"Give us a little help and allow us to keep innovating," says Grande Ronde Hospital CEO Jeremy Davis.
Hospitals everywhere are feeling squeezed, but rural facilities especially are struggling to make ends meet and their mission will be made even more arduous if lawmakers don’t intervene.
Grande Ronde Hospital CEO Jeremy Davis knows that reality better than most as the leader of a nonprofit in rural Oregon, which is why he shared his insight before the Senate Finance Committee in a May hearing called “Rural Health Care: Supporting Lives and Improving Communities.”
Davis’ appearance allowed him advocate for rural hospitals during a time when many facilities are either shutting down or on the brink of closure as provisions from the pandemic run out.
The CARES Act provided rural hospitals with temporary funding and expansion of telehealth, but with capital since drying up and telehealth flexibilities set to expire on December 31, rural health once again needs Congress to take action, Davis told HealthLeaders.
“Now, with that funding having gone, most of these rural hospitals were already struggling heading into the pandemic and the pandemic didn't make them better,” Davis said. “It further challenged vulnerabilities within their operating structure within the reimbursement climate. So now that we're past the pandemic, there's kind of this reckoning and we're starting to see those rural hospitals are picking up steam that are that are vulnerable to closure.”
Since 2020, 37 rural hospitals have closed their doors, according to data compiled by the University of North Carolina’s Cecil G. Sheps Center for Health Services Research.
Many of the ones that remain open aren’t faring much better. A report by healthcare advisory firm Chartis earlier this year found that 50% of rural hospitals are operating at a loss, up from 43% in 2023.
Making telehealth flexibilities permanent, which Davis and many other rural hospital leaders are asking for, isn’t going to solve all of rural health’s problems, but it will help the situation from getting worse.
“Most importantly with some of these telehealth flexibilities, you look at behavioral health in our country. There's just an unmet need and we found as a result of telehealth that a lot of these patients felt more comfortable accessing these services in the comfort of their home because they weren't coming into a clinic and feeling like they were going to be judged and people thinking why they're there,” Davis said. “So we've been building this capacity. We've been trying to expand broadband. We've been doing this for a purpose. We, in some aspects, met the challenges of COVID head on with having some of that infrastructure in place because we had technology. Let's not go back. Let's go forward.”
Outside of telehealth, Davis unsurprisingly highlighted low reimbursement as the other area lawmakers should consider.
Most hospitals and clinics don’t receive adequate reimbursement when it comes to Medicaid or Medicare, Davis said, and the funding rural providers received during the pandemic went a long way to offsetting that.
While the pandemic is over and leaders aren’t necessarily expecting an infusion of $100 billion into hospitals again, Davis just wants a little aid in making it an even playing field for rural health.
“One of the things that I said in my testimony is, as a rural hospital administrator, we're looking for a help up, we’re not looking for a handout,” he said. “We want to be good stewards of the resources. We recognize funding is complex but trust us, enable us. There's a lot of really good people that are working in rural that are used to doing some great things with limited resources.
“As one of our hospitalists told me when I first arrived here, we fight above our weight class. There are a lot of rural hospitals in this country that fight above their weight class. So give us a little help and allow us to keep innovating, keep trying and see some of the amazing things that we can do.”
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The cross-market deal would extend Sanford's reach into Wisconsin and Michigan.
Sanford Health and Marshfield Clinic Health System are in talks on a merger that would give both operators a partner they’ve been seeking for some time.
The systems announced they’ve reached a nonbinding understanding to create a 56-hopsital system serving the Midwest, with the transaction expected to close by the end of the year, pending regulatory approval.
Under the proposed deal, Marshfield Clinic’s Wisconsin and Michigan facilities would become a region within Sioux Falls, South Dakota-based Sanford while maintaining regional leadership and branding. Sanford president and CEO Bill Gassen would lead the combined system, with Marshfield Clinic interim CEO Brian Hoerneman serving as president and CEO of the Marshfield region.
In addition to the hospitals, the resulting organization would consist of nearly 56,000 employees, 4,300 providers, two fully integrated health plans, speciality pharmacies, and research institutions.
Both sides have tried and failed to complete mergers in recent years. Sanford’s three attempts were with UnityPoint Health in 2019, Intermountain Healthcare in 2020, and Fairview Health Services in 2023. The first pursuit fell apart after UnityPoint’s leaders rejected the move, whereas the breakdown of the Intermountain deal came after former Sanford CEO Kelby Krabbenhoft abruptly resigned. Sanford eventually called off the merger with Fairview due to lack of support in Minnesota.
With Marshfield Clinic, Sanford hopes to write a new narrative.
“We are who we are today because of combinations with care delivery organizations in rural communities across America’s heartland,” Gassen said in the news release. “These opportunities have allowed us to follow through on our promise to deliver world-class health care to every patient we serve no matter their ZIP code, and we are eager to continue building on this track record with Marshfield Clinic Health System.”
For Marshfield Clinic, past failed unions came with Gundersen Health System in 2019 and Essentia Health earlier this year. The latter saw Essentia point to Marshfield’s turbulent financial situation as the primary factor for pulling out.
Marshfield Clinic reported operating losses of $250.8 million and $367.9 million for fiscal years 2023 and 2022, respectively. Combining with Sanford, which raked in $402.2 million in operating income last year, affords Marshfield necessary financial stability.
“Partnering with Sanford Health presents an incredible opportunity for our organizations to unify and establish the premier rural health system in the nation,” Hoerneman said. “Together, we will ensure sustainable access to exceptional care for our communities for years to come.”
The company announced that its reorganization plan received court approval. What's next for the company?
Cano Health has successfully climbed out of bankruptcy months after entering restructuring, the primary care chain announced.
By converting more than $1 billion of funded debt into common stock and warrants, and receiving a commitment of more than $200 million from existing investors for its business plan going forward, Cano said it emerged from Chapter 11 as a reorganizing private company.
In February, the provider filed for bankruptcy and was delisted from the New York Stock Exchange following a significant stretch of financial trouble that saw it accrue liabilities in the range of $1 billion to $10 billion.
With a “significantly improved capital structure and optimized operations,” Cano will now turn its attention to its Florida market.
"We are taking a disciplined and strategic approach to our growth over the next few years, with the primary goal of improving services for patients within our existing Florida footprint, which now consists of 80 locations,” Cano Health CEO Mark Kent said in the news release.
“We are already seeing encouraging results across our improved platform, and I am immensely proud of our associates for their continued dedication to our patients throughout this process. Despite the challenges we have faced as an organization, we have emerged as a stronger and more focused company with a bright future."
Necessary shake-up
Cano said it is on track to hit its goal of $290 million in annualized cost reductions by the end of this year, with $270 million in cost reductions and productivity improvements already achieved.
The company was forced to make changes after reporting net losses of $270.7 million and $491.7 million in the second and third quarters of last year, respectively.
Liquidity was partly achieved through strategic divestitures of underperforming expansion markets, including the sale of its Texas and Nevada primary care centers for nearly $67 million to Humana’s CenterWell Senior Primary Care business.
Cano also exited operations in California, New Mexico, Illinois, and Puerto Rico, while reducing its workforce in the third quarter of last year by 21%.
Additionally, Cano announced leadership changes to its board of directors to better align with its planned path. Alan Wheatley, a former Humana executive who ran Medicare and Medicaid programs, will join the board as Executive Chariman, serving alongside two other members, Kent and Eric Hsiao of Nut Tree Capital Management.
The longtime leader of Banner Health joins the HealthLeaders Podcast as he heads into retirement.
Few CEOs in healthcare are afforded the perspective Peter Fine has gained after decades of experience in the industry, including 24 at the helm of Banner Health.
As he enters retirement to give way to the nonprofit health system’s new chiefAmy Perry, Fine can look back at a long and successful career that saw him witness firsthand how both healthcare and the CEO role changed over time.
Fine offered his insight on the HealthLeaders Podcast this week, detailing how the leaders of hospitals and health systems have had to evolve to meet the moment, especially after the pandemic.
"The focus before was all we have to do is provide a good clinical product and that satisfies everybody. Well, that's not the case," Fine said. "So that causes you to have to change certain things in your style and your approach and the things that you say and do in front of others become way different.
“Creating that recognition for everybody that you also have to look for opportunities to take away pain points that get in the way of the consumer interacting with us. It's a different approach because how you speak and what you say become way different."
Tune in to the episode to hear more from Fine on disruption in the industry, tackling workforce challenges, and what advice he would give to incoming CEOs.
The health system is forced to go back to the drawing board as it attempts to dig its way out of financial trouble.
Optum is backing out of its pursuit of Steward Health Care’s physician group, according to the Massachusetts Health Policy Commission (HCP).
The development is a blow to Steward’s efforts to financially recover through restructuring after filing for bankruptcy, leaving the beleaguered company without a clear buyer for its assets.
Steward revealed its plan to sell Stewardship Health to UnitedHealth Group-owned Optum in March by filing documents with Massachusetts regulators. However, the HCP said Optum is no longer working to finalize the agreement, which had faced scrutiny from state and federal lawmakers for being anticompetitive.
Optum is already the largest employer of physicians in the country and Steward toldWBUR that a “challenging” review process at the federal Department of Justice kept the deal from moving forward.
The company stated it will continue to search for buyers.
"Stewardship Health remains a valuable asset that provides excellent care for its patients; there are multiple other parties that remain interested in acquiring the business and Steward is in active negotiations," Steward said in a statement to WBUR.
Despite claiming its assets as valuable, Steward last week pushed back deadlines for bidding on its assets, including its physician group and about half of its 31 hospitals.
In May, Steward filed for Chapter 11 bankruptcy and put all of its hospitals up for sale to pay back over $9 billion in total liabilities. Of that, $6.6 billion are long-term rent obligations, $1.2 billion are loans, almost $1 billion are unpaid vendor bills, and $290 million are unpaid wages and benefits, according to court documents.
Steward had said it finalized debtor-in-possession financing from Medical Properties Trust for initial funding of $75 million and up to an additional $225 million upon the satisfaction of certain conditions.
The health system was hoping to keep its hospitals open as the bankruptcy process plays out, but it’s unclear how the disintegration of the sale of Stewardship to Optum will affect its plans.
A completed transaction would result in two Rhode Island safety net hospitals transferring to The Centurion Foundation.
Los Angeles-based Prospect Medial Holdings has been given the go-ahead by Rhode Island Attorney General Peter Neronha to sell two safety net hospitals to The Centurion Foundation, but only if the organization jumps through a number of hoops.
Specifically, Neronha has outlined 40 conditions for Prospect to meet to close the deal, which include the paying of all the hospitals’ unpaid bills and investing in repairs that allow the facilities to comply with regulatory standards. The significant caveats put private equity-backed Prospect under pressure to leave the hospitals in an acceptable state before it exits Rhode Island.
The hospitals, Our Lady of Fatima and Roger Williams Medical Center, are owned and operated by Prospect’s subsidiary, CharterCARE Health Partners, and are being bought by Atlanta-based nonprofit The Centurion Foundation.
Neronha toldThe Boston Globe that Prospect is “an owner that doesn’t want to own hospitals.”
“I wouldn’t lose any sleep if, under the right circumstances, they were gone,” he said of Prospect. “In fact, I would cheer it.”
After Prospect acquired full ownership of the hospitals in 2021, Neronha required the organization to satisfy a set of conditions and put $80 million in escrow to keep the facilities running.
However, Prospect has since racked up $24 million in unpaid bills, according to Neronha. On June 12, before Neronha approved Prospect’s sale application, Rhode Island Superior Court Judge Brian Stern ordered Prospect to pay $17.3 million of its unpaid bills within 10 days.
Jeffrey Liebman, the CEO of CharterCARE Health Partners, told the Globe: “I think we’re doing fine. I think the hospitals are doing OK.” Liebman did call the sale to Centurion “a better way.”
Neronha said to the Globe: “I just have no confidence in Liebman’s leadership at all. The truth is, we’re fighting for a better future for these hospitals than he is. That says a lot to me.”
The situation marks the latest tug-of-war over hospitals owned by private equity.
A recent report by the Private Equity Stakeholder Project revealed more bankruptcies in healthcare are involving private equity-owned companies, with 17 such instances in 2023, accounting for 21% of all bankruptcies in the industry.
A new survey underscores the importance of technology investments to address the workforce.
As providers grapple with workforce shortages, automation has quickly become a sought-after solution for leaders seeking to lessen the workload on their staff.
Organizations recognize the value of investing in automation to reduce burnout and human error to make it easier for clinicians to deliver care, according to a report by technology company Royal Philips.
Nearly 3,000 surveyed leaders worldwide expressed optimism about the future of automation in the industry. Around nine in 10 respondents (88%) said the use of technology to automate repetitive tasks or processes is critical for addressing staff shortages, while 84% indicated automation will save staff time by reducing their day-to-day administrative tasks and 76% reported automation will allow workers to perform at their highest skill level.
The areas where the most leaders have already implemented automation are billing processes (47%), clinical documentation/notetaking (44%), and clinical data entry (43%).
Despite only 25% of respondents having implemented automation in workflow prioritization, that is seen as the biggest opportunity for investment going forward, with 44% of leaders planning to implement automation there within the next three years.
However, many are still cautious about diving head-first into automation. Nearly two-thirds of respondents (65%) reported skepticism among their staff about the use of automation, while 79% of leaders themselves said they are concerned about the possibility of data bias in AI applications exacerbating disparities in health outcomes.
When implementing automation or AI, organizations must properly train and educate their workers to understand how those solutions should and shouldn’t be used. By creating more transparency around solutions and having effective data collection in place to quantify its impact, leaders can combat the risks associated with the technology.
What’s clear, though, is that providers’ labor strategies must include investments in automation to lift the administrative burden off clinicians’ shoulders, resulting in a more engaged, sustainable workforce for the future.
“It's critical that we change our processes and we add the technology that can facilitate a different kind of work stream,” Banner Health CEO Amy Perry recently told HealthLeaders. “We talk a lot at Banner about the fact that we just can't ask people to do more with the same number of people without changing the process. It's absolutely impossible. It's not sustainable.”
A session at the HFMA Annual Conference dives into a people-first approach to solving one of the biggest pain points facing CEOs.
Healthcare leaders understand that labor strategies must adapt to meet an evolving workforce, but recognizing it is one thing and committing to it is another.
Though the strength of a workforce is still very much measured in numbers such as costs and turnover rate, prioritizing less easily quantifiable areas like employee satisfaction and happiness has the potential to result in a more sustainable workplace model.
The head of the Southern California-based health system emphasized the importance of leaders setting organizational values that create transparency, humility, and genuine caring for all caregivers, as well as agreed-upon metrics that organically lead to better outcomes both clinically and financially.
How can it be done?
To achieve that, Keck has programs focused on professionalism, resiliency, and well-being that aren’t one-offs, but instead woven into the fabric of the organization.
For example, physicians and nurses can share concerns about co-worker behavior through the Daily Incident Reporting System, leading to peer messengers sharing the incident with the person named and accountability/goal setting discussed if patterns of concern continue. The whole process is meant to be non-punitive and off the record, creating an environment that encourages to reporting and development.
Even instituting a relatively innocuous change like keeping Fridays meeting-free has resulted in people getting their work done and meeting milestones in the other days of the workweek while cutting down employee stress, according to Hanners.
Setting a workplace culture should start from the top and permeate to the ground level, but the role and impact of middle management can often get overlooked.
Hanners believes you need buy-in at middle management, which is more challenging today than it’s ever been due to a multitude of priorities, hundreds of emails, and lack of responsiveness. You also need your modern mid-level manager to be empathetic, trustworthy, transparent, mindful, and accountable, on top of being a good developer of talent.
CEOs should not lose sight of mid-level leaders and afford them opportunities to discuss their experiences, which will help with organization-wide healing during a time when labor strikes and shortages are hampering workplaces. Surveys to receive feedback from both caregivers and leaders are vital to understanding which areas need improvement.
The commitment to the people in its organization has led to Keck Medical Center dropping their total turnover rate from 12.4% in July 2022 to 9.2% this past April. Less turnover has also made it easier for Keck to reduce contract labor by over $13 million year-over-year.
The proof is undeniable: Cultivate a positive environment for your workforce and the results will follow.
The deal comes on the heels of the completed purchase of Geisinger Health.
Kaiser Permanente’s Risant Health will continue to build out its fleet of health systems with the addition of Cone Health.
In signing a definitive agreement to purchase Greensboro, North Carolina-based Cone for an undisclosed amount, Risant will bring on its second operator, pending regulatory approval, as part of a plan to acquire several systems to form a value-based care network.
Risant completed its first system deal in April when the transaction for Danville, Pennsylvania-based Geisinger Health closed, nearly one year after Kaiser’s subsidiary laid out its blueprint. Following the sale, the nonprofit said it was aiming to add “four to five” more systems over the next half-decade.
Jaewon Ryu, Risant’s CEO, had stated the organization was seeking out “like-minded entities” to acquire after announcing the affiliation with Geisinger. In Cone, Risant gets another system that opens the door to a new market while also operating a health plan.
“Cone Health’s impressive work for decades in moving value-based care forward aligns so well with Risant Health’s vision for the future of health care,” Ryu said in the news release. “Their longstanding success and deep commitment to providing high-quality care to North Carolina communities make them an ideal fit to become a part of Risant Health. We will work together to share our industry-leading expertise and innovation to expand access to value-based care to more people in the communities we serve.”
In Risant’s network, Cone would operate independently and maintain its brand, name, and mission, as well as its own board, CEO, and leadership team.
Cone operates four acute care hospitals, a behavioral health facility, an accountable care organization, and a health plan in North Carolina’s Piedmont Triad area. The system reported $2.8 billion in operating revenue and $197.6 million in net income for fiscal year 2023.
By joining Risant, Cone will reap the benefits of increased capital and access to technology, with Kaiser pledging a commitment of up to $5 billion to the network in the coming years and an expectation to reach a total revenue of $30 to $35 billion.
“Becoming part of Risant Health presents a unique opportunity to shape the future of health care in the Triad, the state, and across the nation,” said Mary Jo Cagle, Cone president and CEO. “As part of Risant Health, Cone Health will build upon its long track record of success making evidence-based health care more accessible and affordable for more people. The people across the Triad will be among the first to benefit.”
Regulators aren’t expected to trip up the deal due to Risant and Geisinger operating in markets outside of North Carolina.
For the first quarter, Kaiser’s earnings showed a hefty net gain of $7.4 billion thanks in large part to Risant’s deal for Geisinger, which brought in a one-time net asset gain of $4.6 billion.
Kaiser will be on the lookout for other systems to acquire, likely with similar characteristics as Geisinger and Cone.
The healthcare finance event in Las Vegas will feature discussions on the biggest strategic trends in the industry.
There is no shortage of challenges on the plates of hospital and health system CEOs right now, putting pressure on organizations big and small to find solutions to the most pressing problems.
The good news? Everyone in the industry is in together for the most part. Sure, the discrepancy between the haves and have-nots means many operators have less margin for error than others, but whether you’re a big system or a rural hospital, the same pain points are affecting the bottom line.
More than 3,000 participants from across the country will get together in Las Vegas next week at the HFMA Annual Conference to discuss best practices to these challenges and hash out major trends to improve financial stability.
Here are four talking points that will be featured at the conference for CEOs to track:
Responding to cyberattacks
Cybersecurity isn’t a new issue in healthcare, but it has come to the forefront in the first half of this year due to several high-profile attacks, most notably the one that knocked out Change Healthcare.
These ransomware events aren’t just damaging organizations’ finances, they’re also disrupting clinical operations. Without preventative measures and a response plan in place, providers will be left unprepared to withstand the negative consequences from attacks.
How health systems can maintain their clinical operations during a cyberattack will be a point of emphasis at the conference, allowing organizations to improve their risk management and overall resilience.
Workforce investments
It wouldn’t be a meeting of industry leaders without extensive discussions on the workforce, arguably the number one pain point for CEOs currently.
Ensuring a sustainable workforce requires a multi-pronged approach and an understanding of how and where to invest in. Since the end of the pandemic, health systems have moved away from contract labor to cut down on expenses, but without solving for the factors that cause turnover, organizations will see their bottom line take even more of a hit in the long run.
At the conference, CEOs will share workforce programs that have shown success and the metrics that demonstrate that progress.
Negotiating with payers
With margins as tight as they are, providers are feeling the squeeze from payers more and more. But what can they do about it?
Organizations must rethink their contract negotiations to strengthen their position and create more financial flexibility, which often requires a change in approach that is specific to the type of services provided.
Some of the strategies leaders are expected to dig into at the conference include the use of a data analytics team to create leverage against payers, as well as independent review organization language in contract agreements.
M&A for growth
Within portfolio management, pursuing mergers and acquisitions is one way for CEOs to achieve significant growth.
When it’s a viable strategy, dealmaking can yield tremendous value that improves clinical outcomes and creates financial optimization.
Whether you’re a local hospital wanting to expand into a national market, or an organization exploring a shift to payvider status, leaders at the conference will identify key objectives and methods to get the most out of transactions.
