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How hospitals and healthcare systems can prepare for more change in 2023

Nov 09, 2022

The healthcare industry came out of the COVID-19 pandemic in a healthier position than other sectors. But the favorable conditions didn’t last.

What happened?

At the height of the pandemic, healthcare organizations received significant stimulus funds to subsidize labor costs and deliver essential services. As inpatient capacity improved, financial conditions worsened for many hospitals. By spring of 2022, much of the financial support had dried up. Meanwhile, demand for healthcare services remained high — too high for many hospitals to keep up.

Now, hospitals are short staffed and paying more for the labor they have (in some cases, 10-20% more). Commercial payers are reluctant to raise rates or increase reimbursement rates. And supplies, pharmaceuticals and equipment all cost more, too.

The speed and severity of the financial shortfall caught some hospitals by surprise. Independent, mid-sized hospitals are feeling the pain most acutely, since they tend to be less diversified in terms of geography, services and investments. But nobody is immune.

Without staff to spare, hospitals are cutting back on services and hours instead. Many are laying off managers and executives — exactly when they need strong leadership to guide them through change.

The current healthcare delivery model is strained, possibly beyond repair. That means hospitals and healthcare systems can’t “weather the storm.” They need to rethink how to deliver quality care with permanently fewer staff.

Six strategic priorities can help hospitals and health systems make the shift:

Healthcare trends 2023

1. Redefine financial health

Different economic conditions call for new, or at least wider, definitions of “normal” and “healthy” finances. For example, demand and expenses are both high right now. As a result, healthcare organizations may be able to carry fewer days cash on hand and still be in a sound financial position. Financial priorities are also different. (This isn’t the time to stockpile cash.)

Once organizations reset their expectations around financial health, they can explore different budget and funding strategies. Organizations might seek financing at different thresholds or pursue alternative sourcing strategies altogether. Healthcare leaders should re-establish what “financial health” looks like for their organization. Then, develop strategic plans and risk profiles to match.

2. Revisit strategic plans

Strategic planning often starts with an assessment of market demand. Today, demand is not an issue.

Healthcare organizations need to evaluate how much care they can afford to provide and where. Based on current costs and reimbursement rates, previously planned capital projects or acquisitions might not add up. Or populations may have shifted, changing the geographic distribution of where healthcare is needed.

Wipe the slate clean. Revisit strategic plans based on today’s conditions and new demands from patients and staff.

3. Invest in people and technology

The labor force is operating in a permanent deficit — and not only in healthcare. Hospitals are never going to attract enough qualified workers to meet demand. Instead, they need to redesign how people work and deliver care.

Nonpatient care tasks must be automated to free up critical human resources. Workers need new skills related to technology and data. And change management experts (and strong leaders) need to guide everyone through the transition.

Technology cannot replace human interaction. But it must supplement human-delivered care so staff can focus on the most important (and rewarding) work. Hospitals need to invest in people and technology — and new ways of leveraging them both — to meet future healthcare needs.

4. Fill in knowledge gaps

As workers retire (or leave the industry for less-demanding jobs), they’re leaving a huge knowledge gap in their wake. Hospitals need to invest in training and development to ensure healthcare outcomes (and experiences) meet their standards of care.

5. Compete for consumer-patients

In the past, hospitals had few competitors, especially in rural areas. As organizations become adept at delivering virtual care, they’ll be exposed to more competitive threats.

Customers are also becoming savvier about what they need and expect from healthcare providers. If we fall into a recession, consumers’ power of choice and value will gain even more momentum. This is unpopular, but the truth is, many patients can choose where they receive care. Healthcare providers that deliver the best outcomes and experiences will attract more patients and payers.  

6. Bravely pursue radical change

Healthcare executives cannot wait for things to get back to “normal.” It doesn’t exist. More staff, more beds, more facilities … none of the traditional responses will help healthcare organizations meet demand.

Healthcare systems need to optimize delivery and augment the human workforce with automation, process improvement and process reduction. Software, training and change management can help healthcare organizations address demand profitably.

In the short term, hospitals need to cut costs and reduce spending to prepare for the transition. Revolutionizing healthcare delivery is a smart investment that will pay off, but hard times can be expected along the way.

How Wipfli can help

Looking to jump on these future trends in healthcare? Wipfli can help. From digital transformation to strategic planning to talent optimization, we help healthcare organizations navigate change and come out strong. Learn more about how.

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Author(s)

Kelly Arduino
Principal
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