Driving operational performance in topsy-turvy times

Given the challenges in today's healthcare market, it's time for hospitals and health systems to rethink what it takes to succeed in the current environment. Maintaining the status quo isn't the answer. 

At a session sponsored by Optum at the Becker's 10th Annual CEO + CFO Roundtable, Ken Leonczyk Jr., vice president, market solutions strategy at Optum, facilitated a discussion about the market forces shaping healthcare and how organizations are responding.

Five key takeaways were: 

  1. When it comes to labor, hospitals and health systems are in an "arms race." Talent shortages are affecting the entire healthcare labor continuum, from physicians and nurses to housekeeping and janitorial staff. "We expect supply chain problems to sort themselves out," one participant noted. "Labor issues aren't as addressable. They are long-term, systemic problems that require five- to 10-year solutions. What we are doing now is simply stealing talent from one another."

The arms race for talent has become a vicious cycle. Nurses handling tasks like patient registration are frustrated. They quit and go to another hospital for a big sign-on bonus. Existing employees at hospitals are upset that they didn't get bonuses, so they resign and move to a competitor hospital. Meanwhile, physicians can't perform surgeries due to insufficient OR staff, so they quit. Housekeeping staff are leaving for better pay at an Amazon fulfillment center.

  1. Healthcare organizations must rethink their employment models. Health systems that reexamine "business as usual" are the ones that will win talent. "Employees want flexibility, but we're stuck in our ways and keep offering people three 12-hour shifts," one participant said. "Other places ask how people want to work and they accommodate that. Until we adopt that mindset, we will always be in that arms race." Another participant agreed. "True diversity and equity are about providing people with flexibility."
  1. Demand volatility is also a major challenge. In the wake of the pandemic, patient volumes are back, but the current demand is for medical services, not surgical procedures. This is a significantly less profitable part of the business and patient no-shows are common. "Demand is way up, so we have to schedule far into the future," one participant said. "Yet, no-show rates are huge. We are thinking about new ways to deal with that. For example, organizations are taking novel approaches to the problem, such as providing transportation for patients or giving therapy patients a $10 gas station gift card if they complete all their sessions. 
  1. The financial pressures facing healthcare are daunting. Many health systems are on three-year contracting cycles with payers. During the current cycle, the medical Consumer Price Index hasn't increased at the same rate as inflation. In negotiations, healthcare organizations are asking payers for a significant rate increase because Medicare isn't covering patient costs. The payers, however, feel that inflation isn't a problem. 
  1. Health solutions giants are striving toward vertical integration. "Companies are acquiring care assets that are competing with every type of healthcare except the acute care hospital. There's a big play going on in the rise of the vertical ecosystem and insurance companies are betting big on Medicare Advantage for the future," Mr. Leonczyk said. Some healthcare executives are considering defensive mergers as their only possible alternative.

While the healthcare landscape may seem bleak, many see bright spots and opportunities. Automation has the potential to transform clinical, back-office and revenue cycle systems. In addition, CMS has funded 1,000 new residency slots for hospitals and student interest in healthcare careers is on the rise post-pandemic. "I'm hopeful because lots of people aren't running away from the fire," one participant said. "They are running toward it." 

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