Keys to Achieving Financial Sustainability for Hospitals and Health Systems
Hospitals and health systems are facing a challenging road ahead as they strive to achieve financial sustainability in today’s complex healthcare landscape. With the nation’s aging patient population, rising costs, staffing shortages, and evolving reimbursement models, C-suite executives are under immense pressure to navigate these obstacles and secure a stable financial future for their organizations.
A recent analysis by Oliver Wyman suggests that organizations will need to realize cost reductions of 15% to 20% by 2030 to establish a foundation for long-term financial sustainability. This is no small feat, especially with revenue uncertainties on the rise.
The end of stimulus funds and reimbursement enhancements from public health emergencies, coupled with the restart of Medicaid redetermination, are expected to reduce safety valves for providers. The shift of millions of patients from commercial insurance to Medicare is also a significant concern, as it could lead to underpayments and revenue losses for healthcare organizations.
To address these challenges, leaders will need to focus on three key areas for savings and implement innovative strategies:
1. Optimizing high-value operations: Traditional process redesign in staffing, perioperative services, length of stay, and administrative functions can yield significant savings. By targeting annual savings beyond the traditional 5% to 7% range, organizations can capture value-generation opportunities and enhance efficiency in key areas.
2. Rethinking and redeploying sites: As care delivery and payment models evolve, health systems should reassess their physical care delivery sites and align them with changing trends. By shifting care to the best, lowest-cost sites, creating centers of excellence, and optimizing bed mix, organizations can generate estimated savings of 7% to 8%.
3. Treating value-based care like a service line: Value-based care models can help organizations close the gap in cost transformation challenges. By focusing on prevention and wellness to keep patients out of expensive inpatient settings, healthcare systems can achieve long-term sustainability and generate incremental revenue opportunities.
In the face of mounting challenges, healthcare leaders must be proactive in implementing these strategies to secure financial stability for their organizations. By embracing innovation and strategic planning, hospitals and health systems can navigate the complexities of the healthcare landscape and build a sustainable future for themselves and their patients.