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Analysis

LCMC Health CFO Reexamines Financial Standing at the 2020 Mid-point

By Jack O'Brien  
   June 18, 2020

Hospital finance leaders have to analyze the damage done from the virus and also look to implement effective revenue growth strategies and expense control measures going forward.

Editor's note: This conversation is a transcript from an episode of the HealthLeaders Finance Podcast. Audio of the interview can be found here.

Mid-June marks the halfway point of 2020; a whirlwind year that has presented unforeseen financial obstacles to hospital executives.

Though the first wave of the COVID-19 pandemic has slowed in recent weeks, hospitals are left with the challenging prospect of reexamining their financial position as well as planning for the rest of the year and into next.

Listen: Lovelace Medical Center CFO Discusses the Pandemic in New Mexico

Jenny Barnett-Sarpalius, CFO of LCMC Health, a five-hospital system based in New Orleans, spoke with HealthLeaders about analyzing the financial damage done from the virus and looking to implement effective revenue growth strategies and expense control measures going forward. 

This transcript has been lightly edited for brevity and clarity.

HealthLeaders: Jenny, what can you say about LCMC's financial standing? How was it affected by the first wave of the pandemic and how is the organization recovering?

Barnett-Sarpalius: At LCMC Health, we were fortunate enough to be in a strong financial position heading into the pandemic. However, our hospitals, as you know, were hit hard and fast with New Orleans being one of the hot spots in the country. We diligently monitored and managed liquidity and cash flow requirements, particularly in light of the significant increases in supply and personal protective equipment (PPE) costs, premium labor costs, and emergency capital, all of which were required to treat our patients.

The financial impact to our system in March and April alone exceeded $58 million, and the estimated impact for us in May and June, will probably be a minimum of $43 million. The receipt of the stimulus funds has been absolutely critical in helping us to mitigate our losses. Our elective cases are beginning to return, but the ramp up that we've seen is slower than we had projected. We have also been proactive in our community outreach to patients to let them know that hospitals are safe and also communicate the importance of not delaying patient care.

HL: How has the coronavirus affected your role as a CFO? Is there more of a focus now on diversifying the organization's portfolio going forward, and if so, how?

Barnett-Sarpalius: With any crisis, including the COVID-19 pandemic, one important underlying principle that I've learned is [to] remain calm. [This] is hard to do when you're in the middle of such a crisis. Because COVID-19 hit us so quickly and so fast, we had to adjust and adapt quickly, and we also had to be creative. We adapted to a remote and virtual work environment; I'm sure other organizations did as well.

We had to get creative with our supply chain and procurement processes as the supplies and the PPE were not available through our normal distribution channels. We were dealing with vendors whom we had never dealt with before, many were overseas, and we were placing blind faith in [the idea] that the suppliers would deliver, with a lot of money at stake. We had to be creative, flexible, and agile. We were successful, though, as a result of our efforts, and our organization fortunately never ran out of PPE. Although we did get critically low at times, we never ran out and we were able to provide the care and the supplies for our patients and our employees that we needed to help us during this time.

Related: Emerging From Pandemic: LCMC Health CEO Details How the New Orleans System Is Moving On

Also, our telehealth and our virtual care platform ramped up overnight, from probably about a couple hundred cases pre-COVID to now well over 20,000 virtual visits in total. Relative to our portfolio diversification, telehealth and virtual care is here to stay, I don't see that going anywhere in the future. Telehealth and virtual care is efficient; patients seem to like it and physicians seem to like it. [Telehealth] can't replace all of our outpatient care, but I think that we will continue to invest in this area. We've also applied for telehealth grants and we are looking to incorporate that into our portfolio going forward.

HL: This is a two-part question: In what areas do you see opportunity for revenue growth for the organization, and what are some cost-saving initiatives you're exploring or putting into action?

Barnett-Sarpalius: To be honest, right now we're focused on returning our revenue streams to pre-COVID levels. We need to restore our elective procedures and get them back to pre-COVID levels. To do that, we need to help our patients understand that it's OK and safe to return to our hospital for care; [emphasizing] the importance of not delaying care. That's our focus right now, trying to reestablish and get back to our baseline. At the same time, we are focused on growing and developing our telehealth and our virtual care; I think there's opportunity for growth in that service line. Obviously, there are different reimbursement levels than traditional care. We are focused on growth, but we have got to get our hospitals back to our baseline and then go from there.

Listen: NCHA President Steve Lawler on COVID-19 and the Future of Telehealth

On our cost-saving initiatives, we're also focused on getting our expenses back in line [to] pre-COVID [levels]. We saw a spike in our supply costs, which was tremendous, and also our labor costs. We're paying a lot of premium pay and shift differentials to keep our labor force intact and redeploy the labor as needed. We had significant premiums in all areas of expense due to the surge of COVID-19.

HL: How is LCMC positioning itself, financially speaking, for the potential second and third waves of the virus at the end of this year and start of next year?

Barnett-Sarpalius: I can say that we are prepared for another surge. We have been diligent and careful about managing and monitoring our liquidity, our cash flow requirements, and making sure that we have available liquidity to us at all times. We have been hyper-focused on updating our projections so that we know what the impact will be on a run-rate basis, should we have another surge. We also were forward-thinking when we were going through the first wave of the pandemic, on our supplies and PPE, knowing that we might need to stock and keep our levels at a higher rate for future outbreaks or occurrences. I think we're in a good position there. And I will say that we became adept at managing our labor pools.

We benefited from being a system; we have the Children's Hospital in our portfolio and during the pandemic, there were no volumes in the Children's Hospital. While that was unfortunate for them, it greatly benefited the system because we were able to redeploy all of that personnel to help out our other hospitals and that worked well for us. We became good at managing labor pools and resources.

We learned a lot from the disruption, and we have figured out how to leverage that to propel us forward. In summary, I would say we are prepared.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


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