West Tennessee Health’s CFO on Current Staffing Challenges

In our July/August cover story, we interviewed a broad range of experts and of leaders in the field, regarding the current state of finances in hospitals and health systems nationwide. As everyone understands, the financial distress partly emanating out of the COVID-19 pandemic has become a real and medium-term threat to many hospital-based organizations nationwide. And what are finance leaders in hospitals, medical groups, and health systems doing right now? Leveraging the best technology they can acquire to optimize their revenue cycle management (RCM) systems, rethinking staffing and other resource-intensive issues, thinking about alternative sources of revenue, and above all, readjusting their perspectives to be able to plan for instability and unpredictability going forward into the future.

The statistics are clear: hospital finances remain at risk, as of mid-2022. Indeed, the Chicago-based Kaufman Hall consulting firm found this spring in its “National Hospital Flash Report: April 2022,” authored by Erik Swanson, and released on May 2, that, while some positive signs had emerged by March of this year, and “…hospitals saw early signs of relief as outpatient volumes and revenues returned and expenses eased with fewer high acuity patients, even so, the latest performance results suggest a long road ahead with actual hospital operating margins in the red for a third consecutive month as organizations struggle with inflation, national labor shortages, and other operating pressures. The median Kaufman Hall year-to-date Operating Margin Index was -2.43 percent in March.”

Indeed, even as the stats improved over this spring, the overall financial struggle for hospitals has continued, the report found, stating that “The median change in Operating Margin rose 32.7 percent from February to March and 85.6 percent compared to March 2020. The median change in Operating EBITDA Margin increased 26.7 percent month-over-month and 98.1 percent versus March 2020. Year-over-year (YOY), however, the median change in Operating Margin was down 48.7 percent and the median change in Operating EBITDA Margin declined 37.8 percent compared to March 2021.”

At the center of all of this right now, experts agree, remains clinical staffing, especially nurse staffing, which is in real crisis, as more and more nurses leave healthcare—rapidly—or at least, leave their staff positions, often accepting contracts as agency/traveling nurses, even while staying in their hometowns. The costs to retain nurses of all types, naturally, are skyrocketing.

One of the senior finance executives we interviewed for the cover story was Jeff Blankenship, CFO at the public, not-for-profit West Tennessee Healthcare in Jackson, Tennessee, whose anchor hospital is the 635-bed Jackson-Madison County General Hospital. Below are excerpts from Healthcare Innovation Editor-in-Chief Mark Hagland’s interview with Blankenship from late this spring.

When you look at the financial pressures that your health system and others like it are facing right now, some of them coming directly out of the pandemic during 2020 and 2021, what does that landscape look like now?

For us, and this is probably true of most rural health systems, we’ve experienced waves of financial issues. The first wave was the cancellation of elective procedures in the spring of 2020. Then it was supply chain and PPE [personal protective equipment], and crisis planning and preparation issues. Then, more recently, it’s shifted to staffing in a big way. What’s interesting is that even now, when pandemic volumes have declined significantly, our revenue and volumes have not been rebounding as we would have hoped, and we’re left with a significantly different mix of staffing costs. We’re paying really high levels of agency staffing costs; we’re trying to wrestle that down. We’re about a $1 billion organization, with $1billion of revenue and $1 billion of expenses. We’re city- and county-owned and are a hospital district; we don’t receive tax support; but we’re a sole community hospital and a DSH hospital [disproportionate share hospital] and a regional referral center.

And we’re the safety net provider for this region, so all the transfers [during the height of the pandemic] ended up coming here, which pushed our capacity to its limits. And some staff through the first waves, could not continue. It was stress and burnout. Our nursing vacancies are over 300 right now [accounting for an overall 18-percent nurse vacancy rate], and the number of agency staff exploded through the middle of that, with the rate going as high as $150 an hour. Many of our own staff shifted to becoming agency staff and traveled in the region, causing a nurse staffing cost crisis.

We’ve been trying to move the rate back down and canceling some contracts; we’ve also introduced all manner of scheduling for greater flexibility, so someone transitioning out of agency can have a softer landing. We did increase our base pay some, and 14-week contracts at a higher rate, and some scheduling options—not unlike what they would have to commit to under agency staffing… And we’ve seen some movement there.

We did increase our base pay some, and 14-week contracts at a higher rate, and some scheduling options—not unlike what they would have to commit to under agency staffing… And we’ve seen some movement there. It’s a little early to say where things are going to land. And where is this all going to land? Pay is not going to go back to where it was, but it’s a little unclear yet where it’s going to go. And nursing is at the head of the line, but issues with coding, revenue cycle, even entry-level positions like admitting and registration. We’re sort of finding ourselves at the back of the line where people went to work. In this, we’ve been hit by the Great Resignation. So it’s a tough nut to crack. In the past, we were used to trying to improve on productivity or right-size or optimize operations, and there’s nowhere to go; we’re already highly operationally efficient.

How are you framing this as your organization’s CFO?

I’ve been saying, we have to adjust our operating model to need fewer people; no matter what we introduce as a recruiting and retention perspective, there aren’t going to be as many people willing to work in hospitals, so we’ve got to adjust our model. We’ve talked a lot about leveraging technology nd eliminating redundant processes. It’s the old speech about efficiency, but it’s taken on added urgency, because it’s so difficult to recruit. New employers are coming to the market, and it’s great we’re seeing some economic boom, but it also introduces the threat of more competition, from an employment perspective. But we’re redoubling our efforts on efficiency, and moving individuals to the tops of their licenses. And trying to align pay and function.

Do you see any potential place for robotics to help in certain operational areas?

Yes, I really do, and it’s shifting from, well, that would be nice, to actively pursuing something. I see us leveraging robotics mostly in situations where there are redundant tasks. We might have a backlog of claims that has to be reprocessed from a payer, or some other process that might be automated; it’s moved from kind of a nice-to-have, to something that’s very necessary. And, looking for solutions that are technology-forward. We transitioned from a very people-centric patient collection process involving phone calls and emails, and with that technology, we’ve shifted some of that to the patient, the customer; it’s what patients want. Cedar. We had moved off a legacy system to Cerner just before the pandemic in 2019, and we really wanted to move to a more technologically centric collections process. We had a lot of patients on payment plans and were managing that ourselves. We decided to go with Cedar, because it was the most technology-forward of the options. And it’s really paid off. We weren’t sure, being in a rural area, how it would be accepted, but people really embraced it, and praised us for it.

What about business process automation and eventually artificial intelligence, in revenue cycle management?

Going back to the staffing question—if we can’t get the number of staff we want, we have to make sure the staff we have are focusing on what matters the most. And it seems like that’s where AI can help, as it can help point us to the accounts most fertile. We’ve seen a little bit of that with clinical document improvement. Iodine has elements that can help the coding people focus on the accounts that have a greater likelihood of their making a difference.

How can CFOs work successfully with CIOs and CTOs in such areas?

For the CFO, it’s always about return, right? It’s really about identifying true added value—not technology for technology’s sake, but if we could take AI and apply it to a situation, and help our folks do things better, then we could add value. We’re sort of redefining value a bit in terms of efficiency. Before, it was a nice-to-have; now, it’s efficiency.

How do you see this entire landscape evolving forward over the next few years?

I would hope that we would see another evolution of technology in healthcare; as much as we’ve evolved, we still fall short of using technology in meaningful ways. It feels as though we need to move forward in integration, and eliminating redundant processes, or giving the consumer what they want, and using that to make our work easier. I’m hoping we’ll see some advancement, and in that, you’ll see things like AI really coming to the forefront.