital administrators, recruiting and retaining physicians is a number one priority. A strategic plan should identify specialties needed and the revenue or bottom line effect of attracting additional physicians.

A hospital in Arkansas regularly assesses each physician and specialty area, determining patient days per physician arid establishing a potential for each person. By looking at three-year trends, interviewing referring physicians, and looking at usage patterns, the hospital found that a urologist was losing significant business to another community and that recruiting a second urologist could increase hospital revenue by $400,000 annually.

* Fund raising. A small community that wants its own hospital must support it. Administrators and board members must communicate with local residents and educate them about contributing time and money to the hospital.

An 18-bed California hospital drew local support with pancake breakfasts, barn dances, and speaking engagements. Those activities raised $140,000-and the following year 76 percent of local voters approved a $200,000 tax levy for the hospital.

Government grants also should be explored. In 1989 the Health Care Financing Administration began its $8.9 million Rural Health Care Transition Grants Program, which awards grants of up to $50,000. The program's first year brought funding to 184 projects.

* Price increases or decreases. Pricing has yet to play a major role in hospital preference, but some services - such as elective mammographies-may be more price sensitive than others.

Studies on maximizing prices conducted by several hospitals have resulted in increases for selected services and substantial added revenue. Clearly, however, hospitals with substantial numbers of Medicare or Medicaid patients will see relatively small effects from price increases.

Many rural facilities have adopted flat rate fees for maternity services, encouraging pre-payments and ensuring patients of no additional charges. One hospital saw a 20 percent increase in patients through this mechanism.