Healthcare systems are dealing with historic revenue losses brought on by inconsistent patient volumes, payer reimbursement issues, an extremely tight labor market and rising costs.
These factors are forcing healthcare leaders to make major changes in how they deliver care and generate revenue.
In an October webinar hosted by Becker's Hospital Review and sponsored by Ensemble Health Partners, Jim Gaffney, executive vice president and chief strategy officer, and Jason Pritchard, senior vice president of finance, both of Ensemble Health Partners, discussed trends affecting healthcare revenues and shared insights into how to prepare for the current — and future — unprecedented financial environment.
Four key takeaways were:
1.) Healthcare systems are under immense financial pressure. COVID-era losses combined with increasing costs of labor and supplies were bad enough. Add in other factors like payers making reimbursement more difficult, rising interest rates, increasing accounts receivable days and fragile cash flow, and healthcare systems' finances are facing a perfect storm unlike any other. Kaufman Hall on behalf of the AHA found that 68 percent of the nation's hospitals will end 2022 with their operations in the red versus 34 percent in 2019. And, the first quarter of 2022 was the worst performance on record for hospitals in terms of operating margin, according to Ensemble research. "The rates of losses and cash burn that we've seen in the last year or so just aren't sustainable," Mr. Gaffney said.
2.) These financial pressures have led many healthcare leaders to conclude there is no longer a path to profitability inside the hospital's four walls. Instead, a shift from acute to ambulatory settings will be increasingly common, as well as non-acute care sources of revenue. That includes ambulatory surgery centers, behavioral health and infusion treatments. "Services traditionally provided in the hospital will not look the same, as within the next two years the hospital-at-home model is anticipated to take off," Mr. Pritchard said.
As hospital leaders look outside the hospital, steps they are taking include investing in primary care as a feeder, focusing on regional relevance and partnering with community care organizations to refine care delivery.
3.) Another revenue opportunity: strategic investments. Dollars allocated to strategic investments, including investments in innovation and in venture capital funds, have been steadily increasing. The increase has occurred since 2010, Mr. Gaffney said, but really exploded during the pandemic. Large hospital venture funds invested $284 million in 2010, according to Healthcare Dive; in 2021 hospitals invested $2.7 billion in VC funds, as more hospitals participated. "Frankly, some health systems see it as a necessity," Mr. Gaffney said. "They're looking for ways to offset their costs with some other source of income." Some hospitals are also working to redefine their innovation model.
4.) Healthcare leaders are also getting more aggressive on revenue protection. According to Ensemble's revenue cycle assessment data, a $1 billion net patient revenue system, sees an average of $31 million in revenue lost to missing charges, coverage denials, level of care disapproval, and underpayments, among other factors. Meanwhile, payers are reporting record revenue and profits, Mr. Gaffney said. The key for providers is getting paid what is owed by payers. A comprehensive documentation process can help reduce the burden on physicians and can help claims move more smoothly and quickly, while providing backup for payer challenges.
Among the steps hospital leaders are taking to get more aggressive on revenue protection are using price transparency to negotiate better rates with payers, thinking beyond individual technologies to develop comprehensive patient engagement strategies and eliminating missed revenue and combatting payer behavior through strategic partnerships.
Cost and financial pressures aren't going away any time soon. Health systems can remain solvent by focusing on top-line revenue growth — diversifying income streams, defining an innovation model by monetizing data, capitalizing on intellectual property and making strategic investments. And they can move to protect revenue aggressively with high-performing revenue cycle operations.
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