The 'legitimate and pervasive' issue facing health system CFOs

Behavioral health, maternity care and nephrology are among the inpatient services that report the greatest operating losses and represent significant challenges for hospitals and health systems that continue to rebound financially while demand for higher acuity care increases. 

Inpatient services are costlier to provide, but government payer payments for these services fall well below costs, according to the American Hospital Association. Ongoing workforce shortages, fractures in the supply chain for drugs and supplies, and high inflation are also continuing to fuel hospitals' costs and drag down their bottom lines. 

Health system leaders are striving to get their operating margins back on solid ground after a tumultuous few years. One key issue CFOs are focusing on is identifying ways to mitigate losses from service lines that are not as lucrative as top revenue-generating services.

"This is a legitimate and pervasive challenge," Clay Ashdown, CFO of Salt Lake City-based Intermountain Health, told Becker's

"As a not-for-profit system, it is incumbent upon us to provide a full complement of necessary services to our patients and health plan members. Providing adequate access and excellent service requires a relentless commitment to operational efficiency while enhancing quality," Mr. Ashdown said. "It also requires growth in strategic areas to sustain services that do not provide a positive margin in a traditional payment mechanism."

Mr. Ashdown, who has served in various financial leadership roles during his 24 years with Intermountain, said the health system is continuing to expand its proactive care methodology with additional risk-based payment arrangements.

"We do this through our own health plan, Select Health, and through innovative payment arrangements with external parties. This allows us to appropriately invest in an individual's overall health and wellbeing without focusing on the revenue associated with a transactional episode," he said. "By aligning financial incentives with comprehensive, proactive healthcare, it should lead to better long-term outcomes and more sustainable financial results."

Select Health serves more than 1 million members across Utah, Idaho and Nevada, and expanded to Colorado in January as part of a partnership with Aurora, Colo.-based UCHealth.  The two health systems plan to form a clinically integrated network with more than 700 physicians.

Mr. Ashdown shared some advice for CFOs at hospitals or health systems who are finding it challenging to mitigate the losses from service lines that consistently operate at losses, such as behavioral health, maternity care, nephrology or wound and burn care. 

"A CFO must achieve alignment within the executive leadership team and their board. Then, depending on the organization's capabilities and experience, it would be prudent to explore partnering with strategically aligned organizations to accelerate performance and augment competencies. This could be done with vendors or other health systems with unique and scalable capabilities," Mr. Ashdown said. 

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