By any measure, 2020 was a disastrous financial year for U.S. healthcare providers.
As the COVID-19 pandemic overwhelmed their emergency capacity, hospitals and health systems saw their most profitable revenue pipelines dry up as patients delayed elective procedures and stayed home.
Calling it the “greatest financial crisis in our history,” the American Hospital Association estimated in June that healthcare providers would lose a total of at least $323 billion in 2020—and that was before the country was hit with a late-year surge in coronavirus cases. Hospitals reported average declines of between 20% and 35% for inpatient and outpatient volumes, respectively, compared to 2019.
With vaccines now rolling out, the healthcare industry can afford to be more optimistic about 2021. But a strong recovery won’t be automatic. It will demand careful, smart planning that takes into account the many new challenges and opportunities for healthcare delivery in the post-pandemic world.
Hospitals can benefit from taking a quarter-by-quarter approach to their recovery in 2021, pushing ahead with operational and strategic changes as the pandemic starts to wane and we return to something of a more normal environment by the end of the year.
In the first quarter, the vaccine rollout must continue to be the top priority. Delivering vaccines smoothly and efficiently isn’t only important to beat the virus; it’s crucial for building the community trust and confidence that will bring patients back for exams and surgeries and reactivate hospitals’ key profit pipelines.
The current tight supply of vaccines means hospitals are facing intense pressure to meet the demand from their most vulnerable populations. Patients in some states have complained of long waits, chaotic booking systems and confusing messages from their local authorities and health providers. Hospitals need to work closely with their suppliers, medication management teams and local health authorities to get the logistics right. No less important, they need to leverage their marketing departments to ensure that public communication is clear, proactive, consistent and transparent. In the age of social media, hospitals need to control the message about vaccine management or risk having it controlled by others.
By the second quarter, conditions should allow the focus to shift to developing a clear financial plan, taking into account the impact of the last year and the key changes that are going to be needed going forward. This is especially vital for the many hospitals that have we shifted to a June financial year-end. This is the time to take a hard look at recent expenses and to analyze which items from government aid programs like PPP loans can be claimed or should be returned.
Many hospitals, for example, received advance payments for projected Medicare fees that will need to be factored into revenue and spending projections.
Any previous long-term financial plan will need to go back to the drawing board to account for the post-COVID-19 world.
That plan now needs to factor in more nonclinical staff working from home, including the technical support they’ll need and how to use the real estate they leave behind. Staff levels will likely need to be adjusted to ensure the institution is right-sized for the new demands.
Investing and staffing for the transition to even more telehealth services—one residual change from the pandemic that is clearly here to stay—needs to be a central part of the financial forecast.
The third quarter is the time to start implementing the changes you’ve prioritized in the financial plan. The key goals are likely to be ensuring the right staffing levels (potentially using labor productivity benchmarking methods), making the right investments for telehealth and updating revenue cycle management to ensure the organization is being paid for all services provided.
In the scramble to put together telehealth services amid the pandemic, some providers have overlooked the need for delivery methods to be HIPAA-compliant. Considerations for documentation and billing should be made to ambulatory EMR systems to ensure proper compensation for telehealth activities.
FaceTime, for example, has been widely used by hospitals since the pandemic started but is not HIPAA-compliant. Many E&M (evaluation and management) codes from regular in-person provider visits should be reviewed and updated in order to avoid missing revenue from virtual provider care.
By the fourth quarter, the hope is that the virus will be in retreat as a result of vaccinations, continued social distancing and an element of herd immunity. As a semblance of normality returns and revenues rebound, healthcare leaders should have more space to focus on addressing the weaknesses exposed by the pandemic, such as the failure of many emergency departments to handle the surge in patients.
This is also the time to think about how best to capture the opportunities presented by technological and demographic changes. Some 10,000 people turn 65 every day in the U.S., representing a huge opportunity for healthcare institutions to improve the delivery of services and leverage the trust that they have hopefully built with their communities during the pandemic.