In a recent episode of HealthLeaders' podcast, Javersack discussed her organization's solutions to deal with its most significant financial challenges.
The year 2022 may be behind us, but the challenges hospitals and health systems have been facing over the last 365 days are far from over. But just because obstacles like expenses, labor shortages, supply chain issues, and inflation are still around, it doesn't mean healthcare leaders haven't found solutions to help ease the financial impact these issues are causing.
Dawn Javersack, the chief financial officer for Nicklaus Children's Health System recently appeared on an episode of the HealthLeaders Podcast, where she discussed labor challenges impacting the industry, and the strategy the organization put in place to reduce its reliance on travel nurses. Javersack also provided insight into Nicklaus Children's Health System's growth strategies and financial well-being plans for this year.
This transcript has been lightly edited.
HealthLeaders: Can you give us an example of a financial challenge Nicklaus Children's faced in 2022, and how the organization resolved this?
Dawn Javersack: There have been many challenges during 2022, many of which are continuing impacts from the pandemic. And while not all of these challenges have been solved, we've tried to implement solutions in order to mitigate the impact of those challenges. I think one of the most significant challenges that all healthcare providers are facing is in the workforce. Both in the availability of resources as well as the cost of labor as a result of the shortages from a staffing perspective.
We've spent a lot of time on that over the course of the last several years. First, we've made a concerted effort to focus on employee engagement—trying to work with our workforce and connect them to our mission. We started a program called September to Remember in 2020, which is a month-long celebration of employees, whereby every week we have a different theme. We have giveaways, we have ice cream socials, we send [gifts] to employees' homes, all with the intent to cement that connection back to the mission.
We've been providing more flexibility, particularly for those employees who can work remotely. As everybody started to work remotely in 2020, we found that in some of those instances, like our corporate staff, for example, they enjoyed that kind of environment. So, we've offered greater flexibility as an organization to try and accommodate that wherever it's possible, dependent upon their role. As a result of those two initiatives, plus many others, we've improved our employee engagement up to the 75th percentile as compared to our peers across the country.
HL: Contract labor has been a much-needed tool through the pandemic, but it has come at great expense to organizations. How has Nicklaus Children's dealt with this?
Javersack: We established an internal traveler pool for our nurses to minimize our reliance on external travelers. Within that program, we increased the rate of pay for nurses who sign up and make a commitment for a six-week period to work an additional 24 hours each pay period. We do pay them a higher wage, but it is still less than the cost of an external traveler. We started that about six months ago, and since that time, we had a total of over 26,000 hours that have been worked by our own employed internal traveler pool.
HL: What is Nicklaus Children's doing differently from other hospitals, whether it's pediatric-specific or general to maintain the organization's financial stability?
Javersack: Within our strategic plan, we have four pillars that frame the focus of our strategic plan. One of those pillars is called 'operational excellence.' And we define operational excellence as providing the best clinical care and support services in the most cost-effective way without compromising quality service or safety. And we as an organization have made a sustained commitment to process improvement and scaling efficiencies.
As part of that pillar experience, we entered into a process of engaging middle management leaders to focus on one subject of continuous improvement for a 120-day period. We refer to this as a 'workout.' Our first workout was focused on the elimination of waste. We had a little bit of fun around it. We called it Margin Madness, and we put our management team into teams and used a tournament format like what you see in March Madness.
The leaders were expected to identify two changes—big or small—that they could implement every 30 days, over that 120-day period. Each manager or director was expected to implement eight changes over the course of that period of time. We set a target for the elimination of waste at $6 million within that 120-day period. And when we concluded it, I was thrilled with the results because our middle managers were able to identify and implement almost $14 million worth of changes in a short period of time, all working on the elimination of waste in their particular area or collaborating with their peers and their colleagues to implement changes that might be multidisciplinary in nature.
HL: What opportunities for growth do you see coming down the pipeline for 2023?
Javersack: As a pediatric facility, we do have a dominant market share in our primary service area. We have almost 70% inpatient market share in Miami-Dade County, which represents our primary service area. That said, our services aren't limited to our primary service area, and so I think there's a lot of opportunity, particularly in our secondary service areas. Those are the two counties to the north of Miami-Dade including Broward and Palm Beach counties, and also to the west of us out going towards the west coast of Florida, in Collier County.
Over the course of the last two years, we have focused on partnering, or developing relationships with other healthcare systems and in particular adult systems in our market. That started with a relationship with Baptist Health of South Florida, which is a large organization that spans the three-county market area in South Florida. We now provide pediatric coverage in their existing facilities. One of their main facilities exited the pediatric space, so we developed a transfer agreement whereby those children are now seen at Nicklaus Children's.
So, I see us focusing a lot on developing partnerships, particularly with adult systems for the provision of pediatric care. We're also focused on building our four institutes, which cover heart, neurosciences, orthopedics, and cancer services, and all of that tied in as well to growth within our employed physician network.
"It is with much sadness and disappointment that the hospital will now face bankruptcy and closure," the organization says.
Madera Community Hospital—a Madera, California-based healthcare provider with over $200 million in total patient revenue and 106 staffed beds—has filed Chapter 11 bankruptcy and will be permanently closing its doors on January 10, 2023.
"The financial strain the pandemic has placed on Madera Community Hospital has resulted in a large loss," the organization said in a press release. "Hospital leadership has reached out to other possible partners as well as working with our legislators in an effort to find funding for the hospital without success. It is with much sadness and disappointment that the hospital will now face bankruptcy and closure."
Madera Community Hospital had previously entered into an agreement with Trinity Health Corporation, whereby Trinity would have acquired the struggling hospital. Trinity ultimately decided not to go ahead with the partnership.
"It disappoints me greatly that Trinity Health decided to walk away from its affiliation agreement with Madera Community Hospital," Congressman Jim Costa (CA-16) said in a statement published after the deal was canceled. "For more than 18 months we have worked with Madera Hospital and its Board of Directors, the California Attorney General, and state and local leaders to help maintain access to Madera Hospital and the full services that only this acute hospital provides in Madera County. I believe the Attorney General fairly assessed the application and required reasonable conditions to protect the community. Unfortunately, these conditions did not meet the needs that Trinity Health Care Systems required."
Madera Community Hospital filed bankruptcy on January 3, 2023, at that time services in the ER, OB ward, as well as outpatient and surgery closed. All patients remaining at the hospital on the closing day will be transferred to other hospitals by January 17, 2023.
James Reed has served as CEO for the Albany, New York-based healthcare provider since October 2012.
St. Peter’s Health Partners—an Albany, New York-based healthcare provider with over $170 million in total revenue—has announced that James Reed, president, and chief executive officer of St. Peter’s Health Partners and St. Joseph’s Health in Syracuse, New York, will retire effective December 31, 2022.
"Leading St. Peter’s Health Partners for the past decade, and more recently St. Joseph’s Health in a regional capacity, has been my honor, and I am grateful to have had the opportunity," Reed said in a press release. "I am thankful to have served with an incredible team of nearly 15,000 colleagues in Albany and Syracuse, working together to provide the exceptional, compassionate care our communities deserve. I remain in awe of the determination and resilience this tremendous team of people has displayed, never wavering in their commitment to keeping each other, our patients, residents, and loved ones safe and cared for."
Reed has served as CEO of St. Peter’s Health Partners since October 2012, and his career in healthcare leadership spans 30 years. Highlights from his time with St. Peter’s Health Partners include strengthening the organization’s financial position and its national quality rankings. Reed has overseen major capital projects as part of a comprehensive master facilities plan in Albany and Troy. He has helped establish the St. Peter’s Health Partners Medical Associates and the recent restructuring of the institution’s board.
"Jim has been integral to the success of St. Peter’s, St. Joseph’s Health, and Trinity Health in the region," Benjamin Carter, EVP, and Chief Operating Officer of Trinity Health said in the release. "Jim is a bold and courageous leader. His vision was key to St. Peter’s and St. Joseph’s coming together organizationally to build on the strengths of both ministries to provide the best possible care to residents of the Capital Region and Central New York. We will be forever grateful for his contributions to improving the health of these communities, and for his dedication to the mission and values of St. Peter’s, St. Joseph’s, and Trinity Health."
Steven Hanks, who currently serves as the chief operating officer for SPHP and St. Joseph’s Health, will be assuming the role of system president and CEO for the region, effective January 1, 2023.
"By working together, we aim to make meaningful progress in improving child health outcomes, which here in Louisiana are among the worst in the nation," says Chuck Spicer, President of Our Lady of the Lake Health.
Our Lady of the Lake Children’s Health—a Baton Rouge, Louisiana-based pediatric healthcare provider with 988 beds and over $4 billion in total patient revenue—has partnered with Children’s Hospital New Orleans in an effort to provide children across the state with access to better healthcare.
"Sharing a passion for the well-being of children, Our Lady of the Lake Children’s Health and Children’s Hospital New Orleans have similar histories of innovation, accomplishment, and a steadfast commitment to the children and families across our communities," Chuck Spicer, President of Our Lady of the Lake Health, said in an email release. "By working together, we aim to make meaningful progress in improving child health outcomes, which here in Louisiana are among the worst in the nation. We believe that a healthier future for our children happens together."
The affiliation will take effect on January 1, 2023, and establishes a framework where Our Lady of the Lake Children’s Health and Children’s Hospital New Orleans—a 257-bed, not-for-profit pediatric medical center with over $1 billion in total patient revenue—will collaborate to provide better quality care and greater access to care for younger patients.
"Our affiliation offers new and exciting opportunities for innovation," John Nickens, President and Chief Executive Officer of Children’s Hospital New Orleans, said in the release. "We know that we can do more together. For example, we will be able to join forces in the recruitment of pediatric sub-specialists, retention of top talent, and our commitment to building centers of excellence for pediatric care, close to home."
The affiliation will roll out in two phases. First, the two hospitals will focus on improving the pediatric services offered in Baton Rouge and the surrounding communities. Children’s Hospital New Orleans will be responsible for the day-to-day operations of Our Lady of the Lake Children’s Health through a co-managed approach with committees comprised of board, physicians, and other leaders across the two organizations. In the second phase, the two hospitals will work together to create a statewide network for children’s specialty care.
"Across our institutions, we have the best and brightest pediatric providers, nurses and other experts working across Louisiana and the Gulf South each day to shape a healthier future for kids," Greg Feirn, Chief Executive Officer of LCMC Health, which manages Children’s Hospital New Orleans, said in the release. "The results when our shared expertise, resources, and commitment to the communities we serve come together are limitless."
CFOs and CEOs shared sage advice with HealthLeaders on how to weather the current financial storm hospitals and health systems are dealing with.
Ask any hospital or health system CFO what keeps them awake at night and you'll hear three things: labor costs, growing expenses, and shrinking margins. And while 2022 came with significant financial challenges for these leaders, it also brought considerable opportunities for them to think outside the box and implement innovative strategies that helped keep their organizations afloat.
Over the course of the year, HealthLeaders connected with CFOs and CEOs at different hospitals and health systems across the country to learn about how they are leading their organizations among these challenges. Here are five stories with healthcare leaders that you won't want to miss.
''Everyone is talking about supply chain disruptions, supply chain inflation, and the bottlenecks, those things in healthcare have been an issue for the past two years. It's not an easy turnaround, so becoming more efficient in the revenue cycle is going to take automation technology. Artificial Intelligence is big in that space, and if can you optimize your revenue cycle and automate it that will help with labor. Technology is the foundation of almost everything that we do today.'' —JoAnn Kunkel, CFO at LCMC Health
''The largest investments hospitals should make are in their workforce. Certainly, technology and new equipment are important, but without the doctors, nurses, and support staff to take care of the patient, we can't provide the quality care that our communities expect of us. Like everyone else in today's job market, but especially in healthcare, ensuring we have a qualified workforce is a top priority. Today's competition for the workforce is forcing systems to invest more in this area.'' —Michael Sunday Jr., CFO at Pardee UNC Health Care
''We need to focus some resources on educating … about our cost structure. Somebody said to me recently, 'People were so excited about the healthcare system during COVID and what we did for them and now they've kind of forgotten about it because now we're back to conversations about how expensive we are.' There's no doubt that healthcare is expensive. But by the same token, most people providing healthcare are trying to do a good job at keeping costs down. So, I think educating the public about that, so it doesn't get out of hand is valuable.''
''We could also look into developing partnerships and affiliations and things of that nature that will help add to that traditional revenue stream and allow us to be a little bit more self-sufficient. So, maybe working with venture capitalists is an opportunity in some investment lines. That can shore us up and add revenue, where we might see REITs taking revenue away from us.''—Cheryl Sardo, CFO at UC Davis Health
''[Value-based care (VBC)] works. The numbers show it. Medicare saved $1.6 billion in 2021 alone. Think about what will happen when all Medicare recipients are in a program. Payers get it. Big corporations get it (or are at least investing in it). Walgreens, CVS, and Amazon—all the executives that were assigned as ''talking heads'' after their big acquisitions stated that the new businesses were part of their move to value-based care.''
''We all thought we'd be further along towards value-based already, so I'll be more measured in my view than I offered years back. We will certainly advance VBC in 2023. More commercial payers are getting more constructive on the model and providers are more aware of not only the patient benefit but the financial opportunity. And of course, Medicare has put out 2030 as the target for all beneficiaries to be treated by a value-based care provider. We're still not to the point of leaps, but we will see gains in value-based contracts.'' —Ralph de la Torre, MD, CEO at Steward Health Care System
'''We plan on having a positive margin this year—we'll miss our budget—but we'll be profitable—somewhere between a 1% and a 1.5% margin before anything in the market. That's just operations. So, we're preparing HSS with strong leadership and strong financials moving forward in challenging times. We're taking a proactive approach to evolving our care delivery system to be more flexible and cost-effective, while never, ever-changing our outcomes or quality, or our patient experience.''
''We were dealing with supply chain disruptions. Material shortages, and transportation issues during COVID. So, this year we opened a warehouse and we're now keeping materials in storage. We can't wait six to eight weeks for critical supplies, so now when we do have a shortage, we're able to pull items for our warehouse. We also work closely with our physicians and senior leaders when there's a shortage to quickly develop alternative vendor and product options.''
''We want to continue to do the best we can to keep our A-plus rating. But we also want to make sure to get back to our strong financial foundation, which we had prior to COVID. We are undertaking plans to improve our revenue growth. We want to enable our current MD practices to grow and add more people and see more patients effectively.''
''We also need to look at our efficiency and managing the shift to outpatient from inpatient capacity. Everything that we're looking at will ensure that we're reshaping for the future.'' —Stacey Malakoff, CFO at Hospital for Special Surgery
The investment analysis firm sees non-profit healthcare organizations continuing to struggle next year as inflation and labor costs drive expenses higher.
Moody's Investors Service has a negative outlook on the not-for-profit healthcare sector going into 2023 as difficult operating conditions, labor costs, supply chain disruptions, Medicare cuts, and the end of the CARES Act funding all negatively impact hospitals’ financial well-being.
"While operating cash flow will grow in 2023, the high-expense environment, coupled with modest revenue gains, will limit the profit margin for the not-for-profit healthcare sector," Brad Spielman, Vice President and Senior Credit Officer for Moody's Investors Service said in a press release. "This level of operating cash flow production will likely prove insufficient over the long term to enable adequate reinvestment in facilities, maintain investment in programs, or support organizational growth—key considerations that drive our negative outlook."
Moody’s expects inflation to be in the "high single-digit range" as 2023 gets underway, which will drive up costs for hospitals and health systems in every department.
"Because of hospitals' limited ability to respond quickly with price increases, higher inflation will have a particularly negative impact on operating margins," Moody’s said in the release. "Other drivers of expense growth include higher drug costs because of reimbursement changes and increased supply costs because of supply chain disruptions. Continuing exposure to cyber risks will cause organizations to spend significantly on preventive measures, and to shoulder the consequences of security failures. Additionally, higher interest rates will raise the cost of debt and make financing equipment or investing in capital more expensive."
Moody’s could revise its outlook to "Stable" if reimbursements improve, if there is an increase in high-margin service volumes, and if there is a decline in labor costs. These factors could potentially result in sufficient operating cash flow growth, which could support the needs of organizations as the year continues.
Katherine Wong is joining the organization from Northwest Medical Center.
HCA Florida Kendall Hospital—a 447-bed facility with over $5 billion in total patient revenue—has appointed industry veteran Katherine Wong as its new chief financial officer.
"Katherine is joining us from Northwest Medical Center where she has had great success as CFO for the past three years," HCA Florida Kendall Hospital CEO Brandon Haushalter said in a release posted by South Florida Hospital News. "Katherine has spent 17 years working with HCA across a variety of roles, including her first leadership position as patient access supervisor at Aventura Hospital in 2009. Katherine is an amazing HCA career growth story, and I am very excited to have her joining our Kendall team."
Other CFOs who have changed hospitals or moved into different roles include Michael Mewhirter, the chief financial officer for Kettering Health. Mewhirter has stepped into the CEO role for the organization following the retirement of CEO Fred Manchur. Andrew Zukowski, who previously served as CFO for UNC Rex Healthcare, became CFO for ECU Health on November 28, 2022. Baptist Health—the largest health system in Kentucky with almost 500 total staffed beds and over $3 billion in total patient revenue—recently announced that Rick Carrico will take over as CFO for the retiring Steve Oglesby.
Organizations will need to embrace change if they want to improve their financial well-being.
It can be argued that 2022 was one of the most financially challenging years hospitals and health systems have ever experienced, and it looks like 2023 is going to bring more difficulties as these organizations try to overcome rising costs, labor shortages, and inflation—just to name a few.
"Today, hospitals are facing multiple issues in the healthcare industry, including the rising cost of labor, a labor shortage, rising costs of supplies due to inflation, pandemic spikes, and reductions to Medicare and Medicaid reimbursements," Michael Sunday, Jr., CFO for Pardee UNC Health Care, previously told HealthLeaders. "To take on these challenges, we are first looking at ways to not rely on contract labor. That could mean creating a hospital contract labor pool to reduce the impact of contract labor. Other steps would include hiring in-house recruiters to help bring qualified employees into the organization and finding ways to reduce costs, including the reduction of waste and energy consumption."
Tina Wheeler, sector leader for Deloitte's U.S. healthcare practice, released the 2023 Outlook for Healthcare, where she identified four forces that will impact health systems and hospitals in the next year. Her research is based on the results of a recent survey conducted by the Deloitte Center for Health Solutions.
The four forces are:
Inflation and affordability: Only 7% of health system survey respondents said inflation and affordability issues were not likely to impact their 2023 strategy while 76% thought it would have a significant impact.
Digital transformation: Twenty-nine percent of health system survey respondents said the accelerated digital transformation would likely have a major impact on their organization's strategy in 2023, while 63% thought it would have a moderate effect.
Shrinking margins: It is likely 2022 will be one of the worst financial years hospitals have experienced in decades. With operating margins compressed, some hospitals could get acquired while others may be forced to close their doors.
New payment models: Transitioning to new payment models, such as value-based care, will be a top priority in 2023, among those health plan leaders surveyed for 2023.
"The thought always has been that healthcare was kind of recession-proof, but what we're seeing is a trend—with inflation being so high—where consumers are saying [I need to prioritize] putting food on the table or I have to afford to put gas in my car," Wheeler says. "People deferred elective procedures and even general healthcare during COVID-19. And now inflation has almost exacerbated that effect, because now people are saying, 'Well, if I can do a virtual visit, am I really that sick, or do I really need that test?' And then the other concern is, how is that going to impact preventative care."
The financial impact of delayed care
One of the most significant financial challenges facing hospitals and health systems in 2022 was declining margins. A major contributing factor to this margin pressure has been the decline in patient volumes.
"A lot of health systems are still recovering from low patient volumes and revenue shortfalls that are tied to the pandemic," Wheeler says. "And on top of that, it's the perfect storm because you've got increasing cost of supplies due to inflation, you've got labor costs, which are continuing to rise. And the one thing that we've found statistically is that wage inflation doesn't go away. So, when you start paying people more, whether it's nurses, clinicians, cafeteria workers, or maintenance workers—once you start paying more, it's difficult to pull back."
One thing Wheeler and her team at Deloitte have noticed is that the issue when it comes to labor isn't as much of a shortage as it is these organizations lack a sufficient plan to reduce their labor costs. One way Wheeler says hospitals and health systems can combat this is by focusing more on the organization's digital transformation, which can help eliminate those low-value processes and jobs.
"The other trend that we're seeing from a cost savings perspective is how a lot of health systems are asking: 'Do I need to have a big IT shop, or should I outsource that?' So, we call that an operate play, where you're taking an area where you used to have a department of 100 or 1,000 people and are saying, 'No, we don't need to do that. Let's focus on what we're good at, which is treating patients and providing care to communities," Wheeler says. "And maybe we should be outsourcing more of these functions, which in turn will reduce costs."
Another tactic that can help offset margin pressures, according to Wheeler, is revenue differentiation. Different streams of revenue from sources that hospitals may not have necessarily been involved with previously can go a long way in reducing this burden.
"We're seeing a huge trend along those lines," Wheeler says. "We're seeing this continued convergence in our industry. You've got all of the retail disruptors in healthcare. As the retailers are getting in, healthcare providers are considering getting into retail. So, continuing to think about not being a traditional hospital, but looking at other revenue streams to differentiate so that you would have higher margin products to offset some of these lower margin issues that you're dealing with. It's continuing to look at ways to not be just that traditional bricks and mortar healthcare."
Exploring new payment options
Concerning the health plan industry, most health plans will start 2023 in a strong financial position, according to the Deloitte research, thanks to a decline in healthcare claims in 2022. Hospitals and health systems, however, are likely going to start off the new year in the red and spend 2023 figuring out how to move back into the black. One way Wheeler says they can do that is through alternative payment methods such as value-based care.
"Health plan executives that we surveyed specifically said continuing the journey of value-based care was top of mind and part of the strategy for 2023," Wheeler says. "It's such a contrast—the headlines about health plan financials in contrast to healthcare provider financials. And so, I think what will be interesting to see is health systems will inevitably move to more value-based care. There's a view that the healthcare system must shift … but there's also hesitation because they're facing such a difficult time. If they haven't been doing anything in the last five to 10 years, they're probably already behind."
Wheeler says she's seen organizations run pilot programs, but they haven't been delivering well on those pilots because they haven't fully embraced care delivery transformation.
"I'm focusing on quality and value and trying to align the financial aspects of healthcare with the delivery of care. Healthcare, in general, is known as a loss leader—you can't make any money at healthcare," Javier Vallejo, CFO for Prism Health North Texas, previously told HealthLeaders. "Time and time again, if you look at the business cycles, the facilities that are doing something right, the facilities that are working towards the future, they are finding ways to bridge that gap and bring those two concepts together."
As for Wheeler, she says organizations just need the "right push" to make value-based care work for them.
"I believe 2023 is going to be another challenging year for hospitals and health systems as they work to balance financial pressures with the need to invest in the future while ensuring high-quality care," Wheeler says in her report. "These organizations will likely need to do all they can to attract and maintain patients."
"Three out of five hospitals are underwater, and the fourth is on thin ice," says Bea Grause, RN, JD, president, Healthcare Association of New York State.
Across the state of New York rising care delivery costs and continuing workforce shortages are forcing hospitals to reduce or eliminate services to maintain their bottom lines, while more patients lose access to care.
Forty-nine percent of hospitals report reducing and/or eliminating services to mitigate staffing challenges, although they are ensuring their most critical services remain in place, according to research from a survey by several New York hospital associations: Critical Condition. All the hospitals surveyed have reported nursing shortages they cannot fill, while over 75% said that other key worker positions cannot be filled. Sixty-four percent of New York hospitals have reported a negative operating margin and 85% report negative or unsustainable operating margins of less than 3%.
"Hospital margins are absolutely going in the wrong direction, and everyone should be alarmed," Wendy Darwell, president and CEO, Suburban Hospital Alliance of New York State, said in an email release. "The pandemic and recent natural disasters have proven we need strong, well-resourced hospitals that are ready for anything. New Yorkers are better off when their hospitals are thriving."
The New York hospital associations are looking to local, state, and federal leaders to help stem the financial crisis currently plaguing organizations as they deal with the tripledemic of influenza, RSV, and COVID-19, as well as a worsening mental health crisis.
"Three out of five hospitals are underwater, and the fourth is on thin ice," Bea Grause, RN, JD, president, Healthcare Association of New York State said in the release. "We face a very real danger of hospitals closing, patients losing care, healthcare workers losing their jobs, and communities losing their lifeblood. The state and federal governments must immediately provide new funding, enact common-sense policy changes and make no cuts to existing vital healthcare funding."
Hospitals are asking for more help in stopping the labor crisis and for officials to make healthcare employees a top priority.
"Workforce shortages are causing vacant positions to go unfilled and services to be cut. Policymakers must immediately invest in the healthcare workforce and our hospitals to ensure they can serve their communities for years to come," Gary J. Fitzgerald, president, and CEO, Iroquois Healthcare Association, said in the release. "Hospitals’ labor costs are forever changed. Without help, they face hard choices with dire consequences."
The organization attributed its lackluster earnings results to continued pressures from rising expenses, labor shortages, and capacity constraints.
Mass General Brigham, a not-for-profit, integrated healthcare system based in Boston—has ended fiscal 2022 with an operating loss of $432 million (-2.6% operating margin) and a net loss of $2.3 billion.
The organization attributed its lackluster earnings results to continued pressures from rising expenses, labor shortages, and capacity constraints. Mass General Brigham also cited "heightened unfavorable volatility in the financial markets" as another contributing factor to its fiscal year operating loss. The system also reported total revenue of $16.7 billion for fiscal 2022.
"Healthcare is facing an unrelenting economic crisis that is impacting patients’ ability to access care. It is our responsibility at Mass General Brigham to continue to provide high-quality care while being good fiscal stewards on behalf of the 1.7 million patients whom we care for," Anne Klibanski, MD, President, and CEO of Mass General Brigham, said in the earnings release. "While what we are experiencing today is unprecedented, it’s important to remember that we have overcome challenges before during our long history. The stress placed on our workforce and our system over the past several years has been enormous, and the employees at Mass General Brigham continue to show strength and resiliency. We are confident that thoughtful and strategic decision-making coupled with efficient resource management will enable us to continue investing in critical medical research, education, and the communities we serve, while ensuring that we can care for every patient who needs us."
For the 2021 full year, Mass General Brigham reported an operating income of $442 million. This includes $232 million of permanent grants from the CARES Act, which were used to prevent, prepare for, and respond to cases of COVID-19, and $30 million in Affordable Care Act risk corridor program subsidies for insurance coverage provided from 2014 to 2016. Excluding these funds, operating income was $180 million (1.1% operating margin), including income from provider activity of $203 million (1.4% operating margin) and a loss from insurance activity of $23 million (-2.5% operating margin). The system reported an overall gain of $3.2 billion in 2021.
"Heading into 2023, we are employing strategies and tactics to address capacity challenges and ongoing inflationary pressures on labor and supplies costs, including a heightened focus on clinical integration to enhance patient care efficiencies and resource stewardship. We have also prioritized engaging with Mass General Brigham’s leaders who are closest to the programs and services delivering care across the system to identify the most thoughtful and targeted approach to reducing costs," Niyum Gandhi, Chief Financial Officer, and Treasurer at Mass General Brigham said in the release. "Simultaneously, we are taking the next steps in transitioning our care model to one based on value rather than volume, facilitated by the launch of a zero premium Medicare Advantage plan, moving approximately 140,000 Medicaid members into a full-risk program and demonstrating our commitment to improving the affordability of patient care."