Being a hospital or health system CEO in 2023 is all about embracing the current reality and deciding it’s not so bad after all. Operating margins across the industry are still down but investment portfolios are coming back. Nursing labor costs are still high but those discussions around new nursing models that were once off limits are now out in the open.
The middle of 2023 finds many health systems in a year of transition, away from the crisis mode of the pandemic but looking for new strategies that work in a current environment where the popular discussion is more about rich payers and the cool new private equity backed providers.
The 32 invited hospital and health system executive officers at the HealthLeaders CEO Exchange this week emanated a shared confidence that brighter days are ahead.
Challenges remain, but the ideas that are being discussed to solve them have some new wrinkles, including:
Nursing Workforce Disruption Can Be a Good Thing
While nursing shortages have been costly and impacted service delivery, disruption also has brought about necessary changes, many of which have been long overdue. Nurses are gaining a stronger voice. Leaders are providing more communication and greater transparency. New models of care are being introduced, giving rise to increased diversity and clear career paths. Leaders are finding ways to remove labor-intensive, non-nursing tasks from the bedside. AI and virtual care are filling critical gaps while improving quality and efficiency. And CEOs and CFOs are working more closely with CNOs to forge solutions. Much remains to be done, however, such as treating nursing as revenue versus cost, and ensuring a safe environment as workplace violence increases.
Digital is Great, but…
Hospital and health system CEOs see the value of digital health in multiple ways, from improving access, streamlining workflows, and improving quality. The gathered CEOs participated in a workshop lead by CIO and author Ed Marx titled “Finally See the Value of Digital Transformation.” Headwinds to “going all in” on digital transformation remain, including the enormous bandwidth still required for EHR implementation and maintenance, financial constraints exacerbated by significant industrywide operational losses and some uncertainty around which technologies will really engage with customers. In general, many CEOs still view digital as not a single transformative strategy but one of several to grow the business.
Play Harder with Payers
Relationships with national and regional commercial payers remain a challenge, with several CEOs representing health systems that are engaged in somewhat contentious contract negotiations with payers. In these negotiations, payers and providers are often jousting for public support, with payers standing behind the argument that they are keeping costs down, while providers may argue that higher premiums have led to higher payer profits rather than reduced healthcare costs. One of the CEOs encouraged his colleagues that ultimately providers may have more leverage than they are currently using.
Happy Physicians, Happy Healthcare
With such a shortage of physicians in the market, it is more important than ever for health systems to ensure they are working with their physicians to keep them engaged and happy. Efficiency drives providers, as shared by the group, as they pose the question “How can we make their job easier and more meaningful?”
While cash is ultimately king, to keep your docs out of the hands of private equity competitors, consider using tools like different care models, automation, and technology around documentation, and developing physician leaders to be a driver of your system’s mission.
Compete and Grow
As private equity in healthcare continues to knock on the doors of our CEOs, finding ways to not only compete for the same patients but also opportunities for growth is crucial for survival.
Keeping in mind the phrase “no margin, no mission,” making your system the provider of choice in your market with strategies of: an A+ customer experience, retaining an engaged workforce, and understanding the alignment of your strategic plan. However, growth via partnerships is a pathway more CEOs are taking. Though they can be out of necessity, partnerships are critical in helping drive revenue by divesting in service lines that are no longer benefiting the organization while ensuring customers are receiving the care they need.
To inquire about attending any HealthLeaders Exchange event, email us at exchange@healthleadersmedia.com. Space is limited so reach out immediately. There are no fees and travel is covered for qualified executives.
Nurses are striking. Payers are flexing. What’s a CFO to do?
2023 may end up being the year that healthcare chief financial officers envy their counterparts in retail or manufacturing. When costs go up for those CFOS, they can always raise prices. Not so for hospital financial leaders whose revenue butts against the brick walls of commercial payers and the U.S. government.
What has pushed health system margins to the breaking point has been an unprecedented rise in the cost of clinical labor, coupled with a slow return to pre-COVID volume that might help make up for narrow operating margins. What CFOs can do in the meantime may fall back to good old hard decisions: cut labor costs strategically, play hard with payers and take risks on new revenue streams.
How to attack these hard decisions requires some careful planning, and some advice. We asked the members of the HealthLeaders CFO Exchange for the top issues they are facing in 2023. Below are just a few. For a deeper dive, the members of the HealthLeaders CFO Exchange will gather March 22-24 to talk strategy, workarounds and solutions to:
Hard decisions for the workforce
Of particular concern for CFOs is the potential for nursing labor costs to lead to nursing labor strife. No CFO who wants to get to the point where their caregivers are walking out, but neither can a reasonable CFO ignore the rise of clinical labor costs and how to incorporate that into a long-term strategy. Inherent in that discussion is a realistic view of temporary labor.
CFOs are always looking for ways to keep labor nimble, with solutions that optimize costs by more closely matching with volume.
Leverage with payers
There is no such thing as mutual “payer relations” these days as the nation’s health insurance conglomerates continue to enjoy record profits, and along with that the leverage to keep forcing down rates in negotiations with health systems. Providers are finding it increasingly difficult and costly to manage the delays and denials payers are throwing at them.
How to respond? Looking to lock in contract rates over a longer term may help even out the effects of recent inflation.
Fighting back has its risks. Some providers are scaling back participation in Medicare Advantage plans, which may end up alienating patients. Some providers may also revisit the idea of provider-owned health plans, hoping that the experience will provide more value than previous cycles.
Market dynamics: Threats and opportunities
Even in a down market, growth is still an imperative. Whether to build, buy, partner or merge will depend on the threats or opportunities in your market. But 2023 demands a consistent and methodical approach, looking carefully at the effects of inflation on proformas and new services.
And while CFOs are looking at those, don’t forget to watch your physicians, who may be having lunch today with the provider wing of a giant payer or VC-backed clinic that will cherry pick what is left of your reliable customer base.
Debt, investments, and cash
Even with strategic questions taking up considerable executive bandwidth in 2023, there is still the urgency to keep all the cash you can now. Are you reviewing every contract for value? Have you squeezed out all the value you can in supply chain and employee benefits?
Is the investment portfolio correctly balanced for risk and growth? Are you buoyed against looming debt covenants? Is your bond rating at risk of a downgrade?
None of these questions are necessarily new for 2023.
But the solutions just might be.
The HealthLeaders Exchange is an executive community for sharing ideas, solutions, and insights. Please join the community at our LinkedIn page.
