How Careful, Smart Planning Helps Healthcare Facilities Mitigate Future Financial Risks

How Careful, Smart Planning Helps Healthcare Facilities Mitigate Future Financial Risks

Posted May 8, 2022 from

COVID-19 has impacted healthcare financials dramatically, so now it's important to develop strategies to help mitigate future financial risks.

Utilization of services and financial health of hospitals will continue to be affected by the pandemic well into the future. Hospitals have been challenged by profound revenue losses due to forced shutdowns and a slow recovery of patient volumes, particularly for elective and non-emergent care. Considering how COVID-19 has impacted the healthcare industry, it’s more critical than ever to regularly review the following key metrics to monitor the financial health of your hospital 2. Volume and utilization trends – can be big picture indicators of financial distress if patient volume is declining or if space is not fully maximized for operational efficiency Fewer individuals participating in employer-based private insurance plans – hospitals have relied on private payers historically to improve their bottom lines; each year hospital systems are negotiating with commercial payers for higher reimbursement. The shift of more employers to high deductible health plans  – thus cost-shifting to the employee, making it less likely for a patient to want to receive care It’s therefore important to plan with the outlook that current healthcare utilization is not sustainable – especially in light of the pandemic. Pre-COVID, the median hospital margin was 3.5%, with several hospitals operating at a negative margin.4 In a recent report by Kaufman Hall, the median operating margin for hospitals and health systems was down 42.4% in February 2022 from February 2020 – just before the pandemic started.5 Proper facility and financial planning can help alleviate financial challenges and help hospitals move towards a sustainable system. Financial impacts of COVID-19 affects healthcare facilities differently Some have increased revenue due to COVID-19 hospitalizations, but on the flip side, they have increased costs due to additional staffing and resources to accommodate these patients The hospitals that (under pre-pandemic conditions) received a higher share of revenue from outpatient services and had higher surgical volume, were at the highest risk for financial challenges due to COVID-related restrictions. Teaching hospitals, hospitals operating at high occupancy rates, and those affiliated with health systems are not as dependent on these revenue streams and therefore were not negatively affected to the same extent as these smaller facilities.

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