7 Proven Strategies to Increase Profitability of Your Rural Hospital

Jun. 28, 2017

There's no easy fix, but there is a strategy to achieve profitability for your rural hospital.  In fact, there are 7 effective solutions:

  1. Building relationships with referring physicians
  2. Forming strategic partnerships
  3. Retaining patients and sustaining their satisfaction
  4. Choosing marketable and profitable service lines
  5. Engaging employees
  6. Strategically planning marketing efforts
  7. Implementing marketing that produces results

Based on Legato's experience of working with rural hospitals throughout the nation, I'll cover these topics in more detail in an upcoming NRHA webinar. For now, I'll address the first two points, and future blog posts will discuss the other solutions.

Building relationships with referring physicians.

I find this to be one of the most missed opportunities in rural healthcare.  Every situation is different.  Sometimes you have visiting surgeons in key areas such as orthopedics, urology, or ophthalmology.  And as you know, the success of your hospital is predicated on performing procedures at your organization, not the mothership affiliated with the referring physician. I hear all too often, "well they set up a clinic here, but that's just to see patients.  Then they refer them to (insert larger city 1-2 hours away)."

Like any successful business interaction, there has to be give and take.  Sometimes this is the contract stage, or later.  But, there has to be an understanding that there is a mutual benefit in having a provider set up an office on your campus.  Collecting rent for their office space doesn't pay the bills for you.  What I have found is that referring providers are much more open to conversations about which procedures can be brought to your hospital than what you might give them credit.  At the same time, it's having the realistic discussion about which procedures make most sense to be done locally, and which should go elsewhere.

As an example, maybe the diagnostic work can be done locally, and the total joint replacement gets referred.  Or the endometrial ablation is done locally but the more complex gynecological or urological procedures are done elsewhere.  Or maybe some of the more complex procedures can be done locally.  Of course, part of this conversation is about the equipment, staffing and efficiency of your operations - and frankly, treating your referring physician like a customer.  What does he or she need?  How can these be mutually beneficial?

Remember in the end, you are still promoting your services and not the individual physician's practice, as we want to stay clear of any Stark or anti-kickback concerns, but these key physicians are vital to keeping your organization in the black.

Forming strategic partnerships.

You may want to remain independent, but how can you do that in the ever-changing dynamics of rural health? We see a lot of press about hospitals closing, or the uncertainly of proposed legislation and its impact on rural health.

I would suggest that the definition of "independence" might need to be reconsidered.  In other words, generally, rural hospital leaders look at independence as the ability to control their own destiny and keep decisions local.  This can still be done, even if it means reaching out and getting creative about future relationships.  The first point is exploring possibilities, and realizing in the end you may not decide to pursue any of them.  However, as an example, I've seen rural hospitals form relationships with competitors for certain situations, or to share the services of a surgeon.  I've seen joint ventures formed, or rural hospitals becoming affiliated with a system, rather than being purchased.  The key to me is keeping your autonomy, but also being smart about what makes the most sense from a viability perspective - and separating emotion from fact.

Please understand, I am a strong proponent of rural health and organizations staying independent and local.  But I also know that every situation isn't black or white, and some of the more successful rural hospitals I've seen are represented by leaders who look at situations from all angles.  It gets complicated at times, because sometimes it's also about educating a board of directors, whose members may have varying levels of business or healthcare experience.

Check out part 2 of this blog series here.

Thanks for reading, and feel free to reach out to me anytime with your comments or suggestions for other blogs.

Mike Milligan, President, Legato Healthcare Marketing

Attend Our Upcoming Webinar

Register for our upcoming webinar, July 12 at 2:00 CDT "7 Proven Strategies to Increase Profitability of Your Rural Hospital" presented by Mike Milligan, President of Legato Healthcare Marketing. Mike will provide a no-nonsense webinar with practical tips for rural healthcare executives to put into immediate action.

Register here. 

Website by: Craig Erskine

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