Key Strategies Health Systems Need To Ramp-up Their Finances

COVID-19 has put an incredible financial strain on hospitals and health systems. In the beginning health systems \had to deal with an overwhelming number of infected patients. They had dwindling resources and faced a severe shortage of protective equipment and staffing resources. As the pandemic progressed, the situation only got more dire, testing kits were not sufficient, due to lack of safety resources, the healthcare workers who were treating the infected, began getting infected themselves. Healthcare workers began falling victims to burnouts and PTSDs, which did not optimise operations and the ER facilities began to overflow and hospitals and health systems without the revenue to sustain them were forced to close down the ER and as time progressed, the hospitals themselves. 

Revenue began to severely dip after some much needed safety measures were put into effect. COVID-19 is an extremely communicable disease, so safety measures like lockdowns, quarantines, social distancing were put into effect. While they did help in curbing down the fast spreading infection, the economy did take a meteor-sized loss.

From the smallest medical practice to the largest hospital system all had incurred substantial losses in revenue due to the decrease in patient volume and elective surgeries. Elective procedures contribute a significant chunk of the revenue to most hospitals and once that revenue was lost all of a sudden, the health organizations had to flounder for different avenues of revenue. Experts and researchers at the American Hospital Association, say that the healthcare sector as a whole had incurred a whopping loss of $202.6 billion. That is an average loss of $33 million per hospital in just four months. 

Some of the decisions the hospitals and healthcare organizations have had to make to manage these have been regrettable. Layoffs, furloughs, pay cuts, and overhead restructuring have become common among health systems trying to adjust to dramatically reduced revenue. While these unfortunate measures did ease the loss, it can be best described as a temporary fix, or a band-aid on the wound the size of The Grand Canyon. 

Hospitals need to understand that they were heading towards a loss before COVID-19. All COVID-19 did was accelerate it and thrust some of the obvious flaws with our health system into the limelight. Now some health systems are making bold strategic moves related to their market position, service portfolio, and/or physician network. Others are building off lessons learned during their response to COVID-19 to change the way they engage patients and consumers and springboarding into new models of care delivery. 

As of today, the economy is being reopened slowly and health organizations are generating revenue albeit gradually. However, it is going to be a long time before these organizations are churning revenue like the old days, so to speak. In the meantime to compensate for the losses and to build a solid recovery plan, here are some key strategies that can aid in the process. These strategies are based on analysis of over 50 interviews with health system leaders by the ECG. The goal of these strategies is to learn and perfect a business model that can achieve a sustainable recovery. 

ECG conducted over 50 interviews with health system leaders to explore the impact of COVID-19 to their business model and discern those strategies deemed most essential to achieving a sustainable recovery. Six initiatives surfaced as those that health system leaders are pursuing to improve their financial and strategic position as they plan for the future of their organizations and how best to serve their communities.

No one in the history of time has voluntarily wanted to go to a hospital. Patients find it scary, inconvenient, expensive and a huge ordeal. If you look at health systems that have a greater number of patient volume, you will notice that they prioritize convenience of their patients.That is what you need to do. Building an ambulatory care network meets this consumer demand while creating opportunities to partner with physicians, target market segments, and expand a health system’s service area. Many health systems are aggressively pursuing acquisitions and joint ventures of ambulatory surgery centers (ASCs) as the migration of surgical, and now cardiac, cases to ASCs accelerates.

Before COVID-19, people were used to conventional care. Virtual services were inconsistent with no clear guidelines opr reimbursement policies. Telehealth & telemedicine seemed to be so far in the future, that patients and physicians both did not want to go through the hassle of getting used to it now. COVID-19 changed all that. Everyone understood their importance and are now aggressively implementing it. In fact it is one of those rare businesses that boomed as a result of the pandemic. It helped patients and aided in offsetting some of the revenue losses.

Healthcare isn’t just treating patients anymore. It has evolved into so much more now. Consumer satisfaction is a rule-of-thumb when you wish to run a successful business. Healthcare is no different. Patients engagement must be prioritized and invested to ensure the longevity of the business. Now with the rise of virtual services due to COVID-19, it is more important than ever. It is easier to be polite and caring during a conventional visit, it is slightly harder to express concern virtually. To achieve this, healthcare organizations have to shift to a consumer-focused digital health. Doing so requires redesigning ambulatory operations, including changes to scheduling models, support functions, clinical operations, and staffing models.

Regionalization refers to the coordination, centralization, and/or colocation of similar service offerings within a given service area. When effectively designed and implemented, regionalization allows health systems to coordinate care, eliminate duplication and redundancies, reduce costs, optimize resource utilization, and improve outcomes. Many health systems have failed to rationalize service lines that have previously been cross-subsidized by other service lines. On the surface, decisions to eliminate duplication, standardize clinical processes, and reduce care variation within a system may seem obvious, yet many organizations have only recently started focusing on this opportunity to achieve a high return on investment and drive increased quality in a more efficient delivery platform.

Credit downgrades for health systems have grown substantially this year. But not because of COVID-19. The pandemic has greatly exacerbated the cash flow and liquidity challenges that many health systems were already experiencing. Most health systems have taken the many steps necessary to meet financial covenants at their next testing interval. And a technical default won’t necessarily result in a downgrade, because credit agencies recognize the pandemic is not a reflection of the overall financial performance of a health system. Many health systems are looking longer term and see advantages from operating with less capital tied up in buildings and equipment. Initiatives like DBOOM—design, build, own, operate, maintain—allow health systems to liquidate their central utility plant and/or other assets to access cash while gaining efficiencies in the services that are outsourced. In some cases, health systems are able to sell capital assets for cash while reducing ongoing operating expenses.

On average, health systems have “invested” more than $300,000 per physician annually. During COVID-19, the required investment has increased dramatically. Hospitals frequently pay stipends to independent medical groups that provide hospital based services to supplement the shortfall between each group’s costs and professional collections. Stipends paid by a hospital can amount to several millions of dollars annually to anesthesiology, emergency medicine, and hospitalist groups. Yet despite these investments, care is still often poorly coordinated among providers, quality is poorly measured and managed, and patients find it difficult to navigate the system. The strategies health systems are pursuing to address these issues vary widely, but there is consensus that the status quo is unacceptable.

A plan that incorporates these strategies is sure to come out of this pandemic more whole than the ones that do not. Most importantly, you won’t just be surviving the pandemic, but this will guarantee the longevity of your business. We @BillingParadise, understand the need for Telemedicine and other virtual services. That is why we don’t just support our clients in implementing virtual services, but we also ensure that it is provided with end-to-end support and at an affordable rate.