For HealthLeaders' Revenue Cycle Technology Week, hear why the AVP of revenue cycle management at Geisinger Health System says the IT department is key.
In honor of HeathLeaders' Revenue Cycle Technology Week, we are spotlighting some of the best stories in revenue cycle technology.
Most revenue cycle leaders have started implementing automation in one sector or another of their department, but while automation may seem like a simple fix, collaboration is usually needed with teams beyond the revenue cycle.
More leaders are bringing in their IT teams to help streamline their revenue cycle automation, and as Christy Pehanich, AVP of revenue cycle management at Geisinger Health System, says, collaborating with IT and merging skill sets is a necessity in optimizing revenue cycle automation.
For HealthLeaders' Revenue Cycle Technology Week, hear how the VP of finance and revenue cycle at PMHA worked to secure more revenue and reduce denials.
In honor of HeathLeaders' Revenue Cycle Technology Week, we are spotlighting some of the best stories in revenue cycle technology.
As finance and revenue cycle leaders fight against poor operating margins, reduced reimbursement, and inflated expenses, developing and executing a strategic path to a financially sustainable future is essential.
Nicole Clawson, VP of finance and revenue cycle at Pennsylvania Mountains Healthcare Alliance (PMHA), feels these same pressures at her health system—a collaborative network of independent community hospitals located primarily in Western and Central Pennsylvania.
When budgets are tight, leaders need to be strategic when investing in technology. Because cost efficiency is so important, healthcare systems and hospitals alike need to get a lot of bang for their buck when considering technology—ROI is always key.
Clawson has the same thoughts since the PMHA mission is to enhance the ability of its member hospitals to provide patient-centered community-based care and to maintain their status as independent community hospitals.
To help ensure financial stability, the revenue cycle division at PMHA includes an overall approach to standardization and process efficiencies focusing on people, process, and technology, Clawson explained to HealthLeaders.
CVS Health is cementing itself as huge competition to hospital and health systems.
All (healthcare) eyes have been on CVS Health for a while, but with strong financial growth in 2023's third quarter, it's cementing itself as a huge disruptor for hospital and health systems.
CVS Health recently reported strong financial results for the third quarter, achieving $2.3 billion in profit. Total revenues increased to $89.8 billion for the quarter and reached $264 billion for the year, marking a 10.6% increase compared to the previous year.
On top of this, the company generated $16.1 billion in cash flow from operations.
What does this mean for hospital and health system CFOs who are looking to compete with the retail giant? Here are four major impacts this news has on healthcare CFOs:
Market disruption: CVS Health's continued growth and financial performance positions the company as a significant disruptor in the healthcare market. Hospital CFOs should closely monitor CVS Health's expansion into various healthcare services as the retail giant is likely to affect patient volumes and service offerings in your area.
Diversification and innovation:CVS Health's ability to adapt to changing consumer needs by expanding care access and lowering costs is a reminder for hospital CFOs to focus on diversification and innovation in healthcare services. Exploring ways to enhance patient care while managing costs is crucial for remaining competitive.
Medicare market: CVS' announcement of Aetna's 2024 Medicare products, along with a high CMS star rating accounced in October, emphasizes the competitive landscape in the Medicare market. At a time when payer/provider relationships are strained (especially with Medicare Advantage), hospital CFOs may need to assess their Medicare offerings and network strength to remain competitive in this space.
Financial considerations: Hospital CFOs should be attentive to CVS Health's financial strategies, such as acquisitions and debt management, as these actions can impact the broader healthcare market. Evaluating the financial health and stability of your organization is crucial, as always.
While there were several major impacts to the market, it wasn't a total win for the retail giant, though.
CVS Health is fighting higher-than-expected healthcare utilization along with other financial setbacks, interim CFO Tom Cowhey said during its investors call. This, Cowhey said, means investors should expect its 2024 earnings to be at the low end of the company's guidance.
Nonetheless, CVS Health's third quarter earnings demonstrate its continued expansion and influence in the healthcare sector. Hospital CFOs should use this information to inform their strategic planning, assess competitive pressures, and consider innovative approaches to patient care and financial management. Adapting to the evolving healthcare landscape is essential to remain competitive in the face of disruptive market forces.
2023 was a difficult year financially, but two challenges in particular were top of mind for one CFO.
The challenges that go along with maintaining the financial stability of a healthcare provider are vast and ever-evolving, but there were two major challenges in particular that weighed heavy on CFOs in 2023.
John McMahon, CFO for Elara Caring, chatted with HealthLeaders and detailed two major challenges that kept him up at night this year: wages and automation.
McMahon found that you can’t always beat the competition’s wages. So, in order to battle the increasing costs of labor, he had to place a focus on automation to make the organization a more desirable place to work than the competition.
From labor costs to payers, CFOs had their work cut out for them in 2023.
Hospital and health system CFOs are finally seeing some financial relief as revenue increases offset rising expenses and operating margins stabilize, but 2023 was far from easy.
CFOs faced three major challenges this year, and it’s clear these pain points will follow financial leaders into the new year. Here’s a review of those challenges.
Labor costs
Labor expenses were a top concern for CFOs in 2023. Staffing shortages across clinical and administrative functions forced hospital and health systems to rely heavily on contract labor, resulting in a majorly stressed bottom line.
CFOs found that throwing money at the problem—i.e., salary increases and bonuses—wasn’t sustainable to attract and keep talent, especially when competition is fierce.
The result? CFOs started to pull back on agency use and stepped-up retention efforts on a budget.
Poor margins and bankruptcies
CFOs continued to face poor margins in 2023. While the outlook is more positive than in past years, there’s still a long road ahead to financial recovery.
The median year-to-date operating margin index increased from 0.9% in July 2023 to 1.1% in August 2023, according to recent data. While these margins are still below historical levels, it's noteworthy that hospitals have consistently achieved positive margins since March.
While margins seemed positive overall, there were quite a few hospitals and health systems who didn’t fare well in 2023.
For example, McLaren St. Luke’s closed earlier this year following years of declining revenues and an unstable reimbursement environment.
"Hospital critics frequently focus exclusively on a fleeting period of stability, ignoring other available data that show the real costs of cascading waves of illnesses, inflationary pressures, and skyrocketing expenses for drugs, labor, supplies, and equipment," Ben Finder, director of policy research and analysis at the American Hospital Association said this year.
Looking at the big picture showed a much different story, he said.
Fitch, Moody’s, and S&P all released reports describing how nearly every metric of hospital and health system financial health declined in 2022, Finder said, and 2023 results might not be much better.
Contending with payers
Between denials and prior authorizations, providers felt a lot of push back from payers this year. Throughout the first half of 2023, payers were aggressively pursuing prior authorizations, creating tremendous administrative burdens. Also, the initial prior authorization/
precertification denial rates for commercial inpatient claims reached over 3% in 2023’s first quarter.
In addition to these struggles, thanks to economic headwinds made up of record inflation and operational challenges, hospital and health system CFOs were finding their backs against the wall in negotiations with insurers, feeling under the gun to secure favorable reimbursement rates in negotiations in 2023, and payers reluctant to capitulate.
One result of this was the public, drag-out war-of-words Prisma Health and UnitedHealthcare engaged in. Don’t forget there was also the fight between Bon Secours Mercy Health and several regional Anthem Blue Cross Blue Shield plans.
Providers started to realize they more leverage in payer negotiation than they think, but it requires willingness and preparation to pull certain levers.
Between going public with payer qualms or considering vertical integration, CFOs had a few options to secure the deal they wanted, and a lot of them were used to their advantage.
2024 will not be any less complicated, so stay tuned for trends CFOs need to focus on to ensure success in the new year.
UHS and Tenet Healthcare both beat Wall Street expectations for the third quarter of 2023, contrasting results from CHS and HCA.
Both Universal Health Services (UHS) and Tenet Healthcare were profitable in the third quarter, which was in contrast to Community Health Systems (CHS) and HCA.
Demand for services in its hospitals catapulted UHS' earnings in the third quarter to $3.6 billion, up 6.8% from the same period in 2022.
Although revenue increased, UHS saw a decrease in net income from $182.8 million in the third quarter of 2022 to $167 million in the same period in 2023.
At the same time, operating expenses increased by 7.1% from the same period in 2022 to reach $3.3 billion in the third quarter of 2023. At the same time, salaries, wages, and benefits increased by 6.4%.
Despite the quarterly decrease in net income and increase in expenses and labor costs, UHS reported a relatively stable net income for the nine months ending September 30, 2023, compared to the same period in 2022. This suggests that the financial performance might have fluctuated within the year, but overall, the system maintained profitability.
When it comes it Tenet, the system posted $5.1 billion in net revenue for the third quarter.
On top of this, the net income from continuing operations available to Tenet’s common shareholders was $101 million, equivalent to $0.94 per diluted share. This compares to $131 million, or $1.16 per diluted share, in the third quarter of 2022.
Tenet’s adjusted EBITDA, excluding grant income in the third quarter of 2023, stood at $851 million, up from $787 million in the third quarter of 2022.
This increase can be attributed to strong volume growth in ambulatory care and hospital operations segments, improved contract labor costs, and recognition of $7 million of income from cybersecurity insurance proceeds.
The rise in adjusted EBITDA, driven by strong volume growth and cost management, indicates that the organization is effectively adapting to changing patient demands. It’s likely Tenet will continue to focus on operational efficiencies and growth opportunities in both ambulatory care and hospital operations in the fourth quarter and beyond.
So where did HCA and CHS fall short?
HCA's business in the third quarter was positive overall, which translated into strong revenue growth, but it seems the financial tipping point for HCA was its joint venture with Valesco as increased staffing costs and lower-than-expected sales had it performing below expectations.
As for CHS, it has been plagued with reimbursement challenges, inflationary pressures, regulatory hurdles, and evolving consumer behaviors CHS CEO Tim Hingtgen said during its investors call.
Hingtgen said CHS plans to focus on its expansion projects, strengthening its workforce, and controlling expenses to get its numbers back in the black.
CHS and HCA both announced they would downwardly revise their lower-bound guidance for the year following third quarter earnings.
Community Health Systems (CHS) is in the red for the third time this year.
Despite rising patient admissions and efforts to control labor expenses, CHS took a net loss of $91 million in its third quarter 2023 results.
Recent data shows hospitals are seeing some financial relief as revenue increases offset rising expenses and operating margins stabilize, but the same is not ringing true for CHS. The system missed Wall Street expectations for earnings per share despite its wins in increasing admissions and controlled labor expenses.
Why the continued losses this year? CHS has been plagued with reimbursement challenges, inflationary pressures, regulatory hurdles, and evolving consumer behaviors CHS CEO Tim Hingtgen said during its investors call.
Moving into the next quarter and beyond, Hingtgen said CHS plans to focus on its expansion projects, strengthening its workforce, and controlling expenses to get its numbers back in the black.
Here are several other key takeaways from CHS’ third quarter:
Revenue growth: CHS reported net operating revenues of $3.086 billion for the third quarter of 2023, reflecting a 2.0 percent increase compared to the same period in 2022. Net operating revenues increased by 5.1 percent, CHS said.
Volume growth: CHS experienced strong volume growth in admissions, adjusted admissions, ER visits, and clinic appointments during the third quarter. CHS says this growth is attributed to investments in service lines, physician recruitment, and capacity optimization programs.
Losses and adjusted EBITDA: CHS saw a net loss attributable to CHS stockholders of $91 million for the third quarter, compared to $42 million for the same period in 2022. However, when excluding specific adjusting items, the loss improved from $0.52 per share (diluted) in 2022 to $0.33 per share (diluted) in 2023. CHS’ adjusted EBITDA was $360 million, the report says.
Cash flow: Net cash provided by operating activities decreased to $29 million for the third quarter of 2023, compared to $137 million for the same period in 2022.
In a push to improve margins, the utilization of contract labor is declining.
Reducing labor costs is a top concern for CFOs, so pulling back on agency use has been a major theme in 2023, especially since the money CFOs pumped into contract labor during the pandemic is now majorly stressing the bottom line.
As HealthLeaders has been reporting, a new survey is showing there’s a major reduction in contract labor and an increased interest in recruiting and retaining home-grown staff.
According to Kaufman Hall’s 2023 State of Healthcare Performance Improvement report, the utilization of contract labor appears to be majorly declining. Only 4% of organizations are experiencing increased utilization of contract labor, compared to 27% last year, the report says.
In fact, 61% of respondents to this year’s survey say contract labor utilization is decreasing, compared to 44% in last year’s survey.
How are CFOs achieving this?
The ability to reduce reliance on contract labor may be driven in part by the significant percentage of organizations that are using such tactics as internal or enterprise float pools (64%) or a greater number of per diem or pro re nata employees (45%) in lieu of more expensive contract labor.
Organizations are also strengthening their recruitment and retention strategies. Almost all surveyed (98%) are pursuing one or more recruitment and retention strategies, including raising starting salaries or the minimum wage (90%), the report says.
These aspects are exactly what Scott Wester, president and CEO of Memorial Healthcare System, a South Florida-based nonprofit system, prioritized for his organization.
“COVID changed the landscape of how we dealt with the workforce, predominantly the reliance on agency nurse travelers, outside contractors, and not having enough personnel to meet the demand that was out there, mostly on the clinical side,” Wester said.
“We spent almost $280 million a year utilizing outside contract or incentive pay and heavy reliance on nurse travelers. We recognized we needed to get people back to wearing our Memorial badge. Over the course of 12 months, we've dropped about 80% of use of outside contract labor. We're now about a $200 million savings just on that perspective,” Wester said.
So how did Memorial pull it off? The organization did it by bolstering its talent acquisition team, making sure to play more offense than defense, and by reaching out to the work community to try to figure out what was limiting people from joining the organization.
While the reduction in contract labor will help, Kaufman Hall experts expect that it will be a slow climb for hospitals to return to the 3-4% operating margins that help ensure long-term sustainability.
While staffing and capacity challenges have clear implications for revenue, an increased rate of claim denials—reported by 73% of respondents—has had the most significant impact on hospitals’ revenue during the past year, the report says.
Ongoing labor cost management, revenue cycle optimization, and strategic planning will be key for CFOs in 2024.
CFOs will need to continue to focus on labor cost management. The declining utilization of contract labor and the emphasis on recruitment and retention strategies suggest a future trend of hospitals intensifying their efforts to manage labor costs even more so in 2024.
Leaders may explore innovative workforce models, invest in employee development, and collaborate with educational institutions to address contract labor costs and talent gaps.
Revenue cycle optimization will still be the key to financial health in 2024. With increased claim denials having a significant impact on revenue, CFOs will likely continue to heavily invest in technologies and processes to improve revenue cycle management.
Not only will tech investments help revenue cycle performance, but it can play an important part in staff retention strategies as technology can reduce administrative burdens.
CFOs will obviously need to continue to focus on achieving and maintaining long-term financial sustainability as margins are not where we want them. This may involve cost containment, revenue diversification, and strategic financial planning to gradually recover and maintain healthy operating margins into 2024 and beyond.
The Hospital of the University of Pennsylvania is in line to receive $86 million from the 340B drug program settlement.
Stemming from a legal settlement resolving cuts made to the 340B drug pricing program, the Hospital of the University of Pennsylvania is set to receive a massive payout.
The disbursement amounts to the sixth-largest payout to any hospital in the nation, and accounts for the bulk of the $129.2 million coming to the University of Pennsylvania Health System, according to CMS.
The Philadelphia Inquirerreported on the payout and says the settlement effectively addresses past reductions in the program for the hospital.
The Pennsylvania hospital says that under the program, it saved $717 million in the year that ended June 30 and it is using some of those savings to help pay for $17.8 million in unreimbursed care in emergency departments, according to the Inquirer.
This comes on the heels of CMS’ announcement earlier this year that it would pay eligible hospitals $9 billion in a lump sum payment under a proposed remedy for the “unlawful” 340B payment cuts.
"Henry Ford Health system and a lot of folks rely on 340B discounts and other mechanisms like disproportionate share payments. We're a big teaching institution, so a lot of these special payments that we do in order to teach the healthcare leaders of the future or make sure that we can take care of vulnerable patients are extremely important," Damschroder said.
"So that is an area that we and others are actively—in our advocacy—ensuring that these programs stay intact or evolve to a place that enhances the programs for the people that were trying to care for," said Damschroder.
Cheryl Sadro, the CFO for UC Davis Health, and Tammy Trovatten, the director of government reimbursement for UC Davis Health, also connected with HealthLeaders to discuss the financial impact of these 340B payments.
“One of the things we've been watching and will continue to watch through this process is where we go from here with 340B. We're the only level one trauma center in a multicounty area, and between 340B trauma and transplant, we've garnered a large portion of our bottom line,” Sadro said.
HCA CEO Sam Hazen told investors that compensation associated with its staffing firm pressured its 2023 third-quarter earnings.
The for-profit healthcare system just released its 2023 third-quarter earnings, and while it’s reporting financial growth, it seems its joint venture with physician staffing firm Valesco impacted the bottom line.
Here are seven key takeaways of HCA’s third-quarter report and why it may be the first ripple we see from CFOs scaling back on contract labor:
Financial performance: HCA Healthcare reported robust financial performance for the third quarter of 2023, but its newest joint venture is “unfavorably” tipping the scales. HCA reported $1.63 billion in third-quarter operating income on revenues of $16.21 billion, but the company's results were negatively impacted by its physician staffing joint venture, Hazen said.
Earnings and net income: Despite strong revenue growth, the net income attributable to HCA Healthcare was $1.079 billion for the quarter.
Adjusted EBITDA: The company reported an adjusted EBITDA of $2.880 billion for the quarter. HCA’s joint venture had a negative impact of about $100 million on HCA's adjusted EBITDA in the quarter as well on a year-to-date basis, CFO Bill Rutherford said on the investors call.
Operational metrics: Key operational metrics, such as same facility admissions, same facility equivalent admissions, and emergency room visits, all increased in the third quarter.
Balance sheet and debt: As of September 30, 2023, HCA Healthcare had total debt of $39.346 billion.
Cash flow: The report shows a decrease in cash flows provided by operating activities compared to the previous year.
Dividend and share repurchase: HCA Healthcare declared a quarterly cash dividend and repurchased common stock during the third quarter.
What does this mean for the rest of the industry?
HCA's business in the third quarter was positive overall, which translated into strong revenue growth, but it seems the financial tipping point for HCA was its joint venture with Valesco as it “performed below our expectations," Hazen said.
Why did the staffing firm perform below expectations? HCA missed Wall Street profit estimates in the third quarter largely due to Valesco's increased staffing costs and lower-than-expected sales, Rutherford said.
While Hazen stands by the long-term strategic value of acquiring Valesco, which absorbed thousands of physicians across hundreds of locations, HCA’s impacted earnings report comes amid financial volatility for staffing firms across the industry.
At a time when CFOs are trying to scale back their use of staffing firms and focus on bringing staff in-house, more staffing firms are filing for bankruptcy and reporting major losses.
HCA’s earning report may be the first ripple we see from CFOs scaling back on contract labor and underscores the importance of careful vendor selection and risk management for hospitals CFOs.
