Health system execs adjust to meet 2024 budget expectations

Many of the same challenges plaguing health system finances this year will carry over into 2024: inflation, tight margins, rising costs and lower reimbursement. But top executives aren't waiting for a more favorable economy to transform their organizations.

"It is really tough out there financially right now. I anticipate this tough environment – inflation, workforce challenges, and slower growth to name just a few – to be with us for the next 24 to 36 months," said Peter Banko, division president of CommonSpirit Health, based in Chicago. "But, despite all this, the future is exceptionally bright. Meeting budget expectations, to fuel and fund growth, will require a turnaround mindset. Saying it and doing it."

Mr. Banko told Becker's his team will focus on people and operations next year, setting high but reasonable goals and prioritizing results over activities. As the former CEO of Centura Health, which was acquired by CommonSpirit earlier this year, Mr. Banko sees his role next year as creating clarity, certainty and ownership for governance, leadership and caregivers zeroing in on the system's mission while also prioritizing a sustainable bottom line.

"Through this difficult and unpopular work, we must create a compelling and engaging vision (and plan) for growth; consumer-driven, physician network, ambulatory network and winning in both select geographies and services.," he said.

In an early October report, Fitch backed the strategy of continued investment in capital projects and setting a vision for long-term growth, despite financial challenges. Health systems that aren't forward looking risk falling behind, according to the firm.

Robert S.D. Higgins, MD, president of Brigham and Women's Hospital and executive vice president of Mass General Brigham in Boston, told Becker's the system has had an eye toward growth while developing next year's budget.

"It's a challenging time in healthcare and we continue to work to absorb significant inflation in both labor and supply ghosts, while supporting and nurturing our employees who are central to our mission of providing high-quality, compassionate healthcare to our patients and their families," Dr. Higgins said. "From a strategy perspective, we will continue to focus on how to protect and grow our research, education, and community service mission in this increasingly challenging financial environment."

Renton, Wash.-based Providence's executive team anticipates the headwinds from 2023 to persist next year, including the risk of recession, staffing pressures, clinician burnout and uncertain regulatory environment. But they're not slowing down on innovations or growth.

"Top-of-mind priorities for our leadership team will be simplification and deconstruction to ensure our caregivers are as well-positioned as possible to support our patient community that Providence is oriented around what our health system can do best," Wasif Rasheed, chief revenue and growth officer at Providence, told Becker's. "We anticipate announcements in 2024 reflecting the culmination of our long-term strategy discussions and will ensure our health system stays on a positive trajectory for the future."

There isn't one clear path toward strategic relevance for the future, but organizations do need a strong vision, argued Kenneth Kaufman, managing director and chair of Kaufman Hall, and Pete McCanna, CEO of Baylor Scott & White Health, in an August blog post. They challenged health system leaders to evaluate whether their strategy is dynamic and relevant post-COVID and figure out how to capitalize on it. If their strategy isn't exciting, executive teams can introduce a "relevant and executable vision" that re-ignites their organizations.

"Executive teams, clinicians, and boards are simply too distracted or too tired to spend time on planning processes that are not well thought out and highly directed," Mr. Kaufman and Mr. McCanna wrote in the post. "This immediate observation next demands a discussion that outlines post-COVID strategic principles, definitions and the creation of a vision that relates immediately to actionable strategy. It would be an understatement to note that for hospitals there is not 'strategic time' to waste."

Dan Woods, CEO of Mountain View, Calif.-based El Camino Health, said one of his system's top budget priorities next year is improving access to care, including virtual care and investing in ambulatory and alternative hospital sites. The system is also recruiting physicians and clinical staff to elevate its hospital campuses and clinics.

"The national and geopolitical climate we are in today influences the financial anxiety health systems have been facing in the past few years, in my opinion," said Mr. Woods. "El Camino Health is emphasizing financial stewardship across the board, with a specific focus on tightly managing indirect patient costs. We remain bullish on investing in innovation, but we are also selective in prioritizing the contemporary science of medicine that brings the highest value to our patients and the communities we serve."

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