While Hospital Margins Shrink, Leaders Search for More Sustainable Operating Models - Industry Analysis by Loyale Healthcare

LAFAYETTE, Calif., Dec. 2, 2020 /PRNewswire-PRWeb/ -- Healthcare consulting firm KaufmanHall just published its November flash report with updated financial analyses of hospitals and health systems. For the period Jan. 1 through Oct. 30, 2020 median changes across the U.S. reflect "a challenging month for hospitals and health systems nationwide amid ongoing instability spurred by the COVID-19 pandemic." Not surprisingly, operating performance remained below 2019, managing only 2.4% on the Kaufman Hall Operating Margin Index with CARES Act funding and negative 1.6% without CARES.

Throughout this challenging year, healthcare has been hit with higher expenses (up 14% per Adjusted Discharge YTD) and reduced volumes (down 11%). Pointing out that "Expenses continued to rise as hospitals replenished staffing levels in light of rising COVID cases and incurred the cost of drugs, personal protective equipment and other supplies needed to ensure safe care," the report goes on to predict that, "such increases will put hospitals in a tenuous situation if volumes plummet," something that now appears increasingly likely as COVID cases and hospitalizations continue to spike and states impose ever stricter stay-at-home policies.

It's tempting to view healthcare's disappointing financial performance so far in 2020 as an anomaly - something that will quickly self-correct when the crisis is over and market conditions get back to normal. Based on our clients' experiences, however, we're convinced that patients won't be satisfied returning to healthcare's old normal. If health systems and hospitals hope to benefit financially from the surge in demand that will follow the pandemic, they'll need to recognize and adapt to some important consumer dynamics that predated the pandemic but have been amplified because of it.

Better Patient Care. Lower Costs. Higher Margins – Realizing the Benefits of Holistic Virtual Care

The COVID-19 crisis has taught Americans that it is not necessary to go to a medical facility to get care from a qualified health professional. Before the pandemic, virtual care was a minor sideline for most healthcare providers with little or no long-term value as a strategic asset. But with support from the Center for Medicare and Medicaid Services (CMS) during the national emergency, virtual care delivery quickly became one of the most impactful silver linings during the crisis.

The success of the channel for safer, more cost-effective care delivery caused CMS administrator Seema Verma to announce as recently as October that, "CMS is taking action to increase telehealth adoption across the country." She went on to state that, "This revolutionary method of improving access to care is transforming healthcare delivery in America. (We) will not let the genie go back in the bottle."

At the same time patient acceptance of – and demand for - telehealth has exploded, hospitals and other healthcare providers have discovered compelling financial benefits to the improved productivity, reach and scalability of digitally delivered care. But the benefit potential for providers is limited by the fact that telehealth as it is currently imagined has a number of inherent long-term deficiencies.

As stunningly successful as telehealth has proven to be during the pandemic, it's important to note that virtual care as it is currently delivered is effectively incomplete. And even though Medicare reimbursements for expanded telehealth services continue to encourage Americans to access their healthcare electronically, the patient benefits of telehealth are exclusively clinical. In other words, they impact the patient's medical experience only. That would be fine if patient care experiences were composed entirely of medical needs and events, but we all know that the actual care journey is much longer and more complex. And nowhere is that journey more fraught with obstacles than with patients' financial experiences.

Even before the pandemic, millions of Americans were delaying or avoiding care because of concerns about their ability to afford the personal out-of-pocket costs for deductibles and copays. Since the pandemic began, according to research published by Kaiser Health News, "48% of Americans said they or a family member has skipped or delayed medical care because of the pandemic, and 11% of them said the person's condition worsened as a result…" The same report found that, "about 3 in 10 adults have had trouble paying for food and 11% paying medical bills. Nearly 1 in 4 adults said they or a family member in the next year will likely turn to Medicaid."

We have written extensively on this topic in recent months. In "Patients Love Virtual Health. Digital Financial Engagement Makes It Better," we shared the results of consumer research published this fall. Noting that, "patients are very happy with their COVID-19-inspired virtual care experiences," but that, "To achieve a truly patient centric experience, Hospitals and Health Systems must expand their vision for virtual care to include every patient experience in every setting." As noted above, this is particularly true when it comes to the patient's financial experience.

In the same article, we explored the convergence of digital patient enablement and consumerism. Citing a report published by IBM titled "Patient-centric healthcare: It's time for a new operating model," we expanded on the report's observation that, "Success comes when a company learns to deliver experiences or content in a personalized, participatory way, designed with the consumer's preferences in mind," with our own experiences working with some of the country's largest healthcare providers.

Concluding that "COVID-19-inspired innovation and patient enthusiasm for digital engagement have created the ideal environment for the rapid development of holistic, patient-centered operating models," we shared our clients' determination to, "reframe their vision of care to include every dimension of the patient experience." Pointing out that, "Consumers are demanding it. The competition is stepping up to deliver it, and the technology exists to realize it," we concluded that, "healthcare providers who expect to thrive in the post-COVID-19 healthcare marketplace must embrace it."

Ramping Up for Healthcare's Post COVID-19 Recovery

Like it or not, the pandemic has forced a historic reset on the American healthcare industry. It's impossible to predict with certainty what the industry will look like in the next few years, but it is possible to imagine the opportunities. In analysis published by PwC titled, "COVID-19 recovery for the healthcare ecosystem, gearing up for the next normal," the consulting firm offers a planning framework to, "rethink the enterprise and accelerate transformation to seed future growth." We agree completely, especially as the potential transformation affects consumers' financial experiences, our area of expertise for thirty years.

To truly realize the considerable promise of virtual health over the long-term, health systems and hospitals must employ digital tools to reduce or remove the financial barriers to patient care and payment. Even before the pandemic, patient payments were an increasingly important revenue source for providers everywhere. By delivering financial transparency, affordability options, and clear & concise personal communications, we're seeing every day how patients' financial experiences can be elevated to the level of their clinical experiences.

As providers look for new, more cost-effective operating models to meet the high standards of what PwC calls the New Health Economy, our clients' experiences are proving that holistic virtual care can be leveraged to reduce costs, improve patient engagement and drive growth all at the same time. As the industry looks for certainties in the uncharted territory after the pandemic, better patient financial experiences look like a sure bet. That's a race we're happy to be running in.

Kevin Fleming is the CEO of Loyale Healthcare

About Loyale

Loyale Patient Financial Manager™ is a comprehensive patient financial engagement technology platform leveraging a suite of configurable solution components including predictive analytics, intelligent workflows, multiple patient financing vehicles, communications, payments, digital front doors and other key capabilities.

Loyale Healthcare is committed to a mission of turning patient responsibility into lasting loyalty for its healthcare provider customers. Based in Lafayette, California, Loyale and its leadership team bring 27 years of expertise delivering leading financial engagement solutions for complex business environments. Loyale currently serves approximately 12,000 healthcare providers across 48 states. Loyale is proud to have an enterprise-level strategic partnership with Parallon which includes the deployment of Loyale's industry leading technology at all HCA hospitals and Physician Groups.

Media Contact

Michael Morrison, Loyale Healthcare, 406-868-9179, [email protected]

SOURCE Loyale Healthcare