A New Year for Rural/Small Hospitals

Going From Gross Fear to NET Hope

A New Year for Rural/Small Hospitals

As a rural or small hospital with a history of low ops margins, you might find the new year intimidating…for many reasons: Your hospital may have low cash flow, declining revenues and/or rapid and major increases in expenses. Your cost of capital may be unbearable. 

The three hospitals below suffered through all these negativities and many more, repeatedly. Then they worked with Microscope’s Margin Solutions to significantly, easily and quickly enhance their ops margins on a net basis. 

Margin Solutions is a patented margin maximization service, emphasizing net new cash.

Margin Solutions recently served three rural/small Midwest hospitals. These hospitals had an average NPR of $40MM and averaged 190 EEs each.  We combined the engagement data and averaged it to construct a “single composite” hospital.

Within 14-16 months, by doing one solution every 4-10 weeks with little effort on each hospital’s part, these hospitals were able to achieve an average level of new, actual net-net, countable cash of 4% of NPR. The net-net percentage-of-NPR range was 3% to 6% of NPR, weighted by NPR. That means the “worst” case scenario was “only” a net-net of 3% of NPR, when one solution per every 4-10 weeks was completed. 

4% of an average $40MM in NPR is $1.60MM in new net-net cashfor the average composited hospital.

Gaining this new net cash involved very little work or time on the hospitals’ parts. The average hospital’s total engagement workload was 8 hours per month over 14 months, spread over three management staffers per hospital. 

In fact, we’d argue that this is the fastest and easiest way for a rural/small hospital to quickly get a whole lot of net new cash on a “no work," no-risk basis.  About 85% of the new net dollars were easily countable revenues.

All three hospitals went from a negative ops margin to a positive ops margin after implementing only twelve solutions. That is, by implementing only one new Solution every four to eight weeks with relatively minimal effort on each hospital’s part, a million dollars plus/plus in new net cash was gained for each hospital. 

Not only did the three hospitals gain a lot of very much needed net cash, they also did it quickly and easily, with a minimal workload on the hospitals’ respective parts. Margin Solutions did 85%-90% of the work at all three hospitals.

One of the most important factors that facilitated such a rapid and high dollar net gain was that each hospital only used twelve very easy-to-implement Solutions out of our curated Top Forty set of Solutions.

Even more fortunately for these three hospitals was that they each subsequently implemented additional dollar-generating Solutions, raising their average total engagement-produced new cash to an average net of 4.8% of NPR.

In sum, with Margin Solutions doing 90% of the work and using only twelve Solutions, a net-net high dollar outcome was quickly produced. This very positively effected the hospitals’ ops margins. This was all done on a no-risk, no up-front cost, no out-of-pocket basis for three, very resource-challenged rural/small hospitals. And, most rural/small hospitals are in fact severely resource-challenged.

We’d be very pleased to discuss this no-risk, net dollar-generating approach with you. Please contact Rick for a 5 minute conversation:

Rick Kunnes, MD. 
Managing Principal, Margin Solutions
MicroscopeHC, LLC