As promised, excerpt number two from "The 11.1% Survival Guide for SNFs: 5 Tips for Thriving When Times Are Tough."
Tip 2: Focus on Generating Revenue to Overcome Reimbursement Cuts
This is an extension of what we’ve said already—it’s not enough to just focus on cutting costs. Think about the revenue.
We provide census and revenue analyses for multi-location SNF clients that illustrate the potential revenue growth associated with incremental census growth up to 5 percent (growth we've documented with a 26-SNF client using our Referral Management System).
These analyses take actual financial and census data from skilled nursing facilities and model the increase in revenue based on average revenue per patient day. The example analysis provided here shows a gain of $12.5 million annually for a 20-location SNF that builds census from 86 percent (about the average for nursing homes) to 91 percent.
The math is powerful and demonstrates how effective marketing, improved business intelligence, faster referral response times and automated admissions processes can drive dramatic growth in revenue. If you’re cutting back sales and marketing resources—whether it’s people, systems or programs—you’re facing decreases in census at a time when you can least afford it. And regaining that lost momentum can prove difficult or impossible. If you can improve census by having the same people apply better tools and more efficient processes, that should be the number one focus of your SNF organization. No cost cutting measure could possibly have as big of a positive effect on your bottom line.
Consider it another way. Your organization makes staff and budget cuts to sales and marketing, trimming $500,000 in expenses next year. In turn, the loss of resources results in a 1 percent decline in average daily census for the year. Based on our sample analysis, your organization would save $500,000 in expenses—and lose about $2.4 million in revenue. That’s the definition of pennywise.
Now let’s look at the alternative—strategic investment in marketing and sales tools and processes to grow quality census. And what defines strategic investment? We like this definition by economist Jules Goddard of the London Business School:
The rule for cost control should be: cut back on those existing costs that are not relevant to the strategy and invest in those costs that, if they were to exist, would strengthen the strategy.
So, let’s now say you retain your marketing and sales budget and staff, and invest $200,000 in marketing and capacity management tools and software programs that ultimately increase your census by just 1 percent. Again, based on our example, you will realize a $2.2 million return—12-to-1. And your likelihood for success will increase because many of your competitors will be waiting on the sidelines, scaling back their marketing and sales efforts in response to budget and funding cuts.
Email me at dwalker@patientplacement.com if you'd like the complete free survival guide.
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