Nonprofit hospitals are particularly under duress to remain financially viable, says Novant Health’s COO.
As hospitals and health systems face unprecedented financial pressures, Novant Health executive vice president and COO John Gizdic recognizes that innovative cost-containment measures aren’t a luxury, but a necessity for long-term sustainability.
From skyrocketing labor expenses and inflation to increasingly acute patients and rising pharmaceutical prices, nonprofits like North Carolina-based Novant Health are strained to do more with less, all while remaining committed to the mission of serving every single patient.
“Throughout all of those challenges, we’re also investing in our community’s health infrastructure and really serving as that safety net,” Gizdic told HealthLeaders. “So having that additional factor of making sure we’re here for our community has contributed as well.”
Gizdic’s assessment is backed by new data from Emory University’s Rollins School of Public Health, which shows hospital expenses per adjusted admission rose nearly 40% between 2013 and 2021. The study found steep increases in payroll (31.3%), pharmaceutical spending (42.2%), and other operational expenses (53%) during that time. Labor alone made up 56% of total hospital costs by 2024, and rising case complexity contributed to financial burden.
Nonprofits, meanwhile, experienced a faster rise in per-admission costs than for-profit hospitals by 2021, with nonprofits exceeding for-profit costs by approximately $1,287.
Rethinking care delivery
To counteract rising expenses, Novant Health is reengineering how and where care is delivered by prioritizing lower-cost, higher-convenience ambulatory settings.
“We’ve really tried to approach it from several different ways, one of which is trying to really reimagine care delivery and focus on an aggressive shift to lower-cost ambulatory settings,” Gizdic said. “Whether it’s ambulatory surgery centers, outpatient imaging centers, even outpatient infusion centers, as well as care at home.”
The organization has set a goal to double its ambulatory surgery centers in the next three to five years, Gizdic stated.
This strategy is also a hedge against potential policy shifts, including federal site-neutral payment proposals that would reduce or eliminate reimbursement differentials between hospital-based outpatient departments and independent sites of care.
“By really moving care towards that ambulatory setting and having those alternative sites of care when and where clinically appropriate, we believe that better prepares us for things like site neutrality and certificate of need and other regulatory changes that may be coming,” Gizdic said.
Complementing the outpatient shift is a commitment to clinical excellence.
“By improving safety and quality, it reduces clinical variation and improves outcomes. In the end, that lowers cost of care,” Gizdic said, noting Novant Health leads North Carolina in A’s for the Leapfrog Hospital Safety Grade and ranks among the top in Vizient’s quality database.
Pictured: John Gizdic, executive vice president and COO, Novant Health.
Supporting the workforce
Gizdic knows that any long-term cost strategy must include workforce sustainability. The Emory study reinforces that, citing a 15% increase in case mix severity and an 11% rise in full-time equivalent (FTE) employees per hospital bed from 2013 to 2021. Higher FTEs correlated with increased costs per admission.
“Our number one expense in healthcare is labor,” Gizdic said. “We are people taking care of people. Creating an environment that people want to come to and stay is going to help reduce that labor expense and reduce turnover.”
To combat burnout and turnover, Novant Health has made employee well-being a board-level goal. The system solicits staff input and is exploring offering concierge perks like dry cleaning, meal delivery, and on-site car maintenance. It also invests heavily in leadership development and career pathways.
“People don’t typically leave organizations—they leave their leader,” Gizdic said. “Working with them on that career path… creates retention and helps us develop their skills for roles that are hard to recruit for.”
Impactful medication management
Going forward, Gizdic sees opportunity in preventative and value-based models of care, particularly around chronic disease management. Novant Health’s Mediful program, which is part of MedVenta Health Solutions, launched last year and offers patients free consultations with pharmacists, is delivering clinical and financial results.
“Eighty percent of the more than 15,000 patients we had as part of the Mediful program saw a reduction in their out-of-pocket expense for their medication,” he said. “Even better, on average, those patients enrolled that are diabetics saw their A1C level lowered by over 2%. So we're not only seeing a financial impact, we're seeing a clinical impact as well.”
These outcomes echo the findings of the Emory study, which indicate that hospitals will need to move toward prevention and tailored interventions to solve for the financial constraints of high-complexity populations.
With the healthcare landscape continuing to shift, Gizdic is focused on ensuring Novant Health can adapt without straying from its mission
"We know patients want more access, they want more convenient access,” he said. “We have it in every other aspect of our life—why not healthcare?"
Jay Asser is the CEO editor for HealthLeaders.
KEY TAKEAWAYS
New data reveals hospital expenses per adjusted admission jumped nearly 40% from 2013–2021, with nonprofits seeing a faster rise in per-admission costs than for-profit hospitals.
In response to rising expenses, Novant Health is shifting care to lower-cost ambulatory settings, allowing it to weather potential site-neutral payment changes.
Workforce retention initiatives and chronic care programs like MedVenta are also central to Novant Health’s long-term cost containment and quality goals.