In the absence of a silver bullet to fix short- and long-term obstacles, hospitals and health systems must remain open-minded about what strategies will help them maintain financial solvency.
This year has been one of the most challenging on record for the healthcare industry, and while the next few months are likely to be marked by widespread uncertainty stemming from rising pandemic cases, hospitals across the country are aiming to finish off 2020 on a strong note.
To do so, hospitals are trying to reignite the revenue engine, pursue capital diversification strategies, and cut out unnecessary expenses.
In the absence of a silver bullet to fix these short- and long-term obstacles, hospitals and health systems must remain open-minded about what strategies will help them maintain financial solvency.
In this month's episode of the HealthLeaders Finance Podcast, Matthew E. Cox, CHFP, CPA, CFO at Spectrum Health in Grand Rapids, Michigan, discusses reigniting the revenue engine and maintaining financial solvency going into what could be a difficult winter.
This transcript has been lightly edited for brevity and clarity.
HealthLeaders: Matt, you serve on the HFMA board of directors for the 2020-21 term. Based on your conversations and interactions with other health system CFOs, what are the lingering financial challenges facing provider organizations, and what are some effective strategies that leaders should consider implementing?
Cox: Being a member of HFMA, in addition to being a board member, I have the opportunity to talk to a lot of people. As I talk to others, I often hear about strategies of shifting from volume to value, and those that have made this shift are more likely faring well than others that happened during this pandemic.
Along with that, I see a lot of CFOs embracing value as a strategic advantage, making sure that patients understand the value that they're getting by staying within an integrated delivery system, not having extra tests, and getting good pricing. I hear some that are really capitalizing upon that as a system as we are at Spectrum Health.
Many of us are also focusing on the basics, too. So, just because there are new things that we need to be working on doesn't mean that benchmarking, productivity, revenue cycle, supply chain are any less important. In fact, a lot of CFOs, including myself, are doubling down on our core businesses and making sure that we're running them efficiently and that they benchmark well against our peers. Many CFOs know that we must thrive with digital healthcare, so there are lots of conversations around that.
We've seen a significant shift to digital over the past few months, and we need to make sure that we don't simply revert back to the old way of providing care post-COVID-19. There are lots of conversations about automating everything that we can. There's so much opportunity in our industry to embrace automation, and it's challenging to find staff right now, even during this pandemic. Automation is a great tool to help staff be more productive. I'm not just talking about back-office functions that a lot of people have done, but we've also implemented things like autonomous tugbots to move supplies and meal trays within our large hospitals.
We're also looking at a lot of other neat stuff that has a great return on investment that we plan on implementing over the next few months. There are a lot of CFOs that talk about their home-based care capabilities, curbside services, and drive-thru testing. We're all doing those things and that's part of responding to COVID-19, but I believe it's also responding to the way that patients want to be treated beyond COVID-19.
Lastly, I would say that being an integrated delivery system, Spectrum Health has both care and coverage, which has been a great structure for us. It's helped us continue to perform well even through this pandemic. There are a lot of other approaches that CFOs are [following] to take on risk and start insurance companies, partner with insurance companies, or change their contracts to accept an additional level of risk. Generally, everybody's working hard and trying to make sure that we continue to thrive as an industry and deliver necessary patient care.
HL: There's a growing sense of optimism that a coronavirus vaccine could be available next spring and that life could "go back to normal" by the end of 2021. What do you think about the forward-looking timeline as it relates to both the virus and your organization? What would a return to normal look like for Spectrum?
Cox: I'm not sure when a vaccine will be widely distributed or how effective it will be. Certainly, we're encouraged and hopeful that we could have a vaccine that could be widely distributed by the end of 2021.
We are gearing up and making sure that we have all the things necessary to be one of the organizations that can distribute millions of doses of vaccines. We've bought the sub-freezers, we've got enough stock of syringes so we can deliver the vaccine, so we're planning on being part of the solution.
As far as what it will look like on the other side of this, I think it will be different. With the back-office, we've proven that people can work remotely, whether that's 10 miles or 1,000 miles from our hospitals.
I do see continued work from home even after people can come back to the office. I think the hybrid approach, for the back-office, will be to work at home some and come in to work with their team.
HL: How has the pandemic affected your approach to healthcare finance, and what have been some silver linings in terms of innovations or changes your organization has embraced over the past eight months?
Cox: Certainly, the pandemic is something that none of us have ever done before. I can't say, 'Well, I did this 10 years ago when I worked in this job.' This is new for pretty much all of us in healthcare. So, my approach was to focus first on responding to the virus.
We did everything that we needed to do to be compliant with the orders from Governor [Gretchen Whitmer], but also we knew that we had to serve our communities well and make sure we had the necessary PPE and plenty of ventilators. We did everything that we needed to do, and we did it with increasingly open communication and transparency.
We've been holding lots of meetings with our staff and community, and I think that's been received well. I think that that's one of those silver linings, that we're going to continue to communicate better than we ever have before. We were able to reignite our revenue engine quickly at Spectrum Health.
We now value our call center more than we ever had. It was nice to have a call center so that when we got the green light to start performing elective cases again, we could fire those cases up pretty quickly in our integrated delivery system.
We did some things early on because we didn't know what we were up against. We froze some retirement contributions, and we had some pay reductions for our employed physicians. But in both cases, because we've been able to recover quickly, we've been able to reverse those decisions. We've also been encouraging all of our employees to reimagine our work. We've been challenging the teams to think about what can we do in a different way?
Some of those things can be like, can we do curbside vaccinations? And the answer to that was yes. And then we move forward to how do we keep doing curbside vaccinations in the winter in Michigan? So, there's never a dull moment, but I think we've done a nice job of continuing to reimagine what we've done. We keep talking about what can we do virtually? How can we more effectively work through the backlog of cases in those types of things?
HL: In your view, can hospitals and health systems get through the winter without an additional fiscal stimulus from the federal government? In the absence of a potential economic bailout, what can hospitals do to weather the storm?
Cox: I hate to say it, but the answer is that it depends on the market you're in, the current financial situation, and if there's another spike in cases.
Where we're at as a system is secure; we're an AA-rated system with nearly $8 billion in revenue, and we typically have a 3.5% operating margin. This year is going to be a little less than that. I predict it is going to be positive and our budget for next year will be positive, without any federal aid, but that assumes a relatively low amount of COVID and, hopefully, a vaccine coming shortly.
Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.