Journal of Healthcare Management - May/June 2013 - (Page 172)

Journal of H ealt H care M anage Ment 58:3 M ay /J une 2013 by way of risk contracts. In fact, these leaders see balance sheet liquidity rebuilding potential in such arrangements, as long as the imputed annual financial inflation rate of the agreements creates positive cash flow margins as the IHS (1) reduces its per unit clinical care costs and (2) slows the rates and levels of inefficient care use patterns (e.g., unnecessary hospital readmissions, unnecessary physician’s office visits, nonproductive diagnostic procedures). Under such financial arrangements, the third-party payers can be satisfied with suppression of the medical loss ratios3 while the contracted provider organizations reduce total costs of care at rates that are greater than are the downward pressures on the imputed financial value transferred by the payer contract. CoNClUSioN While many health systems have strengthened their balance sheets over the last several years, future balance sheet liquidity requirements will increase to unprecedented levels. Health systems will need to operate from models that effectively control all the moving parts of care and related production costs. IHSs will likely need to adopt more integrated models of community healthcare delivery and greater control over operating economics and total costs of care performance. NotES 1. Liquidity represents the ability of a business to meet all cash obligations as they become due. Related metrics include days cash on hand and cash-to-debt ratios. 2. The total cost of care is a measure of the total cost of treating a population in a given period, expressed as a risk-adjusted per member per month value. The measure includes all services associated with treating a patient: inpatient stays, outpatient services, professional services, pharmacy operations, ancillary services, and all other related costs of health services consumed. Appropriate risk adjustments permit fair comparisons between providers, insurers, and geographic regions over time (HealthPartners, 2012). 3. Medical loss ratio refers to the total costs of medical care incurred by the party holding the related financial risk—either the insurer or the provider. rEFErENCES Bhargara, H., & Abhay, M. (2011, November 1). Electronic medical records and physician productivity: Evi-dence from panel data analysis. Published November 1. http://papers.ssrn.com/sol3 /papers.cfm?abstract_id=1952287 HealthPartners. (2012). TCOC toolkit. Bloomington, MN: HealthPartners. Moody’s US Public Finance. (2009, February). Interest rate swaps cause new liquidity stress for some healthcare, higher education and other not-for-profit borrowers—rating implications will depend on borrowers’ other credit attributes. New York, NY: Moody’s Investors Service. Standard & Poor’s. (2013, January 4). U.S. not-for-profit health sector outlook: Providers prove adaptable but face a test in 2013 as reform looms. Ratings Direct. New York, NY: Standard & Poor’s Ratings Services. Zismer, D. K., & Cerra, F. B. (2012). High-functioning integrated health systems: Governing a learning organization. White paper. San Diego, CA: The Governance Institute. Zismer, D. K., Sterns, J. B., & Claus, B. (2011). Capital efficiency and integrated health system designs. Healthcare Financial Management, 65(7), 88–94. 172 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1952287 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1952287

Table of Contents for the Digital Edition of Journal of Healthcare Management - May/June 2013

Journal of Healthcare Management - May/June 2013
Contents
Interview with Thomas C. Dolan, PhD, FACHE, CAE, President and CEO, American College of Healthcare Executives
Equity in Care: Picking Up the Pace
How Might a Reforming U.S. Healthcare Marketplace Threaten Balance Sheet Liquidity for Community Health Systems?
Assessing the Productivity of Advanced Practice Providers Using a Time and Motion Study
A Positive Deviance Perspective on Hospital Knowledge Management: Analysis of Baldrige Award Recipients 2002–2008
How to Improve Breast Cancer Care Measurement and Reporting: Suggestions from a Complex Urban Hospital
The Fear Factor in Healthcare: Employee Information Sharing

Journal of Healthcare Management - May/June 2013