Still, most industries are ahead of healthcare in willingness to implement the technology.
As workforce challenges continue to confound healthcare organizations, nearly one in five CEOs anticipate utilizing generative AI this year to cut down on staff, according to a survey by PricewaterhouseCoopers (PwC).
However, PwC’s annual global survey, which interviewed 4,702 CEOs across the world, found that healthcare leaders are less likely to turn to generative AI than those in most other industries. The findings underscore AI’s growing presence in businesses, but also healthcare’s tepid willingness to fully invest in the technology right now.
When asked to what extent generative AI will impact headcount in your company in the next 12 months, 18% of healthcare CEOs said they expect to reduce headcount by 5% or more. Healthcare was tied with two other industries (hospitality and leisure, real estate) for the third-lowest among 23 industries. The only industries that finished lower were engineering and construction (12%), technology (14%), and metals and mining (14%).
The global average among all CEOs who were asked that question was 25%, with media and entertainment at the top with 32%, followed by banking and capital markets (28%) and insurance (28%).
“As business leaders are becoming less concerned about macroeconomic challenges, they are becoming more focused on disruptive forces within their industries,” Bob Moritz, global chair at PwC, said in a news release. “Despite rising optimism about the global economy, they are actually less optimistic than last year about their own revenue prospects, and more acutely aware of the need for fundamental reinvention of their business. Whether it is accelerating the roll-out of generative AI or building their business to address the challenges and opportunities of the climate transition, this is a year of transformation.”
While AI has untapped potential, many healthcare leaders are being careful before investing and implantation because the technology requires more than a surface-level understanding to employ it safely and effectively.
Arien Meyers, president and CEO of the Society of Physician Entrepreneurs, a professor emeritus at the University of Colorado School of Medicine and Colorado School of Public Health, and a strategy advisor to MI10, recently told HealthLeaders that many hospitals haven’t met AI readiness standards yet.
“Our understanding and intelligence is that most hospitals don’t even know how to start,” Meyers said. “And many don’t know where they are now” on AI maturity.
One new hospital CEO offers his advice to other leaders taking the reins.
Whether you’re stepping into the role of CEO at a new organization or stepping up at the same place, gauging how to make an immediate impact can often be challenging.
That’s a situation Phil Wright knows all too well after logging his first few months on the job at Memorial Regional Hospital South, which he joined this past October.
With the CEO position churning over across the country, new leaders every day are being tasked with coming in and leaving their imprint on their hospital or health system.
On a recent episode of the HealthLeaders Podcast, Wright shared what approach he recommends other incoming CEOs take in the early stages of assuming the role to ensure both immediate and long-term success.
Transactions were on the rise in 2023 and much of the momentum is expected to continue this year.
Hospitals and health systems are increasingly pursuing mergers and acquisitions (M&A) to stabilize their financial situation, which is partly driving more dealmaking, according to a report by Kaufman Hall.
With hospitals continuing to deal with financial headwinds, consolidation should remain a sought-after avenue for many organizations in the foreseeable future, while regional market development will also be an area of focus.
Per Kaufman Hall, 65 transactions were announced in 2023, an uptick from the 53 seen in 2022. The total transacted revenue of those deals was $38.4 billion and the average size of the smaller party by annual revenue was $591 million.
More than a quarter of the total transactions (28%) involved a financially distressed partner, which was nearly double the amount in 2022 (15%) and the highest percentage since the data started being tracked.
“While many of these financially distressed organizations are smaller hospitals and health systems, the presence of larger systems in the mix has now resulted in average size of a financially distressed partner by annual revenue of over $160 million for the past two years, again, the first time that figure has been reached in recent history,” the consulting firm wrote.
Hospital margins are slowly inching forward after returning to positive territory early in 2023 but have yet to hit pre-pandemic levels. Kaufman Hall’s latest National Hospital Flash Report found the median calendar year-to-date operating margin index was 2.0% through the end of this past November, “still well below the 3% - 4% range often cited as a sustainable operating margin for not-for-profit hospitals and health systems.”
As hospitals search for M&A partners, Kaufman Hall believes “these trends underscore the need for organizations to, whenever possible, attempt to work from a position of strength when seeking partnership alternatives before financial distress impacts a hospital or health system’s flexibility.”
Going forward, Kaufman Hall also projects more interest in dealmaking by independent community health systems, along with new partnership models motivated by a desire to remain independent and regulatory challenges.
Many deals are eventually being stopped in their tracks by regulators, with FTC enforcement having hit its highest level in 20 years.
Reducing the workload on caregivers and staff needs to be the priority, says one health system leader.
CEOs across the healthcare industry are losing sleep thinking of ways to alleviate workforce challenges.
While there isn't one simple solution, AtlantiCare Health System president and CEO Michael Charlton thinks he and his peers should be focusing on one area in particular: lessening the work that is causing burnout and mass exits by workers at all levels.
"I'll acknowledge that we have a workforce problem, but I think more importantly we have a work problem," Charlton recently shared on the HealthLeaders Podcast.
Since being appointed to the helm of the New Jersey-based health system this past October, Charlton stressed that it's been all about "workforce, workforce, workforce." In his view, however, the way to attack labor shortages isn't to first and foremost think about how to add or replace workers, but to instead go to the root of the issue.
"Whether it's regulatory, whether it's finances, whether it's the headwinds healthcare faces, we have just placed more and more work on our clinical caregivers, on our administrators, on our supervisors, on our managers. And it goes on and on and on. So when people say 'how are you going to look at the workforce problem?' My first foray into this is to say, 'listen, we've got to solve the work challenge.' We have to make sure that we create an environment where our clinical caregivers, our administrators, our managers are not overburdened with their workload. At the end of the day, we have to make sure that they're healthy and happy because they have to deliver exceptional care and to do that you have to be well and to do that we have to create work-life harmony."
Unfortunately for CEOs, that amount of work in healthcare doesn't appear to be organically slowing down anytime soon. Patient volumes may no longer be what they were near the peak of the COVID-19 pandemic, but as more and more workers choose to leave their organization or profession altogether, the responsibilities will continue falling on those who remain.
With leaders looking to keep costs down, simply hiring more people is no longer a plug-and-play solution. CEOs must find new answers, ones that require creativity and a willingness to invest in both people and technology.
For example, hospitals leaders are providing non-traditional benefits to keep their workers fresher and happier, according to a recent survey by Aon. That includes 93% of hospitals offering flexible work options, while 83% offer personal leave and 53% provider paid parental leave beyond state and city mandates.
Ultimately, the most effective approach to lessening the workload may lie in technology. By implementing AI and automation, CEOs can address the burden being placed on their workers through a strategy that could create cost savings down the road. An area like revenue cycle is especially ripe for investment, with tasks like prior authorization and denials management requiring time and energy that could otherwise be avoided.
It will take CEOs committing in more ways than one, but the dividends to solving the work problem could be the key to unlocking workforce sustainability in healthcare long-term.
The venture capital firm's HATCo business will acquire a health system, pending regulatory approval.
Just three months after declaring its intention to purchase a health system within a year, General Catalyst has found a partner to act as the proving ground for its concept.
The venture capital firm announced that its business spinoff Health Assurance Transformation Corporation (HATCo) has signed a non-binding letter of intent to acquire Summa Health, an Ohio-based nonprofit integrated delivery system.
The two organizations said they are working on finalizing an agreement in the next several months that would make Summa a wholly owned subsidiary of HATCo and convert the health system into a for-profit operator. Financial terms of the deal were not disclosed.
It’s unclear, however, if the acquisition will pass regulatory review, with Summa’s status change to a for-profit likely being the most important sticking point for regulators.
If the move does go through, it will further bridge the gap between venture capital and providers and give HATCo co-founders Marc Harrison and Hemant Taneja their opportunity to see through their vision, albeit with sizable risk.
When the duo proclaimed their plan of buying a health system this past October, the news raised eyebrows across the industry. Venture capital rarely takes that bold of a step in healthcare and even though General Catalyst already partners with 20 health systems across 43 states, Harrison and Taneja were adamant they needed a health system to implement and test new technology unencumbered by cash-strapped and risk-adverse providers.
“HATCo is grounded in the belief that by making health systems more profitable, vibrant and innovative, they will be better equipped to serve everyone in their communities with greater impact,” Harrison said in the news release. “We are thrilled to partner with Summa Health to bring this vision to life. The current national healthcare system is fragmented and creates barriers to care and wellness. In partnership with Summa Health, we intend to prove that a model that’s better for patients can also be good for business and create a blueprint for other systems and communities.”
In Summa, General Catalyst is taking on a health system that is dealing with financial struggles, with the organization recording an operating loss of $37 million for the first nine months of 2023, which followed an operating loss of $39 million in 2022.
In a community announcement on its website, Summa said CEO Cliff Deveny will continue to lead the system.
“We believe that in HATCo, we have found a truly strategic partner that is committed to our model and the culture that drives who we are,” Summa’s board of directors wrote. “This is a unique and unparalleled opportunity to invest in our care and community to a greater degree. We are excited about advancing our shared vision to create a new, more proactive, affordable and equitable system of community-based, lifelong healthcare.”
In a blog post, Harrison and Taneja addressed concerns that the acquisition is “another ‘private equity’ deal.” They pointed to their focus being on innovation instead of taking out costs, as well as to their expected timeline for the move, writing that “this is not a quick flip but a long-term commitment to transformation that benefits the community.”
As part of the transaction, HATCo said it will also create a community foundation to invest into social determinants of health in the Greater Akron area.
While the industry will be keeping a close eye on how the partnership plays out, it will first be in the hands of regulators to determine whether it even gets off the ground.
The two organizations have opted to create a four-hospital network called Hudson Health System.
Hudson Regional Hospital and CarePoint Health System are going from foes to partners in a financially motivated decision to form a new healthcare network.
The sides announced the signing of a letter of intent to create Hudson Health System, which will include CarePoint’s three hospitals—Bayonne Medical Center, Christ Hospital in Jersey City, and Hoboken University Medical Center—and Hudson Regional Hospital.
The move isn’t officially a merger, but is driven by the financial distress of CarePoint, which recently said it has requested $130 million in state funding to continue operating “at an optimal pace.” This past October, the New Jersey Department of Health noted in a letter sent to local and state officials that the system was operating at a 14.14% loss. Additionally, CarePoint is facing several lawsuits from vendors who claim they are owed nearly $5 million, according to a report by NJ.com.
The financial turmoil has led CarePoint to pursue a partnership that significantly improve its chances at survival, albeit one that requires teaming up with a competitor that has been on the other side of a much-publicized quarrel.
The frosty relationship between the two organizations has included a fight over the operation of hospitals and a lawsuit by CarePoint accusing Hudson Regional Hospital of collusion. Under the agreement to form, pending litigation will be dismissed.
Yan Moshe, chairman of Hudson Regional Hospital, will be chair of Hudson Health System, while CarePoint president and CEO Achintya Moulick will serve as the president and CEO of the new network.
"Since entering this marketplace in 2018 our team has driven a patient-focused mission that incorporates technology and engages leading healthcare professionals to deliver care under a new model," said Moshe in the news release. "I am excited to bring our proven track record and experienced team in partnership with Dr. Moulick to build a high quality, stable health care system that the county deserves.”
Moulick said: "Hudson County is the most diverse and dynamic community in New Jersey, and its residents deserve nothing less than exceptional care, affordable access, the most advanced specialties and technology, and the highest caliber physicians to serve patients' needs, especially the underserved communities that rely on our facilities.
"Yan Moshe has shown the type of innovative leadership that will allow us to thrive in an ever-changing healthcare environment, and with adequate state support I believe we can build a hospital system that will deliver on its core mission."
The Midwest organizations called off the move to create a 25-hospital health system.
Another merger bites the dust. This time, with little (known) scrutiny from the Federal Trade Commission (FTC). So why did Wisconsin-based Marshfield Clinic Health System and Minnesota-based Essentia Health abandon their proposed union?
According to an announcement put out by the organizations, the decision was a mutual call—one made nearly six months after they signed an integration agreement in July to form a 25-hospital health system serving Wisconsin, Minnesota, Michigan and North Dakota.
“We have decided that a combination at this time is not the right path forward for our respective organizations, colleagues and patients,” Marshfield Clinic interim CEO Brian Hoerneman and Essentia Health CEO David Herman said in the release.
Despite the merger falling apart, the systems shared that they’ll still look to work together going forward.
“We will continue to seek opportunities for collaboration as two mission-driven, integrated health systems dedicated to sustainable rural health care,” they said. “Our organizations have great respect for one another, and we each remain committed to strengthening the health of our communities as we deliver high-quality, compassionate patient care.”
The proposed merger was first announced in October 2022 and the systems expected the deal to close at the end of 2023, pending regulatory approval. In October 2023, Minnesota Attorney General Keith Ellison stated this his office would review the deal’s compliance with state and federal antitrust laws.
This marks the second occasion Marshfield Clinic has been involved in a potential merger that was eventually called off in the past four-plus years. In December 2019, the organization and Gundersen Health System chose to not follow through on a deal that would have created a 13-hospital system.
Through the first nine months of 2023, Marshfield Clinic reported an operating loss of $133.6 million, compared to an operating loss of $92.6 million over the same period in 2022. While operating revenue increased from $2.28 billion to $2.32 billion, expenses also jumped 3.5% to $2.5 billion.
Essentia, meanwhile ended fiscal year 2023 with $121.7 million in net income, a significant increase from the $72 million in net loss in 2022.
Though the FTC wasn’t publicly involved in evaluating the merger between the systems, the agency has had its hand in several other deals recently. According to the FTC and Department of Justice’s recently released Hart-Scott-Rodino Report, 50 merger enforcement actions were filed in fiscal year 2022, which was the most since 2021.
The ramifications of an election year on healthcare could be significant, says one CEO.
Many of the challenges CEOs have been dealing with since the pandemic aren't going anywhere in 2024, but this year brings a new wrinkle that will impact leaders in undetermined ways.
It's no secret that this is a presidential election year. Depending on how it shakes out, healthcare could be greatly affected for the foreseeable future—much more that most sectors. That makes 2024 an important year for the future of the industry, Karmanos Cancer Institute president and CEO Boris Pasche told HealthLeaders.
"That is what I see as the looming potential changes," Pasche said. "Where will Congress and the new president take us in the next in the next four years?"
Whether incumbent president Joe Biden remains in office or is beaten by a challenger will impact all areas of the healthcare system, from hospitals to insurers and everything in between.
"There are different philosophies in terms of healthcare, in terms of coverage, in terms of insurance," Pasche said. "Obamacare is now more than 15 years old. It's still there, but there are a lot of things that will probably be discussed during this this election year—price of drugs, accessibility, insurance coverage. So I think it's a very important year to come in terms of the future of healthcare because we know that healthcare eats up a very large amount, a very large fraction of the national budget and for good reasons."
How much can CEOs plan for what may come in November? Very little, Pasche said. Even with forecasts on the regulatory climate, leaders will have to wait and see like the rest of America on what's in store.
While Pasche believes the government is and will continue to be dedicated to cancer care, he doesn't know exactly what that will look like. He pointed to the 340B program, which was hit by prescription drug payment cuts for 340B-covered entity hospitals by nearly 30% in CMS' final rule in 2018 during Donald Trump's presidency. In June 2022, under a different administration, the Supreme Court unanimously rejected the payment cuts to hospitals, deeming them unlawful.
"That's one example that show you how tenuous this balance is in terms of healthcare depending on political decisions," Pasche said.
Other potential changes on the horizon will be weighing on the minds of CEOs over the next 12 months, even if they're unclear on what their response will be.
Addressing labor shortages and unrest will once again be critical.
Healthcare CEOs with New Year’s resolutions undoubtedly have improving their workforce near the top of their list. Labor challenges were a major theme of 2023 and it doesn’t appear as if that’ll be any less of a pain point in the coming 12 months.
How those challenges and the strategies used to alleviate them evolve is yet to be seen, but leaders can get a better idea of what’s ahead by tracking the shifts occurring in the industry.
Here’s a look at three workforce trends for CEOs to keep an eye on this year:
Unionization
While healthcare is no stranger to unions, the realities of a post-COVID world are creating more unrest among workers.
Whether it’s doctors, nurses, or other staff, there’s plenty of discontent coming as the result of burnout, lack of compensation, and working conditions.
Physicians especially are showing their frustration as they feel the squeeze from hospitals and health systems under financial pressure, which is not only affecting them personally, but impacting their patients’ quality of care. As health systems seek out mergers and acquisitions, further consolidation of physicians will continue to be a reason for unionizing.
The more strikes occur and unions form, the more workers across the country will feel emboldened to organize. How will CEOs respond? The best way to deal with unionization is to prevent it from happening in the first place and hospital leaders will have to be proactive this year in heading off unrest before it becomes a movement.
Investing in people
Keeping workers happy is a clear priority for CEOs, but leaders are recognizing that it’s about appealing to workers’ desires, as well as their pockets.
With hospitals prudently managing labor costs and cutting back on agency utilization, it’s as important as ever for organizations to reduce workforce turnover. To achieve that, CEOs must be willing to invest in their workers to retain and attract talent.
That investment goes beyond pay increases. Hospitals that are struggling financially need to be creative in how they compensate and reward their workers. According to a recent survey by Aon, most health systems are adding premium benefits, including 95% offering tuition reimbursement programs, 93% offering flexible work options, and 84% offering personal level.
Supporting workers in all aspects will be an emphasis for CEOs to combat labor shortages.
AI’s role
How artificial intelligence affects the workforce isn’t just a healthcare question, but a global question. Healthcare, however, tends to adopt new technology more slowly than most industries, so it will be interesting to see how willing hospital CEOs are to invest in and implement AI in 2024.
It’s hard to ignore though that workforce challenges are creating a greater need for innovation. AI has the potential to significantly supplement the workforce by improving efficiencies and removing burden from workers, but it also requires educating staff on new technology.
AI’s presence is also affecting the C-suite with new leadership positions being created to oversee strategy. How different will executive teams look from traditional structures moving forward?
Ultimately, CEOs must accept that trial and error will be required in a lot of cases before AI’s role in healthcare is fully realized.
Karmanos Cancer Institute CEO Boris Pasche offers his advice to other leaders.
As a physician-turned-CEO, Karmanos Cancer Institute’s Boris Pasche has a better understanding than many of his peers on the unrest physicians across the country are feeling right now.
Burnout, workforce shortages, unionization… there are several challenges CEOs face in ensuring their physicians are satisfied and eager to work for them. Thinking like a physician helps, but the formula isn’t a complicated one, according to Pasche.
He recently joined the HealthLeaders podcastand shared his advice for fellow CEOs wanting to improve physician relations at their organization.
