In late 2022, CommerceHealthcare® published its annual assessment of leading issues and opportunities influencing providers.
Healthcare Finance Trends for 2023 – Multiple Intersecting Challenges (Trends Report) offered eight themes in four overarching categories:
Financial
- Patient financial experience
- Digital transformation
- Building trust
Finance Update
Four financial themes were prominent in the year’s first half:
Chasing elusive profitability
The median hospital operating margin turned positive in May, and labor costs appear to be headed in the right direction, though they still exceed pre-pandemic levels.[1Increased patient lengths of stay represent profit headwinds. Regaining profitability requires “unrelenting cost discipline” and concentration on producing “recurring savings.”[2]
Staying on revenue growth track
Pursuing top line growth remains a high 2023 priority alongside cost control. Commitment to telehealth remains steadfast. Half of CFOs expect to increase investment throughout the year. .[3]
The current emphasis is on making telehealth more convenient through:
- Attractive hybrid virtual/on-site combinations of care
- Asynchronous care opportunities
- Virtual care subscription services[4]
Managing reimbursement disputes
Throughout the first half of 2023, payers were aggressively pursuing prior authorization of procedures, and 95% of hospitals say that this process is consuming considerable staff time. [5] Initial prior authorization/precertification denial rates for commercial inpatient claims rose to 2.8% in 2022 and reached over 3% in 2023’s first quarter. [6] The cash flow impact is not trivial. As one measure, 50% of hospitals indicated that they are carrying over $100 million in receivables for claims older than six months. [7]
Addressing ongoing workforce challenges
This year has seen some easing from pandemic crisis levels, but staffing is a substantial challenge across clinical and administrative functions. Nursing remains a flashpoint. Over 142,000 RNs returned to work in 2022, a 4% uptick, and turnover declined nearly 5% to a still-high 22.5%.[8] However, prognoses augur a meaningful nurse exodus. In late 2022, nearly one-third anticipated leaving direct care within a year. [9] On the administrative side, 63% of organizations say they are experiencing staff shortages in revenue cycle management. [10]
These workforce disruptions are producing:
- Increased cost. Median staff costs increased 10% from 2022 to 2023. [11]
- Constrained growth. Caregiver shortages hinder revenue optimization.
- Knowledge loss. Early retirements of seasoned executives create an “experience brain drain.” [12]
- Stepped-up retention efforts. Organizations are working to retain employees through pay increases, hybrid work extension and benefits such as on-demand Earned Wage Access.
Patient Financial Experience
Even with financial constraints, providers realize that substantial improvements in patient experience are vital and cannot be deferred. The impetus emanates from two leading directions — patient demand and competitive pressure.
Patient demand
The patient struggle to meet cost obligations is ongoing. In a Harris poll, 61% of Americans cited affordability as their highest barrier to care access, while 26% said healthcare costs strain their finances and 23% stated insurance fails to cover care. [13]
The need is fueling expansion of patient financing programs. Low- and no-interest credit lines covering significant dollar amounts and extended durations remain the industry gold standard for generating patient-friendly experiences. Over 60% of hospitals and medical groups anticipate greater reliance on third parties to offer patient financing over the next two years. [14]
Competitive pressure
Early 2023 witnessed little diminution in activity by payers, “retail health” providers, and other competitors to expand further into ambulatory care services. Bain & Company projects non-traditional players will own 30% of the primary care market by 2030. [15]
Beyond taking market share, these competitors are leveraging technology to offer highly convenient care and financial experiences, pressing traditional providers to “up their game.” Several strategies are urged by industry leaders, from partnering with the national firms to adopting retail practices to expanding outpatient facilities aggressively - either organically or through acquisition. [16],[17]
Digital Transformation
Digital transformation has been a significant goal in healthcare for several years. A mid-year status check reveals several points of technology emphasis.
Technology as enabler
Facing heavy financial challenges, providers are focusing pragmatically on digital enablement of key near-term goals and are rigorously screening technology projects for rapid ROI. Current priorities support two goals:
- Growth. Funds are flowing to technologies that foster diversification of revenue streams. Telehealth, remote patient monitoring and other tools are critical to fast-growing ambulatory services and Hospital-at-Home programs. Home services are projected to grow 20% over the next decade. [18]
- Cost reduction/process improvement. The first half of the year saw an expansion of financial process automation to cut costs, manage remittances effectively and address continuing supply chain management/payables changes.
Requirements for value realization
Unlocking transformative value from technology deployment is increasingly understood as carrying several critical success factors:
- Becoming a core part of operations. The right automation goes beyond one-off cost savings to become foundational to operations.
- Wide deployment and use throughout the organization. Application Programming Interfaces (API) to facilitate integration of various information systems are important for broad adoption.
- Interdisciplinary teams to drive projects. The goal is faster product development that more closely maps to desired business outcomes.
Building Trust
The Trends Report noted the challenges and benefits of building trusted relationships with patients, employees and other vital constituencies. Trust yields practical returns.
Consumers “crave a trusted partnership” with healthcare providers. [19] Analysts believe that their reservoir of community trust enhances most providers’ partnership attractiveness to retail health corporations.
One key component of organizational trust is cybersecurity. Cyberattacks have not diminished in 2023. A federal report noted that “ransomware attacks, data breaches — and often both together — continued to be prevalent in attacks against the health sector” in the first quarter of the year. [20] Investment in cyber-defense is growing at 15% annually, while rising insurance premiums are adding financial burden. [21]
Conclusion
The Trends Report themes are not only still in force at mid-year, but many are also intensifying. Multiple crosscurrents span financial management, patient financial experience, digital transformation, and trust-building. Staying the course on driving change is imperative to meet today’s demands and usher in new levels of success for healthcare. To read the full report from CommerceHealthcare®, please click here.
CommerceHealthcare® solutions are provided by Commerce Bank.
1. Kaufman Hall, National Hospital Flash Report, June 2023.
[2]. Advisory Board, “10 Takeaways from our Cost Management Intensive,” March 17, 2023.
[3]. BDO, Healthcare’s Challenging Road Ahead: 2023 BDO Healthcare CFO Outlook Survey, February 2023.
[4]. Penn State Health News, “Penn State Health Enhancing Access to Primary Care Through Subscription-based Virtual Service,” June 13, 2023.
[5]. American Hospital Association, “Infographic: Commercial Health Insurance Practices that Delay Care, Increase Costs,” November 2022.
[6]. Crowe, Time for a Commercial Break: Crowe RCA Benchmarking Analysis, May 2023.
[7]. American Hospital Association, “Infographic: Commercial Health Insurance Practices that Delay Care, Increase Costs,” November 2022.
[8]. Nursing Solutions Inc., 2023 National Health Care Retention and RN Staffing Report, March 2023.
[9]. McKinsey & Company, Nursing in 2023: How Hospitals are Confronting Shortages, May 2023.
[10]. J. Asser, “Majority of Providers Expect to Outsource Patient Financing,” HealthLeaders, April 14, 2023.
[11]. M. Hagland, “AMGA Survey: Clinics Struggling with Chronic Staffing Shortages, Costs,” Healthcare Innovation, May 30, 2023.
[12]. Kaufman Hall, 2022 State of Healthcare Performance Improvement, October 2022.
[13]. The Harris Poll and American Academy of Physician Associates, The Patient Experience: Perspectives on Today’s Healthcare, May 20, 2023.
[14]. J. Asser, “Majority of Providers Expect to Outsource Patient Financing,” HealthLeaders, April 14, 2023.
[15]. American Hospital Association Center for Health Innovation, Health Care Disruption: 2023 Outlook, February 2023.
[16]. Ibid.
[17]. Definitive Healthcare, Retailers in Healthcare: A Catalyst for Provider Evolution, May 2023.
[18]. Sg2, 2023 Impact of Change Forecast Highlights, June 21, 2023.
[19]. The Harris Poll and American Academy of Physician Associates, The Patient Experience: Perspectives on Today’s Healthcare, May 20, 2023.
[20]. U.S. Department of Health and Human Services Health Sector Cybersecurity Coordination Center, “HC3 Cybersecurity Bulletin,” 2023.
[21]. A. Condon, “Hospitals Must Boost Cybersecurity Investment Despite Other Costs Weighing on Margins,” Becker’s Hospital CFO Report, April 17, 2023.
CommerceHealthcare® solutions are provided by Commerce Bank.