Challenge 

In 2014, the University of Alabama at Birmingham Health System (UABHS) was facing what many academic medical centers were anticipating — a potential reduction to clinical, educational, and research revenue at unprecedented levels. Challenges to Medicare payment reductions, value-based purchasing, increasing governmental and regulatory burdens, constraints to state funding, diminished philanthropy, and reduced indirect medical education payments were just a few of the looming concerns for administrators.

UABHS worked with an independent firm to forecast five years of revenue and operating costs, including projected increases for strategic/capital investments and increases to wages/benefits, while maintaining appropriate cash reserves. The prediction was a cumulative $600 million improvement to fund identified strategic requirements.

Solution 

The health system partnered with Guidehouse on an enterprisewide initiative to help with the projected revenue and cash flow gap. The two-year project was called “Foundation for the Future.”

Over the course of 24 months, Guidehouse’s team concentrated on:

• DRG-focused clinical redesign
• Revenue cycle income statement improvement
• Revenue cycle cash flow improvement
• New streams of revenue (specialty Rx)
• Non-labor cost reduction:
  • Laboratory
  • Pharmacy
  • Surgical and procedural supplies
• Clinic throughput and scheduling policies
• Hospital labor productivity

Impact