To grow and sustain the business, leaders should be asking necessary questions about key facets of their financial strategy.
Hospitals across the country are under immense financial stress and as long as that fiscal pressure remains high, CEOs have no choice but to always be operating with the bottom line in mind.
Even as the median operating margin for hospitals continues to stabilize and we move further away from the pandemic, expense growth continues to outpace revenue for many facilities, widening the gap between profitable and struggling organizations.
To keep the doors open CEOs need to be constantly evaluating and revaluating key areas with the aim of achieving fiscal sensibility. That’s why this topic and its solutions will be featured in a roundtable discussion at our upcoming HealthLeaders CEO Exchange, held in May in Kohler, WI.
Attendees talk shop at the 2023 HealthLeaders CEO Exchange.
Until then, here are three ways CEOs can strive for fiscal sensibility:
Understand your market
Whether your hospital is thriving or not, it’s necessary for leaders to gauge their market and where they stand within it.
If your market is growing, it’s important to take advantage by broadening your reach to capture new patients. If your market is being compressed, you must find ways to hold onto your share, such as keeping referrals for speciality care.
Seeking out M&A is strategy for both growth and survival, with one of the trends in the dealmaking right now being health systems’ reorganization of regional markets. By committing resources to core markets with growth potential, health systems can expand delivery of care across their organization.
Assess revenue streams
One of the primary ways to combat high expenses is to introduce new revenue streams, but CEOs should first recognize what is and isn’t working for them currently.
If your hospital is finding success with digital health solutions, for example, consider how you can capitalize on patients’ needs by expanding your offering so you can provide care outside of your walls.
At the same time, many hospitals, especially in rural locations, are having to cut back on services because they’re not generating enough revenue to keep up with costs. A study by Chartis found that nearly a quarter of rural hospitals closed their obstetrics unit, while 382 have stopped providing chemotherapy.
Sometimes, scaling back or eliminating services will create more financial stability than adding new streams.
Improve payer relations
Costs ballooning at a faster pace than reimbursement will always be challenging for CEOs to navigate, which is why it’s as vital as ever to have a strong payer strategy.
Establish a relationship with payers that creates transparency, allowing you to know the rates they’re asking for and why. That will enable both parties to reach an agreed upon endpoint without wasting time and energy.
Rather than adding to the adversarial dynamic, leaders can benefit from a more collaborative approach that emphasizes open communication with payers, which can reduce administrative burden like denials.
Our Spring 2024 CEO Exchange is being held on May 20-22 at the American Club in Kohler, WI
Are you a CEO interested in attending our event and strategizing with other attendees? To inquire about attending the HealthLeaders Exchange event, email us at exchange@healthleadersmedia.com.
The HealthLeaders Exchange is an executive community for sharing ideas, solutions, and insights. Please join the community at our LinkedIn page.
Jay Asser is the contributing editor for strategy at HealthLeaders.
KEY TAKEAWAYS
HealthLeaders CEO Exchange in May will have roundtable discussions on how executives can be more fiscally efficient.
Some of the areas that CEOs should consider to tighten finances are market growth, adding or dropping services, and payer strategy