How leaders of hospitals and health systems are being paid is affected by the current financial climate.
A competitive talent market coupled with the thin operating margins is causing hospitals to rethink how they compensate their leaders.
Retaining and recruiting executives, however, remains a priority for CEOs, who continue to deal with the financial and operational ramifications of workforce turnover.
The challenging environment though has led to modest increases in executive compensation for the year, according to a report from consulting firm SullivanCotter, which surveyed more than 3,100 organizations representing nearly 42,000 individual incumbents.
Based on the report and other rumblings, here are three trends on executive pay for CEOs to monitor heading into 2024.
Base salaries going up
Hospitals and health systems understand that keeping and attracting talent requires renewed commitment on their end, which has taken the form of higher base salaries.
For 2023, the year-over-year median base salaries for all executives increased 4.1%, compared to 4.3% in 2022, the report found. Whereas health system executives saw increases of 4.8%, subsidiary hospital executives experienced increases of 3.9%, adhering to a trend that has been present over the past several years.
The roles within health systems that showed median base salary increases of 5% or higher tended to focus on strategy/planning, technology, financial sustainability and risk, integration, and workforce strategy.
CEOs must anticipate base salaries continuing to rise along these lines in 2024 and be prepared to compensate executive as such, even in the midst of financial unrest.
Incentive awards stagnating
Where hospitals and health systems are scaling back in executive pay, to offset the rise in base salaries, is with incentives and bonuses.
Due to a dip in incentive plan payouts in 2022, the year-over-year increase in 2023 total cash compensation (TCC) was lower than the increase in base salaries, the report revealed. Health system executives saw TCC levels increase by 3.5%, compared to their increase of 4.8% in base salaries.
As incentives are tied to the performance of organizations, CEOs have had to be cautious in extending TCC while margins stabilize. CEOs can still offer incentives, but they should be strategic by rewarding top performers and focusing incentive plans around priority areas to improve operations.
CEO pay draws scrutiny
Between recent workforce strikes and criticism of nonprofit hospitals, CEO pay has recently come under fire.
The issue has reached Capitol Hill as Sen. Bernie Sanders, I-Vt., took aim at community benefits and CEO compensation provided by nonprofits through a report by the Senate Health, Education, Labor and Pensions committee.
"While these hospitals provide woefully insufficient care to the patients most in need, they provide massive salaries to their top executives," the report stated. "In 2021, the most recent year for which data is available for all of the 16 hospital chains, those companies' CEOs averaged more than $8 million in compensation and collectively made over $140 million."
The American Hospital Associated denounced the report's argument on community benefits but didn't respond to the criticism regarding CEO pay.
The more unrest there is in the workforce, the more under the microscope CEO salaries will be. CEOs must be ready to stand by their pay, while also being cognizant of the perception from both outside and inside their organization. Assessing employees' level of satisfaction with their compensation and proactively addressing it can potentially avoid further friction.
As workforce unrest takes hold, physician groups look toward unionization.
Workforce unrest in healthcare has been building since the pandemic and it doesn't appear to be calming down anytime soon.
Through several strikes, organized labor is making its presence felt and it's coming during a period in which hospitals and health systems are already stretched thin financially and operationally.
CEOs must be ready to respond to unionization and, ideally, focus on preventing them in the first place, especially as unionization is spreading across the healthcare workforce with greater physician involvement.
A sign of things to come?
In the latest example of bubbling frustration among healthcare workers, around 400 physicians and 150 nurse practitioners and physician assistants across more than 50 clinics operated by Allina Health voted to unionize earlier this month. The vote, which was 325 to 200, according to the National Labor Relations Board, creates what is believed to be the largest group of unionized private-sector physicians in the country.
The union will be represented by the Doctors Council, an affiliate of the Services Employees International Union, which said in a statement on its website: "This is a win not only for the doctors that stood together and the supporters who rallied alongside them but also for the patients and the communities they serve."
Allina said it is not going to appeal the outcome of the vote to the National Labor Relations Board. In response to the vote, Allina said in a statement: "While we are disappointed in the decision by some of our providers to be represented by a union, we remain committed to our ongoing work to create a culture where all employees feel supported and valued. Our focus now is on moving forward to ensure the best interests of our employees, patients and the communities we serve."
Allina's employees unionizing may not be the most indicative of what other organizations could be in for going forward. The health system has been dealing with a range of operational challenges, from posting an operating loss of $122.7 million in the second quarter to ending a controversial policy that restricted care to patients with medical debt after facing public scrutiny.
Yet, the reasons for Allina's physicians choosing to unionize are also present everywhere: understaffing, burnout, administrative burden, and compromised care quality.
Similarly, resident physicians at George Washington University in Washington, D.C., voted to unionize earlier this year, citing pandemic burnout.
By addressing issues such as burnout, or at least showing your workforce you're willing to, CEOs will give employees less incentive to organize.
Prevention is the best medicine
Most of the time when unions form, the assumption is that compensation is the driving factor. While pay is often a sticking point for workers, it is usually in combination with another problem that creates dissatisfaction, such as extended hours on the clock.
Undoubtedly, CEOs must invest in their employees with competitive salaries and benefits to retain talent, but they should also invest in areas to improve efficiencies and reduce workload. Revenue cycle, for example, has opportunities for implementing technology that can both save time for physicians and help an organization's bottom line.
Outside of financial and operational investment, CEOs need to focus on personal investment to keep employees happy and feeling respected. Something like an employee recognition program or other benefits that extend beyond the workplace can go a long way.
Another way CEOs can really stay ahead of the game is by empowering their workers, especially physicians. Larger health systems may be more susceptible to unionization due to consolidation cutting down on independent practices and as a result, taking decision-making out of doctors' hands.
Encouraging physician leadership and valuing input allows doctors to feel like they have a say in how their patients are cared for.
Joe Perras, CEO of Cheshire Medical Center, recently toldHealthLeaders: "We need to make sure that we are doing everything we can to improve employee engagement across our hospital. Engaged employees provide higher quality, safe care than unengaged employees. People who believe in the mission will give their all to take care of patients, and we need to foster that."
A union formed. Now what?
If a petition is handed in and a union forms, it can feel like a loss, but the situation is far from unsalvageable.
Once this happens, CEOs need to shift from a reactive mindset to a proactive one. Now, it isn't just about assessing ways to improve the environment for employees, but addressing specific concerns or demands.
Most importantly, CEOs must maintain good working relationships with unions. The greater the friction and tension, the harder it gets to negotiate and find middle ground. Effective, good faith communication can be the difference in trading one demand for another.
Also, be aware of how agreeing to a union's ask will affect the rest of the organization. In the case of the recent Kaiser Permanente strike, the union stood firm on protecting the revenue cycle workforce from outsourcing. Kaiser agreed to that in the new deal, which means it will now have to find other ways to save on costs within revenue cycle, such as implementing automation.
Whether a union forms or not, CEOs should have an idea of where their organization's vulnerabilities lie, what their stance on certain issues are, and whether there's wiggle room to adjust.
This article has been updated to reflect Allina's decision not to appeal the vote of its members to unionize.
Despite overall hospital margins improving, many health systems remain in need of a lifeline.
As more hospitals feel the constraints of financial pressures, they're turning to dealmaking to alleviate costs.
Health system mergers and acquisitions are continuing to trend toward pre-pandemic levels, but the volume of transactions doesn't necessarily indicate improved financial health. Rather, several of the recent deals have been driven by financial distress, as well as issues sustaining higher occupancy levels, according to a report by Kaufman Hall.
Eighteen transactions were announced in the third quarter, easily clearing the 10 deals over the same period in 2022 and the seven deals in Q3 2021. Of the 18 transactions from July through September of this year, seven involved a hospital or health system that cited financial distress as a driving factor for the deal, Kaufman Hall stated.
While hospitals as a whole are seeing margins stabilize the further back the pandemic is in the rearview mirror, that doesn't mean every facility is enjoying the same financial relief. Kaufman Hall's latest National Hospital Flash Report showed the median year-to-date operating margin index increasing from 0.9% in July to 1.1% in August, with net operating revenue increasing 8% month-over-month and gross operating revenue rising by 9%.
However, as Kaufman Hall's report over the summer noted, the gap between performing and struggling hospitals has widened, creating a haves and have-nots dichotomy. That divide is creating a more robust environment for M&A, with health systems in need of a lifeline seeking out partners with increased financial flexibility.
Kaufman Hall's M&A report revealed that only one of the transactions in the third quarter was considered a "mega merger," or a deal in which the smaller party has annual revenues above $1 billion. Total transacted revenue was $8.2 billion, which was down significantly from Q2's figure of $13.3 billion, but the drop-off was due to the second quarter having three mega mergers announced.
"When removing the mega mergers from each quarter, the average revenue in Q3 was actually significantly higher than that of Q2, at $243 million and $159 million respectively, demonstrating the significant uptick in activity in sizeable independent hospitals seeking out partnerships with larger organizations," the report said.
Fourteen of the 18 transactions in Q3 featured nonprofit acquirers, with half of those being academic or university-affiliated health systems. While many health systems have seen patient volume slowly creep back up to pre-pandemic levels, academic health systems are experiencing higher occupancy levels, with a recent Kaufman Hall report showing a median inpatient occupancy rate of 70% at academic health centers, compared to 53% at acute-care hospitals.
"Aligning an academic health system with a community-based health system provides the opportunity to relieve some of the occupancy pressures at the academic flagship hospital by utilizing available space in high-quality community hospitals to treat lower acuity patients," the report stated.
"An academic/community health system pairing also offers expanded opportunities for residency programs, clinical research trials, and patient access to tertiary and quaternary services."
Looking forward, CEOs should be prepared for increased scrutiny on transactions with new proposed merger guidelines issued by the Federal Trade Commission and the Department of Justice, Kaufman Hall warned.
However, hospitals recently secured a major win against regulatory requirements for dealmaking when a U.S. district judge ruled in favor of LCMC Health's purchase of three Tulane University hospitals from HCA Healthcare. The ruling granted the health system's request for a summary judgement that the transaction was exempt from federal antitrust laws due to Louisiana's issuance of a state certificate of public advantage (COPA). The FTC has lobbied against COPAs, which are currently present in 19 states.
The company released its fourth quarter earnings and financial outlook for 2024.
Walgreens plans to shut down 60 VillageMD clinics and exit five markets next year in an attempt to cut at least $1 billion in costs as it pivots in strategy with a new CEO.
Two days after naming Tim Wentworth CEO, the drugstore chain released its fourth quarter earnings report, showing a net loss of $3.1 billion for the year, compared to net earnings of $4.3 billion for the 2022.
"Our performance this year has not reflected WBA's strong assets, brand legacy, or our commitment to our customers and patients. In just six weeks, we have taken a number of steps to align our cost structure with our business performance, including planned cost reductions of at least $1 billion, and lowered capital expenditures by approximately $600 million," interim CEO Ginger Graham said in the release. "We anticipate seeing the impact of these actions in fiscal 2024, beginning in the second quarter."
Graham also said the company is "intently focused on accelerating our profitability in the U.S. Healthcare segment," which will be helped by the closing of 60 underperforming VillageMD clinics in 2024, Walgreens leadership revealed on a call with investors.
The U.S. Healthcare division consists of primary care provider VillageMD, at-home care provider CareCentrix, specialty pharmacy Shields Health, and Walgreens Health.
While pro forma sales for the quarter grew 17% for VillageMD, 24% for CareCentrix, and 29% for Shields, the unit as a whole reported an adjusted operating loss of $83 million.
"While we have made progress on the build-out of our healthcare business, we are not satisfied with the near-term returns on our investments," John Driscoll, president of U.S. Healthcare, said on the call. "We will continue to grow in 2024, but with a renewed focus on more profitable growth."
He added: "VillageMD, Summit Health, and CityMD will be the most meaningful drivers of growth in fiscal 2024. It has taken us longer than anticipated to realize the cost synergies across the combined assets."
For the fiscal year 2024, Walgreens said it expects adjusted earnings per share to be between $3.20 to $3.50, coming in below analyst forecasts of around $3.70.
Graham highlighted three near-term operational priorities for the company going forward: supporting customer-facing activities, "scrutinizing every penny of spend that does not directly benefit the customer," and improve cash management.
Wentworth will be at the helm of the company, effective October 23, as it takes these steps to drive towards profitability.
Speaking on the call, Wentworth said: "Walgreens was built on convenience, access, and trust and has unique advantages in today's healthcare environment. I see the opportunities before us to build on our pharmacy strength and our trusted brand to evolve healthcare and the customer experience to deliver better outcomes at a lower cost."
It's a potentially seismic strategy that will further close the divide between venture capital and providers.
Venture capital firms are no strangers to acquiring and restructuring hospitals, but their relationship with healthcare has generally stopped short of direct ownership to influence how care is provided.
However, that's exactly what General Catalyst is attempting to do through its bold move of buying a health system as a testing ground for new technology. The venture capital firm announced its eyebrow-raising intentions at the HLTH conference, where it publicly launched a business spinout called Health Assurance Transformation Corporation (HATCo). Former Intermountain Health CEO Marc Harrison will lead the new company, working alongside General Catalyst managing director Hemant Taneja.
While Harrison and Taneja did not divulge key details such as which health system they are looking to purchase, when the acquisition would happen, or for how much, the announcement at HLTH and through their blog postsignals a potentially unprecedented shift in how venture capital can break down walls between it and providers.
"[It] is another step in GC's move to 'transcend' venture capital," Harrison and Taneja wrote in the blog. "We've said that achieving HATCo's mission will require a long-term orientation that existing fund structures cannot support."
Venture capital firms don't usually buy health systems due to the thin margins and regulatory challenges. It's a high-risk, low-reward business decision for players whose main objective is to squeeze out profits.
What General Catalyst is trying to do through its impending purchase is change the paradigm. The venture firm already partners with 20 health systems across 43 states that test out technology developed by its portfolio companies, but the firm is now seeking to implement new technology without being restricted by cash-strapped and risk-averse providers.
The private equity model is all about reducing costs and in many ways, General Catalyst is hoping to do the same, but Harrison and Taneja said the commitment to technology and innovation will give "health systems the opportunity to capitalize on new revenue streams, which (in turn) should allow them to invest in more innovation and in servicing their communities. In addition, HATCo will look to foster the creation of scaled platforms (rather than fragmented point solutions) that can provide the missing technology pieces of the puzzle."
The other aim of General Catalyst's plan is to leverage its technology to implement a value-based care model that demonstrates it can be both better for patients and profitable for business. Part of HATCo's vision is to use AI and data analytics to prevent patients' conditions from developing or worsening, thereby reducing the need for costly services.
It's not too dissimilar to what Kaiser Permanente is striving for with its launch of Risant Health, which is focused on delivering value-based care through technology to its acquired health systems. Where HATCo is attempting to differentiate is by creating a blueprint with its health system that can be applied elsewhere.
HATCo also wants to deviate from the typical timeline of venture capital acquisitions—the thinking isn't years-long, but decades-long. It's a long-term play that Harrison and Taneja say they have the capital and stomach to see through.
"The transformation of our healthcare system is not a short-term endeavor," they wrote. "Even venture's decade-long return horizons are insufficient to effect real, systemic change. HATCo aims to create a new standard of healthcare investing and set expectations for investors to think longer term."
The suggested timeframe means other venture capital firms may have to wait a while to see if General Catalyst's unprecedented maneuver pays off, but before the full results are even realized, the process could embolden other firms to make similar leaps.
Regardless, it's becoming more and more clear that the future of hospital and health system mergers and acquisitions will be driven by technology and the role it can play in not just refining healthcare, but overhauling it.
Bruce Broussard will give way to Jim Rechtin in the latter half of 2024.
Humana has already mapped out its succession plan with longtime CEO Bruce Broussard set to step down in the second half of 2024, the company announced.
After spending more than a decade at the helm of the payer, Broussard will end his tenure and hand the reins to Jim Rechtin, president and CEO of Envision Healthcare.
The transition to Rechtin reflects the direction Humana is heading, with the company expanding beyond only offering health insurance and becoming an integrated model. In 2022, the company restructured into two business units: Insurance Services and CenterWell. The latter includes healthcare services, such as its primary care clinics.
Along with its sister brand Conviva Care Enter, CenterWell Senior Primary Care delivers care to more than 272,000 members in more than 250 centers across 12 states. Humana plans to add an additional 30 to 50 new centers per year through 2025.
Rechtin brings experience in provider settings from his previous role as president of UnitedHealth Group's OptumCare and from multiple leadership positions with DaVita Medical Group.
"Jim has worked closely with clinicians in many different care settings," Broussard said in the news release. "That experience will help support our growing clinical footprint and continuing evolution as a health care company and the important work we do in driving health outcomes for our customers."
Kurt Hilzinger, chairman of the Humana Board, said: "[Rechtin's] first-hand experience leading through challenges and opportunities of a changing health care services continuum will help accelerate our integrated care strategy at pace."
In its announcement, Humana also said Rechtin has "a deep understanding of Medicare Advantage," which will be key as the payer continues to hone in on that side of the business. Humana is exiting the commercial health insurance market and focusing on growing its offerings in Medicare Advantage (MA), where it has the second-largest market share behind only UnitedHealth Group. Under Broussard, the company tripled its MA membership to more than five million.
Broussard, who joined Humana in 2011 and took over as CEO in 2013, will remain as a strategic advisor to the company into 2025. Until Rechtin steps in for Broussard, he will act as the president and chief operating officer, effective January 8, 2024.
The company is seeking ways to improve cash flow to stay afloat.
Cano Health found a lifeline in its sale of its Texas and Nevada primary care centers and more divestitures could be on the way for the company as it claws for liquidity.
By selling its clinics to Humana's CenterWell Senior Primary Care business, the value-based primary care chain brings in nearly $67 million, including over $35 million in cash paid at closing, Cano announced. The sale comes weeks after the company said in its second quarter earnings report that there was "substantial doubt" about its ability to financially continue within the next year.
With the sale to Humana's subsidiary, Cano now has approximately $109 million in available liquidity, of which $80 million will be used to pay off debt so the company can avoid being required to comply with the financial maintenance covenant.
Cano CEO Mark Kent said in the news release that the sale refines the company's footprint and focus on improving operational and medical cost performance in the Florida market.
"The net cash proceeds from this sale strengthen our balance sheet, allowing us to continue executing on our plan and supporting our mission of providing market-leading primary care," Kent said.
According to Kent, the sale is also one of "many planned steps" in Cano's strategy to gain financial flexibility, which means more selling of assets could be on the way for the company.
Overseeing potential moves in the immediate future will be Eladio Gil, who steps into the role of interim CFO after Brian Koppy departed at the end of September, the company announced.
Cano has had to weather unrest in its leadership, with three board members resigning earlier this year while criticizing the company for poor corporate governance and increasing debt.
Meanwhile, founder and CEO Marlow Hernandez stepped down from his role in June after the backlash.
Federal approval of hospital transactions may not be required in certain states.
Hospitals secured a major victory in their battle with the Federal Trade Commission (FTC) over regulatory requirements for mergers and acquisitions.
A U.S. district judge ruled in favor of LCMC Health's purchase of three Tulane University hospitals from HCA Healthcare, granting the health system's request for a summary judgement that the transaction was exempt from federal antitrust laws.
The ruling backed the power of state certificates of public advantage (COPA), which allows mergers and acquisitions to avoid federal approval if they receive oversight from the state. LCMC and HCA argued that the deal was exempt from pre-notification requirements implemented under the Hart-Scott Rodino (HSR) Act—notifying federal antitrust authorities and observing a 30-day waiting period—because of the issuance of a COPA from the Louisiana Department of Justice.
The FTC has lobbied against COPAs, claiming that transactions exempt from federal antitrust requirements have led to higher costs and worse outcomes.
Judge Lance Africk wrote in his ruling that "the court appreciates that this holding may make enforcement more difficult for the FTC in the narrow context of transactions that close pursuant to state COPAs."
Greg Feirn, LCMC Health CEO, said in a statement: "We are pleased to announce that the District Court has recognized the value of our partnership with Tulane University and upheld the State of Louisiana's approval. Earlier this year, LCMC Health and the Attorney General Jeff Landry took a strong stance by taking legal action to safeguard this significant collaboration. This partnership underwent a thorough review and approval from the Louisiana Department of Justice, which has been validated by the court's decision."
Due to the ramifications of the ruling, the FTC may pursue an appeal. Nevertheless, the decision is noteworthy in that it strengthens protections for hospital transactions from federal oversight.
By securing a state COPA, hospitals can avoid requirements under the HSR Act, including the 30-day waiting period. The FTC has also recently proposed sweeping revisions to the HSR Act, which would greatly increase the burden on hospitals.
However, not every state has COPA laws. Currently, 19 states have some version of a COPA law, so hospital transactions outside of those states won't be able to skirt federal approval.
Hospitals and health systems must be proactive instead of standing pat and waiting for inflation to ease.
Since hitting record highs during the pandemic, inflation has continued to wreak havoc on the economy. Every industry has been affected in some way and healthcare is no different.
Hospitals and health systems, however, are in the precarious position of being susceptible to inflationary pressures during a time when margins are thin. That reality has tasked CEOs and CFOs to adeptly maneuver to keep finances afloat and doors open.
It's no wonder then that most healthcare CFOs view the current economic situation as their top organization concern, a survey by Deloitte revealed.
The good news? Medical prices are growing at a similar rate as past years, but are being outpaced by prices in other parts of the economy, according to analysis by KFF. The opposite has typically been the case, but using the consumer price index, KFF found that medical prices grew by 0.1% year over year in June 2023, below the 3.0% overall annual inflation rate.
Meanwhile, the producer price index, which represents inflation from the producers' perspective, has increased 3.5% for overall health services during that same period, illustrating the toll inflation is taking on healthcare organizations' costs, even if it is showing signs of cooling.
The c-suite now has no choice but to evaluate every single financial decision in the context of how it will be affected by inflation.
"The biggest part of that is just reassessing any plans for growth and major capital, just like anybody would normally do with their personal decisions with regard to major purchasing. Health Systems must do the same," Matthew Arsenault, CFO at Baptist Health South Florida, toldHealthLeaders.
"So, we want to make sure that we provide care, but deciding which projects happen when and evaluating the cost of those projects and inflationary environment is something that we're constantly doing more of now, and more frequently than we have been historically because of the current inflationary environment."
Ultimately, fighting inflation means finding ways to reduce expenses and improve efficiencies. The c-suite needs to work together and place focus on a few areas of contention including labor costs, revenue cycle, and the supply chain.
Lower labor costs
Arguably the biggest challenge hospital and health system leaders have had to face since the onset of the pandemic has been the workforce. Specifically, the decline in staff coupled with the increase in labor costs.
The KFF analysis on inflation found that since mid-2021, health sector wages have increased slightly faster than overall average weekly earnings. While average weekly wages for employees of private organizations increased by 16.9% from $982 in February 2020 to $1,148 in May 2023, healthcare employee average wages rose by 19.3%, from $1,039 to $1,239 over that span.
Skilled nursing employees have seen the highest average wage increases, with average weekly earnings rising by 23.7% from $671 in February 2020 to $830 in May 2023. Skilled nursing, of course, has also experienced significant turnover and burnout over that period, forcing organizations to rely more on contract labor.
Bringing those contract labor costs down has been a priority and several hospitals have made encouraging progress doing that this year. For example, HCA Healthcare for the second quarter reported a decline of 20% in contract labor costs year over year, which allowed the health system to net $1.193 billion for the quarter, compared to $1.15 billion for that period last year.
How can CEOs and CFOs keep contract labor in check? By investing in their staff to both retain employees and attract new ones. That means offering competitive salary and bonuses, as well as improving staff wellbeing.
Strengthen revenue cycle
Investment, however, shouldn't be limited to just the workforce. Executives need to review revenue cycle management (RCM) processes and assess ways to implement technology to cut down on administrative tasks and collect money in a timelier manner.
"To tackle financial challenges in healthcare, hospitals typically look at strategies such as optimizing operational efficiency, implementing new payment models, exploring partnerships, and investing in innovative technology," Stephen Forney, senior vice president and CFO of Covenant Health, toldHealthLeaders. "At Covenant, we've seen how AI can play a crucial role in addressing financial challenges by streamlining workflows and improving revenue cycle management."
Whether it's pursuing an end-to-end solution or a bolt-on vendor to fill in the gaps, hospitals can benefit greatly from embracing automation in their RCM. The key is to find the right technology or vendor to invest in.
One of the greatest areas of need in RCM right now is denials management. Only 38% of hospitals and health systems currently automate any component of denials management, according to a survey by AKASA, while Plutus Health found that 30% of surveyed providers said AI and robotic process automation resulted in faster cash flow and collections.
Despite tight budgets, hospitals and health systems can save on costs in the long run by strategically devoting resources to create the most efficiency as possible in RCM.
Optimize supply chain
Another area where inflation has created issues is supply chain, resulting in disruptions and product price increases.
Ideally, hospitals will choose not to pass the price increases on to their patients, but that requires engaging with suppliers to understand the actual costs of products to ensure reasonable prices.
"We are working closely with our suppliers to make sure they understand that we need to push back on cost increases, and they need to find ways to take cost out," Sam Banks, chief procurement officer and vice president of supply chain at Indiana University Health, toldHealthLeaders. "In some areas and contracts, we have protection against inflation or at least a cap on prices. That has saved us in quite a few situations."
He added: "I am a firm believer that the better we understand how their products are made and their input costs, the better our ability is to push back on cost increases."
Organizations can also cut down on unnecessary costs by identifying opportunities for standardizing equipment and supplies, allowing for less reliance on multiple vendors. Technology can also be utilized to improve inventory management and reduce waste.
Inflationary pressures are still high, and healthcare is still in a place where the c-suite has to pull necessary levers to avoid getting swept up by relentless waves.
CMS announced minimal changes to the average monthly plan premium in the private program.
Payers offering Medicare Advantage (MA) plans continue to want to keep premiums down to attract members.
CMS announced that average premiums, benefits, and plan choices for MA will remain relatively unchanged in 2024, with the data showing that MA plans are opting to remain competitive with their offerings.
The average monthly plan premium for all MA plans is projected to bump up 4% from $17.86 in 2023 to $18.50 in 2024. Most members that choose to stay in their plan will experience little to no premium increase, with nearly 73% not seeing any premium increases at all, according to the federal agency. Supplemental benefit offerings, meanwhile, will "increase slightly."
"Today's release shows that, as expected, people with Medicare will continue to have robust options and stable benefit offerings in the MA market," Meena Seshamani, CMS deputy administrator and director of the Center for Medicare, said in a statement. "We encourage individuals eligible for Medicare to review these options as well as Traditional Medicare and enroll in the option that best meets their health needs."
The availability of low to zero-dollar premium plans in MA has been a factor in the private program's growth over the past decade and with MA enrollment in 2024 projected to represent approximately 50% of all Medicare enrollees, MA payers are eager to seize as much of the market as possible.
However, it is possible that the saturation of zero-dollar premium plans is driving more beneficiaries to choose plans with higher premiums and lower out-of-pocket costs.
According to a recent report from eHealth, demand in zero-dollar premium plans fell for the first time since 2018. While 84% of eHealth enrollees still chose a plan without a monthly premium, the potential trend away zero-dollar premium plans may cause MA plans to reconsider offerings in the future.