Healthcare system executives predict revenue for hospitals and healthcare systems to be lower at the end of 2020 due to the COVID-19 pandemic.
Healthcare leaders predict lower hospital revenues by end of 2020
May 22, 2020
by John R. Fischer
, Senior Reporter
The vast majority of hospital and healthcare system executives expect their organization's revenues to be lower by the end of 2020, according to a Guidehouse analysis of a survey conducted by the Healthcare Financial Management Association.
That’s the sentiment shared by 89% of the 174 respondents in the report, with almost two-thirds expecting decreases of more than 15% and one in five projecting declines greater than 30%.
"For provider executives, the main area of uncertainty is specific to the recovery of patient volumes," Dr. Chuck Peck, a partner at Guidehouse and a former health system CEO, told HCB News. "As local and state legislators allow organizations to conduct elective procedures, will consumers avoid obtaining care, including in the emergency department, due to fear of contracting the virus? How will the economy impact consumer ability to afford and access care? Executives have also been left asking, 'how do we meet the demand for increased telehealth and remote work? Despite federal funding and relief sources, how will we overcome the significant operating gaps and struggles accessing capital from the loss of patient volumes and investment income?'"
Executives say a number of intermediate and long-term cost reductions in capital expenditures would be needed to offset the financial strain of the pandemic on their institutions. Among them are new and existing construction (76%); labor adjustments such as furloughs, layoffs, and hiring freezes (76%); and canceling or renegotiating contracts and co-management agreements (69%).
Half of the survey’s respondents do not expect elective procedures at their organizations to return to pre-COVID levels until the end of the year, while 11% of all executives — only 3% of health system respondents — believe federal funding will be enough to cover COVID-19-related costs. Another 15% say they are more likely to participate in M&A activities as a result of the pandemic, and 14% are more likely to seek new partnerships.
Despite their losses, executives do see a greater adoption of digital technologies in the long-term, particularly telehealth, which along with contact centers is one tactic organizations often say they will implement or improve to enhance future growth revenues. Sixty-seven percent predict they will use at least five times more than they did prior to the pandemic, and more than 22% have already decided to increase work-from-home options and reassess future space-use. One third believe their organizations have all needed telehealth capabilities, while one in five expect their organizations will return to primarily onsite work arrangements set up before the pandemic.
"Removal of regulatory barriers, more lucrative reimbursement models, increased start-up funding, and rapid shifts in access have all catalyzed telehealth adoption. Similarly, consumers will be more willing to engage in telehealth visits than previously, permanently altering physical appointment volumes," said Peck. "Furthermore, healthcare call centers have traditionally focused on metrics like dropped calls and call wait times. As the pandemic evolves, providers must implement contact center platforms and applications that go beyond simply answering the phone, to include speech recognition and customer information on pop-up screens."
Organizations should also consider investing in service line strategies, and according to 57% of respondents, improve revenue cycles, including enhancing accounts receivable and collections, to promote further growth.
Among other questions on their mind are how will they respond to a second COVID-19 wave or surges, if one should take place, and how do they address dramatic shifts in payer mix, according to Peck, who believes the pandemic will teach executives much about their changing industry and how to adapt in ways that address these concerns.
"The pandemic has taught healthcare the importance of being nimbler to right size operations, and moving from a fixed to variable cost structure will be key to do so," he said. "Many back-office corporate functions have moved to a virtual environment as a result of the pandemic, leaving provider executives wondering whether they need as much real estate. According to our COVID survey, just one-in-five executives expect their organizations will return to the primarily onsite work arrangements they had before the pandemic. Not surprisingly, capital expenditures, including new and existing construction, is the top area respondents say they’ll target for intermediate and long-term cost reductions."
The survey was conducted between May 4 and May 8.