Bon Secours Mercy Health has been working since 2019 to diversify into alternative revenue sources and new digital platforms.
But leadership with the nonprofit hospital chain admitted massive labor expenses caused by the pandemic are impacting that push to branch out.
“It has the potential to disrupt our investment,” Bon Secours CEO John Starcher said during the annual J.P. Morgan Healthcare Conference on Tuesday. “I would be disingenuous if I didn’t say that labor pressures are one of the things that keep me up at night.”
Starcher said the hospital system faced inflationary pressures of over 8% in 2021 and that agency and travel nurse expenses doubled in the fourth quarter of last year.
“That has the opportunity to add an additional $200 plus million in expense that we hadn’t historically carried,” he said.
The intense pressure from labor expenses, which are being felt across the entire hospital industry, has forced Bon Secours to be more disciplined about executing diversified strategies that can bring in alternative revenues.
Starcher cautioned that the increase in labor costs doesn’t have to come “at the expense of the investments in other opportunities.”
Bon Secours has moved in recent years to make investments in diversified growth opportunities. These include the purchase of revenue cycle management company Ensemble, which has grown from $10 million in revenue since it was first purchased to $1 billion.
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Starcher said not only Bon Secours but other systems have struggled with cash flow and getting patients through the system over the last two years.
Other investments include the creation in 2019 of Harness Health Partners, an employee health solutions company, and Advantus Health Partners, which offers supply chain solutions.
Starcher added it was important not just to grow Bon Secours' geographic footprint.
“We will be less anchored to our geographic footprint,” he said. “If the pandemic … has taught us anything is geographic is less and less important in terms of leveraging meaningful scale.”
Bon Secours isn’t alone in combating rising labor expenses. AdventHealth’s leadership team shared on Monday at JPM that labor costs led to an additional $400 million in operating expenditures last year.
Hospitals have faced a staffing crunch over the past year due to the COVID-19 pandemic, which has fueled a reliance on pricey travel and agency nurses to preserve enough staff capacity to fight the virus.