It's time to re-engineer our approach as hospital leaders are caught in the cost vise

COVID-19 caused us to re-engineer how we live our lives — everything from how we celebrate holidays, to how we get married and honor our deceased loved ones. The pandemic is forcing us to rethink how we map the financial dynamics of hospitals as leaders are caught in a vise of escalating costs and workforce shortages.

No single strategy or tactic will solve our challenges, so we need to be open-minded about a wide array of alternatives — some of which might push us to the edge of our comfort zones.

As we race to address severe workforce issues, realign business structures and escalate cybersecurity, financial data from traditional public sources — typically lagging two years — will never line up with COVID-impacted figures. Comparisons of historic inpatient data will not compute with the ongoing shift to outpatient care. Only about 4.5 percent of Ohio hospitals' more than 32 million annual patient encounters, for example, are inpatient.

What we know in real time

Becker’s reported this week on the Kaufman Hall Report measuring median operating margin for U.S. hospitals at -3.45 percent in February, slightly better than -4.52 percent in January yet "still well below sustainable levels." The median change in operating margin was down 11.8 percent from January to February, but median margin changes were most dramatic compared to just before the start of the pandemic, with operating margin down 42.4 percent from February 2020 levels.

As of March 30, Ohio hospitals have reported financial losses of $7.58 billion since March 9, 2020 when Ohio declared a state of emergency. The estimates, reported by hospitals to the Ohio Hospital Association, include an estimated $2.38 billion in revenue lost from the initial halt of elective surgeries and unanticipated emergency expenses for equipment, supplies and staffing. Ohio hospitals continue to report about $6 million daily in losses.

Yes, Ohio hospitals have received financial relief of about $3.22 billion through federal and state COVID-19 emergency programs, but that leaves an estimated $4.36 billion funding gap that grows daily. 

What now? Cost control is paramount

Hospital leaders know healthcare costs are a concern for American families, and we own the responsibility for constantly seeking ways to reduce costs. A recent national study reported nearly 60 percent of Americans could not pay an unexpected $1,000 expense from savings. They would incur debt to pay the cost. Only 41 percent said they had savings to cover. Of those who would have to borrow, 12 percent could not manage a $400 expense.

We cannot be sending bills to people who have no hope of settling up.

Cost reductions being explored among OHA's membership of 250 hospitals and 15 health systems are vast and range from the simple to the most technically advanced. One health system is piloting a virtual patient safety attendant. Audio and visual monitoring in patient rooms 24/7 is provided by virtual attendants who notify the bedside team when a patient is exhibiting risky behavior such as trying to stand up without assistance. This reduces the need for staff to work as "sitters" in the room for patients at risk, especially in emergency rooms, intensive care units and behavioral health units.

Columbus-based PriorAuthNow is working with many Ohio hospitals to bring down the number of people required to pursue prior authorization from insurers. And telehealth technologies, escalated during COVID-19, enable us to expand our reach and more efficiently provide health services to people whose conditions can safely be treated from a distance.

Sustainability programs are yielding big savings. Ohio leads the nation with 20 ENERGY STAR certified hospitals. These facilities have invested in energy-saving improvements that will save about $3,000 on energy costs per bed every year.

No idea should be dismissed, and we must know how to measure its impact as we work to heal our finances to reassure our communities we will be there 24/7/365 to meet their needs.

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