Ripped from the headlines: on May 13, local news television station WMBB in Panama City, Florida, reported this: “Employees at Healthmark Regional Medical Center in DeFuniak Springs have apparently not gotten their most recent paycheck. News 13 spoke with a medical professional currently working at Healthmark who has chosen to remain anonymous. ‘No one has been paid to my knowledge, including salaried people because I asked today, since… our last payday was April 22,’ our source said. News 13 learned that Healthmark Chief Operating Officer Lisa Holley offered to provide a letter to employees to give to banks and creditors. It states that Healthmark is experiencing a delay in payroll obligations and that due to circumstances beyond their control, funding was not available to cover paychecks…. ‘As far as anyone can say it’s closed,’ our source said. ‘There’s no inpatients, there’s no ER, there’s nothing. I mean the ancillary services are there but there’s not a patient in the building unless they are an outpatient getting their labs drawn.’ The emergency room closed back on March 18 for renovations.”
Obviously, very few hospital-based organizations have found themselves in such dire circumstances as that one did last month. But 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.
CFOs recognize the need to adjust to a shifting landscape
In a report published this spring by the Chicago-based Healthcare Financial Management Association (HFMA), which represents and supports CFOs and other senior finance leaders in hospitals, medical groups and health systems, CFOs spoke out about what they need to do in the coming months. The report is entitled “CFO of the Future: The new and improved healthcare finance leader of tomorrow,” and was authored by Lisa A Eramo.
Eramo wrote that “Jennifer P. Marion, FHFMA, CPA, CGMA, senior vice president and CFO of Franciscan Alliance, Inc., in Mishawaka, Indiana, said productivity and strategic resource management are top priorities that will continue to occupy her time going forward. In particular, she is an executive sponsor of the organization’s new enterprise resource planning (ERP) system that replaced its previous manual and rudimentary process. ‘We need to get timely, actionable information, and we previously spent so much time closing the books,’ she said. ‘We needed to change our computer systems and our operating model to allow more time for strategic financial planning. We also wanted our coworkers, through automation, to work at the top of their abilities.’ For example, in the revenue cycle department, the organization uses a number of robotic process automation tools to automate a number of manual activities. Why? It enables staff to research problems and make suggestions for improvement. ‘When you automate manual tasks, it also improves coworker satisfaction and reduces turnover,’ Marion said. ‘It’s rewarding for coworkers to be trained to the next level so they can be promoted and continue to grow.’”
And beyond automation—which is gradually leading to the introduction of artificial intelligence (AI) and machine learning (ML) capabilities in healthcare finance—finance leaders in patient care organizations are working forward with mindsets that are more flexible than ever. As Eramo notes in the report, “Marion also spends much of her time trying to change reimbursement arrangements with payers — a challenge she anticipates will continue in the years ahead. ‘The goal is to have reimbursement arrangements that focus on the value of the work we’re doing to keep people well,’ she said. ‘The traditional fee-for-service model doesn’t work for a healthcare organization focused on trying to bend the cost curve.’ Marion works with Franciscan Alliance’s leadership team to advocate for value-based and bundled payment programs with commercial payers,” Eramo notes in the report. “They also work with self-insured employers. ‘It has been a journey we’ve been on for a number of years, and it has not been easy,’ she said.”
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.”
Richard L. Gundling, senior vice president of the professional practice at HFMA, notes that “Hospitals are many times the largest employers in their community, and thus are impacted by national trends. And the bulk of workers are nurses and clinical staff. But IT, finance staff, housekeepers, and food service” are also being affected. Hospitals, he notes, “are feeling the pain of hiring housekeeping and food service staff that hotels and restaurants are competing for.”
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.
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, puts it this way: “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.” The bottom line, he says, is that CFOs and their colleagues are going to have to continue to plan for volatility in some key operational cost areas.
What’s particularly difficult here is that ongoing nurse staffing shortages have been predicted for years; but the pandemic has clearly dramatically exacerbated the situation. A report posted on Sep. 7, 2021, by Patrick Boyle of the Washington, D.C.-based American Association of Medical Colleges (AAMC), noted in “Hospitals innovate amid dire nurse staffing shortages,” that “Health field leaders have been warning for years that hospitals face a nursing shortage. One widely cited study projects a shortfall of 510,394 registered nurses by 2030. The main reasons, according to such groups as the American Nurses Association, are waves of baby boomer nurses entering retirement age, an aging population that will require more medical care (and more doctors and nurses), faculty shortages that limit the capacity of nursing schools to accept more students, and more nurses moving away from direct patient care or leaving the health field altogether because of stress. COVID-19 has intensified some of those conditions,” Boyle continued. “The first surges last year compelled many nurses and other health care workers to leave their jobs, but the vast majority battled through the exhaustion, despair, and fear out of a sense of duty and with faith that medical researchers would find ways to combat the disease. They just had to hang on until then.” And he quoted Tricia Thomas, Ph.D., R.N., associate dean for faculty affairs at Wayne State University College of Nursing in Detroit, as stating that, “When we were able to jump in with vaccinations in January [2021], there was a sense of great hope. We were already fatigued and weakened and frustrated — and we got slammed again,” Woodward said.
Rob Gamble, a director in the Chicago-based consulting firm The Chartis Group, says that West Tennessee Health’s Blankenship’s level of concern is precisely typical these days. “On a scale of 1 to 10, a 7.5 is about where the average CFO is right now in terms of their level of concern” over staffing-related operational cost issues. What’s more, the Philadelphia-based Gamble says, “That level of concern might go up to a 9 or a 10 in certain geographies, or certain types of patient care organizations. Obviously, those that historically have had a hard time recruiting to their organizations, are probably at a 9 or 10 on that 1-10 scale. I’m personally concerned about rural hospitals; if you struggle to staff nurses in a rural hospital, there aren’t a lot of alternatives,” he says. Meanwhile, part of the challenge, he says, is that “This situation does not look to have any short-term resolution. In a recent survey we conducted on staffing concerns”—the firm’s “Reviving Workforce Resilience: 2022 Healthcare Workforce Survey,” published on May 16—"37 percent of our survey respondents said that they think the staffing outlook will improve in the next year, 33 percent think it will stay the same, and 30 think it will get worse.”
AI and other technology to the rescue?
So what’s the solution to these staffing shortage-driven issues that look to be long-term in healthcare? HFMA’s Gundling opines that technology will inevitably have to be leveraged in order to master the financial challenges that hospitals and health systems are facing. “If the workers are not going to be there, healthcare is going to look at artificial intelligence and what robotics can do. And where there’s a nurse who did follow-up calls, maybe a part of that is done by a robot.” In other words, technology will inevitably need to be leveraged for a variety of purposes related to anticipated ongoing staffing shortages, especially of nurses, but also of others.
David Sylvan certainly believes that such moves are inevitable. Sylvan is CEO of UH Ventures, the development arm of University Hospitals Health System, which is based in Cleveland. As its website indicates, “UH Ventures is solving for the future of University Hospitals and the future of healthcare. We identify, develop, and deploy the most disruptive and creative innovations that originate from within University Hospitals as well as from organizations all over the world.”
“The notion that we should just continue to do everything we’ve been doing and assume somehow the elapsing of time, or our dashing good looks and effervescent personalities, will carry us through, is delusional,” Sylvan says. “The notion of nurses resigning and becoming travelers and coming back and charging two to three times the amount that they were previously making, is not sustainable, because at some point, the financial sustainability of that will fail, and there will be pull pressures dampening that trend. But simply addressing symptoms without looking at cause—that’s also under pressure. How do we use technology to support clinicians, and how do we get them to the top of their licensure, and relieving RNs, for example, by backfilling certain more administrative duties with LPNs, for example? And how do we take away some of the time factor associated with diagnosis? How do we use scribes or voice technologies or even avatars, to relieve some of the physician and clinician documentation burden?”
Those are all questions that senior leaders in patient care organizations should be exploring right now, Sylvan says, add that “Those organizations not exploring alternative revenue streams, are facing an existential crisis. We can invest in devices, software, technology, therapeutics, to take some of the redundancy and waste out. Healthcare institutions are astoundingly inefficient; there’s a lot of waste. And if you start to look at taking out waste, you’ll also end up taking out some harm. And there’s an intertwined ballet here. Those [progressive] systems will survive.” And, he adds, that is particularly true as the value-based movement evolves forward, because doing more with less will absolutely become the norm going forward.
The Chartis Group’s Gamble agrees about technology deployment. “Whether it be computer-assisted coding, robotic process automation, whether it be bots to help automate phone calls that registrars need to get back to, or whether it be patient self-scheduling—any of those enhancements and innovations that technology can support, will only be productivity drivers, and can help lessen some of the impacts” of staffing shortages, in both the short and longer term.
And, says Gamble, strategic planning flexibility will absolutely be key going forward. Indeed, he says, “I think it will become a vital survival capability. The planning horizons have shrunk. There is less predictability and more instability in the market right now; there’s more instability in our staffing. And I think we’re still on the front end of this curve. I don’t think this is something that’s going to stabilize in another 12 months; it will probably play out in the next three years until we get to the ‘new normal.’”
