Rural health systems, like their metropolitan counterparts, are faced with an array of challenges that include high inflation, staffing shortages and the rising costs of labor and supplies, but often face unique challenges when it comes to barriers to care, patient populations and health insurance status, among others.
Jeff Graham, a tenured healthcare executive who grew up in southern Ohio, is highly familiar with rural healthcare's challenges. For the last six years, he has served as president and CEO of Adena Health, where he has been focused on tackling such challenges, identifying opportunities for growth and leading the Chillicothe, Ohio-based system through the pandemic.
Mr. Graham spoke with Becker's about Adena's financial objectives, the unique challenges it faces as a rural system and key opportunities for future growth.
Question: How is Adena looking at financial planning for 2024? What are the system's core financial objectives?
Jeff Graham: Since COVID, we've found that financial forecasting and planning is not the norm. We are shifting away from a typical budget forecasting model that health systems would use when adding a new specialist or a new service line. Typically you could look back at your generational volumes and come relatively close in terms of forecasting ahead. However, in line with outpatient migration, among other trends, that traditional way of budgeting is becoming outdated. So, we are shifting to a revenue current trend model, which we feel is more accurate, especially with the variables occurring in the way services are being delivered (from inpatient to outpatient) and even with the mix of patients we would generally see.
The net revenues associated with these changes make it challenging to forecast our business models, but our focus is to continue to strengthen and stabilize our margins and forecast growth and expense control models from other trends. No health system can cut themselves out of where they are today. The way that hospitals and health systems are going to do that is to be more efficient, find partnerships and grow. It's stepping away from what we've relied upon for years and being innovative in how we forecast and measure trends for future growth.
Q: What partnerships or growth opportunities have had the most significant effect on Adena?
JG: We're evaluating all services across Adena, and I think all systems are doing this amid shrinking margins and different patient volumes. Today's healthcare business is so complex. For example, the complexity of the revenue cycle today — especially with denials, payers and the changes they are constantly making — most organizations don't have the internal resources to stay up to date or be able to effectively deal with certain issues to get paid correctly. We partnered with Ensemble Health Partners, a RCM company, to outsource and share in the management of those operations, which brings great benefit to Adena, but also provides an opportunity for employees to grow their career in a much larger setting. It's been a real win-win for our health system.
Q: Many systems saw margins shrink amid labor challenges, declining patient volumes and high inflation rates. How is Adena working to address these issues?
JG: We're a rural health system, which is a different world to how metro health systems approach things. People in many of the communities we serve are accustomed to driving for care, so we are continuing to develop specialty care here to truly have that care close to home. We partner with certain organizations like pediatric providers to have a higher level of care regionally for the people who live in southern Ohio, so they don't have to drive long distances. That's one example of many in which we are partnering with organizations on services that we may never be able to provide at that level, but we're able to do them at a local level and keep patient care within our organization. Adena's focus is to continue to grow services in our rural communities to create jobs and, more importantly, provide high-quality care to people who live in those rural markets.
The big issue is, like most health systems, we're experiencing double-digit inflation of expenses — whether it be from labor or supply costs — and we've had to take a hard line and strong negotiation stance with managed care organizations. Unlike retailers, we can't adjust our pricing on how we're paid. We have contracts, government programs don't pay current year and there's really no negotiation with the government. But with commercial payers, it's simply not right for hospitals to have to bear the burden of the economic downturn when we operate on razor-thin margins — especially coming out of the pandemic. But then you see managed care organizations recording major profits while continuing to increase denials and internal costs, and we're just trying to get paid appropriately. That's not a partnership, and that's definitely not helping take great care of our communities.
Q: What is the biggest leadership curveball you've faced during your tenure at Adena? What's the hardest lesson you've learned as CEO?
JG: The biggest thing has been communication. You may think that you're overcommunicating, but you can be surprised when you find out that people aren't aware or up to date on where things are within the health system. There's been so much going on every day in healthcare for the last three-plus years, but I think we simply have too many communication platforms. We've used digital formats, letters, videos, etc., to make sure everybody was up to date with what was going on, but I think it just created more of a problem. We looked at all of our communication channels and streamlined them so people understand which platforms will give you what type of information. That's had a tremendous impact on our organization in being able to adjust to change as well as being able to move forward and execute on our strategies.
The other thing that surprises me is that people often still think they have to travel to a bigger city to get great care, despite the high level of specialty care we provide in our rural communities. That's been the standard for many, many years. I grew up in southern Ohio, and prior to Adena over the last 20 years building up those specialty services, you had no choice. The hardest lesson I've had to learn is you just don't change that mindset overnight. When I look at the level and complexity of care we provide — and the national recognition we receive from accrediting bodies — the curveball for me was that I thought that mindset would change a lot faster. But what I can say is that mindset is changing, and over the last six years, we've almost doubled in size.
Q: Adena has doubled in size in the six years since you've been CEO. Where are the biggest growth opportunities in the next six years? What are you most excited about?
JG: The biggest growth opportunity is to reduce outpatient migration in rural markets through the expansion of tertiary services in those markets. Keeping great care local, continuing to recruit highly trained specialists and to be able to take care of the care that should be in our rural markets, expanding outpatient services throughout the region and continuing to build regional partnerships with others in southern Ohio. Those are the primary focuses.
Mergers and acquisition are not the answer for everybody. I've seen multiple organizations lose market share as services shift to a metro area instead of continuing growth. I've seen some vibrant community hospitals steadily decline after M&A to become a fraction of what they were. I'm excited about expanding and growing services in these hospitals, which in turn, drives a positive economic engine for the community as well as creating more jobs and making care available to the local community. I'm not saying M&As can't be positive, but they are not the answer for everyone. I believe we can thrive into the future in this arena of healthcare because we need to be different. Care in rural markets and the obstacles we face in terms of enhancing our communities' health is different from what it would be in a larger metro area.
Q: If you could eliminate one healthcare problem overnight, what would that be?
JG: Having someone have oversight over commercial payers' policies for denying claims. There is really no oversight, and every company has their own policy and procedures, their own reimbursement schedule and their own reasons to deny claims. Medicare Advantage is the latest example. This is so costly to health systems and is playing a negative role in net revenues and positive margins, or even break-even margins, especially in markets that don't have a high commercial payer mix. It's had an extremely negative effect on rural hospitals and health systems.
Traditional Medicare is a better payer than commercial Medicare Advantage plans; hospitals can't just absorb an 8 to 10 percent reduction from what we were already getting from the government for services. That's what we're seeing; it's just not sustainable and it's not saving the government any money either. It's a real problem, and the answer is not handing over the Medicare program to commercial payers. There needs to be oversight of the policies that dictate how these commercial payers are paying claims and truly partnering with the patients, which is at the core of this.