Steps Toward a Leaner, Meaner, and More Agile Financial Strategy in Healthcare

Streamlining and crisis-proofing operations can help hospitals and health systems put the pandemic's impact behind them.

A key lesson from the COVID-19 pandemic was understanding how resilient, resourceful, and agile many hospitals and health systems are—qualities that no doubt helped many of them survive the crisis.

The ability to respond to change is critical in helping healthcare organizations move on from the pandemic and begin the journey to financial recovery. Part of that effort is a better use of data to drive decision-making and patient engagement.

That is the focus of Sauk Prairie Healthcare, a 36-bed acute care hospital located in Prairie du Sac, Wisconsin—located approximately 25 miles northwest of Madison. In addition to the hospital, Sauk Prairie Healthcare operates four primary care clinics in surrounding communities and additional specialty practices within Prairie du Sac. 

Sauk Prairie Healthcare has served these communities since 1956. The healthcare system is best known for its orthopedic surgical care, with patients seeking services from across the United States, according to James Dregney, vice president of finance and operations at Sauk Prairie Healthcare.

A stronger focus on the value of trustworthy data

As part of its recovery strategy, Sauk Prairie Healthcare has invested in a new electronic health record platform, which has a planned go-live date of November 1, Dregney explains.

"The conversion to our new EHR is our primary focus in 2022," Dregney says. "A key outcome of the conversion will be an ability to perform more actionable data reporting and analytics. With rapidly changing payer policies, timely identification of revenue cycle process issues will be critical to ensuring we receive the reimbursement earned for the services performed."

With reimbursement models for orthopedic care shifting and value-based contract arrangements becoming more common, Dregney says the healthcare system has been expanding capabilities in primary care and coordinated care services.

Sauk Prairie Healthcare became a member of an ACO at the beginning of 2022. With that, the EHR conversion includes a focus on workflows and data reporting around value-based care delivery models and quality reporting, Dregney says.

The financial and clinical toll of the COVID pandemic

"The most significant impact on the organization was in March and April 2020, when elective procedures were placed on hold or significantly curtailed," Dregney recalls. "As an organization known for its orthopedic procedures, many of which were elective, the result was a significant reduction in cash flow."

During the four years prior to the pandemic, leadership at Sauk Prairie Healthcare had undertaken initiatives to improve financial stability and strengthen the balance sheet, including increasing the cash on hand available, Dregney explains. With the impact of the pandemic on elective procedures, Sauk Prairie Healthcare quickly responded to the availability of the Medicare COVID-19 Accelerated and Advance Payments program to provide additional funds to meet short-term cashflow needs. 

"The Medicare Accelerated Payments provided a sense of security in case the slowdown of elective procedures persisted for an extended period," Dregney explains. "However, those procedures began to be performed again during the end of April and May 2020, allowing for revenue to be generated to cover expenses. In addition, as a result of pre-pandemic initiatives to improve the efficiency of operations and reduce expenses, the use of the Accelerated Payments to support operations was not necessary."

In addition to the impact on elective procedures, labor supply and cost have been a challenge throughout the pandemic, Dregney says.

"Initially, in addition to the high level of concern for the well-being of our team members, there was concern about what staff contracting the disease could have on staff availability and the cost of caring for individuals covered by our health insurance plan," Dregney recalls. "As time has gone on, the impact has shifted more towards the results of nationwide retirements and resignations of individuals in the healthcare industry. It's been more difficult to recruit and retain staff. Those challenges persist. We have and continue to look for unique solutions to address the needs of our Sauk Prairie Healthcare team members while also continuing to focus on long-term financial stability."

Pre-pandemic strategies have shown their merits

One important lesson that Dregney says he learned because of the pandemic was confirmation that the pre-pandemic strategies Sauk Prairie Healthcare had implemented truly did improve the organization's financial strength.

"We put ourselves in a position to weather the storm we have faced thus far," he says. "We realize there are still a lot of challenges ahead of us and we can't rest. But, to date, we have been successful."

"The pandemic enabled our leadership team to highlight the importance of keeping our eye on the proverbial ball," Dregney continues. "Shortly before the pandemic took hold in the U.S., our bond rating was raised as a result of the pre-pandemic initiatives. That increase could have been viewed by some as a recognition by the rating agency of Sauk Prairie Healthcare's financial stability. While it was a recognition of the improvements we had previously made, the pandemic showed that nothing is certain and we need to continue working to improve our operating efficiency and strengthen our balance sheet to help weather future disruptions, whatever they may be."

About a year into the pandemic, the healthcare system was engaged in contract negotiations with an insurance company. After extending the contract while Sauk Prairie Healthcare continued the discussions, the payer indicated they were going to stop paying claims entirely until an agreement was reached.

"While this could be viewed as an attempt by the payer to capitalize on a perceived disruption in cash flow during the pandemic, the strength of Sauk Prairie Healthcare's balance sheet allowed us to continue negotiating and not be forced to accept an agreement that was not reasonable," Dregney says.

Recovery doesn't mean a return to the past   

Executives at Sauk Prairie Healthcare understand that moving forward can't mean a return to their old ways. Hospitals and healthcare systems must learn from the pandemic and make significant changes in how they operate and deliver care. The healthcare industry lost as much as 30% of its workforce during the pandemic, by some estimates. The sector simply can't return to past practices.

"We were faced with recruiting and retaining challenges during the pandemic across most areas within the organization," Dregney says. "Our human resources team, and all of our leaders, have been acutely focused on creative staffing and compensation models."

"There have been times in the past when a workflow problem may have resulted in a request for additional full-time employees in a department," Dregney notes. "The pandemic has forced leaders to have the first considerations be those of workflow changes and process improvements, in order to eliminate waste and ensure that all work efforts produce value for the organization."

The experiences from the pandemic have resulted in a more critical analysis of additional processes and the flow of data between departments, to identify and work towards a LEAN Ideal State for Sauk Prairie Healthcare, Dregney explains.

Becoming a leaner, meaner, and more agile organization

In addition to labor challenges, Sauk Prairie Healthcare experienced disruptions in the supply chain.

"This is the same as every organization in the country," Dregney says. "Throughout the pandemic, our supply chain leadership has been excellent at identifying alternative products to fill gaps, as well as working to improve contract compliance with our GPO. About a year before the pandemic, Sauk Prairie Healthcare transitioned to a new GPO. We experienced some immediate gains as a result of that transition."

The supply chain challenges allowed Sauk Prairie Healthcare to more easily transition products that were not on contract to a new product or brand that was on contract. 

"The pandemic broke down the individual preference item concerns that possibly would have been risen in the past. With labor and supplies [being] our two largest expense items, making improvements in these areas as a result of pandemic-related issues has definitely made us leaner," Dregney says.

Finally, Dregney says Sauk Prairie Healthcare will continue its "unrelenting pursuit" of improvement in operational and financial performance. 

"The pandemic has demonstrated the need to look at operations and contractual arrangements with an eye towards risk and uncertainty," Dregney says. "As a smaller organization, some of the levels of risk we experienced during the pandemic had been considered unlikely. The pandemic changed that thinking. As a result, we have become 'meaner' in the sense that we are now focusing on those risks and having hard discussions with vendors and payers as we negotiate new agreements."