From planning for a potential recession next year to investment opportunities and innovative ways to tackle labor challenges, here are 10 key insights and objectives from hospital and health system CFOs across the country:
1. Dan Morissette, CFO of Chicago-based CommonSpirit, on short-term goals: CommonSpirit Health continues to deliver essential healthcare services to communities across our 21 states, despite challenging and uncertain economic conditions. We are leveraging our strengths as a large and integrated healthcare network to address nationwide labor shortages, maintain access to care and ensure we can sustain our operations. At the same time we are focused on improving care quality, reducing costs and investing in new ways of delivering care.
2. Daniel Morash, CFO of Boston-based Brigham and Women's Hospital, on recession planning: It isn't easy to plan for a recession, particularly because it can have both negative (payer mix, patient volume) and positive impacts (decrease in labor and supply inflation) on our financial performance. The best advice I would give is that hospitals need to consider recession scenarios when making long-term commitments on wage increases, capital expenditures and planning for capacity for patient access. Most of our focus needs to be on the acute challenges we are facing. Still, it's important to be careful not to overreact or overcommit financially when a recession could change a number of trends we're seeing now.
3. Kevin Hammons, CFO of Franklin, Tenn.-based Community Health Systems, on third-quarter improvements: Sequentially [in the third quarter] we saw improvements in admissions, adjusted admissions and ER visits. We also improved length of stay, reduced contract labor expenses, made improvements to our capital structure, maintained strong liquidity and produced positive free cash flow during the quarter.
On the contract labor expense or our contract labor expense, while still elevated over the prior year, continued to show sequential improvement. During the third quarter of 2022 contract labor was approximately $100 million compared to $60 million in the prior year quarter. This compares to $150 million in the second quarter of 2022 and $190 million in the first quarter of 2022. We anticipate continued progress in reducing contract labor going forward.
4. Michelle Bruhn, CFO of Sioux Falls, S.D.-based Sanford Health, on the biggest opportunities in 2023: We are reimagining how we deliver care to our communities — our vision is to bring affordable, comprehensive and seamless healthcare to people at the right time, in the right place.
Sanford Health recently launched a $350 million virtual care initiative to transform healthcare for rural and underserved communities across the upper Midwest. As part of this initiative, we will be focused on expanding access, improving the patient experience, advancing innovation through new research, attracting and training a new generation of clinicians and sharing learning opportunities through an education institute. We also recently broke ground on a new Virtual Care Center, which will feature dedicated clinician workspaces equipped with the latest telemedicine technology to offer on-demand urgent care, behavioral health care and primary care.
As we look ahead to 2023, I'm excited about the opportunity for Sanford Health to shape the future of healthcare and improve the health and well-being of those we have the privilege of serving.
5. Cheryl Sadro, CFO of Sacramento, Calif.-based UC Davis Health, on growth and investments: We have many plans on the table to grow our footprint to better serve our patients. We are fortunate to maintain a very high census in our health system, and in fact continue to look at innovative ways to partner with other systems for inpatient capacity and post-acute options for our patients. As the local markets continue to grow, we are expanding our outpatient presence in terms of ambulatory surgical capacity, infusion and primary care. We are also exploring innovative ways to generate returns outside the traditional four walls of our organization such as IT partnerships and engagement in public private initiatives.
6. Brenda McCormick, CFO of St. Paul-based Children's Minnesota, on the organization's digital transformation: One of our strategies to better serve our patients over the next five years is our digital transformation that focuses on improving overall access. We are accelerating this work to make it easier for families to find the care they need, when and where they need it. We are utilizing our internal digital experts and partnering with external experts who can see what's next in the digital space before we can. We have a digital governance board, and also project sponsors and strategy owners for each initiative and tactic. Most of our digital transformation focus is on patient-facing activities and asking the question, "How do we meet our patient families where they are?"
As an exclusively pediatric healthcare provider, our patient families are different from adult systems. Our average family is younger — Millennial and Gen Z — who live most of their lives online and on mobile. For this reason, we're in the process of expanding online scheduling, online bill pay, mobile access, medical pre-appointment forms and scheduling directly from our "Find a Doc" application. In 2021, we launched a new virtual visit platform to provide a more comprehensive and efficient user experience. Our digital transformation allows us to serve more patients in new ways while maintaining our commitment to providing highly-specialized and compassionate care.
7. Lisa Medovich, CFO of Kerrville, Texas-based Peterson Health, on exploring affordable housing for staff: I don't think we ever thought a couple of years ago that we would be focusing on housing as part of a service line per se … but we're looking at and exploring alternatives.
There is a university that is within Kerrville called Shriner. We are exploring utilizing and renting out some dormitory rooms — not so much dormitory [rooms], but apartments — that have separate living quarters but shared space for kitchen. We're looking at different Airbnbs and people in the community that are willing to rent because of the fact that it's difficult to find affordable housing. And it also is difficult to rent and find affordable rent. We want to help them with that.
What we're looking at is potentially — maybe five or 10 years from now — building a housing or apartment complex for our folks to live in or temporarily live in.
8. Lisa Goodlett, CFO of Charleston, S.C.-based MUSC Health, on healthcare areas ripe for disruption: I've always been a big proponent of learning from other industries. Recently I was interacting with an investment company, and instead of having to prove my identification, they took my voice imprint, and I thought that was amazing. We need that technology as we're talking to people about their care. How can we do these verifications?
You could check in when you register, and all those complicated steps could be done online, and we could have voice authentication. How do we pick up this technology? For patient refunds, other industries are using ways to interact with customers commercially. We want to get into using Zelle and Venmo and really get out of the paper process [for billing].
We've got a push that we call digital transformation and enhancing the patient digital experience. I think consumers are going to demand efficient scheduling like the airlines have. How do we move ourselves from a traditional academic center to this very pliable, consumer -friendly organization that can make change happen? And the benefit is this change increases our price elasticity on some of our services.
In healthcare, it's also sometimes a struggle to gain access. How do we get into the iPhone in a different way? We're an Epic shop, but we're not going to have that be the only way patients can interface with us. It should be what's easiest for the patient. How do we get them information they need from us? How can they self-schedule and move themselves forward? We define success in digital transformation by how many touches we reduce, not only for our internal workforce, but also for our customers and patients. Are six clicks necessary, or can we do it in just one? We also want to streamline those interactions and have transparency in the process.
9. Greg Hoffman, CFO of Renton, Wash.-based Providence, on the top priorities consuming his time: No. 1 is workforce. It's not only the challenges of the current shortages as we navigate yet another surge and wave in the pandemic — but most importantly, it's just ensuring we're taking care of the well-being of our caregivers. I mean, that's top of mind for us. It is a very stressful time. There's a lot of burnout.
10. Jennifer Alvey, CFO of Indianapolis-based Indiana University Health, on managing profit and staffing while enacting a price freeze: I'd like to explain what our pricing care affordability strategy actually is. It's been written many different ways in the press, and what it really is, is a multiyear plan that when you account for all the payers and services, it will essentially hold our revenue that we receive from price increases flat year over year. And so in that same time period, it'll bring more than a billion in savings for healthcare consumers after you factor in inflation. And we've committed to getting our commercial prices to national parity by the end of 2025. So, kind of to your point about how can we do that while trying to be optimally staffed? We're creating an internal constraint on our system to have to get more efficient because we are holding that flat. And boy, is that a lot harder to accomplish in the current workforce environment.
It's a great question. Our labor went up three times its normal amount last year. And we expected similar pressures this year, and adequate staffing will be a higher expense for us. But it really can assist our price affordability plan by allowing us to reduce the high cost of traveling nurses, catching up on carrying out thousands of elective surgeries and procedures that were postponed during the pandemic.