The COVID-19 crisis has had a devastating impact on healthcare providers’ financial performance. But the same kinds of digital innovations that helped drive the industry’s inspiring response to the public health crisis will fuel its financial recovery, setting the stage for better patient experiences and improved operating performance.
The gravity of COVID-19’s financial impact on healthcare providers is difficult to overstate. According to a release from healthcare consulting firm Kaufman Hall, hospital operating margins “plummeted 282% in April compared to the previous year, 326% below budget.” April was the first full month to bear the brunt of COVID-19-related disruptions to costs and revenue. And according to the analysis, “The damage has been severe, with median operating margins falling to -29%.”
“April was the worst month ever for hospital finances,” said Jim Blake, managing direct at Kaufman Hall. “Our nation’s hospitals are in a perilous position. They are serving as the frontlines of our battle against this virus, but the pandemic is threatening their fundamental financial viability at a time when we need them most. The road back to recovery will be difficult and our healthcare system will be forever changed.”
The early stages of that change are already underway. Indeed, some healthcare systems and hospitals had already included a number of transformational initiatives in their strategic plans. The COVID-19 crisis has motivated many to accelerate what had been long-term ideas into immediate operating imperatives. Telehealth is just one example. Necessitated by requirements for contactless patient engagement and supported by revised reimbursement policies from Medicare and Medicaid, digital patient engagement has been fast-tracked by providers everywhere to manage costs, boost productivity and respond to patient expectations.
This technology-enabled transformation extends to healthcare financial management, where the need for transformation is more acute than ever before. According to a Black Book Research release titled Accelerated Digital Transformation Key to Recovery for Healthcare CFOs,” when more than 1,800 healthcare CFOs and other leaders were surveyed about the effectiveness of their existing systems, “93% of all provider respondents stated that missing capabilities and redundant or conflicting systems were identified in Q2 2020 to drive immediate financial systems rationalization and acquisitions.”
Healthcare CFOs recognize that the digital transformation of financial systems is an imperative. And although, “100% of all CFOs surveyed recognize they will experience a significant revenue decline this fiscal year and they will have to adjust spending accordingly, only 12% expect they will need to cut or defer spending on their financial systems’ digital transformation.”
“It would seem most CFOs understand what the pandemic has proved is the need to speed up digital transformation initiatives to not only survive but to prosper in the new normal,” said Doug Brown, President of Black Book Research in their announcement. “For CFOs eager to expedite their organization’s digital transformation, the standardization and simplification leaders want in their back-end processes are allowing for less complicated, faster adoption despite the times.” In fact, the research goes on to report, “Eighty-one percent of surveyed CFOs and senior leaders revealed the absolute and immediate need for digital transformations for long term survival of their healthcare organization.”
One Loyale Healthcare client, an industry-leading provider of financial and operating solutions across the country, has made digital financial transformation its top priority. By working with Loyale to shift provider processes away from costly, labor-intensive systems requiring person-to-person contact, they are finding that patient safety and revenue cycle performance don’t have to come at the expense of patient satisfaction. This vision for digital patient financial engagement was an important part of why Loyale was chosen as the digital patient engagement platform for one of the nation’s largest healthcare system.
Traditional healthcare financial systems have become an operational liability, especially now in the midst of the COVID-19 crisis. Loyale’s clients are looking to reduce their costs while improving the delivery of care in a socially-distanced, disease-conscious environment and they want to do it now. Contactless digital patient financial engagement is the only path that offers the efficiencies providers need and the experiences patients demand.
Understanding the New Normal for healthcare financial management
Before COVID-19 lit a fire under many hospitals’ and health systems’ transformational initiatives, patient revenue cycle systems were encumbered by a variety of inefficiencies. Digital transformation corrects these, thereby reducing costs and improving resiliency - all while setting the stage for longer-term revenue improvement. The comparison below illustrates some of these inefficiencies’ outcomes and the results that can be achieved as new approaches are embraced.
Pre-COVID-19 / Post COVID-19: The New Normal
High Payroll or Outsource cost structure / Low-cost, tech-enabled cost structure
Difficult to scale, either up or down / Instantly adapts to meet demand
Digital patient engagement less than 10% / Digital patient engagement of 60 to 80%
High patient collection costs / Two-thirds reduction in cost or more
Financial & regulatory compliance, costs / Outsourced - no staff time or added expense
Low patient collections, 20%+ bad debt / Reduce patient bad debt by 20% or more
Up to now, most hospitals and health systems have relied on large teams of staffed and outsourced personnel to manage patient financial interactions. The patient’s financial journey, from the point of engagement through treatment and finally into billing and payment - is affected by multiple systems, many of which have customarily been performed on site, face to face. Additionally, many of these systems don’t talk to each other, requiring even more work and creating opportunities for error. Finally, this disjointedness has made it impossible for even the most sophisticated providers to really understand how their patient revenue cycle systems are performing.
Alternatively, digital patient financial engagement is completely integrated, not only with other revenue cycle systems, but with other key healthcare systems such as Electronic Health Record (EHR) and merchant services. Perhaps most important of all, digital patient engagement incorporates the best qualities of proven digital providers in other industries to engage and delight patients who have become accustomed to finding information and doing business online. Its superior integration from end to end throughout the patient financial journey helps assure that healthcare CFOs and other leaders know exactly what’s working and what isn’t. This is crucial business intelligence that finally makes it possible to make well informed decisions about what to do next.
Turning Trauma into Transformation
The COVID-19 crisis has left a wake of financial damage across the healthcare industry. The severity of that damage is discouraging to say the least, and overcoming it won’t be easy. But cause for optimism is clearly evident throughout the industry’s remarkable response to the crisis. From creative new techniques for remote triage to satellite ICUs assembled and staffed in days instead of years to 3D-printed throat swabs to improve access to testing, America’s healthcare system has already demonstrated an astounding ability to adapt and transform. The industry’s continued commitment to digital transformation will be a fundamental component of its successful transition into healthcare’s new normal. We at Loyale are honored to be a part of it.