Children’s hospitals have taken a financial hit during the COVID-19 pandemic. Yet, warning signs were there pre-pandemic that many were struggling. Now, leaders face an urgent need to assess enterprise risk and determine next steps to protect their futures.
For the past three decades, operating challenges for children’s hospitals have been increasing. The delivery of pediatric care has shifted to outpatient settings while community health systems have bolstered their pediatric service lines to capitalize on the advantages of operating a NICU. These two changes have tightened revenue-generating opportunities for many children’s hospitals.
At the same time, new payment arrangements and care delivery models made the provision of pediatric hospital care more complex for legacy specialty pediatric providers. Meanwhile, delivery of pediatric care has been severely affected by the maldistribution of pediatric clinicians across specialties and regions. Further, if Medicaid funding were to be capped for children with special healthcare needs, such policies could have dire financial repercussions for children’s hospitals in some states.
Children’s hospitals are walking a tightrope, balancing what’s best for their patients with financial stewardship to ensure their asset can provide for their communities.
The solution for how to successfully do both is complicated.
First, leaders need to assess how many children, in terms of captured population, are required to sustain a full-service children’s hospital with a complete complement of subspecialty services. Additional efforts to turnaround a children’s hospital’s financial performance and reposition the organization for the future typically focus on the following five areas.
- Margin enhancement: Aligning quality metrics, financial incentives, and other components of value-based payment models across payers can accelerate the transition to value-based care.
- Volume growth: This is essential to support inpatient volumes in the tertiary and quaternary service areas.
- Patient and family experience: The ease with which patients and their families can access services and the quality of the experience they encounter are key factors in market-area loyalty.
- Clinical efficiency: Reducing clinical variation includes working toward achieving zero unnecessary readmissions, hospital-acquired infections, and medication errors.
- Innovative partnerships or acquisitions: These can involve organizations within the same geographic area or even in other states—and they aren’t limited to partnerships with other providers.
Children’s hospital leaders can protect their organization’s long-term health and remain a vital resource to their community. Guidehouse experts are helping pediatric hospitals reevaluate their operating model and reposition for the future. Read more in the Rethinking Children’s Hospital Strategy report.