Since July 2020, Syntellis has shared data, insights and key performance indicators aggregated from more than 900 hospitals and health systems to quantify the financial impact of COVID-19. This valuable data clearly shows year-over-year declines in margins and volumes and increases in expenses. For example, operating margin was down 4.9% without CARES funding, adjusted discharges were down 10% and total expenses per adjusted discharge increased 14.4%.a But the data doesn’t capture how healthcare leaders responded to these challenges.
To understand healthcare finance teams’ COVID-19 response, Syntellis partnered with HFMA’s Financial Analytics Leadership Council (FALCO) to collect data through a December 2020 survey of HFMA members and a January 2021 virtual meeting where more than 25 FALCO members discussed survey results and shared insights. During the roundtable discussion, an important theme emerged: The pandemic’s profound impact on revenue, volume and expenses has created a unique and critical need for data and analytics.
1. Declining operating margins and revenue force planning process changes
No one can accurately predict or adequately plan for a pandemic, but some healthcare organizations embraced the difficult timing by turning it into an opportunity to realize long-needed changes.
For one member’s organization, the pandemic hit right as they embarked on financial planning for fiscal year 2021. As a result, the organization ran without an operating budget for the first six months of the fiscal year. After talking for years about moving from an annual budget to rolling forecasting, the finance team agreed that 2020 was a good time to make the leap. For the second half of the fiscal year, this organization will use rolling forecasting to complement the operating budget. But looking ahead to fiscal year 2022, rolling forecasting will replace the operating budget in its entirety.
Additionally, 71% of HFMA members indicated a focus on making changes to capital planning processes. One member’s organization reevaluated its capital plans in anticipation of the pandemic’s lasting effects, prioritizing investment in telehealth technology and redesigning administrative spaces to account for more remote employees.
2. Changes in payer mix and increased unemployment will have lasting impacts
Increased unemployment and the subsequent changes in payer mix created additional challenges that impacted financial planning and priorities. Fifty-five percent of HFMA members experienced a negative impact on operating margin. To address this, 90% plan to focus on reducing expenses in 2021.
One member’s urban healthcare organization saw firsthand the effect of individuals moving out of the city. The payer mix shifted to include more government payers, and operating margin took a hit. As a result, the organization revisited its 10-year plan, indicating that what was once thought to be a short-term issue would have a longer-term impact on future plans.
Declining profitability also raised the question of whether large capital spends were at risk. Several FALCO members recalled discussions within their respective organizations around reevaluating leases and shifting some administrative employees to permanent remote status to free up space and shift expenses.
3. Sharp drop in patient volumes underscores importance of value-based care and diversified revenue streams
Having the same volume with a different payer mix would present unique challenges of its own, but volume decreases in the ED, OR and chronic condition screenings resulted in additional shifts to the plan — including adjusting capital and cash, reducing overhead expenses and focusing on additional revenue opportunities.
Despite declining volumes throughout much of 2020, 40% of HFMA members were optimistic that their organizations would return to pre-pandemic volumes over the next year. However, for those that typically budget for some level of growth, a return to projected pre-pandemic 2020 volumes would mean coming in below budget in 2021. Looking at performance in individual areas of the organization — such as surgery, outpatient and the ED, among others — may help healthcare leaders identify improvement opportunities and plan accordingly for decreased volumes in other areas.
Survey respondents' data and analytics priorities