What hospitals and health systems can do to recover financially from COVID-19

By | May 5, 2020

Hospitals and health systems have had an extremely rough couple of months as they continue to combat the COVID-19 coronavirus pandemic. But with the infection rate slowing and several states experimenting with gradual reopenings of their economies, the healthcare industry is looking to a time when the worst of the pandemic has passed — and they’d like to get back on track financially.

That’s easier said than done. Models run by Strata Decision Technology, which has access to reams of industry data, shows that while January and February were largely business-as-usual for the nation’s hospitals, March and April saw a significant impact from the virus. Either volumes spiked because of an influx of coronavirus cases, or they tanked due to the temporary loss of elective surgeries.

In both scenarios, margin projections for the year took a serious hit. How much of that loss hospitals are able to recapture is a mark of an organization’s recovery, but success will require a high level of energy and effort.

“(Hospitals) did some incredible things in the mitigation of the crisis,” said John Baker, Strata’s senior director of continuous improvement. “Think of the barriers that were taken down in days, sometimes hours: pop-up hospitals, discharging patients at a much more rapid pace than historically. That same energy, that same incredible innovative spirit, has actually got to take place in recovery. People are going to want to wipe their brows and be relieved that they’re out of the crisis, but they’ve got to maintain that energy. It’s just as important in the recovery.”

Baker, who led successful cost improvement programs at UnityPoint, Northwestern and several other health systems prior to joining Strata, envisions a plan that can help the healthcare industry climb its way out of the hole. The plan involves a seven-step process that hospitals can start implementing immediately.

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The first step, according to Baker, is simply to establish ownership, and that needs to take place on two different levels. On the first level there needs to be someone, preferably in the C-Suite, who can remove indecision and hold people accountable; if this person is an executive, their presence alone can drive some the accountability that’s needed. On the second level should be a dedicated staff member who acts as a central point of coordination for program leadership and management — someone with exceptional organizational and administrative skills who can understand and communicate the tactics that are being deployed, and translate that back to the leadership.

The second step is setting the target. There need to be numbers that would indicate a successful financial recovery — so what are those numbers? The target needs to be established mathematically, but that data then needs to be translated into a form that’s easy for the broader organization to digest. That’s where a graphic comes into play.

It may seem elementary, but a core graphic or visual can highlight the reasons for the established recovery target; being able to explain the target is what creates organizational buy-in at all levels. Arbitrary targets that don’t resonate with staff will result in weak engagement and minimal commitment to the program. Another factor organizations may want to consider is creating alternative methods of communicating to different audiences — some may respond to margin, some to reducing cost per case, or another metric. It’s a modern implementation of the old adage, “A picture is worth a thousand words.”

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The third step is a simple one: Name the recovery program. Brand it.

“The reason for it is more practical than you might think,” said Baker. “A branded program not only helps with effective communication, but think of the logistics — different care teams can immediately know what the program is all about.”

Step 4 is to establish guiding principles, which sounds like an administrative task, but is an important means of determining the “true north” for any and all financial opportunities.

“Achieve targets, don’t achieve savings at the expense of quality — things like that,” said Baker. “You’re going to get a lot of ideas, and you want to make sure those ideas are consistent with those guiding principles. You don’t want to come across as saving for the sake of savings. The purpose should be about evolving and transforming and being better as an organization, not just about cuts. If it’s just about cuts, it’s painful.”

Program governance is the cornerstone of Step 5. Baker calls it “designing the machines” because there are two conceptual “machines” that should continually be feeding into each other. The first machine is where new ideas are vetted for their potential. Some will be rejected because they’re not supported mathematically, and some will be prioritized for tracking. That’s the second machine: Project performance management. That’s where teams track how the program is doing versus its potential. These two machines churn in a constant feedback loop and can help an organization get a handle on whether they’re making progress.

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Step 6 is all about getting a handle on resources.

“If we think we’re going to eliminate an orthopedic device because it has similar outcomes to another device, who’s going to do the math, look at the data, develop improvement strategies, meet with physicians? That requires resources,” said Baker. “However, we have to acknowledge that a 10-person consulting team doesn’t exist at every organization that’s going to be pursuing a recovery program, and that’s why an effective governance structure is all the more important, because as long as you’re feeding all the initiatives into an accountability structure, you can can get progress on initiatives.”

The seventh and final step is to communicate, communicate, communicate. The recovery program shouldn’t be sequestered in the upper echelons of organizational leadership. It should be understood from the very tippy-top of the organization all the way to the front lines, because the entire organization should be mobilized toward recovery — much as they were mobilized during the preparation and mitigation of the crisis.

“Sure, you can do 2 to 3% cuts every year, but when it comes into double digits, you need to do something different, something transformational,” said Baker. “If organizations do the same cuts, they’re going to cut into the bone. Applying these steps and principles and concepts will make the recovery program effective.”

Twitter: @JELagasse

Email the writer: jeff.lagasse@himssmedia.com

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