There are such varied perceptions about if and how behavioral health inpatient units can be profitable. One CFO of a medical/surgical hospital said, “The juice ain’t worth the squeeze”. And, I have heard many CEOs of medical hospitals assume it isn’t profitable and felt it wasn’t worth the headache – until they actually saw the results.
There are so many variables associated with making a behavioral health inpatient operation profitable. Profitability is important whether we are talking about for-profit or not-for-profit operations. They have to make money to pay the interdisciplinary team’s payroll, support the expenses of staying open, and cover the capital expense incurred for building the unit(s). If we don’t have a successful operation, we cannot provide necessary services to the vulnerable people we are trying to help.
I think about operations like following a recipe for baking. If you cut corners or completely skip ingredients, it’s very difficult to get the result you want. The recipe varies by patient population, market dynamics, volumes, and unit size, but the following ingredients are all important: Unit configuration, design of patient flow, therapeutic environment and programming, regulatory compliance and readiness, staffing plan, psychiatric coverage, payer mix, program leadership, managed care reimbursement methodology and rates, access points, referral development plan, and management of accounts receivable. All these key ingredients are used to develop a comprehensive plan for success. Execution of the plan is essential. Without a solid interdisciplinary plan and strong execution, it’s like trying to bake without turning on the oven.
Inpatient Behavioral Health can and should be profitable. If an existing operation is not running well into the black, there should be discernible reasons why it is failing. From those diagnoses, a strong action plan can be developed – steering toward a path of effective clinical functioning and profitability. For new operations, it is imperative to have a comprehensive interdisciplinary plan developed and executed for a successful opening and long term operation. If you cut corners in the process, it can be bumpy road, with patients not getting the care they deserve and the hospital showing a margin in the red. In response to my old funny and cynical CFO colleague, the juice is worth the squeeze. It can be done!
