I recently had a discussion with one of our advisors, Dr. Mark Soberman to discuss the challenges that health system administrators are facing due to the COVID-19 pandemic, and how to move forward under this kind of stress. Mark Soberman, MD MBA FACS, has over 20 years of experience as a clinician, section director, educator, and medical staff leader. He is acutely familiar with the hurdles that hospitals and physician practices are facing at the moment, and took some time to share his observations and predictions.
“The pandemic has hit every stakeholder in healthcare.”
One of the central themes throughout our discussion was how widespread the effects of the pandemic are, with every aspect of the healthcare ecosystem under stress in some way. To put it in perspective, healthcare accounted for almost 18% of the GDP in 2019, and these same health systems are now facing massive losses, estimated at $50 billion each month from hospitals. Even a large hospital system such as Mayo Clinic, which produced $1 billion in net operating revenue last year, is facing $900 million in losses in 2020, even after furloughing workers and pausing major construction projects.
What are healthcare administrators focused on right now?
There is a huge burden on healthcare providers to find cost-effective ways to operate, since a decline in visits and elective surgeries put a halt to crucial revenue streams. Dr. Soberman explained that the biggest issue in the minds of hospital administrators is managing the revenue cycle while trying to maximize resources and efficiency. “Trying to be efficient is going to be paramount; everyone is looking at even thinner margins compared to previously low margins.” In addition, many patients are facing unemployment and a loss of health coverage, meaning they’re unable to pay for treatment.
When facing these compounding financial problems, Dr. Soberman recommends that healthcare administrators should move forward by looking for opportunities to maximize revenue. Cash flow is very important, and most health systems have seen their cash flow negatively impacted.
Who is the most vulnerable provider segment?
The areas hit hardest by the pandemic are the most vulnerable financially. Hospitals in areas with high numbers of COVID-19 cases have had to shift resources to meet this new need, spending heavily on protective equipment and more staff, while abandoning services that are more profitable.
“The smaller the health system in general the more vulnerable they are. Size matters in this case,” Dr. Soberman explained. Smaller practices are also vulnerable to the effects of this pandemic, since they don’t always have a financial reserve to protect them during a crisis. They are at risk of shutting down services or closing their doors completely, meaning their local patients have less access to medical care.
In order for vulnerable providers to manage expenses, Dr. Soberman advises that administrators should not fail to invest in systems and services that can enhance the revenue cycle. They can make measured decisions about actions that enhance their bottom line. In addition they should explore resources and federal assistance that can provide relief.
One way we discussed is to rely more heavily on remote options like telemedicine as a means to make up for lost appointments. Patients who would otherwise cancel an appointment can meet with a doctor to avoid neglecting care.
“A significant opportunity to shift to outsourcing.”
Dr. Soberman forecasted that we should expect to see major restructuring of health systems after the pandemic. Hospital administrators will start to explore outsourcing solutions that increase ROI by performing tasks that were once arduous and time-consuming. Working with outsource services can help shift risk onto vendors instead of the healthcare provider, and they can be tailored specifically to the provider’s needs.
Taking the time to understand the benefits of these solutions could ultimately help providers save money with regard to reduced headcount and fixed overhead costs, especially when they can show you real-time and projected ROI. Dr. Soberman explained that this is the time to be open-minded to change, innovation, and opportunities to solve new problems. For some providers that don’t have large finance or administration departments to source funding, there is opportunity to be had in a migration towards outsourcing.
Looking towards the future
There’s no doubt that we’re still in the thick of the pandemic, and we expect to see a prolonged economic downturn across all areas of healthcare. That’s why it’s increasingly important that healthcare administrators take a forward-thinking approach to managing their financial burdens. Maintaining cash flow, maximizing efficiency, and being open to inventive solutions like outsourcing can help providers weather the storm.