Kaufman Hall Report: Pandemic Continues to Rock Hospitals on All Levels
“The COVID-19 pandemic continues to undermine performance improvement efforts at hospitals and health systems across the country”: that is the opening sentence of a research report published on Oct. 18 by the Chicago-based consulting firm KaufmanHall. The report, “2021 State of Healthcare Performance Improvement Report: COVID Creates a Challenging Environment,” looks at the diverse factors that are putting financial pressure on U.S. hospitals and health systems right now.
The report cites several different elements that, combined, are making operations more difficult for patient care organizations nationwide “Supply chain disruptions and shortages have driven up prices and forced a return to the costs of carrying larger inventories of needed supplies,” the report states. “Labor shortages and high employee turnover are pushing up base salaries and recruitment costs and have led many organizations to implement retention bonus programs. Volumes in many service lines remain below pre-pandemic levels, putting downward pressure on revenues; clinical staff shortages make recovery even more difficult.”
What’s more, “Signs of longer-term change are evident in the responses to our survey. A strong majority of respondents predict that the pandemic will result in permanent changes to the workforce, with 66 percent saying that the ratio of administrative staff working remotely will continue at levels reached during the pandemic, and another 11% predicting that the percentage of remote workers will continue to increase. Almost half of respondents say the pandemic has driven their organization to adopt new processes, positions, or departments that will be continued going forward.”
The reality, the report notes, is that “ Hospitals and health systems have had little reprieve from the pandemic as new surges in infections have continued to stretch their resources. Still, the changes that have occurred to date—workforce realignments, a rapid push into telehealth and digital care delivery, shifts in utilizations and volumes—point to the need for transformative change that touches most facets of operations. Hospital and health system leaders will need to address questions of access to care, supply chain management, patient throughput, workforce deployment, service line development, and physical footprint.” Unfortunately, it also points out that “Few health systems will have the resources to take on these challenges alone. A fundamental question will be what they need to control and where they can seek out strategic partnerships—with independent physician groups, payers, retailers, third-party vendors, community organizations, and others—that enable them to focus on their core business strategy while expanding the services and optimizing the efficiency, accessibility, and affordability of care they provide to their communities.”
Among the bracing statistics in the report, based on a survey of hospital and health system executives:
>100 percent of survey respondents face issues with clinical staff, including burnout, difficulty filling vacancies, wage inflation, and high turnover rates.
> 99 percent have experienced challenges in supply procurement, shortages of key items and price increases.
> 92 percent are having difficulties attracting and retaining support staff, and almost 90 percent have increased base salaries.
> 75 percent have experienced adverse revenue cycle impacts during the pandemic, including a higher percentage of Medicaid patients and increased rates of denial.
> 54 percent identify a “pain point” at an investment (or subsidy) per physician of $250,000 or less. The average investment per physician at the end of Q2 2021 was $232,583.
> 23 percent say that the ratio of administrative staff working remotely is likely to return to pre-pandemic levels. 66 percent said the ratio will remain at levels reached during the pandemic, and 11 percent said the percentage of staff working remotely will continue to increase.
> 22 percent have seen pediatric services return to pre-pandemic levels, while 16 percent say pediatric volumes remain below 75 percent of pre-pandemic levels. Cardiology and cardiovascular services have seen the most significant rebound, but even here, just 44 percent of respondents have seen a return to pre-pandemic levels.
“Most hospitals and health systems likely feel that their performance improvement efforts have been significantly eroded by the COVID-19 pandemic. Expenses are up, revenues are down, and the end is not clearly in sight,” the report says. Given all that, the report states that “We believe it is time for leadership to rethink their approach to performance improvement, and this will require rethinking the premise that not-for-profit hospitals and health systems can lower their costs while maintaining control over all aspects of their operations. Organizations are going to have to risk giving up some control and find partners who can perform some of their functions more effectively and efficiently.”
