3 Top Strategies to Diversify Your Revenue

Healthcare reimbursements continue to decline, putting pressure on healthcare system CFOs to find new revenue streams.

The need for healthcare services has skyrocketed. The cost of providing that care has gone up. But the reimbursements paid to providers has gone down. That is putting tremendous pressure on healthcare systems to stretch every dollar—and to find new sources for more dollars.

These unpleasant realities were among the topics addressed by Charlton Park, CFO and chief analytics officer at the University of Utah Health, at this summer's HealthLeaders CFO Exchange. Park recently expanded on his message from that event, and shared advice on how healthcare CFOs can diversify revenue opportunities at their organizations.

Making revenue diversification especially important now is "the declining reimbursements that we're receiving from our payers," Park explains.

"Payers aren't interested in subsidizing research and academics. They want to just pay for direct care," Park says. "The type of revenue increases that we were able to get years ago are shrinking, making it necessary for us to do a few things differently, to reexamine the cost of providing care, and to drive cost out of our cost structure. It also has us looking for new and different revenue streams."

Increasing profits without sacrificing patient care

The challenge for many healthcare systems is how to best explore new potential revenue opportunities without diverting from the organization's primary mission—providing the best possible care to patients.

"In an academic environment it might be tempting for the finance team to act in a silo—to begin making deals to create new revenue streams, to come up with things and just implement them. But any of these strategies need to build a consensus within the organization," Park stresses. "We need to make sure that, whatever we're doing to diversify revenue aligns with our mission, and who we are within the state. We want to make sure any opportunities we pursue reflect positively on the university and our mission to provide the highest quality patient care."

At the same time, to keep costs down and continue to support the community, diversifying revenue is important, Park continues. In fact, it is critical to avoid raising prices for providing healthcare services.

"It's a far better option than raising prices," Park says. "So, it's important that we use it, but we also need to make sure we're building a consensus across all of our stakeholders within the health sciences and broader University, and that it is in line with who we are in the community."

Exploring new revenue opportunities is unfamiliar territory for many healthcare CFOs, Park confirms.

"I think some are doing better than others, but we're still pretty new in this space," Park says. "It's difficult for a healthcare provider or hospital that is just used to seeing patients to come up with different strategies to bring in revenue other than seeing patients. It's causing us to think differently."

At the University of Utah Health, the organization is forming internal partnerships to aid in the efforts.

"It is becoming increasingly important to look beyond patient care for revenue generation," Park explains. "We're in a good position with our School of Medicine and adjacent campus to innovate. We're partnering the hospital with the School of Business, the College of Engineering and Health Sciences in order to identify different opportunities to collaborate in new areas."

Here are three strategies that University of Utah Health is using to diversify its revenue.

1. Rethink the need and best use of office space

Space is one of the top areas where many healthcare facilities can hope to realize additional revenues, with the sale or leasing of office space that won't be needed in the future. That is one of the few benefits the pandemic has brought to many organizations, in a variety of industries, not just healthcare, and it was a central point in Park's message at the CFO Exchange.

"Like any health system, we've been space constrained and have had to purchase space and lease space off of our main campus to support our services groups," Park says. "Over the course of the pandemic, like other entities, we've learned how to largely telecommute. It is fundamentally changing the way we do business."

"We've got a lot of new-found freedom with square footage," Park continues. "Some of this is lease space but most of it is space that we own. So, a lot of thought is going into how we can best put that space to use. For example, is there office space that we could turn into clinical space? Is there office space that we can sublet, and let others pay those leases while we make a little bit of profit in return? Or should we sell some of that space, and then put that money into new clinical facilities?"

Basically, the choice boils down to, does the healthcare system make better use of space; does it turn the space into an ongoing revenue stream; or does it part with the space and put the capital into a clinical investment?

2. Find revenue opportunities in the careful sharing of data

Another major source of potential revenue for healthcare systems is with data monetization—finding opportunities to use data to drive insights and efficiencies internally and/or partner externally with third-party analytics firms to drive insights, improve processes, and grow volumes.

Healthcare data is obviously a highly sensitive area, due to HIPAA and privacy concerns and protections, Park acknowledges. But raw, deidentified healthcare data that is not associated with a specific patient can be a valuable commodity.

"We are extremely sensitive with our data and take protecting and securing all of our data very seriously," Park says. "But we have a lot of information and used appropriately that data can create value. There are third-party partners out there that are interested in partnering with us in order to use that information—to drive algorithms that we can use to gain powerful insights, improve our business, and market new products or services."

The University of Utah Health also has internal projects underway that could benefit from data the organization has on patients and care.

"We have an amazing value-driven outcomes tool that we've built within our analytics teams, that really gets at the cost of care and the value of care," Park says, as an example. "We've been kicking around working with different external firms. We might be able to commercialize the data tools that we've created for our internal teams and engage other health systems, enabling them to have the same benefits that we've enjoyed."

Park sees this as the perfect opportunity for a healthcare system CFO and CIO to work together and develop different data assets and data tools to support both the internal business and provide opportunities for commercialization.

3. Sell specialty healthcare services and resources to other hospitals

Another potential area for new revenues is for healthcare systems to sell health services to other providers. That is an area that the University of Utah Health has been providing for a few years.

"Perhaps a little unique to the University of Utah, because of our footprint, we are the only academic medical center in the Intermountain West area, and we help support a wide area of the continental United States," Park says. "We are several years into an initiative to create relationships with healthcare partners throughout the Intermountain West region."

"This is moving them in a number of different ways, and it all starts with patient care," Park explains. "We have the ability to be a resource for them as far as higher-end patient care for their communities. In each case, we can ask, how do we provide support to their staff and physicians? Can we send our own doctors to spend time in their facilities supporting their patients? And how do we provide more expertise or training to their staff and faculties at different hospitals."

The University of Utah Health system has entered into telehealth agreements with several different facilities in Idaho, Wyoming, Nevada, and Montana, Park says.

"There are opportunities to create different revenue streams with those affiliate partners or other outlying hospitals. Many are in rural areas that need access to specially trained physicians or other resources that can be difficult to find. Through our relationship with these facilities, we are able to provide services when they need them and help them keep patients in their communities, but also be that resource when they need to move a patient to a higher level of care."

Charlton Park is a HealthLeaders Exchange member. The HealthLeaders Exchange is an executive community for sharing ideas, solutions, and insights. Please join the community at https://www.linkedin.com/company/healthleaders-exchange/. To inquire about attending a HealthLeaders Exchange, email us at exchange@healthleadersmedia.com.