25 factors that could affect health system performance in 2024

Last year was one of the worst financial years for hospitals and health systems in decades. Many of the same challenges — including staff shortages, inflation and the rising costs of drugs, supplies and services — have continued into 2023, but the good news for hospitals is that patient volumes are rebounding and contract labor expenses are falling, helping operating margins to move in the right direction again.

That said, there are several factors that could affect financial performances next year, according to multiple systems' recently reported financial documents. Here are 25:

1. The effect of a pandemic, epidemic or outbreak of an infectious disease such as COVID-19, which could include:

  • A quarantine, temporary shutdown, overburdening of facilities or diversion of patients;
  • Bed, staffing or supply shortages;
  • Reduced patient volumes and operating revenues;
  • Loss of employment and health insurance for a significant portion of the population;
  • Staff reductions resulting from employee vaccination mandates.

2. The ending of the public health emergency and national emergency, including the associated waivers and modifications in areas such as in the Medicare, Medicaid and CHIP programs and in private health insurance.

3. Decreased revenue due to declining patient volumes; changes in payer mix (including increases in uninsured and underinsured patients); higher expenses related to labor, supply chain or other expenditures; workforce disruptions; and supply shortages and disruptions. 

4. Increases in wages and the ability to attract and retain personnel, including affiliated physicians, nurses and medical and technical support staff.

5. Economic and business conditions, including the effect of interest rates, inflation, increases in the number of self-pay patients, and financial market conditions and volatility.

6. Changes to Medicare and Medicaid payment systems resulting in reductions in payments or changes in eligibility of patients to qualify for coverage.

7. Adjustments resulting from Medicare and Medicaid reimbursement audits, including audits initiated by the Medicare Recovery Audit Contractor program.

8. Legislative actions that reduce the payment for or utilization of healthcare services, such as the Patient Protection and Affordable Care Act.

9. Possible repeal and/or replacement of the PPACA and repeal of the individual mandate.

10. Contract negotiations between payers, employers and hospitals, and other potential efforts by insurers and employers to limit hospitalization costs and coverage.

11. The ability of a health system to integrate hospitals or another system through mergers or acquisitions. 

12. The availability and terms of capital to fund the expansion of a health system's business and upgrade its existing facilities.

13. Proposals to expand coverage of federally-funded insurance programs as an alternative to private insurance or establish a single-payer system.

14. The effect of a health system's indebtedness and its ability to refinance on acceptable terms.

15. Increases in the amount and risk of collectability of uninsured accounts and deductibles and copayment amounts for insured accounts.

16. The increasingly competitive healthcare environment. 

17. Declining populations in the markets in which a health system operates.

18. The increasing number and severity of cyberattacks, as well as the costs of preventing them and protecting patient and hospital data. 

19. The availability of malpractice, cyber or other insurance at reasonable rates.

20. The effects of federal and state laws on tax-exempt organizations relating to exemption from income, sales, real estate and excise taxes and bond financing.

21. The management, utilization and increases in the cost of drugs and devices as technology advances without concurrent increases in federal reimbursement. 

22. The ability of a health system to adjust its cost structure and reduce operating expenses.

23. Changes in business strategy or development plans.

24. Delays in receiving payments for services provided.

25. Changes in accounting standards or practices.

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