Financially Recovering From COVID-19: Hospital Leaders Outline Challenges, Goals
The majority of U.S. healthcare systems are caught between COVID-19 recovery and ongoing financial viability, and the next six months will define health systems, significantly impacting their strategic direction and potentially burdening an already stressed workforce. These were researchers’ conclusions from a recently released report from The Chartis Group, a provider of advisory and analytics services to the healthcare industry.
The organization’s Financial Recovery Survey revealed that 85 percent of health system executives surveyed identified cost reduction as one of their top three priorities for addressing the impact of COVID-19 on their organizations, and they expect to achieve results rapidly. Ninety percent of respondents aim to meet their cost reduction targets in less than 12 months, and of those, more than half (55 percent) are pushing even more aggressively to meet their goals in less than six months, the findings showed.
The online survey was completed in June 2020 by health system leadership. Respondents were predominately a part of the C-suite/senior executive leadership team (62 percent), with 48 percent representing Finance And Operations leadership. Nearly 60 individuals participated in the survey.
According to the researchers, “The urgent need to respond to the magnitude of recent financial losses, along with new pressure to invest in maintaining dual systems of care, have created a complex series of trade-off decisions for healthcare leaders.”
More specific findings from the report included:
- 40 percent of healthcare executives expect to take up to 12 months to reach pre-COVID procedural volumes, but volume recapture alone will not be sufficient to return to prior levels of liquidity
- 45 percent are aiming to reduce their expense base by more than 10 percent, necessitating multi-pronged approaches that focus on traditional improvement strategies as well as more complex strategies to optimize assets and reduce fixed costs
- 90 percent have concerns about factors that may derail or delay successful execution, including resource bandwidth and managing future COVID-19 surges.
Hospitals have already begun initial cost reduction strategies, which include vendor renegotiations (66 percent), reduced staffing (62 percent), executive compensation (59 percent) and furloughs (47 percent).
However, as the lingering impacts of COVID-19 continue to reduce patient volumes and elective procedures, significantly reducing liquidity, hospitals are looking to more advanced margin improvement strategies such as optimizing their revenue cycle (78 percent); optimizing labor/workforce management (69 percent); improving their supply chain (74 percent); improving patient throughput (50 percent); streamlining management structures (50 percent) and improving ambulatory access (50 percent).
Though executives know that these measures must be put in place, many foresee very real challenges in implementation. Managing future COVID surges (43 percent), lengthy, multi-level decision making processes (29 percent), lack of bandwidth to manage improvements (29 percent) and competing priorities (27 percent) are the top reasons executives indicate execution may be stalled.
"Hospital executives must reduce costs to offset the reduction in elective procedures and patient visits due to COVID-19," said Pam Damsky, a director at The Chartis Group. "Given the long-term effect of COVID-19 on patient volume remains unknown, and new financial pressures have emerged, many hospitals will need to make tough decisions, including those that have previously been rejected as unpopular or politically sensitive, such as right-sizing management structures, addressing underperforming assets and restructuring the physician enterprise."
