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It’s Time to Add Value for Revenue-Starved Healthcare Customers

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Photo: ©iStockphoto/mbortolino

Eric Frederick |

CHICAGO — Our national economy remains sluggish and the fiscal challenges in various areas of the country abound. At this writing, the U.S. unemployment rate is around 10%. When you add those “underemployed” or who have simply given up looking for work, the figure increases to 18%.
In the housing market, a record number of properties face foreclosure. Many businesses across our nation are struggling. Jobs are scarce, raises are rare, and employer-sponsored benefits such as health insurance are diminishing.
Many hospitals have seen their investment portfolios lose money over the past several years. Every person who owns stocks is familiar with the drop in values caused by the Great Recession. This decline has negatively impacted the bottom line of a number of hospital systems, which in turn impacts their laundry/linen operations or those companies that provide this service.PATIENT VOLUMES AND COSTS
Lower patient volumes are common across the country. Modern Healthcare recently noted that volumes are down more than 9% throughout the industry. Hospitals have seen revenues diminish as patients struggle with their finances. Bad debt and charity care have increased significantly over the past year.
Patients are watching their spending carefully, and more and more are finding healthcare costs difficult to pay. They may be delaying care to save money. This trend of fewer patient days and increased bad debt will linger for at least a year after the general economy has recovered, I believe.PAYERS
Government payers—Medicare and Medicaid—are not keeping pace with historic payment increases while hospital supplies and other costs continue to go up.
Medicare and Medicaid reimbursements vary from flat to declining compared to normal yearly increases of 2-3%. While insurance companies are raising rates substantially to cover the changes mandated by the new healthcare law, hospitals are seeing reductions in the rate of reimbursements.BENEFITS
Health and pension costs are rising rapidly. For example, employee medical-benefit costs have increased dramatically in recent years—45% higher today than in 2006, according to one of my organization’s FY 2011 budget reports. Health-benefit costs are projected to increase materially again this year. This holds true for pension costs.SALARIES
Across the Mid-Atlantic region, businesses have “tightened their belts” and kept salaries flat. The Commonwealth of Virginia, for instance, hasn’t provided salary increases in the past two years. This trend is expected to continue through 2011.STAFFING
Many healthcare facilities are carefully managing staff-to-patient volumes. In many cases, this means either a decrease in the number of staff or in the number of hours each staff person is working.MARKET STRATEGY
Healthcare organizations are focused on saving money. For some institutions, it has become a life-or-death issue. This economic struggle presents some real opportunities for the laundry industry.
It is the perfect time to work with healthcare customers and investigate the use of high-quality reusable textiles such as isolation gowns, surgeon gowns, incontinent pads and adult diapers. There has never been a better time to discuss these economic and environmentally friendly reusable options.
It is a great time to work with healthcare customers on linen-utilization policies. Many healthcare facilities can substantially reduce their utilization while improving their patient care.
One facility I work with was routinely putting a patient gown in each room prior to the next patient being admitted. Nursing decided to discontinue this practice because the nurses were never sure what type of gown the new patient would need. Would they need a regular patient gown, an IV gown, 5X gown, 10X gown, or no gown at all? This policy change resulted in a 15% usage reduction.
We also made changes in the ER, which shifted from using 3.5-pound thermal blankets to 2-pound blankets. We studied the usage pattern after the change and did not see an increase.
It is also a prime time to strengthen your relationships with healthcare customers. They need to see you as a partner working to help them reduce their costs.
The buzzword this year will be the “value” your service provides. Computer tracking programs and vendor-provided in-services for the healthcare staff are part of adding value to laundry service. It is no longer acceptable just to deliver clean textiles on a timely basis.
Cubicle curtains represent another growth area. Many healthcare facilities send these difficult-to-manage items off to a small cleaner that will charge them by the square inch. These curtains are not difficult for a healthcare laundry to process, fold and return on a drapery hanger. Each curtain needs to be tagged with its width and length, to aid housekeeping in getting it back to the correct location.
For laundry managers who deal with healthcare customers, future success relies on the ability to understand the market forces hammering this section of the economy and take proactive steps to assist customers to improve their bottom line.

About the author

Eric Frederick

Carilion Laundry Service

Director of Laundry Services

Eric Frederick is director of laundry services for Carilion Laundry Service, Roanoke, Va., and past president of the National Association of Institutional Linen Management (NAILM), now called the Association for Linen Management (ALM). He’s a two-time association manager of the year. You can reach him by e-mail at efrederick@carilion.com.

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