The for-profit hospital is further leaning into revenue from outpatient facilities as it aims for financial viability.
Community Health Systems’ subsidiary is buying 10 Arizona urgent care centers as the hospital operator balances divestitures with strategic acquisitions.
The definitive agreement by Northwest Urgent Care to purchase the centers from Carbon Health comes as CHS leans on outpatient services to deliver to financial relief.
Through the acquisition, which is expected to close in the fourth quarter, Franklin, Tennessee-based CHS will expand its integrated health network to more than 80 care sites in Tucson, Arizona.
“Our strategic investments are accelerating the growth of important access points in our health systems and expanding capacity for more patients,” CHS CEO Tim Hingtgen said in a statement. “In markets like Tucson, we are successfully executing strategies that make healthcare accessible and convenient, further improve our competitive position, and generate value for all of our stakeholders.”
CHS’ peers have also been staking a claim on the outpatient side.
Fellow giant HCA Healthcare revealed last November that it wanted to increase its outpatient facilities at each inpatient hospital from 12 to 20 over the next few years, with $2 billion earmarked for a roughly even spend on new inpatient and outpatient locations, according to chief operating officer Jon Foster.
For CHS, outpatient services have aided the system’s financial recovery in recent quarters. Growth in outpatient and same-store surgery volumes in the second quarter allowed the operator to cut its net loss to $13 million, compared to $38 million for the same period in 2023.
“We've been really deliberate about making sure we're putting outpatient access where our consumers want it and need it so that we can continue to capture more of the total share of spend in our markets,” Hingtgen told investors in the second quarter earnings call.
As demand for outpatient services has increased over the years, it has become a profitable investment for providers. Urgent care centers drive utilization but come without some of the expenses associated with inpatient facilities.
While CHS said it is also seeking to grow its inpatient business, the system has pursued divestitures to realign its portfolio.
In July, CHS announced a definitive agreement to offload three Pennsylvania hospitals to WoodBridge Healthcare for $120 million as part of a plan to reap $1 billion in hospital sales this year.
The health system is "built to weather a storm like this," executive vice president and CFO Saurabh Tripathi said.
Ascension's earnings over the past year are a prime example of the turmoil a cyberattack can inflict on a bottom line.
The St. Louis-based hospital operator was on its way to a significant financial recovery before suffering a ransomware attack in May that derailed operations and led to a $1.1 billion net loss for fiscal year 2024.
The cyberattacks on Ascension, Change Healthcare, and other organizations of late have underscored the importance of healthcare leaders investing in cybersecurity to protect against disruptions and lost revenue.
In the case of Ascension, the health system reported a loss from recurring operations of $79 million across the first 10 months of the fiscal year, a marked improvement from the $1.2 billion loss tallied in the same period for the prior year.
However, the ransomware attack caused a considerable downturn over the final two months of the fiscal year, forcing Ascension to finish with an operating loss of $1.8 billion.
"This incident resulted in delays in revenue cycle processes, including insurance verification processes, claims submission, and payment processing, as well as the incurrence of certain remediation costs, which collectively led to negative impacts to results of operations and cash flows during May and June 2024," Ascension wrote in its earnings report.
The system experienced encouraging growth in patient volume across the first 10 months, when emergency room visits were up 2.5%, inpatient surgery visits were up 2%, outpatient surgery visits were up 0.5%, and encounters per provider were up 3.9%. In May and June, same facility patient volumes dipped between 8% to 12% on average from the same period the prior year.
Even after feeling the financial ramifications of the cyberattack, the system's operating margin improved by $1.2 billion from the $3 billion operating loss in fiscal year 2023. Net loss, meanwhile, shrunk from $2.7 billion for 2023 to $1.1 billion, including operating and nonoperating items.
Ascension executive vice president and CFO Saurabh Tripathi said that the operator's focus is on growing patient volume now that it is recovering from May's incident.
"While temporarily impacted by the cybersecurity incident, Ascension's balance sheet and liquidity levels remain strong with sufficient liquidity to continue to provide care for patients," Tripathi said in a statement. "Ascension's solid financial foundation of a strong balance sheet with approximately $41 billion of assets and over $15 billion of liquidity was built to weather a storm like this. With the strong momentum of operational improvements, I am confident Ascension's best days are ahead of us."
The Catholic nonprofit has also been busy divesting assets to trim down its portfolio, shed expenses, and strengthen its core markets.
This year has included deals by Ascension to sell nine Illinois hospitals to Prime Healthcare and a five-hospital system to UAB Health.
The payer is tightening its grasp on the MA market in the Hoosier State.
Elevance Health is upping its investment in Medicare Advantage through its latest deal.
The insurer has reached a deal to acquire Indiana University Health Plans, IU Health’s insurance business, to expand its MA presence in the state and grow the profitability of its private program offering.
IU Health Plans provides MA plans to 19,000 members in 36 counties, in addition to serving 12,000 commercial plans members, according to the announcement.
The acquisition, which is expected to be completed at the end of the year, would result in IU Health Plans operating as part of Elevance’s Anthem Blue Cross and Blue Shield in Indiana.
"Acquiring IU Health Plans reflects our dedication to elevating quality and expanding our product offerings," Dave Mull, Medicare market president of Anthem Blue Cross and Blue Shield in Indiana, said in a statement. "This strategic step aligns with our health equity goals, providing comprehensive access to high-quality care and timely interventions. Through this purchase, we are strengthening our efforts to cultivate healthier communities and improve health outcomes for those we are privileged to serve.”
Elevance downgraded its long-term guidance for its health insurance unit in its second quarter earnings, largely driven by dwindling membership from Medicaid redeterminations and uncertain MA bids for 2025.
Despite seeing membership drop 4.6% and contending with revisions to the MA risk model, Elevance still profited $2.3 billion for the quarter.
Now, as some insurers are scaling back their MA offerings and exiting markets, Elevance is continuing to pour resources into that side of the business.
“It's an incredibly dynamic time in Medicare Advantage and now more than ever, we think it's important to be very thoughtful and rational as we plan for 2025,” Felicia Norwood, executive vice president and president for Elevance’s Government Health Benefits, told investors in the second quarter earnings call. “Despite this environment, Medicare Advantage enrollment is at an all-time high and over 50% of individuals are still choosing MA. That means there's still a clear value for what MA offers and we're committed in the long term to having and operating a profitable and sustainable MA business.”
A new survey reveals technology investment choices and outlooks by providers and payers.
Even with providers and payers focused on getting the most bang for their buck on investments, healthcare organizations are showing a willingness to spend on technology to address pain points and strive for innovation.
In a survey of 150 providers and payers by Bain & Company and KLAS, 75% of respondents reported increased IT investments over the past year, with an emphasis on addressing cybersecurity and labor challenges.
This year has seen several cyberattacks in healthcare that have highlighted the importance of cybersecurity spending. Chief among them is the Change Healthcare attack in February, which 70% of surveyed respondents reported being directly affected by.
In response, many organizations said they’ve audited internal systems and current vendors, while 56% of payers and 38% of providers have increased cybersecurity software spending. Only 11% of providers and 8% of payers stated they’ve not taken action.
Investment in IT infrastructure and services, including cybersecurity, was cited as a top-three priority the most among providers, selected by 38% of respondents. That was followed by clinical workflow optimization (35%) and data platforms and interoperability (33%).
One way to improve clinical workflow optimization is to embrace AI solutions and that’s something surveyed providers have shown a willingness to do. About 15% of providers said they have an AI strategy today, compared to around 5% in 2023.
Both providers and payers reported optimism about implementing generative AI, which the former group is using to assist in areas like clinical documentation. Generative AI solutions have the potential to significantly reduce the administrative burden on clinicians, giving them time back for both their work and personal life, resulting in less burnout.
However, providers and payers alike cited regulatory and legal considerations, cost, and accuracy as the biggest obstacles to implementing AI.
Costs in general were chosen as the top concern to technology investment for providers, selected as a top-three pain point by 49% of respondents. Electronic health records integration was second among the pain points (42%), showing that providers prefer to stick with current vendors instead of pursuing unknown ROI.
Nevertheless, organizations appear more eager overall to take chances and experiment with their technology investments in a post-pandemic world.
These strategies can get physicians to stay instead of walking out the door or leaving the profession altogether.
To know how to keep the physicians at their organization, CEOs should understand what matters most to physicians.
That perspective was shared in McKinsey’s recent survey, which revealed the factors that are influencing physicians to either remain in their role or leave amid a workforce shortage that is only expected to get worse in the coming years.
Of the 631 surveyed physicians, about 35% said they are likely to leave their current position in the next five years, with 60% of those respondents saying they’re likely to stop practicing completely.
Meanwhile, more than half of physicians (58%) indicated that their desire to change jobs has increased over the past year, a jump from the 43% reported in McKinsey’s previous survey.
Here are four ways to hold on to your physicians, based on respondents’ answers:
Improve compensation and incentive structures
Compensation is unsurprisingly a major factor for physicians, with 69% highlighting better pay as a reason to leave their job.
However, with many hospitals and health systems looking to cut back on expenses, increasing compensation is not always a viable option. Though paying up to keep physicians happy can save on the bottom line in the long run by avoiding costs associated with turnover, CEOs can also approach compensation by aligning it with organizational strategy, McKinsey noted.
Organizations should consider revamping their compensation models to further incentivize better performance, along with educating physicians about their incentive structures. Only 23% of surveyed physicians participating in risk-based contracts said they have a “very good understanding” of what is needed to reach their contract goals.
Focus on lifestyle and well-being
Alongside compensation, physicians care just as much about balancing their work life with their family life, with 69% deeming it a reason to leave.
Other well-being factors that influence physicians’ decisions are the intensity of the workload and its demanding nature (66%), the emotional toll of the job (65%), and the physical toll (61%).
To combat these stresses, CEOs should find ways to offer physicians more work flexibility and control over their schedule. The survey found that physicians want the ability to take time off (87%), find coverage when needed (77%), and have the ability to work specific hours (69%).
Flexibility over what days and times to work was deemed more vital for respondents than the ability to work remotely, which was chosen by 38%. Despite this sentiment, only 59% of physicians said that their organization is offering flexible schedules.
By implementing programs that allow physicians to better control their hours and investing in technology solutions that can achieve flexibility, CEOs can combat burnout among their employees.
Involve physicians in decision-making
Physicians also want to be heard and feel that their input is being valued.
More than 60% of respondents said they expect to be at least consulted or have a vote on important decisions, whether that’s on patient care quality, culture, or organizational strategies.
To empower their physicians, CEOs can open more channels of communication to collect feedback and input, as well develop physician leadership to give them the skills to make an impact.
Provide staffing and support systems
Additionally, organizations need to support their physicians by putting the right staff around them to improve delegation and minimize the time spent on administrative tasks.
More than half of respondents cited insufficient levels of support staff (57%) and insufficient quality of support staff (56%) as influences on their decision to leave, with only 30% reporting that their organization is providing support for the tasks physicians feel can be delegated.
To reduce the unnecessary burden placed on physicians, CEOs must ensure they are hiring enough nonclinical workers and having them properly trained, while implementing technology like generative AI to take care of time-consuming tasks like documentation.
The agreement with Medical Properties Trust allows the hospital operator to continue digging out of financial turmoil.
Steward Health Care has overcome a significant hurdle as it attempts to make its way back from bankruptcy.
The troubled health system reached a settlement with its landlord Medical Properties Trust that will absolve Steward of billions of dollars in outstanding debt and pave the way for it to sell its remaining hospitals.
The deal results in MPT waiving its claim of $7.5 billion, including $6.6 in future rent obligations, and allowing Steward to keep $395 million from the sale of three Florida hospitals to pay its lenders and creditors.
In return, Steward will drop its lawsuit against the real estate company, which alleged that MPT had interfered in its sales to improve its position.
U.S. Bankruptcy Judge Christopher Lopez approved the agreement on the heels of Steward selling Rockledge Regional Medical Center, Melbourne Regional Medical Center, and Sebastian River Medical Center to Orlando Health for $439 million. Final approval of the settlement by Lopez is expected to come later this month.
By coming together with MPT, Steward will be able to keep most of its hospitals open. The agreement involves 23 hospitals that will remain operational, including 15 facilities in Arizona, Florida, Louisiana, Ohio, and Texas that already have four new tenants taking over on an interim basis, effective September 11.
MPT expects to bring in around $160 million in annual rent payments upon stabilization in the fourth quarter of 2026, which represents 95% of what Steward would have owed in rent in Q4 2026.
While the new tenants take control, MPT has agreed to defer cash rent payments for the 15 hospitals until the end of the year.
Steward filed for Chapter 11 bankruptcy and put all 31 of its U.S. hospitals on the market in May.
As the hospital operator attempts to turn around its financial instability, its CEO, Ralph de la Torre has come under fire for his mismanagement.
After being subpoenaed to testify at a hearing on Capitol Hill last week, de la Torre declined to appear. Senators are now expected to hold the CEO in contempt when they vote on September 19, allowing for a criminal prosecution of de la Torre.
Key labor indicators are trending in the right direction and providing a reason for optimism for hospitals.
Hospitals and health systems are finally seeing labor challenges easing up, even if they’re not returning all the way to pre-pandemic levels.
Specifically, hospitals are experiencing wage inflation stabilization and fewer job openings, according to a report by Fitch Ratings, which is providing organizations some breathing room from the spikes of recent years.
After year-over-year average hourly earnings sat at around 8% from 2021-2022, wages growth has dropped from 4.2% in 2023 to 3% in 2024.
Hospitals’ payrolls remain on the rise, now 6.7% above February 2020, but part of that increase is due to a welcomed decrease in job vacancies. Hospitals have averaged 18,650 monthly job additions from September 2023 to August 2024, compared to the 14,510 jobs averaged in the previous 12 months.
Healthcare workers are also sticking around at their organizations longer, with the quitting rate falling from the high of 2.9% in May 2023 to 2.3% in July.
Fitch noted that the wage inflation in recent years, while costly, helped hospitals reduce employee turnover and cut down on contract labor reliance.
"Healthcare leadership has been satisfied with this labor exchange, and it has resulted in more predictable monthly expenses, qualitative benefits and improved organizational culture,” the report said.
Despite the encouraging labor trends, hospitals are still not enjoying anything close to the pre-pandemic days.
Job openings in healthcare and social assistance fell from 7.9% in January to 6% in July, but remain far off from the 4.2% average from 2010 to 2019.
"Hospitals are still dealing with post-pandemic pent-up service demand, especially from seniors, that has kept labor needs high,” Fitch Ratings director Richard Park said in a statement. "Sustained high volume levels are a modest positive for health systems, but often come with administrative challenges, slow payments and denial of prior authorizations for care, in particular when dealing with Medicare Advantage insurers.”
The increase in demand for services could significantly worsen the labor shortage problem in the coming years.
Based on current projections, the U.S. will have a deficit of over 100,000 critical workers by 2028, when it needs around 18.7 million workers, according to research by Mercer consultancy.
Even with the respite from labor constraints hospitals may be getting right now, CEOs must ensure they’re taking a long-term view of their workforce and continue to prioritize recruitment and retention strategies.
At hospitals and health systems specifically, CEOs are experiencing a high rate of turnover.
Healthcare has dealt with plenty of volatility in recent years, creating fluctuation at the CEO level.
How has that change affected CEO turnover and how does it compare to other industries? Healthcare overall is actually in line with national averages, according to a report by Crist Kolder Associates, though hospitals and health systems as a subset are seeing significant churn.
The research, which measures the turnover of C-suite executives at Fortune 500 and S&P 500 companies, revealed that the average CEO tenure in healthcare is 7.6 years, slightly higher than the average of 7.4 years across all industries.
Healthcare had the fourth-longest average tenure for CEOs, behind financial (9.3 years), technology (9.1 years), and services (8.0 years). Meanwhile, the industries with the shortest average tenure were consumer (6.2 years), industrial (6.1 years), and energy (4.8 years).
In terms of turnover in 2024, the report found only four CEO changes in healthcare through August 1, representing just 7% of turnover across all industries, which averaged 8.8.
Hospital-concentrated turnover
However, the data of Fortune 500 and S&P 500 healthcare companies doesn’t tell the story of most hospitals and health systems.
At those organizations, CEO turnover increased 42% last year with 146 changes recorded, according to a report by Challenger, Gray & Christmas. After starting this year at a similar pace, hospital CEO turnover has somewhat stabilized with 68 exits recorded through July, compared to 100 over the same period in 2023.
There have always been extreme cases of CEOs resigning or being ousted from hospitals after irregularly short stints, but those instances are seemingly happening more often.
Pioneers Memorial Healthcare District in Brawley, California, is one of the latest examples of this trend as the hospital parted ways with CEO Christopher Bjornberg after just seven months.
In some cases, like at Colorado-based Sedgwick County Health Center, the high rate of CEO turnover has made it harder to recruit and hire qualified candidates.
Between retirements, leaders choosing to step down or head elsewhere, and organizations searching for the right guiding hand in a post-pandemic world, hospitals and health systems are expected to continue experiencing much of the CEO upheaval in healthcare.
Labor challenges in the industry are expected to mount in the coming years, forcing leaders to be proactive.
The workforce shortage in healthcare isn’t going away anytime soon.
In fact, a report by Mercer consultancy projects a shortage of over 100,000 critical workers nationwide by 2028, which means many hospital and health system CEOs will have to be thoughtful in how they fortify their labor force.
For the study, Mercer used historical data and trends through 2023 to forecast changes to the labor market by state and metro and micro statistical areas.
The analysis revealed that if workforce trends hold, the U.S. will have 18.6 million healthcare workers in 2028, compared to the 16.9 million currently working in the industry. The projected increase isn’t expected to keep pace with demand, with the need for labor growing to around 18.7 million over that period, resulting in a shortage of more than 100,000 workers.
“While that figure may not seem like a crisis in absolute terms, it represents an added burden to a system strained by geographic and demographic disparities in access to care,” the report said.
What’s driving the shortage?
The workforce problem will only get worse as the demand outweighs the supply.
Because Americans are living longer than ever and older people utilize services more, the needs of an aging population will require more workers.
The supply side, however, is heading in the opposite direction. Workers are either leaving the industry or fewer people are entering clinical professions due to factors like burnout, non-competitive compensation, and pandemic-related reasons, Mercer highlighted.
Deficit and surplus
The good news? Not every state will face a deficit of workers as the shortage will vary based on geography and occupation, researchers found.
Populous states like California, Texas, and Pennsylvania are projected to have a workforce that exceeds demand, while states like New York and New Jersey will face greater deficits.
Even states that are expected to have overall surpluses may deal with shortages in a specific occupation though. For example, California and Texas will deal with some of the biggest deficits in physicians, compared to states like Pennsylvania, Massachusetts, and Minnesota having greater surplus.
The supply of registered nurses nationwide is projected to outpace demand with a surplus of nearly 30,000 anticipated by 2028, the report stated. Even still, states like New York, Tennessee, and Massachusetts will face a shortage of RNs.
Mercer noted that nurse practitioners are expected to grow at the fastest average annual rate among the occupations in the study (3.5%), while nursing assistants will grow at the slowest (0.1%).
How CEOs should respond
Understanding how their region will be affected by the workforce shortage in the coming years can give hospital CEOs a better idea of how to improve recruitment and retention.
Especially when it comes to compensation, knowing if there is a shortage of physicians in your state, for example, can impact your decision to offer more competitive salaries to workers in your area or recruit from states with a surplus.
Prioritize the occupations that are critical to expansion of services and fill them as soon as possible, Mercer said. Build out your pipeline to include partnerships with local universities and schools to improve your access to future employees.
Most important of all, focus on the workers that are currently in your organization. Employee turnover is costly in the short and long term, so avoiding the loss of workers should be of utmost importance. That requires investment and attention to well-being measures and getting creative with benefits, such as flexible scheduling and career growth.
Taking the administrative burden off of clinical workers by investing in automation, for example, will not only improve retention, but it will cut down on demand as well, Mercer noted.
“Actions should be prioritized against a long-term vision — discrete actions to address ‘the problem of the day’ will not lead to sustained success and will drain limited resources,” the report said. “The path to lasting success requires comprehensive analysis of data to inform decisions and prioritization of actions based on the highest return on investment.”
Peter Slavin is preparing to guide the Los Angeles-based health system into a new era.
Taking the helm of a health system right now as an incoming CEO is no easy feat. To combat the multitude of financial and operational obstacles in the way of keeping a system humming, new leaders have to rely on their experience while learning on the fly.
Peter Slavin, who is set to replace longtime CEO Thomas Priselac at Cedars-Sinai on October 1, expects his varied background to be an asset as he transitions into the role.
After serving as president of Massachusetts General Hospital from 2003 to 2021, Slavin pursued opportunities in advising, consulting, and healthcare investment, which rounded out his view of the industry, he shared on the HealthLeaders Podcast.
“The experience certainly taught me a lot about the array of healthcare activities that are going on out there,” Slavin said. “I learned a lot more about health insurance companies, technology companies, and other actors in the healthcare system. So that's really helped sort of broaden my perspective and understanding of the healthcare system writ large.”
Addressing workforce challenges will be at the top of Slavin’s to-do list when he takes the reins, along with general financial stewardship.
As expenses continue to rise at hospitals and health systems everywhere, Slavin acknowledged CEOs need to be as creative as ever to cut costs and get the most bang for their buck.
One of the ways Cedars-Sinai can do that is through philanthropy, Slavin highlighted.
“Raising funds from donors to create vocations to help advance the mission of the organization and commercializing the intellectual property of the organization, making sure that the fruits of the research effort are actually making it into the commercial world and in the course of doing so, generating resources that can help support the overall enterprise,” he said.
Listen to this week’s episode to hear more on how Slavin plans to strategize for some of the top pain points facing CEOs.
