Seven healthcare stakeholders weigh in on the financial challenges related to the pandemic.
The coronavirus disease 2019 (COVID-19) pandemic continues to present hospital and health system executives with critical challenges to maintaining the bottom line and supporting operations.
While there are several opportunities for revenue diversification and growth, namely in the digital health space, hospital leaders must still make crucial adjustments to navigate the uncertainties spurred by the virus.
Seven healthcare stakeholders weigh in on the financial challenges related to the pandemic that hospitals and health systems will face in the weeks and months ahead.
Former hospital CFO on the state of affairs
Colin McCulloch is an attorney who works as a member of Epstein Becker Green's healthcare and life sciences practice. McCulloch also previously served as CFO for both nonprofit and for-profit health systems.
Citing the pandemic, McCulloch said there are not "many winners on the provider front," adding that the industry is in a "panic mode" while focusing on what costs can be effectively mitigated without creating additional problems down the line.
"The CFOs I talk to are not being stupid, they're not just wholesale laying off staff because they believe that things will eventually get back to something closer to what there used to be," McCulloch said.
He added that plenty of hospital finance executives are reexamining their supply chain operations and ensuring that there's an adequate personal protective equipment inventory for the coming months.
"When I was a CFO, we were talking more about 'just-in-time inventory,' not about warehouses. But now that's become a winning strategy," McCulloch said.
Bonds and billing
David Shelton, CEO of PatientMatters, LLC, a patient financial services company based in Orlando, said he's following two trends that hospital CFOs should have on their radar: the status of the bond market and the effects of the pandemic on billing practices.
Regarding the bond market, Shelton said that low interest rates made the bond market an attractive place for provider organizations to access capital in the past.
He said that many organizations are likely not tapping into those available dollars now given the economic volatility in the markets, which he said could have longer-lasting effects on hospitals as certain capital projects are put on hold.
For billing, Shelton said hospitals are feeling the financial pressures associated with COVID-19 as they treat patients but suffer from a continually deteriorating payer mix.
"We see a lot of hospitals that are holding on to their dollars; that management is more conscious about spending than it was before," Shelton said. "I think it's reasonable for hospitals to talk to me as a vendor and say, 'Hey, how are you going to work on cost management for the remainder of the year? What are your solutions and how do you help me as a facility control a budget that's shot?'"
Hospitals have always operated on thin margins, which made them particularly vulnerable to a sudden economic downturn like the recession caused by the pandemic, according to John Tishler, a partner at Waller, a Nashville-based law firm.
He told HealthLeaders that while many healthcare organizations don't face immediate financial distress due to the relief packages issued by the federal government, there is still an "opaqueness" about what happens when those funds run out.
Tishler said the lower price points of financially stressed organizations will likely entice buyers to pursue opportunities next year.
"In my view, this means that down the road, we're going to see more distress in the healthcare sector, which a lot of people think is bad, but in some ways it's not," Tishler said. "I think it's just an acceleration of a trend that we've already been seeing about consolidation in the healthcare industry."
Tishler added that industry consolidation offers organizations the ability to spread out costs and adopt more best practices, an important development as the healthcare industry has gravitated towards greater efficiencies in care delivery in recent years.
"In some cases, consolidation allows for some of those regional operators to have many more specialists because the bigger you get, the more you can bring in somebody who may just focus on [providing] lung transplants or something like that," Tishler said.
He did warn some larger organizations lack the "personal touch" that comes with a community hospital or smaller health system.
Embrace digital solutions
Tashfeen Ekram, MD, a diagnostic radiologist at Alta Vista Radiology and co-founder of Luma Health, a patient engagement platform based in San Francisco, said provider organizations are faced with two primary challenges: how to reschedule patients in the appointment backlog and how can that be done in a manageable way for the operational staff to handle.
Ekram said many hospitals are trying to bring back patients but are doing so through a manual process that is "inefficient and unsatisfying" to the patient. He urged hospital leaders to continue to embrace the shift toward digital solutions, a trend that he noted had been in place even prior to the pandemic.
To that same end, Ekram said telehealth can drive significant changes in healthcare, both in terms of streamlining care delivery and reducing costs.
"I think we will be able to accomplish a lot through telehealth because [those tools] should be able to drive access to care and it gives a lot of patients access to care that they wouldn't otherwise have had," Ekram said. "I think we can do it in a scalable way that'll be cheaper because eventually these [virtual] visits will not pay as much as they do now for an in-person visit, but I think this will also help to drive down costs and help healthcare systems figure out which of the service lines they can offer over video feed versus in-person."
'Do a lot better'
Steven Shill, CPA, partner and national leader at the BDO Center for Healthcare Excellence & Innovation, told HealthLeaders that the biggest issue for health systems has been the length of the pandemic and the increased likelihood that a second or third wave of cases could occur in the future.
Shill said that provider organizations will increasingly have to rely on technology and data analytics to improve operations going forward.
"I think there's going to be a lot of fallout from a wellness standpoint, a healthcare standpoint, and an economic standpoint," Shill said. "[The pandemic] is going to exacerbate the necessity for us as a country and as a sector to do a lot better."
Patrick Pilch, senior managing director and also a national leader at the BDO Center for Healthcare Excellence & Innovation, added that he expects an uptick in acquisitions in the virtual care space as hospitals continue to find ways to deliver services at a lower cost of care.
Pilch said that at the start of the pandemic, health systems were putting together their own "homegrown" telemedicine programs but now have opportunities to acquire new services.
"I think what we're starting to see the beginning of are the [organizations] who have the money are looking at sustainability and identifying markets where they are looking to expand and how to best do that," Pilch said.
Better connectivity, better bottom line
There are lessons that healthcare finance executives can learn from the banking sector, according to Joe Ganley, vice president of government and regulatory affairs at athenahealth.
Much like financial services, Ganley said there are parallels with the healthcare industry in terms of being complex businesses that consumers value and focus on maintaining security and privacy.
Ganley said that having a robust data operation, with insights into whether patients have made any changes to their care, such as taking their medication or switching clinicians, can be a financial boon for provider organizations.
"To a CFO, I would say there's a long-term play here where better connectivity is going to improve the bottom line and make care better," Ganley said. "When you think about value-based care, if you're going to get paid based on the overall outcomes for the patient, you want to have a complete picture of what's going on in that patient's world."
“The CFOs I talk to are not being stupid, they're not just wholesale laying off staff because they believe that things will eventually get back to something closer to what there used to be.”
Colin McCulloch, an attorney who works as a member of Epstein Becker Green's healthcare and life sciences practice
Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.