Despite enormous annual healthcare expenditures, most U.S. health systems are in a deteriorating financial position.
Many cost-cutting actions have already been taken, forcing organizations to look for ways to grow in order to stabilize and improve their financial outlook. With most health systems pursuing the same strategy, the winners will be those who execute best.
During an executive session of Becker's 10th Annual CEO + CFO Roundtable sponsored by ECG Management Consultants, three consultants from ECG led a discussion about the financial challenges health systems are facing and innovative ideas that have proven successful:
- Andy Bachrodt, partner, strategy services
- John Budd, principal, performance transformation
- Sandy Myerson, principal, performance transformation
Five key takeaways were:
1. The financial position of U.S. hospitals continues to deteriorate. According to an analysis of Medicare Cost Report data, more than three-fourths of U.S. hospitals were either at risk or at high risk of failure in 2020. "It's really hard to fathom, with around $2 trillion dollars a year going through the healthcare system, how it is that so many hospitals are faring so poorly in terms of their overall financial performance," Mr. Bachrodt said.
2. Most health systems have been implementing similar strategies and have already corrected obvious problems. "We've seen exponential growth in terms of expenses with relatively flat revenue," Mr. Budd said. "You can't cut your way out of a 43 percent decline in margin. Those big opportunities where you can come in and find $30 million by fixing something in revenue cycle have dried up, and what you're left with is 20,000 little projects. To be sustainable, we're going to have to grow."
3. Virtual nursing can help address workforce challenges. Virtual nurses can monitor patients' vital signs and labs as well as meet with the nursing staff to provide needed support. "It's a way to retain your experienced staff and accelerate learning for your inexperienced staff," Ms. Myerson said. "There's a lot of a lot of technology that's available today, and it's not very expensive to do this kind of work to get your staff engaged."
Such an integrated nursing program can decrease unplanned readmissions by 37 percent, reduce contract labor by 25 to 70 percent and drop RN turnover by 35 percent, all of which frees up resources to put toward growth strategies.
4. Reducing length of stay is key to unlocking capacity. "Everyone's length of stay over the last six to nine months has gone through the roof," Mr. Budd said. "Our staff is being forced to care for patients who are stuck there." He shared examples to illustrate this problem. "We see ICU patients who can't be downgraded because there's no nurse to take them to a [non-ICU] room," he said. Improving length of stay has been shown to increase access to surgery, reduce transfer denials, boost patient satisfaction scores and generate many other benefits.
5. Strategies around integration and rationalization will drive growth. "Sometimes our greatest competitors are our own partner organizations within our system," Mr. Bachrodt said. "We need to figure out how to operate at a much higher capacity and be very thoughtful about how patients come in and where they go." Critical success factors in doing so include:
- Expanding geographic reach for high-complexity services
- Integrating and rationalizing tertiary services as regionally deployed service lines
- Decanting low-acuity volume to community hospitals
- Creating a robust ambulatory strategy
- Forging physician relationships that align with system objectives for growth
- Ensuring a digital front door is in place to maximize access
Health systems must find innovative workforce solutions, reduce length of stay and integrate and rationalize resources to focus on the growth required to improve current perilous financial situations.