Making financially-sound decisions to fortify the workforce requires proactivity and discipline.
The financial toll of the workforce crisis facing healthcare is placing immense stress on the bottom lines of hospitals and health systems.
Labor costs are high and continue to rise as a result of recruitment and retention efforts to mitigate employee turnover, which continues to plague organizations in the current climate.
Executives spanning the C-suite got together in Washington, D.C. at the recent HealthLeaders Workforce Decision Makers Exchange to shares ideas on how to improve ROI with the workforce. Here’s what they said.
Taking risks with technology
Whether it’s AI or virtual nursing, leaders should be welcoming technology into the workplace to improve efficiency, attract talent, and combat burnout.
Investing in technology means pouring financial and operational resources into solutions without knowing for certain that the direct ROI will be there, especially in the short term, but organizations can’t afford to be risk-averse with battling workforce shortages.
The technology doesn’t even need to be outside-the-box. “We’re chasing bells and whistles” instead of trying to solve for areas like clinical and administrative burden, said Praveen Chopra, chief digital and information officer for Emplify Health.
Solutions like ambient listening tools to automate transcribing not only reduce time spent on tasks for clinicians, resulting in fresher workers, but allow for that extra time to be used more effectively instead of cramming in more time for patients.
Virtual nursing can also be a valuable investment to provide flexibility for nurses wanting more optionality.
Sharla Baenen, chief operating officer at Emplify Health, Bellin region, said that her organization wanted to use virtual nursing to become a destination workplace. However, measuring its impact wasn’t so clear. On the clinical side, Bellin focused on decreasing vacancy rates and the length of stay and saw that those targets were being met. From a workforce perspective, ROI can be quantified through recruitment and retention rates, and qualified through nurse engagement, which Baenen shared has gone up.
Regardless of the technology providers are considering though, clinicians should be involved from the get-go in the process of designing solutions that are easy to use and don’t require extensive training—another clinical and administrative burden. How clinicians are educated and re-educated on using technology can often make-or-break whether the juice is worth the financial squeeze.
Managing labor resources is critical for organizations right now with 40 cents of every dollar going towards labor, said Mike Marquardt, CFO of UVA Health System.
Leaders should look at a holistic approach to the workforce, with CFOs needing to partner with CMOs, CNOs, and COOs to get the right employees at the bedside. Hearing from those employees on how to create more efficiency and make their lives easier will also enable for greater engagement.
It’s incumbent on executives to set the tone for management and hold them accountable as well. That may involve creating more opportunities for training or education of managers, allowing them to be better equipped to allocate resources and put workers in the best position possible.
One of the primary ways organizations can be more cost-effective with staffing is by phasing out expensive contract labor, Marquardt stated. For example, traveling nurses, while instrumental for providers during the pandemic, aren’t delivering the bang for your buck to sustain a workforce. The focus should be on recruitment of new staff and retention of employees already in the building, which have clearer ROI.
By aligning workforce initiatives with strategic goals and optimizing labor expenses, organizations will be able to overcome staffing shortages while maintaining financial health.
See more coverage from the HealthLeaders Workforce Decision Makers Exchange here.
The HealthLeaders Exchange is an executive community for sharing ideas, solutions, and insights. Please join the community at our LinkedIn page.
Details on the acquisition have emerged after the two sides inked a definitive agreement.
The terms of General Catalyst’s purchase of Summa Health have finally been revealed.
The venture capital firm’s Health Assurance Transformation Corporation (HATCo) signed a definitive agreement to acquire the Ohio-based hospital operator for $485 million, the organizations announced, with the details outlining the conditions of the transaction.
General Catalyst first shared its plans to scoop up a health system to be a proving ground for new technology around a year ago at the HLTH conference. It then selected Summa in January, with HATCo CEO Marc Harrison saying the nonprofit’s size and status as an integrated delivery system made it the right fit for transformation.
In acquiring Summa for $485 million, HATCo will allow the system to wipe out its existing debt of $850 million when combined with its current cash, according to the announcement. The remaining cash will go towards funding a separately governed community foundation to support investment for community health in greater Akron region.
HATCo is also committing $350 million in capital funding over the first five years for routine purposes and investment in technologies, along with $200 million over the first seven years for strategic and transformative investments.
The injection of capital will be beneficial for Summa, which experienced an operating loss of $37 million for the first nine months of 2023 after suffering an operating loss of $39 million in 2022.
“As part of HATCo, Summa Health will be better positioned to build upon our existing strengths and capabilities while also benefiting from new opportunities and technology. Our goals are to expand access to care and improve the experience for our patients, providers and staff,” Summa president and CEO Cliff Deveny said in a statement. “This is only the beginning of our long-term journey together.”
Summa will need to transition from a nonprofit to a for-profit provider, potentially creating a regulatory hurdle. However, Harrison and Deveny said earlier this year that they don’t anticipate regulatory scrutiny being a “huge issue” as they worked with the Ohio Attorney General’s office and the Ohio Department of Insurance.
In the announcement of the definitive agreement, the organizations said they are submitting applications to authorities like the Ohio Attorney General, the Ohio Department of Insurance, and Federal Trade Commission to comply with the regulatory review process.
Hospital divestitures also shaped the for-profit health system’s finances, which included $5.1 billion in revenue.
Tenet Healthcare’s restructuring strategy is paying dividends on the bottom line.
The health system delivered a strong third quarter, driven by increased patient volume in its hospital and ambulatory businesses, while feeling the effects of a shifting portfolio after completing hospital divestitures.
For the quarter, Tenet reported a net profit of $472 million and revenue of $5.12 billion, which were both up from the respective figures of $101 million and $5.06 billion for the same period in 2023.
Tenet has sold several of its hospitals in recent years to place more focus on its ambulatory segment, made up of United Surgical Partners International (USPI) and its 520 ambulatory surgery centers and 24 surgical hospitals across 37 states.
Ambulatory revenue in the quarter grew by 21% year over year to $1.14 billion, with surgical business same-facility system-wide net patient revenues jumping 8.7% and net revenue per case increasing 7.6%.
Speaking to investors on an earnings call, Tenet chairman and CEO Saum Sutaria said: “Our transformed portfolio provides us with a high degree of capital and financial flexibility. We will continue to deploy capital to enhance growth in our industry-leading ambulatory surgical business through M&A and de novo development, increased capital spending to fuel organic growth and return excess capital to shareholders via share repurchase given that we believe our equity continues to trade at attractive multiples relative to the market.”
In its hospital segment, same-hospital net patient service revenue per adjusted admission increased 3.3% year over year, contributing to revenue of $3.98 billion. Revenue declined 3.4% from the third quarter in 2023 mainly due to hospital divestitures in the first quarter of this year.
Those first-quarter sales included nine hospitals: three South Carolina hospitals to Novant Health for $2.4 billion, four South California hospitals to UCI Health for $975 million, and two other California hospitals to Adventist Health for $550 million.
In October, Tenet also completed its sale of its 70% majority ownership interest in Brookwood Baptist Health, a five-hospital system based in Birmingham, Alabama.
“All of the sales that we have executed on have been at high multiples to reflect the operational improvements that we have made to each of these facilities over the last several years,” Sutaria said. “More importantly, as a result of these sales, our current hospital portfolio has an enhanced return profile, more attractive geographies for us and our business model, higher expected returns on invested capital that should result.”
Even after its divestitures, Tenet continues to benefit from many of its sold hospitals through the retention of its revenue cycle management subsidiary, Conifer.
However, the completed transaction of the Alabama hospitals caused Tenet to revise its 2024 revenue guidance to $20.6 billion to $20.8 billion, “$100 million lower at the midpoint versus our prior expectations,” Sutaria said.
It's crucial that organizations think beyond the standard recruitment and retention efforts.
The future of healthcare depends on the ability of hospital and health system executives to sustainably inject the industry with new talent.
That objective requires educating, recruiting, and retaining younger clinicians through a different approach than has typically been the case to ensure that staffing shortages aren’t too much to overcome.
Health system leaders recognize that while they may have as many as five generations working in their organizations, it’s the newer generations that are making up the bulk of their staff. Executives must consider what younger workers value to effectively recruit and retain them.
In recruitment, organizations will often have to sell themselves to newer candidates instead of the other way around. One of the ways providers can do that is by being quicker in their responses to job applications, which is a top factor for applicants accepting new positions. Streamlining processes and utilizing AI to speed up the application process can significantly improve hiring practices.
It’s also vital to have people who can speak the language of younger workers involved in the recruitment process. This can involve utilizing high performing bedside nurses to engage with candidates and share the culture of the organization, as well as their own experiences. Providers should also get creative with recruiting through social media such as TikTok to increase visibility among millennials and Gen Z.
After staff are on board, organizations should prioritize flexibility to retain workers. Newer generations want more work-life balance, which means traditional shifts and schedules may need altering. Implementing technology that can reduce clinical and administrative burden, like ambient listening, can also reduce burnout and employee turnover.
Pictured: Executives share strategies on the first day of the HealthLeaders Workforce Decision Makers Exchange.
Overcoming barriers to entry
On the physician side, health system executives are concerned about educating enough doctors to combat shortages.
The low rates at which medical schools accept applicants compared to the vast number that apply means that many potential physicians are left without a path to the profession. Medical schools, however, are hard to innovate, due to the number of regulations and restrictions involved.
Leaders would like to see policy changes on how medical schools and residency are funded, as well as a way to combine undergraduate and medical school together to offer greater opportunities.
In the meantime, the explosion of APPs has filled the void, but executives still need to figure out how to best optimize and capitalize on the talent of APPs. This could include using an APP counsel to help retain them, and creating executive positions to oversee them.
Stay tuned for more coverage of the Exchange as executives further discuss solutions for the workforce.
Are you a CEO or executive leader interested in attending an upcoming event? To inquire about attending the HealthLeaders Exchange event, email us at exchange@healthleadersmedia.com.
The HealthLeaders Exchange is an executive community for sharing ideas, solutions, and insights. Please join the community at the LinkedIn page.
Outpatient revenue growth in the past year is providing some reason for optimism.
Even with high costs plaguing healthcare organizations, hospital margins are trending in a positive direction.
The median year-to-date operating margin for hospitals nationwide creeped up to 5.1% in September after hitting 4.9% in August and 4.8% in July, representing a 2.1% increase year over year, according to data from Strata.
Health systems, however, saw operating margins fall for a third consecutive month to 1.6% in September, down from 1.9% in August, as well as from 12-month high of 2.3% in May and June.
Organizations are contending with swelling labor and non-labor costs as total expense was up 5.9% from September 2023 to September 2024. On the non-labor side, costs jumped 6.3% year over year due to increases in purchased services expense (8.8%), supply expense (8.6%), and drugs expense (6.8%). Labor costs, meanwhile, grew 5.2%.
Compared to August, total expenses in September decreased 2.2%, including a downturn of 2.3% for labor costs and a 2% decline for non-labor costs.
Revenue also slumped month over month, with gross operating revenue decreasing 4.2%, outpatient revenue falling 4.8%, and inpatient revenue shrinking 3.2%. Nonetheless, revenue has significantly improved year over year is up 8.7%, driven largely by a 9.1% jump in outpatient revenue, which outpaced the growth of inpatient revenue at 6.4%.
Patient volume followed a similar pattern, with September showing a month over month drop-off but a year over year jump in outpatient visits and inpatient admissions. Outpatient visits showed the biggest improvement, increasing 3.8% since September 2023, while inpatient admissions rose 2.7%.
Many providers are upping their investment in outpatient services to meet higher demand without incurring the same expenses associated with inpatient settings.
Community Health Systems is a recent example as the hospital operator signed a definitive agreement to acquire 10 urgent care centers in Arizona from Carbon Health.
CEO Terry Shaw shares what strategies AdventHealth has had success with for driving innovation.
Scaling innovation at a health system requires more than just buy-in at the highest levels—it demands a culture of striving for change.
Establishing that culture should come from the top and CEOs must set the tone if they want to get every member of the organization to have a forward-thinking mindset.
“Once that's ingrained into your culture that you're a learning culture, people like it, they like being a part of it, and they like being a part of something that's bigger than themselves,” AdventHealth CEO Terry Shaw told HealthLeaders. “They just really need to know what it is and how they fit in.”
Here are three ways Shaw has built a culture of innovation at AdventHealth and how other CEOs can do the same.
The home-based care business is seeing increased interest and could be ripe for more activity going forward.
Elevance Health is committing to growing its home-based care with its newest acquisition.
The company’s health services subsidiary, Carelon, is planning to purchase value-based home health company CareBridge, allowing Elevance to join its insurer competitors in the home care space.
Elevance CEO Gail Boudreaux characterized CareBridge to investors on a recent earnings call as a “value-based manager of home and community-based services for chronic and complex members that will serve as the foundation for Carelon home health business.”
The deal for the Nashville-based company is reportedly worth $2.7 billion, according to Nashville Business Journal.
Founded in 2019 by Brad Smith, the former director for Medicare and Medication Innovation and co-founder and CEO of Aspire Health, and former senator Bill First, CareBridge operates in 17 states and Washington, D.C., and served over 115,000 patients in 2023. It generates more than $4 billion annually, according to a report by Forbes.
Boudreaux said the acquisition “gives us home-based care and another pillar inside of our growth strategy for Carelon services where we can take significantly more pass-through of the type of medical expense we're managing inside of Carelon.”
In Elevance’s third quarter earnings, Carelon reported total operating revenue of $13.8 billion for a 15% increase year over year, contributing to the insurer’s $1 billion in net income.
Elevance executive vice president and CFO Mark Kaye noted that the company will continue to scale Carelon, adding to its existing services such as behavioral health and pharmacy benefit management.
“Carelon Services is expanding its capabilities to manage a growing proportion of healthcare spending, supporting the long-term growth of the business and by extension, the value it creates for health plan customers,” Boudreaux said.
Home health is an area insurers have targeted in recent years and appears ready for more dealmaking.
Last year, UnitedHealth Group’s subsidiary Optum acquired home health and hospice provider LHC Group for $5.4 billion before agreeing to purchase Amedisys for $3.3 billion, which is pending due to regulatory scrutiny.
Humana, meanwhile, acquired Kindred at Home in 2021 before rebranding the provider as CenterWell Home Health in 2022.
Insurers are primed to offer home health services to their Medicare patients amidst a shift to value-based care.
The hospital operator is no stranger to bouncing back from storms and will look to do it once again.
HCA Healthcare is still recovering from the operational and financial devastation recently caused by Hurricanes Helene and Milton.
The back-to-back hurricanes, which hit the Southeast in the span of two weeks, caused HCA to incur a $50 million revenue loss in the third quarter and anticipate a loss of $200 to $300 million for the fourth quarter.
Despite the drain on finances as a result of the hurricanes, HCA managed to rake in $1.3 billion in profit for the quarter, driven by $17.5 billion in revenue.
HCA also reaffirmed its full-year guidance of between $69.8 billion and $71.8 billion, but the company anticipates the final figure to be in the lower half of that range.
Overall, the health system had 29 hospitals in the path of Helene and 34 hospitals in the path of Milton, CFO Mike Marks told investors on an earnings call. All but two hospitals are back to being fully operational, with Asheville, North Carolina-based Mission Hospital and Florida Largo Hospital significantly impacted by Helene and Milton, respectively.
Mission Hospital is expected to be without potable water for several more weeks, which will cost HCA at least $13 million to create a water supply through October, Marks said. Not only will the expenses and lost revenue for the location affect finances for the remainder of the year, but they will bleed into 2025, CEO Sam Hazen told investors.
Florida Largo Hospital, meanwhile, was flooded and is currently closed and under repair for damage to the building's infrastructure. Hazen said HCA is working to reopen the facility in late December, but anticipates that the repair expenses and lost revenue will hurt fourth quarter earnings.
Pointing to HCA's previous experiences with hospitals impacted by hurricanes, Hazen said: "HCA Healthcare has numerous examples from past hurricanes where our hospitals have recovered from major storms and become more productive than pre-storm performance. I believe we can produce similar results with these two hospitals in time as we move beyond the aftereffects of these most recent storms."
HCA has faced similar challenges with hospitals needing significant repairs in the wake of hurricanes, such as Florida Fawcett Hospital. After being damaged by Hurricane Ian 2022, the location was repaired in a way that it was hardened to hurricanes, Hazen recalled.
As a health system operating in regions susceptible to hurricanes, HCA has to be prepared to respond to the natural disasters when they occur.
"We hardened our facilities as much as we possibly can, but [hurricanes] are, in fact, a way of life," Hazen said.
Nevertheless, Hazen reiterated that HCA is in those vulnerable markets for a reason and that the organization has put itself in a position where it can offset some of the unpredictable consequences.
"We believe that our portfolio of communities that we serve are very well-positioned for long-term growth, as we've indicated," he said. "We understand the risks associated with hurricanes and such. That's why we've built the capabilities that we've got and we think we're diversified enough across those communities to deal with that particular risk."
Strategizing for these priorities is a must for leaders of hospitals and health systems to address their biggest pain point.
Rethinking and retooling approaches to the workforce as a hospital CEO right now isn’t just smart, it’s necessary.
The workforce is evolving in several ways, from newer generations becoming a wider base to how the work itself is done, forcing leaders to constantly consider and implement solutions designed to keep employees for the long haul.
Here are three aspects of the workforce CEOs are targeting at next week’s HealthLeaders Workforce Decision Makers Exchange, where hospital executives will come together to share best practices to combat the top threat to their organizations.
Recruiting and retaining younger generations
Regardless of what your organization is trying to achieve, it won’t be possible without the ability to bring in and maintain talent.
The workforce shortage may not be as dire as it was during the height of the pandemic, but it continues to be a thorn in the side of hospitals and is expected to only get worse in the coming years.
To avoid employee turnover, CEOs need to recognize the wants and needs of younger workers, who often place greater value on flexibility and work-life balance.
“Recruit, retain, and advance” is the focus for Crouse Health CEO and HealthLeaders Exchange member Seth Kronenberg, but bringing a worker through that journey looks different now than it did before.
“The linear path of ‘I stay as a bedside nurse for 40 years,’ that's really not where the younger generation is headed,” Kronenberg said. “People want to transfer into different disciplines and bounce around and work in person, work remote. So we want to be able to have those opportunities so that whatever somebody is looking for from a workforce lifestyle, we can provide.”
Meeting those demands can be complex and call for significant changes in how workers are managed, but by offering more options to employees, hospitals can cut down on burnout and seeing their staff walk out the door.
Utilizing the right technology
Another way to improve retention is by unburdening workers through the implementation of appropriate technology.
Choosing the right solution for the right purpose, however, can be a challenge with the number of choices that are currently available. AI is also still in its relative infancy, which means the limitations on its effectiveness, especially on the clinical side, is yet to be fully understood.
Where CEOs like Kronenberg see the immediate value of AI is in supplementing the workforce to relieve staff of administrative, time-consuming tasks.
“There's value in doing non-controversial, non-medical decision-making tasks that are just tasks that we're burdening our clinical teams with,” Kronenberg said. “That's where we're looking to invest while the rest of the stuff gets sorted out. But we we've seen the opportunity to leverage complementary services with AI that's not replacing the doc, but making the docs and the nurse function more efficiently.”
Examples of that include maximizing the electronic medical record, making documentation more efficient, and triaging patient messages.
Filling the gaps around your workforce with technology can result in organizations needing to hire less people to do many of these tasks.
Creating financial ROI
Ultimately, CEOs understand that they must make workforce decisions that will positively impact the bottom line.
One major way leaders are doing that is by pulling back their reliance on contract labor, which was crucial during the pandemic when turnover was high, but has since become too costly as the workforce has stabilized.
Cutting off labor from traveling nurse agencies or locum tenens is only possible though if organizations are keeping their recruitment and retention rates up by offering incentives that will be cheaper long term.
Instilling workforce governance to manage labor resources can also go a long way to ensuring financial health.
Identifying efficiencies starts at the top with leadership but should permeate throughout an organization because it’s the staff on the ground working closest with patients who can provide a much-needed perspective.
“It's a partnership with management and union. It's a partnership with senior leadership and the frontline managers,” Kronenberg said. “But we also believe very strongly in shared governance, so it's those at the bedside who have the best idea of how to create more efficiencies and partnering with them so they know that workforce initiatives are designed to help make their lives both easier and more efficient.”
Are you a CEO or executive leader interested in attending an upcoming event? To inquire about attending the HealthLeaders Exchange event, email us at exchange@healthleadersmedia.com.
The HealthLeaders Exchange is an executive community for sharing ideas, solutions, and insights. Please join the community at the LinkedIn page.
Connecticut officials have called on the parties to resolve their grievances and finalize the agreement.
Two years after agreeing to a sale of three Connecticut hospitals, Yale New Haven Health and Prospect Medical Holdings continue to be locked in a tug-of-war that is playing out in court and in the media.
Since agreeing to send Manchester Memorial, Rockville General, and Waterbury hospitals to Yale New Haven for $435 million in 2022, the two sides have lobbed lawsuits and criticisms at one another over the conditions of the deal.
Connecticut governor Ned Lamont and comptroller Sean Scanlon have reiterated the importance of the two organizations finding a middle ground to complete the transaction.
"We're in the red zone, getting into the end zone is pretty tough,” Lamont said in a press conference. “We've met with Prospect, Yale separately, met with them together twice, doing everything we could to get this deal done on behalf of the patients. Right now, this dispute lingers on.
“I’m not quite sure we’ll be able to keep them out of the courthouse. So in the meantime, I care deeply about patient safety there, making sure that we monitor that situation closely.”
Lamont also shared that he told Prospect that he wants an independent monitor to oversee the hospitals and ensure patient safety is not compromised.
Meanwhile, Scanlon believes that if Yale New Haven and Prospect can’t work out their differences, it could be time to move on from the deal.
“Litigating this in both the courts and the press is not in the best interest of the patients, and certainly not the members that are in the [health] plan that I run,” he said, according to CT Insider. “Either Yale needs to finish this purchase, or if it's not a workable deal for them anymore… I think we need to figure out another path forward."
The dispute started to take shape in May when Yale New Haven sued Prospect to get out of the acquisition, alleging that the seller engaged in “irresponsible financial practices,” including failing to pay physicians and vendors. Prospect filed a countersuit soon after.
Then, Yale New Haven said Prospect was underfunding its employee pension plans, which prompted the Pension Benefit Guaranty Corporation to get involved last month and claim that Prospect owed more than $4 million for the three hospitals it offloading.
In response, the California-based company accused Yale New Haven of waging “an aggressive campaign in both the courts and via the media to denigrate Prospect Medical’s Connecticut hospitals and employees.”
Yale New Haven has dug in its heels and remains steadfast in its desire to change the conditions of the deal for it to be completed.
"Without revised terms, we don’t see a path forward that would allow us to make the necessary investments in these facilities without jeopardizing our system’s financial sustainability and uphold our commitment to the communities that we currently serve," a Yale New Haven spokesperson said in a statement.
The disintegration between the two transacting parties is a reminder of the complications that can set in after a hospital deal has been agreed upon but before it is finalized.
Health systems not only have to deal with the uncertainty of the FTC potentially blocking transactions, but also with keeping partners satisfied with the agreed upon conditions.
This means that both the buyer and seller should do their due diligence when entering into an agreement, checking under the hood of the involved organizations to have the clearest picture possible of the assets in question.
Otherwise, a stalled-out or dragging deal can have major consequences in both directions, disrupting care for patients, harming reputations, and hampering finances.
