The LEAN Consulting Group

The HCAHPS Reimbursement Myth: The Case for LEAN

HCAHPS and value based purchasing have an impact on Medicare reimbursement.

HCAHPS reimbursement is based on the combination of the patient experience and core measures, calculated on a sliding scale. Hospitals that don’t meet national averages will not necessarily get their money back. Hospitals that exceed the national average will get a bonus.

Currently, one percent of reimbursements are being held back, pending HCAHPS results.

This has caused a panic reaction. Hospitals are scrambling to initiate customer service programs to increase their scores so they can not only recoup the hold back but to get a bonus if they exceed national averages.

Is this the best use of time and resources?

Let’s analyze at this from a LEAN perspective.

Take a hospital with gross annual revenues of $65,000.000. Medicare reimbursements are $9,200,000 annual labor costs $ 23,100,000.

Based on these figures, the Medicare reimbursement at risk is $92,000.

Or is it?

The Myth of HCAHPS Scores and the Impact on a Hospital’s Bottom Line

Reimbursement is based on HCAHPS scores at a ratio of:

30% patient experience and

70% core measures.

In reality, the amount at risk, based on patient experience, at this hospital is $ 27,600.

In reality, the maximum bonus, based on HCAHPS scores, is $27,600.

What is it costing you in terms of staff costs, training time and consultant fees to make $27,600? What is the return on your investment?

If you are focusing on HCAHPS reimbursements, you would be better off focusing on core measures. Your risk is $64,400 and your maximum bonus is $64,400.

What do these figures mean in the big picture?

Focusing all improvement activities on issues that generate Medicare generates reimbursements of $92,000.00 or 0.14% of gross revenue.

Is this the best use of your resources?

Focusing all your efforts solely on improving HCAHPS patient experience scores generates $27,600 or 0.042% of revenue.

Is this the best use of your resources?

The Case for LEAN

LEAN is a process improvement process that can be applied everywhere in your hospital.

Studies have shown that up to 50% of our labor costs are waste. They include efforts that add no value to our patients, they just add cost.

Let’s assume 50% is too high. Let’s assume it’s only 10%.

What if you could eliminate 10% of your labor costs of $23,100,000 or $2,310,000?

That’s what LEAN can do for you.

Call us today to discuss how we can transform your hospital into a LEAN organization.

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