By Tami Kamin Meyer
American hospitals continued their financial recovery from the COVID pandemic by reaching a new 2023 high of 2% in positive operating revenue for June, according to Syntellis, a financial planning and data solutions firm. That increase marks the fourth consecutive month of revenue growth for hospitals following 14 months of negative numbers.
While increased operating revenues can be partly attributed to patients finally seeking treatment for elective surgeries they delayed during COVID, that is not the only reason. Another is the slight decrease in cost of labor borne by hospitals compared to the inflated amounts spent during the pandemic’s labor shortage.
Still, experts offer additional explanations for why hospital revenues are on the rise.
A time of disruption
The American healthcare system is experiencing a “time of disruption,” according to Kelly Arduino, a principal with Wipfli, a national accounting firm. The last time the healthcare industry faced such adversity was 30 years ago, “when the method for reimbursing hospitals from insurance, Medicare, and Medicaid reimbursements changed,” she says.
Hospitals are reviewing their “labor expenses, doing the math and realizing they aren’t making money from clients. (Because of that), they are seeking an increase in reimbursement from insurance companies, Medicare, and Medicaid,” says Arduino.
Hospital systems are slowly coming to terms with the realities of their staffing woes. “Especially in hospitals, there is a recognition the people aren’t there to hire to do many jobs, like back-office work,” says Arduino. That recognition has led some healthcare facilities to invest in computer software designed to provide the back-room support humans once provided.
She says hospitals who were “early adaptors” of such technology are ahead of the game when it comes to generating higher revenues.
Technology’s role
As hospitals begin to take stock of their various technological needs, many are investing in Enterprise Resource Planning (ERP) systems that increase efficiency and create electronic health records.
The vast amount of data gathered by hospital systems requires additional investment in technology which accomplishes specific tasks:
- Notifying patients of appointments
- Tracking whether the patient attended their appointment
- Automating tasks once performed by humans who no longer want those jobs
Hospitals generally utilize between 50 to 500 data sources and applications, says Arduino. Untangling that technological pretzel – and integrating disparate systems and applications – is a monstrous yet necessary undertaking if a healthcare facility hopes to survive. Arduino likens the consolidation of all that data to merging information from several television remotes into one.
This is especially true when hospitals merge. “They need ways to streamline their data with the buyer,” Arduino says. “They need to ask themselves ‘Do we need all these systems? Do we have duplicitous systems? Are we using too many?’”
But overhauling the American healthcare system will not be simple.
“Transformation as to how the business of healthcare is conducted in the United States is a multi-year undertaking,” she says.
Digital transformations
Dr. Justin Norden, a partner with GSR Ventures in Menlo Park, California, and an Adjunct Professor of Bioinformatics at Stanford University, says the digital transformation currently underway in the healthcare system has played a role in its recent revenue uptick.
Technology plays an increasingly integral role in the American healthcare system. According to Norden, “Telemedicine gives (doctors and hospitals) a new revenue stream. It has become the standard, whereas 10 years ago, it was not heard of.”
He says hospitals are interested in growing telemedicine practices, but not because telemedicine itself increases profits, per se. Rather, “it brings patients in for services that do generate funds.”
He says updates in technology contribute to the uptick in hospital revenue for several reasons:
- Growing digital transformation of healthcare systems
- Increasing patient’s access to their care team
- Healthcare systems recognizing how to manage the increased demand for their care teams in digital ways, including telemedicine and asynchronous messaging
Today’s patient wants to be able to communicate with health systems, says Norden. That reality is driving hospitals to figure out how to accommodate those needs.
What else?
Recent increases in hospital revenues are not only attributable to updated technology or patients returning to undergo elective surgeries delayed by COVID, says Norden.
Hospitals are trying to work smarter, not harder.
“Health systems are figuring out how to best utilize their staff to allow them to practice at the top of their license,” says Norden. Such a pursuit includes answering questions like when a physician must be involved in patient communications and when can an assistant handle a situation.
Resolving issues like those is imperative because they “increase billing opportunities and keep costs down, two important goals for healthcare systems financially,” says Norden.
Hospitals are also interested in increasing their digital footprints, which allow them to reach more patients.
“Eventually, that results in increased revenues,” says Norden. “We’re amidst one of the biggest technological transformations. Hospitals who successfully adapt will be more financially successful than facilities who choose to ignore them,” he says, referring to the burgeoning world of AI.
