HFMA Survey: Two-Thirds of Hospital Execs Predict Full Year Revenues Slide 15% Because of Pandemic

Almost 30% of surveyed executives said the outbreak has increased the likelihood that their organization pursues a merger.

Nearly two-thirds of hospital executives expect full year revenues will decline by at least 15% due to the coronavirus disease 2019 (COVID-19) outbreak, according to a Guidehouse analysis of a survey conducted by the Healthcare Financial Management Association (HFMA).

The results, released Thursday morning, indicated that 20% of executives expect revenue declines of more than 30% year-over-year. 

In fact, half of the respondents stated that it will likely take through the end of 2020 or longer for their organization's elective procedure volumes to match pre-pandemic levels.

Only 3% of health system executives stated that the stimulus funding from the federal government will be able to cover costs related to COVID-19.

Given the financial pressures on provider organizations, almost 30% of surveyed executives said the outbreak has increased the likelihood that their organization pursues a merger or a new partnership.

David Burik, partner and payer/provider consulting division leader at Guidehouse, told HealthLeaders that a more active M&A market may not result in more transactions but rather a move by providers towards growing service lines, given the importance of elective surgeries and outpatient procedures to the bottom line.

"You can expect the competition to move heavily on down that road; the organizations with means and infrastructure to take advantage of those that might have had it, might have thought they were getting it, but don't have it," Burik said. "That might be the easiest way for growing organizations to grow, rather than the older model of 'Call us when you're ready to merge and we'll figure it out.'"

The survey reiterated the belief that hospitals and health systems will be offering more telehealth services to patients than before the outbreak.

Nearly 70% of executives said their organizations will be using telehealth "at least five times more" than before the pandemic, though 33% said their organizations have "all needed telehealth capabilities."

Telehealth remains the top revenue growth area, 71%, provider organizations are eyeing going forward. However, two-thirds of health system executives anticipate service line strategies will be a revenue generator in the future, while 57% pointed to revenue cycle improvement. 

Burik told HealthLeaders that the survey points to a gap between organizations that are positioned to grow in the telehealth and virtual solutions space, which will be critical as patients seek care but are wary of returning to the hospital, and those that may have capital restraints.

"All organizations will aspire to growth, but the ability to grow, the balance sheets to grow, and the infrastructure to grow will be pretty discriminating," Burik said. "Some organizations that are our positioned can turn on the switch and make it happen a lot more readily than organizations that thought they were big enough and thought they were virtual enough. Of course, for folks who were struggling before, there isn't much in this that's going to position them better."

Related: 'An Arm and a Leg': Healthcare Takes a Financial Hit in the Midst of Pandemic

While the survey highlights revenue growth opportunities coming out of the COVID-19 outbreak, hospitals are also looking to get a handle on historically high expenses in the face of a potential second or third wave of the pandemic.

Over three-quarters of executives stated that their organizations were focused on addressing labor costs, via "furlough, layoffs, hiring freeze, reducing hours and/or contract labor." Similarly, over 75% stated that they would focus on capital expenditures, including a "reduction in new/existing construction, acquisitions of high-cost medical equipment and technology." 

Almost 70% of respondents are reviewing their purchased services, specifically at "canceling or renegotiating contracts and co-management agreements."

Forward looking, the pandemic has implications for on-site employment and where workers will be in this new normal.

Only 20% of executives expect their employees to return to work primarily on-site and over one-in-five executives have already instituted additional work-from-home options for their organizations.