Steve Lawler, president of the North Carolina Healthcare Association, discusses the ongoing COVID-19 outbreak and what business strategies provider executives should put into place to bolster the bottom line.
Editor's note: This conversation is a transcript from an episode of the HealthLeaders Finance Podcast. Audio of the interview can be found here.
The ongoing outbreak of coronavirus disease 2019, (COVID-19), has infected over a million people worldwide, killed thousands, and disrupted the global economy on an unprecedented scale.
Health system and hospital finance executives are keenly aware of the impact the pandemic has had on their organizations' bottom line and they remain focused on navigating volatile market turbulence.
Steve Lawler is president of the North Carolina Healthcare Association (NCHA) and formerly served as senior vice president of the regional group for Carolinas HealthCare System. He also held leadership positions at Vidant Health, a Greenville, North Carolina–based nonprofit health system, over the course of 20 years.
Lawler spoke to HealthLeaders about the ongoing coronavirus disease 2019 (COVID-19) outbreak, what business strategies provider executives should put into place to bolster the bottom line, and the future of telehealth solutions.
This transcript has been lightly edited for brevity and clarity.
HealthLeaders: When you look at the COVID-19 outbreak, what are the most pressing financial and organizational challenges facing health systems during this crisis?
Lawler: When you think about hospitals and health systems and how they're built and put together, I think first and foremost, we're not built and put together to respond to a national pandemic. So even though we've got plans that date back from H1N1 to plans that we've used in North Carolina to react to hurricanes and floods, this is a long-term sustained event that is essentially asking hospitals to completely upend their typical model, where we're built to take care of folks in a variety of different settings, ranging from ambulatory to acute care.
What we've done is ask hospitals to completely shift that model to paying particular attention to what's going on on the front end, especially for patients that have tested positive for COVID-19 and require high-end, extraordinarily intensive care. What we've seen in the past month are hospitals and health systems shifting from that profitable business that typically is ambulatory or surgical-based to shoring up the front end for COVID-19, such as in the emergency department, the entrance-to-acute-care at the hospitals and then high-end [intensive care units] (ICU) care for days on end. That has eroded the traditional revenue cycle that hospitals and health systems have depended on.
In North Carolina, it's costing about $800 million in lost revenue that would have flowed into hospitals and health systems for their traditional work based on the current model. We've also seen an increase in expenses as people have flexed up on supplies. staff, and equipment. We've seen an increase in about $200,000 per month, so essentially, it's a $1 billion financial impact to hospitals throughout North Carolina.
HL: What are some of the labor concerns that providers—particularly some of the smaller ones—face as they consider furloughing employees? What are some of the thought patterns that go into that?
Lawler: I think right now, hospitals and health systems are focused on three areas. One is hardening their facility. Second is supporting their staff and understanding that this is a long-term event, so resiliency, making sure that they've got the right, personal protective equipment (PPE) and that they've got the right support structures for staff in place is important. And then it's retooling processes to make sure that hospital operations support this influx of sick patients.
Now, what small community hospitals have had to do, these are hospitals that don't have massive balance sheets. These are hospitals that have razor-thin margins, hospitals and health systems that have six months, three months, one month, [in terms of] days of cash. [The hospitals] are committed to taking care of their patients in their community, they've had to make difficult decisions in regard to ‘How do we tool and array our operation in a way that safeguards the sharp end?’ At some point, it's at the expense of some of the essential back office stuff. Hospital CEOs are making tough decisions to say, ‘We can forego that for now because this is an all-hands-on-deck effort to take care of people. Then we'll figure it out on the back end.’
As an association, we've been working in partnership with the federal government and the state government. I was on the phone with the interim CEO for Blue Cross Blue Shield of North Carolina, pushing for innovative payment models that are not based on activity-based payments where hospitals and health systems are doing things, submitting a claim, and then getting paid. We're asking that folks not think in ‘human terms,’ but try to keep up with the spread of the virus and to quickly come up with new alternative payment models that push cash into the door so that hospitals and health systems don't have to make difficult decisions like furloughing staff.
A lot of this is the same approach that families are facing, [this is] a financial crisis where we've got hospitals that are calling companies that provide services and asking them to reduce their cost of service or they're retooling their service agreements to create greater financial space. Or they're calling their banks and asking them to extend a line of credit, or they're going to the financing market to make sure that those hospitals and health systems have financial tools such as bonds and other vehicles within the financial market. They're asking for some space to be able to maneuver so they can take care of their patients. This is one of those things where we're extraordinarily grateful for the work that's taking place in Washington [D.C.] with the Coronavirus Aid, Relief, and Economic Security (CARES) Act, but the fact is they haven't figured out how to distribute those dollars and get those dollars directly to physicians and hospitals. We can't wait based on Washington time; we need people to act quickly.
HL: One service that's gained increased popularity through this crisis has been telehealth; some have said that telehealth is having its moment. I'm curious about your thoughts if telehealth is having its moment, if it's sustainable, and how you see its usage going in the future.
Lawler: One of the things that will come out on the other side of this pandemic, when we're seeing some recovery, are a variety of interesting lessons learned that we can apply going forward. I think telehealth is certainly one of those where we're going to realize that part of the access to care solution for rural and underserved areas is taking advantage of technology and this platform in a way that hadn't been thought of until this crisis. We're going to see a real uptick in individuals that are using telehealth to deliver specialty services to small communities, like a tertiary care hospital or to a community hospital. I think we're also going to see this uptick in self-care where individuals all of a sudden realize, based on practice and necessity, that they can pick up their phone, connect to an app, and then connect with typically an advanced level practitioner to help manage their health.
That’s certainly a real advantage. I think the other piece many states are dealing with are these work-from-home situations, where we've got an incredible amount of fixed infrastructure in healthcare and other places that is occupied by administrative or support staff. At some point in the future, we will have figured out through necessity and practice that we may not need that new infrastructure or fixed structures, we may be able to invest those dollars in something more meaningful for patients.
HL: What are your thoughts on the post-pandemic world and what that will look like for provider organizations? How will they have to act and base their business strategies going forward?
Lawler: I do think it's going to create a new paradigm for the future, but I'm incredibly optimistic based on the heroic people that are involved and taking care of people and communities. If you look at what's going on in New York or Louisiana, or even here in Charlotte, we've got people that are unbelievable in regards to their commitment to taking care of folks, and their willingness to do whatever it takes to do that. I think in the future, we're going to realize that we have to work with our elected officials in our state capitals and in our nation's capital to ensure that physicians, public health, and hospitals are properly resourced to deal with this again. This is not like ‘if it happens again,’ it's going to be when it happens again, and it's likely that this is going to be a new seasonal illness in addition to the flu and the common cold. How we learn from what's taking place and making wise investments is important.
I think the second piece is that as the federal government flexes to invest in some additional infrastructure, being thoughtful in regard to how we invest in rural healthcare platforms throughout the country is important. This is an opportunity to right-size care to ensure it's designed to deliver essential services, but also to make sure that it's able to compete and survive this kind of event. And finally, I think we'll realize that paying based on activity is not sustainable in the event of a pandemic or a healthcare crisis. Looking for wiser and more thoughtful payment models that adequately support the provider community to respond is going to be an important lesson as well.
I'm encouraged just by the amazing people that we have doing this work. There are just incredibly courageous people that are going to work every day and giving it their all. If those are the people that you must rely on in the future, then I've got great hope.
Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.