Where can health systems look to level out rising costs?
A new report from PwC Health Research Institute is renewing a call to action to address affordability in healthcare. According to the report commercial healthcare costs are expected to grow 8% in 2025, and 7.5% for the individual market. The survey looked at actuaries at over 20 employer-sponsored and Affordable Care Act and exchange health plans.
The Outlook
The results are concerning for healthcare, insurers, and consumers.
Insurers, in particular, will likely have to raise premiums, which will be a big hit to consumers already facing rising care costs. A rise in premiums could have aftereffects like an increase in the uninsured population and an increase in medical debt, spelling financial strain for health systems.
Although some health systems have seen improved margins in recent quarters, others are still wading through a sea of increased operational expenses attributed to workforce and current medical supply inflation.
There are some notable trends that could hold off the healthcare cost uptick, such as the increased use of biosimilars, as well as more whole-person care cost management by insurers. But these trends won't be enough to offset expenses, according to the report.
Health systems are also faced with increased regulation surrounding government fee schedules for Medicare and Medicaid, which will lead them to recoup those costs through commercial health plan contracts. Out of the health plans surveyed, over half cited private equity, hospital and physician consolidation among the top three cost inflators. This will feed into contract negotiations and health systems will need to be prepared.
What It Means for CFOs
A tough healthcare climate calls for tougher strategies. CFOs will have to double-down on efforts to contain costs and think outside the box to implement new strategies. CFOs will need to implement hard-ball payer strategies to level the playing field and ensure satisfactory contract negotiations.
CFOs can also look to more strictly manage non-clinical expenses and examine where smaller costs are adding up.
Another possibility is to examine opportunities for non-traditional forms of revenue like filming. Some health systems have added thousands of dollars of revenue a day in fees by allowing film companies to use their facility.
CFOs should also be fully aligned with their revenue cycle team to ensure total financial transparency and goal alignment. Staying aligned with CIOs can also have an impact for CFOs so they can ensure their organization isn't leaking money in the wrong places.
CFOs can dramatically cut costs by decreasing burnout. But where do they start?
Burnout among physicians and nurses has increased dramatically since the COVID-19 pandemic. According to the American Medical Association, physician burnout rose from 38.2% in 2020, to an all-time high of 62.8% in 2021.
Burnout not only affects physicians and their patients, but entire health systems, particularly finances. Nearly one-half of physicians exiting the workforce cite burnout as a major reason.
One study concluded that physician turnover due to burnout costs health systems an extra $260 million each year. Part of this is due to increased use of specialty, urgent and emergency care.
As hospitals and health systems battle rising costs of care, and CFOs look consider ways to contain costs, decreasing burnout could have a big impact. CFOs should examine how burnout is affecting their organization and what’s it costing them. CFOs can then collaborate with CMOs to create an action plan to support physicians to better care outcomes and reduce costs.
“When we start talking about it, we open up the ways to address it,” Dr. Steve Hippler, retired Chief Clinical Officer of OSF HealthCare said during the recent Healthcare Finance Management Association (HFMA) conference in Las Vegas.
Defining Burnout
Burnout goes deeper than just being tired from a long day on the job; it can include emotional exhaustion, depersonalization and decrease in personal accomplishment. While it's not usually external, external factors like workload, overstimulation, and micromanagement all contribute to burnout. Executives at HFMA spoke not just about the amount of work that leads to burnout, but the emotional impact that it creates.
The discussion at HFMA highlighted studies that show interventions have not caused significant improvements for burnout. Mindfulness, art therapy and other methods are all considered band-aid solutions; in that these methods provide temporary relief and cannot be seen as a long-term solution.
What Can Be Done?
When combating physician burnout, the question isn’t “what can be done,” but rather “what can be taught?”
Experts say the key is fortitude. There is a fallacy of resilience when discussing burnout and it leads to an inaccurate perception. Self-efficacy, mental toughness, optimism, and hope are all characteristics that contribute to fortitude.
The good news is that one isn’t just born with or without these qualities, fortitude can certainly be taught. According to one study, high fortitude decreases burnout on all levels.
Organizations should be teaching physicians the soft skills that build fortitude in order to manage burnout. To do this, there must be an initial mindset shift from looking at issues as challenges rather than obstacles.
Fortitude is malleable, experts say. Organizational support certainly helps, but not without fortitude. Leaders can grow fortitude in their staff to combat burnout. The main idea here is about creating the space for physicians to be open about burnout, acknowledge it, and give them the support they need to develop solutions that work for them. Leaders don’t need to provide the solutions, just the space to discuss them.
Another question is “how can the individual and the organization work together?”
Panelists at the discussion noted that leaders should ensure that they:
Know their numbers on the fortitude scale and where their staff lies
Be proactive about implementing change
Ask for help, collaborate within the system
Be a thriver, not a victim
Know that one size does not fit all. Fortitude, like burnout, is different for each individual
“Lean into action, let courage follow.” says one CFO.
The relationship between a CFO and the revenue cycle team is vital for smooth financial operations. This year at the HFMA conference executives shared their insights on what it takes to make CFOs and rev. cycle the ultimate success.
Six key points stood out:
Trust from both sides. A CFO should trust the rev. cycle team and not micromanage, and rev. Cycle should trust the CFO to guide and eliminate barriers.
Consider system-wide participation. Physicians and the CMO should be involved in revenue cycle decisions. The person with the medical degree is going to understand the ground level operation flaws more than an executive who doesn’t deal with it.
Agree on transparency and payer guidelines to not only ensure the organization chooses the right payer partners, but also stays on top of items like denial trends and rates.
Conduct individual meetings with the rev.cycle team. Ensure there is agreement, or resolutions at each step in the process.
Give space for people to be authentic, vulnerable, and share their struggles.
Learn from each other. Rev. cycle learn finance as a goal to better their relationship with the CFO. CFOs can learn the day-to-day rev. cycle operations.
A digital health management platform is making waves in diabetes care and could help members with other care needs.
Blue Shield of California is seeing positive results from a digital health tool designed to give members access to a broad range of health and wellness resources.
In a partnership with Solera Health, BSC members have access to Wellvolution, which offers holistic and lifestyle medicine services such as diabetes care management, weight management, mental and behavioral health, hypertension management, musculoskeletal health and tobacco cessation services.
The aim of the program is to tackle these chronic conditions by teaching sustainable healthy habits through personal coaching and education. Some of the services provide tools for members such as glucometers, exercise trackers, nicotine replacement therapy or a blood pressure monitor to track progress.
Solera Health officials say Wellvolution has seen positive results across the board. According to the company, after using Wellvolution, participants reported:
A 74% improvement in treatment for moderate to severe depression.
A 71% improvement in treatment for moderate to severe anxiety symptoms.
A 49% decrease in the use of diabetes-related medications.
The Innovation Picture
According to Angie Kalousek Ebrahimi, senior director of lifestyle medicine at Blue Shield of California, the health plan has positioned itself as a digital health innovator with numerous virtual care programs, Ebrahimi told HealthLeaders. Broad acceptance of virtual care and digital health tools during the pandemic has helped BSC to push that strategy even further and develop a digital-first mindset.
“I think digital also has the opportunity to sort of simplify things for members that we have in the healthcare space,” she said. “Healthcare is really complicated. We can do something in the digital space that simplifies it.”
A Big Hit To Diabetes
A key element of the platform is diabetes management. Ebrahimi says platforms like these potentially have the power to transform diabetes management across the country and lower the number of Americans who live with the chronic condition.
When individuals are diagnosed with diabetes, they often think of it as a life sentence of monitoring one’s blood sugar and taking medications, and providers may not offer management tools to help their patients understand that process.
When members are given the opportunity to take control of how they manage their diabetes, Ebrahimi says, that’s when results and transformation begin.
“What we've been able to do with that specific condition [diabetes] is let our members know that there is an alternative to support them in their journey,” Ebrahimi said. “And actually, in many cases with the programs that we're offering, members [with type 2 diabetes] are reversing the condition.”
The Power of Control
Part of the success of the Wellvolution platform, Ebrahimi says, is due to members being able to have transparency in their treatment options and have the power to make decisions on their own, with some guidance.
“They can see all of the different programs that we offer to them, " she said. “They can also use an online quiz to find out what programs are going to be best for them.”
“We have already come a long way toward embracing the value of personalized care,” said Solera's interim CEO John Santelli. “The best solutions are the ones that are not only able to deliver high quality care, but which resonate with patients while offering good value for payers.”
Learn how production companies can help give hospital revenue a boost.
What’s one way for a hospital to bring in some extra revenue? The big screen. Hospitals can turn to film productions to rake in some extra cash for their organization, and it may be worth it for CFOs to look in to.
When health systems accommodate filming requests, they can charge a filming fee, which may be beneficial in today’s healthcare climate as it battles rising costs and inflation.
A Viable Revenue Boost?
So what goes into this type of arrangement? Set needs will vary based on the production, but they may take over small wings of a hospital or entire unused floors. Often, filming inside an actual hospital or health system is cheaper for production companies than building an entire set and they’re grateful for the space. Without adequate space though, film productions won’t be a feasible option for a health system.
Health systems will also have to consider how long a production company may be there. Filming can vary, from one day to multiple months. Consider how long the organization can or wants to host the film crew. In most cases, productions are grateful to be filming in a real hospital. Crew are often happy to be surrounded by professional health providers who can attest to whether medical equipment props are set up correctly or provide care if there’s an injury on set.
The Sanford Aberdeen Medical Center turned to filming earlier this year, where a crew spent about 50 hours over the span of five days shooting the movie “Thread Bound.” The crew was able to take over a small wing on the third floor that wasn’t being used due to lower patient numbers.
“Seeing the filmmaker’s excitement at the beauty of our facility and the staff willingness to participate in the creation of it has been really fun,” said lead community programs specialist at Sanford Aberdeen Bea Smith.
Next is negotiation. Warner Bros. isn’t going to need the same rate as an independent film company. Other health systems have charged upwards of $2,000 a day for use of their facility, which can quickly add up over multiple days/weeks.
Health systems have said negotiatings with production companies is easy, but the process will vary based on the company.
Hosting a production company can be a potentially quick revenue booster for health systems and might provide the financial wiggle room CFOs are looking for.
Things To Consider
If a health system is looking to work with a production company, patient authorization is vital. Without it, the system’s reputation could be negatively affected, or susceptible to lawsuits and fines.
Health systems must ensure film crews adhere to facility standards and patient confidentiality protocols, as there have been pricey lawsuits in the past, sometimes costing health systems hundreds of thousands.
Another aspect to factor into this decision is the patient’s experience. Typically, patients don’t want to be disturbed by, say, fake gunshots down the hall. Consider the type of production that will be filming and how disruptive it could be to patients.
Lastly, consider the production company’s schedule. These arrangements are often sporadic, and film crews move in and out of the facility throughout their time there. Flexibility will be another important aspect to consider.
The health giant is totaling its losses after the Change attack.
UnitedHealth adjusted its 2024 outlook after assessing the total impact of the Change Healthcare cyberattack.
The health giant is expected to lose roughly $2.3 to $2.45 billion due to impacts from the attack, which is up from $1 billion seen in previous projections. Even after enduring one of the worst cyberattacks in U.S. history though, UnitedHealth’s earnings prevail.
Earnings & Stock Outlook
Despite provider loan initiatives and mounting medical costs, UnitedHealth still reels in large profits. The company’s revenues soared to $98.9 billion, jumping nearly $6 billion year- over- year due to United’s large, diverse portfolio that includes UnitedHealthcare insurance and several Optum health service units. UnitedHealth’s earnings from operations in Q2 were $8.7 billion, which include the Change Healthcare business disruption impacts.
“The consistent outlook absorbs an estimated $0.60 to $0.70 per share of business disruption impacts for the affected Change Healthcare services, which has increased $0.30 per share since the initial estimate was provided last quarter,” the company disclosed in the report.
UnitedHealth confirmed in its latest earnings report that the company’s adjusted net earnings outlook was $27.50 to $28.00 per share.
UnitedHealth also confirmed in the report the sale of its South American operations, and intentions to sell the remaining ones. The total South American impacts in the quarter were $1.28 per share.
Aftermath of Change Attack
When the Change cyberattack hit in February, it brought reimbursement to an almost stand-still for providers all over the country. UnitedHealth had shut down its IT systems, and hundreds of health systems descended into chaos, unable to process claims and pay their providers.
Two of UnitedHealth’s biggest money drainers were loans sent out to struggling health systems and a ransom payment to the cybercriminals behind the attack. CEO Andrew Witty confirmed in a written testimony that it was his decision to pay a $22 million ransom payment to the cybercriminals who exposed patient data regardless. It’s estimated that one in three Amercians had personal health data exposed in the attack.
UnitedHealth also sent payments totaling $9 billion to struggling providers in the form of interest-free loans. UnitedHealth said it continues to provide financial support to providers who are still in need. UnitedHealth has since restored most of its Change services, and Change has also begun notifying individuals who have had their data exposed.
Currently under investigation by the Department of Justice for its business practices, UnitedHealth operates the largest private insurer in the country.
How do health systems evaluate mission-critical tech in RCM efforts?
There are numerous rev tech solutions in the marketplace and just as many vendors. With financial pressures from inflation and poor payer rates, revenue cycle leaders and CFOs are examining digital transformation initiatives to level up their financial wellbeing.
Miguel Vigo is the chief revenue officer at UC San Diego Health, and he shared the significant improvement he saw in his organization after using an RCM assessment tool. Vigo spoke about how his health system was still able to implement the benchmarks from the tool without having to stray away from their original plans.
“We didn’t want to stray away from our strategy road map, but worked to be able to see more through it,” Vigo said.
What’s The Strategy?
Revenue cycle leaders and CFOs should examine where even their organization’s smallest challenges lie in order to move towards improvements. Financial leaders should ask themselves what adjustments can be made to their system’s most valuable, mission-critical areas. What adjustments will have the most positive impact for the organization?
By focusing on realigning resources to the most valuable and critical parts of the organization, financial leaders can create a straightforward map towards solutions to their biggest challenges.
“[...] we have either improved our metrics considerably which has had a massive value gain, or we have clear transparency on stabilized KPI’s/metrics (within good ranges),” Vigo said.
“To which we have pivoted resources and realigned strategies given those are now in a more protected and steadied state.”
A discussion panel at the HFMA conference highlighted the Revenue Cycle Management Technology Adoption Model as one option that can help point health systems in the right direction on the RCM path. The free benchmarking assessment tool is a product of the collaborative effort of FinThrive and HFMA, identifying the wins and shortfalls in RCM performance and providing custom KPIs measured against industry benchmarks.
Out of the five stages of adoption that the tool uses, Vigo saw his health system was at stage four, meaning the system was doing well in some areas, and needed work on others. “We wanted to put all our cards on the table, and my team stepped up to do that,” Vigo said
Vigo said that one of the best parts of going through this process to improve technology outcomes was how it brought his team together. Everyone had to come together to evaluate the areas they could do better in, and this model gave them a guidebook.
Seeing Results
With meticulous tracking, UC San Diego was able to tackle its biggest challenges throughout the year. A couple areas where UCSD saw the most improvement after using the tool were point of service collections and clean claims rates. According to Vigo the system’s point of service collections increased by over $2 million dollars in a single year.
Prior to RCMTAM, UCSD’s point of service collections percentage of net patient service revenue stood at 0.8%. Afterwards, it increased to 1.1%. UCSD’s clean claims rate also jumped, going from 93% to 97.6%.
What's in the foundation of a strong CFO-CIO dynamic?
When the CFO and CIO can work together without friction, health systems reap the benefits of financially sound innovation.
Numerous issues prevail in today’s healthcare climate, from high costs due to inflation and labor expenses, to physician and nurse burnout due to outdated technology. There are countless challenges that call for CFO and CIO collaboration, but what do both parties need to understand for the relationship to be successful?
The HFMA conference this year highlighted the importance of this collaboration. One CFO described the dynamic as “putting the innovation where it makes sense.”
Andy Adams of Nordic Consulting moderated this discussion at HFMA and notes the value for a health system when a good CFO-CIO relationship is nurtured. “A tightly connected CFO-CIO duo can drive the innovation agenda and work together to manage, evaluate and stage projects and investments across all aspects of healthcare delivery,” Adams summarized in a LinkedIn post.
When both parties focus on understanding the initiative purpose and expected outcomes, they can ensure they are working from the same playbook.
A good CFO-CIO collaboration needs:
Balanced reporting structure steeped in trust.
CIOs must have an understanding of finance, as well as how to examine value versus cost.
CFOs must understand the value of IT: Great CFOs know how to communicate the IT value story.
Shared language: Ensure common business definitions over common data definitions when diving into analytics.
Create an investment model to represent the impact of digital transformation—agree on cost, value, and acceptable risk level.
CMS' OPPS proposed rule checks some boxes for hospitals, but misses the mark for others.
On July 10, CMS released its OPPS proposed rule for 2025, and on par with previous reactions, it’s been met with mixed feelings.
CMS has proposed an increase of 2.6% for outpatient payments for hospitals next year, which would raise rates for roughly 3,500 hospitals and 6,100 ASCs in 2025. This rate is based on the projected hospital market basket increase of 3%, factoring in a 0.4% point for productivity adjustment.
The rule would increase hospital payments by $2.9 billion, plus a proposed $560 million increase in disproportionate share hospital payments and proposed $94 million increase in new medical technology payments.
Although these are substantial numbers, it’s a drop in the bucket compared to rising inflation and labor costs. On top of this, the proposed rule would bring several service and reporting adjustments that hospital CFOs will have to contend with.
CFOs have a cost battle ahead, so let’s examine what’s in store.
CFO Gameplan
While this year started with an optimistic outlook for hospitals, between labor costs and inflation, rising costs continue to be an issue. CFOs will need to strategize where they can, examining alternative revenue paths that fit with their organization.
As discussed by CFOs at this year’s HFMA conference, a focus on implementing AI automation and tech investments in revenue cycle could potentially help. CFOs can look to invest in automation to stay on top of administration burden costs and data reporting under the proposed rule. CFOs can also look to growth opportunities in outpatient services including joint ventures to examine sustainable and profitable expansion avenues.
The AHA reliably hit back at CMS for the proposed rule, once again referring to the new rate as “woefully inadequate.”
In a media statement, AHA’s senior vice president for public policy analysis and development, Ashley Thompson said, “CMS has yet again proposed an inadequate update to hospital payments.”
Thompson also went on to address the financial risk for hospitals under the proposed rule.
“This proposed increase for outpatient hospital services of only 2.6% comes despite the fact that many hospitals across the country continue to operate on negative or very thin margins that make providing care and investing in their workforce very challenging,” Thompson said.
The Big Changes
So, let’s take a look at what these proposed changes would mean, if finalized, and how CFOs can prepare for the challenges ahead.
Remote and Telehealth Payment Alignment:
Seeking to closer align hospital payments for remote care and telehealth services, the agency’s rule would bill mental health care, outpatient therapy, diabetes management training and medical nutrition therapy services provided by hospitals to patients in their homes all under the physician fee schedule.
Rural Emergency Hospitals:
For rural emergency hospitals there are several new measures that focus on health equity and the screening for social drivers of health. Beginning in 2025, the REH reporting period for hospital visits within seven days after hospital outpatient surgery measure would be extended from one year to two years. On top of this, all REHs would be required to report their data under the REHQR program.
Reporting:
The proposed rule would also change aspects of the hospital outpatient quality reporting program, including a greater focus on health equity measure and removing the MRI lumbar spine for low back pain measure in 2025.
Voluntary reporting, a measure hospitals favor, will be upheld for core clinical data elements and linking variables for both the hybrid hospital-wide readmission and hybrid hospital-wide standardized mortality measures from 2023. This will affect payment determination for the hospital inpatient quality reporting program in 2026.
Hospital CFOs will need to ensure their organizations meet these requirements in order to receive full payments under this program.
Medicare Rates:
Lastly, the proposed rule would update Medicare payment rates for intensive outpatient program services provided in hospital outpatient departments, as well as for partial hospitalization. While the existing program structures would stay in place, CMS would use claims data from 2023 and updated cost data from reports conducted three fiscal years prior.
Public comments on the proposed rule are being sought through Sept. 9 and CMS will issue the final rule by early November.
Top finance executives share their tips on how to succeed in today's volatile healthcare economy.
CFOs have a lot to battle with in today's healthcare financial climate. The HFMA conference brought many CFO ideas together and gave insight into the their most prevalent and taxing issues. We’ve narrowed down the best tips for CFOs from the conference.
Value Based Care: Value based care won’t happen overnight, CFOs need to ensure they are patient and diligent around implementation of these models. Health systems should examine any and all options to stay on top of the national payers, including joint ventures to expand areas of care.
To Not Worry:
Market Disruptors: Market disruptors are coming and going at a fast pace, from Walmart to Amazon, everyone is seeking the lucrative aspect of healthcare. But as discussed by CFOs at HFMA, these disruptors don’t seem to understand the healthcare economy and are often stepping back. What these disruptors don’t understand is that primary care economics do not work on their own, and there must be a connection to the payer side or value-based play in order to be profitable. CFOs at the conference were not so concerned here.
Artificial Intelligence: The governance of AI and how smaller organizations are having trouble implementing it are top concerns here. An ‘automation roadmap’ is an important aspect that should not be overlooked. AI implementation is a process that needs to be taken slow with the right type of governance in order to do it successfully.
Big Pharma: Hospitals and health systems face a great financial burden as drug companies increase prices. There is an important need for health systems to push back against big pharma lobbying efforts, as well coming together to speak with one voice.
Payers: Payer denials are increasing rapidly and hurting health systems everywhere. CFOs at HFMA discussed the importance of strong tactics like implementing weekly payer meetings and putting an emphasis on strict documentation.
