Harold Miller, CEO of the Center for Healthcare Quality and Payment Reform, recently appeared as a guest on HealthLeaders Podcast where he discussed ways hospitals can restructure how they deliver services and how they get paid.
HealthLeaders: How can healthcare organizations thrive in challenging economic times?
Harold Miller: The immediate challenges are to restructure staffing to address the workforce shortages that hospitals are facing. The second thing is to keep small rural hospitals from closing.
There are shortages developing because people are simply leaving healthcare because of burnout and hospitals and health systems can't thrive financially if they can't deliver high-quality care and they can't deliver high-quality care without adequate staff.
It isn't just a matter of paying more. Staff is burning out because they are afraid of harming patients, so I think it's going to be essential for hospitals and health systems to restructure the way they deliver care and restructure the work for their staff.
Organizations will need to increase their staff levels so that people want to work there and feel that they are delivering care to patients. I think that the hospitals that do that first will be the most successful.
The biggest challenge to this will be faced by small rural hospitals, because they have been struggling with costs for a long time. When those small rural hospitals close, the community doesn't just lose a hospital, it loses all its healthcare services.
HL: What will that restructuring need to look like?
Miller: Hospitals need to look at the most critical services they offer and how they take care of patients. That might mean that some other services have to be suspended, which in the short term may increase costs. But in the longer run, we need to fundamentally change the way hospitals are paid.
The standard formula for success for hospitals for years has been to do as many procedures and tests as possible and to charge as much as you possibly can for them. This has led to an unaffordable health insurance system and to personal bankruptcies. I think the mission of the hospital has to be reoriented. The mission of the hospital must be to deliver necessary services as safely and efficiently as possible and to charge only what is necessary.
The problem that hospitals have faced though, is that they do two fundamentally different things—but they are only paid for one of them. Hospitals deliver services to patients when they are sick, and they are paid for that. But the other thing that hospitals do, which is essential for a community, is that they are available when somebody needs them—that standby capacity is critical for a community. But hospitals aren't paid for that.
We don't pay for other essential community services that way. We don't pay fire departments based on whether there's a fire and we don't pay police departments based on how many crimes there are, and we shouldn't be paying hospitals solely based on how many services they deliver. They need to be paid a standby capacity payment so that the hospital can maintain its essential fixed costs and then the hospital should only charge and be paid a smaller amount for an individual service whenever it delivers. And with that combination of payment, the hospital can then have adequate payment to deliver appropriate services.
With that combination of payment, the hospital can then adequately deliver appropriate services without feeling compelled to deliver unnecessary services and the pressure to make high profits.
HL: In What ways can healthcare CFOs step up to create an organization that provides high-quality healthcare while maintaining its financial stability?
Miller: A key thing is that in hospitals, the CFO and CMO must be working together, and the finance and the clinical part of the organization need to be working together. In many cases, that's not the case. Clinical people deliver clinical care without even thinking about what it costs, then the hospital finance folks have to figure out somehow where they can cut costs without any ability to influence the way care is being delivered.
People who are trained as CFOs don't understand the clinical side of the operation and the folks who deliver clinical care generally don't understand the finances, and that fundamentally has to change. There has to be a way that they can work together to say how can we redesign care in a way that will cut out the unnecessary costs and pay adequately for the cost that we need, and that's done by having a partnership between the CFO and the CMO and the chief nursing officer and other clinical staff in the hospital.
Kristin Dyer has stepped into the role following the promotion of Ronnie Midgett to CFO for the organization’s parent company.
Medical City Healthcare—a Dallas-based healthcare provider with 99 acute beds and over $880 million in revenue—has appointed a new chief financial officer.
Kristin Dyer has stepped into the role following the promotion of Ronnie Midgett to CFO for the organization’s parent company, HCA Healthcare’s American Group Region. Dyer has been part of HCA Healthcare, the parent company of Medical City Healthcare, since 2013. Before her role at Medical City Healthcare, she served as CFO of the HCA Healthcare North Florida Division, overseeing growth along with financial and operational efficiencies for 15 hospitals and more than 120 additional sites of care.
Also joining Medical City Healthcare as division president is Allen Harrison—who joined the company this year from Methodist Healthcare in San Antonio. There he served four years as president and CEO.
"Providing the highest level of quality, safe and compassionate care is our top priority," Harris said in a press release. "I am honored to work alongside and build on the excellence created by the many dedicated professionals who are already providing outstanding care in every action, every patient, every time."
Each location—four in Missouri and two in Illinois—is accepting new patients.
Neurosurgery of St. Louis, an independent physician’s group serving St. Louis and Metro East Illinois, is expanding in the area, having expanded its presence in the region and now has a total of six locations.
The practice started in 2022, and so far, this year it has added three additional locations and expanded its team of neurosurgeons and nurse practitioners to twelve. The group now has six locations in Illinois and Missouri, as well as a new Specialty Surgery Center of St. Louis which is located in the Walker Medical Building. The practice specializes in treating common brain and spine conditions including brain tumors, cervical and lumbar spine conditions, and spinal stenosis.
"It’s a very exciting time to be part of NSL because of what this growth will allow us to achieve from a quality care standpoint," NSL’s Managing Partner Dr. Michael Polinsky, said in an emailed release. "What this means for patients is that we’re able to offer even more highly specialized care in a more accessible way for people. These additional locations, as well as the new surgery center, will allow us to bring specialized care closer to our patients."
Each location—four in Missouri and two in Illinois—is accepting new patients.
"This has been our vision since 2019. Our vision all along was to have a group of like-minded surgeons who believe in patient-centered care," Dr. Neill Wright, the organization’s medical director, said in the release. "We wanted to deliver patient care in a way that we thought was better for the patient and offered faster access to care. It’s taken us two years to get to this point, but we feel very invigorated that we are doing something that we truly believe will change the way patients receive care for the better. It’s a new way of delivering expert neurosurgical care."
David Koschitzki, CFO at MJHS Health System recently connected with HealthLeaders to discuss staffing costs and organizational investments.
Organizations are under tremendous pressure to maintain their financial well-being and the health of the people they care for, but factors including the repercussions of the pandemic, inflation, labor shortages, skyrocketing expenses, and a cessation of government relief funds have made an already laborious task practically herculean.
One healthcare provider that has seen its fair share of challenges over the last three years is MJHS Health System—a 115-year-old health system based in New York City specializing in senior, hospice, and palliative care. The organization's chief financial officer, David Koschitzki, is kept awake at night by several concerns, but the main one is keeping expenses down without making cuts in valuable areas.
Koschitzki recently connected with HealthLeaders to discuss staffing costs and organizational investments.
HealthLeaders: What's on your mind most these days?
David Koschitzki: As the chief financial officer, I have full responsibility for ensuring that we are making sound business decisions, entering into sound business partnerships, keeping an eye on the bottom line at all times, and making sure that we are staying ahead as best as we can of what is going on out there. Seeing what's coming and trying to adapt and get ready to prepare ourselves for upcoming challenges—and the challenges have been many.
Lots of things keep me up at night. I'm most concerned about managing costs without cutting programs and services. The rising costs associated with being a not-for-profit healthcare organization in one of the most expensive U.S. cities are challenging. Reimbursement levels, whether from Medicare or Medicaid, aren't enough to offset rising costs, whether it's due to inflation costs, salary requirements, cost of living realities, supply chain issues, or simple operational costs associated with being in one of the world's most expensive cities.
Another challenge is the shortage of staffing and the shortages of nursing staff at all levels, not just registered nurses, but also licensed practical nurses and even certified nursing aides. Obviously, that causes costs to rise as plans and different providers compete with one another for a limited staff. That's what's been the most significant challenge over the last couple of years, particularly right now.
HL: What solutions are in place to deal with the labor challenge?
Koschitzki: We try to be creative, and innovative in ways to not only attract new staff but even to retain the existing staff. A lot of our staff have been here for a long time. It's been a good place to work for a long time. And so, a lot of the current staff … are coming towards the end of their work careers. We are doing what we can … to attract new staff, by being more flexible when it comes to working from home or hybrid models of work. But we are also trying to incentivize and retain through enhanced pay through bonus programs, and other employee benefits that are geared towards employee satisfaction.
We also offer employee recognition programs that focus on ensuring that employees are feeling sustained and fulfilled. It's important for them to have an outlet for stress and anxiety, so there are other initiatives that speak to the personnel side of their job responsibilities. In the coming year, we'll be implementing real-time wellness checkups.
HL: As CFO, where would you like to see the organization make greater financial investments?
Koschitzki: We've been investing in a number of different initiatives. Staffing is primarily the largest investment that we've been making. As I said, we have to address compensation issues, and we must address the competitiveness of the industry. So, we've enhanced staff salaries as an investment in our staff, and we've enhanced programs to attract staff.
Digital technology is something that's important to us as well. Being a not-for-profit health system, we have boards of directors who have a lot of interest in what we do and we're mission-driven. Technology is important to them, and they've made sure it's a priority with management and leadership to ensure that we are investing properly in that, so we can advance and prepare for the future.
Currently, New York is 48th or 49th, in terms of hospice utilization by state. Although our hospice program is one of the largest in the area, there's tremendous room for growth and so we're particularly focused on more relationship-building and educating everyone from physicians and hospital groups to community organizations.
Peter Markell will begin his tenure as Lifespan’s CFO effective January 30, 2023.
Lifespan, a not-for-profit health system based in Providence, Rhode Island, with 719 beds and over $2 billion in total revenue, has appointed Peter Markell as the new vice president and chief financial officer for the organization—effective January 30, 2023.
Markell will work closely with the organization’s newly appointed president and chief executive officer, John Fernandez.
Markell’s previous experience includes time as the executive vice president of administration and finance, and chief financial officer and treasurer at Mass General Brigham. He was an executive there from 1999 until his retirement in 2021. While at Mass General he oversaw $14 billion in operations with assets of approximately $21 billion and managed teams within the areas of corporate finance, research management, information systems, real estate, treasury, and human resources.
"The recruitment of Mr. Markell is one of John Fernandez’s first successes, as Peter’s expertise will be an asset to Lifespan’s long- and short-term financial and operational success," Lifespan Interim President and CEO Arthur Sampson said in a release. "He brings a strong balance of financial and administrative management to Lifespan. Mr. Markell will provide key counsel to the incoming CEO and board of directors on strategic planning and direction as the system rebuilds from COVID's financial and operational impact."
NiceRX Health analyzed the net patient revenue of individual hospitals to determine which are the most profitable.
Hospitals and health systems have been struggling financially since before the onset of the pandemic, but it’s not all doom and gloom for some healthcare providers.
Despite the challenges to an organization’s economic well-being from factors such as inflation, rising expenses, labor shortages, and the peaks and valleys of COVID-19 outbreaks, some hospitals are still managing to bring in the big bucks.
NiceRX Health, a company that provides access to thousands of FDA-approved prescription medications through various patient assistance programs, has compiled a list of the U.S. hospitals making the most money. NiceRX Health analyzed the net patient revenue of individual hospitals from 2021 to determine which are the most profitable.
"Not only is the healthcare industry important for the well-being of U.S. citizens, but it’s also a lucrative business for investors," NiceRX Health says in its report. "That’s why we wanted to find out which states earn the most money through their hospitals. We’ve looked at the individual hospitals earning the most through net patient revenue, the states with the most for-profit hospitals, and the states who earn the most through their hospitals."
Here are the 10 most profitable hospitals according to NiceRX:
New York-Presbyterian/Weill Cornell Medical Center. The New York City-based healthcare provider has 862 staffed beds and $5.73 billion in net patient revenue.
Tish Hospital. The New York City-based healthcare provider has 725 total staffed beds and $5.67 billion in net patient revenue.
Cleveland Clinic Main Campus. The Cleveland-based healthcare provider has 1,325 total staffed beds and $5.24 billion in net patient revenue.
Vanderbilt University Medical Center. The Nashville-based healthcare provider has 626 total staffed beds and $4.69 billion in net patient revenue.
UCSF Helen Diller Medical Center at Parnassus Heights. The San Francisco-based healthcare provider has 785 total staffed beds and $4.61 billion in net patient revenue.
University Hospital. The Ann Arbor, Michigan-based healthcare provider has 944 total staffed beds and $4.03 billion in net patient revenue.
AdventHealth Orlando (FKA Florida Hospital Orlando). The Orlando-based healthcare provider has 2,247 total staffed beds and $4 billion in net patient revenue.
Stanford Hospital. The Stanford, California-based healthcare provider has 523 total staffed beds and $3.98 billion in total patient revenue
University of Texas MD Anderson Cancer Center. The Houston-based healthcare provider has 710 total staffed beds and $3.67 billion in total patient revenue.
Cedars-Sinai Medical Center. The Los Angeles-based healthcare provider has 882 total staffed beds and $3.55 billion in total patient revenue.
Large healthcare bankruptcy filings in the fourth quarter of 2022 were almost three times the number of filings in the first quarter 2022.
The healthcare industry has been under enormous financial pressure stemming from the pandemic, labor shortages, rising expenses, and inflation. As a result of these economic challenges, there was an increase in the number of large healthcare organization bankruptcy filings through 2022.
Large healthcare bankruptcy filings in the fourth quarter of 2022 were almost three times the number of filings in the first quarter of 2022, according to research from Gibbins Advisors, a healthcare restructuring advisory firm. Bankruptcies in the first half of 2022 were dominated by the senior care sector, while the latter half of the year saw a greater number of bankruptcies from the pharmaceutical sector. Over the course of 2022, 19 hospitals filed for bankruptcy, closed, or announced plans to close, according to other reports. One key contributing factor to these issues has been the end of government financial relief for healthcare organizations.
"The hospital sector was particularly insulated from financial distress during the pandemic however those protections have ended, and we are now seeing a lot of struggling hospitals, particularly rural and community hospitals," Ronald Winters, a principal at Gibbins Advisors said in the report. "Financial distress will persist if not worsen in 2023 as financial buffers wear thin. COVID-related support deferred this process, but margin squeeze and macroeconomic forces are driving the healthcare market toward consolidation given the enormous scale and depth of expertise you need to compete effectively."
Looking forward, Gibbins advises hospitals and health systems to examine their operations and services through a critical lens. Shifting from inpatient to outpatient and community-based methods of delivering healthcare can help organizations remain "relevant and efficient," the advisory firm says.
"Healthcare organizations need to be future-focused," Clare Moylan, a principal at Gibbins Advisors, said in the report. "If the board pays attention and acts early there’s a lot more that can be done, but by the time you’re tight on cash the options for the organization become much more limited."
The move to more outpatient surgeries has resulted in a 22% cost savings for hospitals.
Hospitals and health systems are working hard to cut costs, and one strategy that has become more popular is shifting to more outpatient procedures.
Inpatient surgery utilization levels decreased 7.33% from 2019 to 2021, according to a survey of over 12 million commercial insurance members by Cedar Gate Technologies—an analytics, population health, and payment technologies company. The research found that hospital outpatient surgery volume grew by 3.1%. However, the largest increase was in ambulatory surgical centers, with utilization rates rising by 10.26%.
Following an initial decline in monthly surgeries from March to April of 175,000 per month to 70,000 per month, Cedar Gate found that volumes recovered by June 2020 to pre-pandemic levels, but those surgeries were taking place on an outpatient basis.
Between 2020 and 2021, many patients avoided hospitals and elective procedures out of fear of contracting COVID-19, according to Cedar Gate, which is one of the factors that led to this shift to outpatient surgery. Some patients opted to forgo surgery altogether when they could. For example, the data shows that people who postponed total knee arthroplasty instead opted for less invasive treatment options, including nonsurgical orthopedic care alternatives such as physical therapy. The Cedar Gate data found a 2.26% increase in orthopedic physical therapy from 2019 to 2021.
"The pandemic accelerated a trend toward decreasing inpatient surgeries, and this shift is impacting hospital revenue in real-time," Rajiv Mahale, SVP, and chief analytics product officer at Cedar Gate, said in an email release. "Experts increasingly agree that hospital inpatient surgery volume is unlikely to ever go back to pre-pandemic levels. Increases in outpatient and ASC surgical volumes, however, present an opportunity for value-based care delivery models by providing strong patient outcomes and lower costs."
Avera Health's investment focus in 2023 is addressing the mental health of its community.
When speaking to some hospital and health system CFOs you may notice that many of them have one unique thing in common: they didn't initially seek a career in healthcare finance. However, once they entered the field and understood the impact they could have on people's lives, they became passionate about the role.
That was the case for Julie Lautt, the chief financial officer for Avera Health—a Sioux Falls, South Dakota–based healthcare provider with 37 hospitals, over 1,600 beds, and more than $1 billion in total annual revenue. Before beginning her career with Avera, Lautt was in public accounting and worked for PricewaterhouseCoopers. She was an auditor and her role was to connect with companies in different industries to help them with year-end financials, but what she really wanted was to be part of an organization's year-round planning and strategies. That's how she ended up at Avera Health, where she has spent the last 23 years helping the organization secure its financial wellness while providing patients with high-quality care.
Lautt recently connected with HealthLeaders to discuss the ebbs and flows she's seen in healthcare finance throughout her career, how she's helped Avera Health through the financial challenges the pandemic has caused, and actionable solutions her organization has implemented to meet those challenges.
HealthLeaders: What did the pandemic teach your organization about the best strategies to overcome challenges?
Julie Lautt: We have a rural network, and we have a tertiary facility that's based in Sioux Falls. Like never before, we came together as a health system and had to look at our operations and finances from a system perspective rather than focusing on all of our individual regions or hospitals or clinic locations. So, we looked at how we could come together to solve the broader challenges.
We looked at the supply chain issue, which was significant during that time and continues to be an issue today, [and] workforce shortages and how we were dealing with capacity and sharing our patients amongst our system. The lessons that we learned became a springboard for us as we're encountering some of these new challenges like the tight labor market, the increasing labor expenses, the inflation that we're seeing, and quite frankly, some of the pent-up demand that we're seeing in our market related to our services. So, we have been focused on how do we align as a system? How do we address this together?
HL: How has Avera Health made workforce challenges a greater priority?
Lautt: One of the innovative solutions that we had was to create our own travel nursing program to reduce the expense of our external travelers that we have to pay for from agencies. So, we're seeing some success where we can attract certain nurses who want to go into those traveling roles, [and] utilize that as an opportunity to serve as our own Avera footprint, rather than doing that from an external perspective.
We're getting a lot of positive feedback because there are a lot of folks who are interested in the travel opportunity, but they also want the benefit and stability of remaining an Avera employee. So, we see it as a win-win.
HL: What other strategies help Avera Health maintain financial stability and high-level patient care?
Lautt: As soon as we started seeing our trends of costs continue to go higher, we began to focus on a financial stewardship plan at Avera, and our number one focus was maintaining our patient care.
We're doing assessments on right-sizing our administrative tasks and non-patient care. We've also been assessing our non-core services. And the reason that we're doing that is to protect those critical components of patient care.
We're taking a look at some of the short-term levers and discretionary spending, while we also focus on long-term sustainability, optimization, efficiencies, [and] utilizing technology.
HL: As CFO, where would you like to see Avera Health make greater financial investments this year?
Lautt: We're focused right now on opening a new freestanding emergency room and clinic on the east side of our town. We also are invested in mental health, and we've identified that continues to be a growing need. We've been at capacity for some time, so we continue to expand in our Sioux Falls market thanks to a grant we have with one of our partners, [and] we were able to construct a new space and answer the need for 24/7 urgent care and residential addiction services for youth and partial hospitalization for youth.
Lower expenses and increased outpatient revenue drove improved month-over-month performance.
Hospitals saw a small increase in their operating margins in November 2022, thanks to lower expenses and an increase in outpatient revenue. However, operating margins remained negative for the year.
Hospital margins were up 12% month-over-month in November, according to the latest National Hospital Flash Report from Kaufman Hall. A decline in volume and shorter lengths of stay contributed to a 1% decrease in total expenses in November, according to the report.
"As we’ve seen in other industries, the significant increases in labor costs have made it harder for hospitals to realize positive margins," Erik Swanson, senior vice president of data and analytics with Kaufman Hall, said in an email release. "Hospitals were fortunately relieved of some financial pressure in November amid a continued competition in the healthcare labor market, potentially due to a shift away from expensive contract labor."
Hospital outpatient revenue saw a 10% year-over-year increase, although inpatient revenue was flat for the same period, according to the report. Hospitals will be able to lean on their outpatient services to address the challenges they are facing, the report says, which should help offset the way inpatient services are affecting margins.
"The November data, while mildly improved compared to October, solidifies what has been a difficult year for hospitals amidst labor shortages, supply chain issues, and rising interest rates," Swanson said. "Hospital leaders should continue to develop their outpatient care capabilities amid ongoing industry uncertainty and transformation."