From the beginning of the pandemic, healthcare executives have faced complicated challenges in managing operations, clinical care and financial responsibilities. While some health facilities have experienced record numbers of patients in need of care, some primary care practices have reported up to a 70% drop in the services they are providing, while many hospitals have frozen salaries or furloughed clinical staff. Now, as healthcare leaders find a way forward, they are focused on the delicate balancing of patient care, provider safety and the need to stabilize the economy for the nation’s healthcare industry.
Financial Implications of the Global Pandemic
Hospitals and other provider organizations have worked to meet their patient responsibilities, handle increased safety measures and establish new operating standards to best serve patients and to protect their medical staff. Economic challenges from cancelled non-emergency procedures, increased demand for medical equipment and supplies and the need to provide child care, transportation and, sometimes, housing for front line workers has created a deep loss of revenue across the entire industry. The American Hospital Association estimates that, between March 1 and June 30, 2020 the healthcare industry will see $202.6 billion in losses. The AHA is examining the root causes for these financial losses and has developed reporting around these four categories:
- Revenue loss due to the cost of COVID-19 hospitalizations
- Revenue loss due to cancelled services caused by COVID-19 restrictions
- Additional costs associated with purchasing personal protective equipment (PPE)
- Additional costs of supporting front line workers in new ways
Finding New Financial Strategies
Throughout the pandemic, healthcare Chief Financial Officers and their leadership teams have maintained their focus on the health and safety of their patients and their providers. Implementing and financing Telehealth initiatives, rolling-out digital tools and establishing drive-through testing sites added to the list of challenges CFOs helped to manage alongside their daily responsibilities. Now, many executives are looking at what the industry may face after COVID-19 and are beginning to develop strategic plans for their organizations’ economic recovery. These plans embody a new mindset within the industry and are taking into account new possibilities, while answering these critical questions:
How do we reduce the costs that ballooned during the pandemic?
Provider organizations have seen costs increase across the board, especially related to covering equipment purchases and ensuring personnel and patient safety. In order to cut costs, executives are looking outside of standard tactics, such as layoffs, budget cuts and implementing stricter operational targets for all departments. Today, CFOs are working smarter by focusing on the big picture and long-term goals when making changes to their operating models. Executives are making an effort to be transparent with internal stakeholders and external partners, while leading discussions around the opportunities to generate new revenue streams in the areas of digital health, manufacturing essential equipment and eliminating internal costs by shifting some types of care to lower acuity settings.
How do we align the resources we have to move our organization forward?
Staffing choices are a difficult and emotional aspect of financial management. Looking at the needs and challenges facing the industry going forward, many financial executives are now steering away from traditional routes of employing lay-offs across all departments or making top-down decisions. Hiring decisions and organizational strategies today must take into account both the current crisis and what the organization’s goals are for rebuilding in the future. Staff-efficient care models will be critical to maximizing the contributions of all team members, while input and buy-in at all levels will be required to make the new models effective. Utilizing digital tools to expand the reach of clinical employees and promoting patient self-management techniques will also enhance the limited resources of provider organizations.
How do we build revenue to replace our losses?
Even with relief from the CARES Act, many healthcare provider organizations are burning through cash rapidly. Many capital investments are on hold and patients continue to fear going into hospitals because of the risk of COVID-19. While small physician groups may see the largest impact, the effects will reach across the industry. As forward-thinking executives are aware, now is the perfect time to explore new ways to invest in their organization’s future. Exploring options for building new infrastructure to support data sharing, adding resources to data analysis and laying the foundation for new ways to provide care without the expense of brick and mortar sites will put healthcare organizations on the forefront of care in the post-COVID-19 era.
Looking Forward Post-Pandemic
With healthcare spending decreasing 18 percent in the first months of 2020, healthcare executives are very clear regarding the challenges ahead. In addition to the need for innovation, technological advances and the improvement in the utilization of resources, healthcare industry leaders are looking at how the projected ‘hot topics’ for the industry will play a part in the post-COVID-19 industry. While the pandemic has created an international health crisis, it has also highlighted the importance of making advances in Telehealth, shifting from volume-based care to value-based care and identifying ways to improve access to care that is safe for patients and providers. Healthcare executives will play a critical role in this path forward and there is great opportunity for improvement and advancement in the years to come.