Net revenue losses estimated at $161.4 billion during the four-month period from March to June 2020. Dire warnings that the number of uninsured Americans could climb north of 40 million as a result of COVID-19 economic fallout. Ongoing uncertainty around the future of the Affordable Care Act, which may hinge on the outcome of the 2020 presidential election. Clearly, for executive leadership at U.S. hospitals and health systems right now, there are a lot of moving pieces in play. Let's take the pulse of an ecosystem in crisis, then turn to specific ways those leaders can help their organizations navigate out of it.
taking the pulse: COVID-19's impact on hospitals and healthcare systems
What's the financial outlook for hospitals and healthcare systems right now?
Going into the pandemic, U.S. hospitals had, on average, 53.4 days cash on hand (defined as the number of days the hospital can pay its operating costs) and 49.2 days in net accounts receivable (defined as the number of days payment is outstanding before it gets collected), according to data from The Journal of the American Medical Association. But these averages may belie the darker reality that many hospitals were in considerably less fiscally stable positions: Those in the 25th percentile had only 7.6 days cash on hand on average, for example.
At the same time, denial write-offs from healthcare payers appear to be on the rise, with one benchmark showing that hospitals have been writing off as "uncollectible" 90 percent more denials on average over a six-year period. Perhaps not surprisingly, all of these factors are leading many organizations to hold off on key capital investments at the moment, particularly around innovation and technology, in order to have critical cash on hand, minimize furloughs and continue to pay staff members.
So that's the financial outlook. But where are we going next, and where have we recently been, specifically in the context of COVID-19? A report from the American Hospital Association (AHA), which includes forecasts for the remainder of the year based on current trends, breaks all of that down. It doesn't make for particularly cheerful reading. A few notable takeaways:
- Between March and June 2020, hospitals and health systems suffered an estimated $202.6 billion in losses, or $50.7 billion in lost revenue per month on average, due to lower patient volumes.
- From July 2020 through the end of the year, those losses are likely to continue to mount, to the tune of $20.1 billion per month on average.
- All together, the AHA forecasts total losses for the nation’s hospitals and health systems somewhere in the ballpark of $323.1 billion for 2020.
During the early phases of the global pandemic, in fact, hospitals saw volume decreases of up to 99 percent for their most lucrative inpatient procedures — and these procedures collectively account for about half of all payments made to hospitals. By the time we reached the height of the crisis, urgent care volumes, too, had reportedly dipped anywhere from 50 to 70 percent compared to pre-COVID-19 levels at hospitals across the board.
Alarming, too, are the anecdotes I've been reading about certain patient behaviors during the pandemic: transplant recipients turning down donated organs, for example, or cancer patients refusing to come in for essential treatments. While that initial wave of fear and panic should be waning by now, hopefully, hospitals and healthcare systems nevertheless need to clearly communicate a message of safety to the public before anxious patients decide to return en masse — a topic we'll turn to next.
a new strategic marketing imperative for our new normal
In the immediate aftermath of COVID-19, doctors, nurses and other front-line healthcare workers were held up in the public eye and heralded as our heroes. (And I might add to that group the finance executives, CIOs, CHROs and others I've worked with during the course of this pandemic: You continued to show up every day, enabling your hospitals and health systems to function. Take a bow. You deserve a lot of credit, and here's a round of applause for you, as well.) Yet, encouraging as all that public approbation was, it's not as if the positive PR has translated to new patients for revenue-challenged hospitals and health systems.
Rather to the contrary. Indeed, there's evidence that many patients are continuing to delay non-essential services, despite the Centers for Medicare and Medicaid Services (CMS) opening up access to "non-emergent, non-COVID-19 healthcare services" way back on April 20.
This cumulative backlog of procedures had initially been a source of optimism among hospital and health system leadership, with many anticipating surging inpatient services volumes in Q3 and Q4. For all too many hospitals and health systems at present, however, that simply hasn't materialized yet — and forward-thinking organizations should recognize in that a strategic marketing and communication imperative. The bottom line: Until perceptions change, patient behaviors aren't likely to.
But what are the key points to convey? What's the story that these hospitals and health systems should tell? In constructing that narrative, the following three areas should be paramount, to my mind:
- Transparency: Be transparent about the number of COVID-19 cases you're handling. Clarify the measures you've put in place to minimize new infections (e.g., different facilities for COVID-19 treatment vs. inpatient services) and reinforce how and why your ongoing COVID-19 screening procedures (e.g., virtual check-ins, screening at all locations, universal masking, social distancing and so on) are effective.
- Capabilities: Highlight your new capabilities, whether that means remote registration options or self-service portals. Everything from scheduling to registration, intake, payment and more can be handled through digital portals without in-person contact at this point — just be sure you clearly explain the benefits of these new capabilities for patients, too (e.g., minimizing in-person contact and time spent in waiting areas).
- Flexibility: Call attention to innovative new service locations and settings, such as telehealth, that may be available to patients. Try to help your patients identify the right option based on their unique and personal healthcare needs.
"The Numbers Tell Our Story" campaign launched by Jefferson Health is exemplary in this regard, whereas an ad like this one from the Oregon Associate of Hospitals and Health Systems, however reassuring, fails to deliver on a lot of the key messaging above.
Finally, don't underestimate the importance of community engagement, which should operate in parallel with these strategic messaging efforts. Temporary working groups, cross-functional task forces, virtual Q&A forums — whatever approach you take, community engagement needs to be a piece of it. That's the only way we can ultimately shift public perception around safety and risks related to COVID-19 for hospitals and health systems.
For hospitals and health systems, one thing is absolutely clear at the moment: We aren't out of the woods yet. Not by a long shot. Healthcare, traditionally thought of as a "recession-proof" industry, has proven to be fallible after all. In this article, I've traced the precarious path many healthcare organizations have faced since the onset of the global pandemic, broken down the forecast for what's ahead and called out an urgent communication and marketing imperative that should be incorporated into organizational strategies going forward.
Backing up a bit, from where I sit in Tatum's healthcare practice I can also share with you just how different the day-to-day reality is for interim executives in the healthcare space right now. Many of these C-suite leaders who had in the past happily traveled for work every week now won't take on assignments if it means they have to get on an airplane (although they seem to be okay with getting in the car). From the standpoint of your talent pipeline, in other words, having a local partner with an existing network of candidates in your area matters more than ever before. And for hospitals and healthcare systems reeling from vacancies in their executive suites, bringing on experienced interim executives to help turn the tide may be the only viable near-term option they have.
Reach out to me if you'd like to learn more, connect and get hands-on solutions that can help position your hospital or health system for profitable growth and deliver bottom-line value today.