Hospital Budgets 2020: Resist the Cost-Cut Bias and Invest for Success - Industry Analysis by Loyale Healthcare

Wednesday, December 11, 2019 Hospital News
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Most of us are familiar with the aphorism, "You have to spend money to make money", but many health systems and hospitals have relied primarily on cost cutting to preserve deteriorating operating margins. As consumerism in healthcare continues to expand, providers must invest to improve efficiencies, engage consumers and drive growth.

LAFAYETTE, Calif., Dec. 11, 2019 /PRNewswire-PRWeb/ -- In business and in life, when funds are tight it's tempting to conclude that the best solution is to spend less. In practice, though, a preoccupation with reducing expenses can blind us to the potential for smart new investments to not only reduce expenses in other areas, but to improve our overall financial condition.

Basically, hospitals, health systems and other providers have two levers to pull when challenged by inadequate financial performance. They can reduce expenses by cutting programs and investments in hard assets and/or reduce the cost of labor (one of the largest contributors to healthcare's costs). Or they can spend on systems and solutions that allow them to attract new business and revenue.

Before examining how each of these levers can be used to optimize operating and financial outcomes for healthcare providers and their patients, it's necessary to consider the condition of the industry and the priorities that healthcare executives are facing in a dynamic and rapidly changing marketplace.

Each year, the Health Care Executive Group publishes its HCEG Top 10, the product of a two and a half day interactive discussion among 100 healthcare executives representing providers, payers and technology partners. At this year's gathering, participating executives ranked the following challenges, issues and opportunities as their top 10 for 2020, which we've summarized below.

The Top 10 Challenges, Issues and Opportunities Healthcare Executives Will Face in 2020

  • 1. Cost and Transparency - Strategies to "address the growth of medical and pharmaceutical costs and impacts to access and quality of care"
  • 2. Consumer Experience - "Assuring that all consumer interactions and outcomes are easy, convenient, timely, streamlined and cohesive"
  • 3. Delivery System Transformation - "Scaling coordination and delivery system transformation of medical and non-medical services…to overcome barriers…and effect better outcomes"
  • 4. Data & Analytics - "Leveraging advanced analytics and new sources of disparate, non-standard, unstructured, highly variable data to improve health outcomes, reduce administrative burdens and support transition from volume to value…"
  • 5. Interoperability / Consumer Data Access - To… "Bring value of aggregated data and systems on a near real-time and cost-effective basis to all stakeholders equitably"
  • 6. Holistic Individual Health - "Identifying and improving the member / patient's overall…well-being for a frictionless and connected healthcare experience"
  • 7. Next Generation Payment Models - "Infrastructure and programs for a more collaborative and equitable approach to manage costs…"
  • 8. Accessible Points of Care - "Telehealth, MHealth, wearables, digital devices, retail clinics, home-based care, micro-hospitals"
  • 9. Healthcare Policy - "Dealing with current healthcare policy regulation, political uncertainty/antagonism…"
  • 10. Privacy / Security - "Staying ahead of cybersecurity threats…to enhance consumer trust in sharing data"
Based on the conclusions of this and a variety of other industry organizations and analysts, it's clear that patients - the consumers of healthcare - are the dominant consideration for healthcare in 2020. Healthcare's consumer age, described by PwC as The New Health Economy, is at last upon us. Consumers, with the support of regulators and a motivated administration are looking for a different kind of healthcare experience and it's very different from what many of us are used to.

We have written extensively about the market phenomena driving the ascension of the consumer. From high out-of-pocket expenses associated with increasing prices and high deductible health plans, to the dramatically shifting expectations of Millennials, to the emergence of new lower-cost competitors launched by proven customer-first organizations. These and other marketplace dynamics are compelling patients to look for better value and more convenience, even if it comes at the expense of a provider relationship.

With the understanding that healthcare providers must find a way to compete in this new, more consumer-centric marketplace, planning and budgeting for 2020 calls for a more balanced approach to managing costs and optimizing revenues. In this environment, healthcare's tendency to rely too heavily on cost-cutting carries significant risks. Risks that will intensify as the consumer marketplace becomes more firmly established.

Cost Cutting that Makes Sense

At the outset, we'll state flatly that merely cutting costs is folly. The risks are too great. Of course, scrutinizing costs is a best practice in any high functioning enterprise. But doing so can be a formidable challenge for large, complex organizations like a health system. With broad investments in people, equipment, real estate, compliance and technology systems, identifying real "fat" in the ecosystem can seem impossible. And in an increasingly competitive marketplace, the consequences of cutting into the "lean" can actually exacerbate the financial problem.

Healthcare providers have at least two constituencies to consider when looking to cut costs; their patients - the above-mentioned consumers; and their associates - particularly their physicians and other clinical and administrative employees. For-profit systems must also consider shareholders. Each of these stakeholders has high expectations; the patient for competent, preferably exceptional care; the doctors and nurses for adequate staffing, competitive compensation and a livable workplace experience. And, when applicable, shareholders expect a return on their investment.

With consumers wielding greater influence on provider revenue than ever before, it doesn't make sense to reduce costs that could have an impact on accessibility or the patient experience. Similarly, already overburdened clinicians are facing unprecedented burnout and turnover. This is no time to cut costs that could impair their experience or productivity.

Here, technology offers the greatest promise for reducing expenses. Leveraging automation, artificial intelligence and data-driven insights, the workflows that make a health system or hospital work can be made more efficient and less costly. At the same time, these more efficient systems enable the provider to deliver a demonstrably better experience to patients - and to the people who care for them.

The key is to use technology that doesn't add to healthcare's already tangled clutter of disparate systems. By partnering with companies like Loyale Healthcare in the area of patient financial engagement, providers are able to integrate multiple systems to deliver vastly better patient experiences while gaining invaluable business intelligence. By unifying systems and the unstructured, highly variable data they capture, providers find that they are able to make dramatic reductions to their billing and collection costs and set the stage for revenue growth.

Making the Case for Smart Investments to Preserve, Grow Margins

We have already hinted at the smartest budget moves in preparation for 2020, smart investments - principally in technology that optimizes existing systems to specifically address each of the priorities, challenges and opportunities in the HCEG Top 10 list above.

In our own experiences working with some of America's largest healthcare providers, we've demonstrated how integration-enabled optimization can lead to millions in cost take-outs. Further we're showing that the additional revenue opportunities made possible by better patient engagement and end-to-end transparency make the "expense" associated with a Loyale partnership an excellent business investment.

Some cost- and margin-conscious healthcare executives are hesitant to make these investments because in certain instances some of their largest investments have actually presented shorter-term inefficiencies. Electronic Healthcare Records (EHR) systems are an example.

No healthcare executive would argue that they should not have made the investment in their EHR system. The question now is how to better leverage the system's considerable breadth to create a more consumer-centered organization. Loyale Patient Financial Manager is one such system. By integrating the EHR with multiple systems affecting the patient's financial experience, we're extracting more value from the EHR and empowering providers and patients with a digital front door they actually want to use.

Technology to improve patient engagement is just one area where smart investments promise favorable financial returns and set the course for addressing healthcare's challenges and priorities. Others include:

  • Investments in ambulatory surgical centers and other lower-cost facilities.
  • Telehealth and other digital care delivery models with relatively low costs and expanded scale
  • EHR systems: Despite the above-mentioned potential for creating inefficiencies, these systems are essential to the delivery of care in the modern healthcare setting. When optimized, however, EHRs can be a critical component in the delivery of holistic, patient/consumer-centered care that considers every dimension of the care experience.
To use the words of one Loyale client, "Spending money is not bad if it generates incremental EBITDA." As the American healthcare industry braces for another year of political and regulatory volatility, we can be sure that consumers' expectations of us will only intensify. Lower-cost competitors and potential competitors like Haven Healthcare, CVS Health, Walgreens Health and Walmart Health are making preparations to meet those consumers where they are. The rest of the industry must be prepared to do the same.

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 recently announced an Enterprise level strategic partnership with Parallon including deployment of its industry leading technology to all HCA hospitals and Physician Groups.

 

SOURCE Loyale Healthcare



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