By Caroline Hudson - Modern Healthcare
Financial performance is improving at many hospitals and health systems, but providers are also steeling themselves for more challenges ahead.
Rising costs and low reimbursement rates continue to strain providers, forcing them to rethink how they deliver care, where they invest and how they position their organizations for success in an evolving industry.
During a recent Modern Healthcare webinar, Marty Bonick, CEO at Brentwood, Tennessee-based Ardent Health, Nick Olson, chief financial officer at Sioux Falls, South Dakota-headquartered Sanford Health, and Robert Fries, CFO at Dallas-based Children’s Health, shared their thoughts on financial strategies and where they see potential challenges in implementing those strategies.
Here are five takeaways from the conversation.
1. It starts with planning.
Strategic planning has been top-of-mind for executives as they navigate a rapidly changing environment. Olson described it as “planning, replanning and planning again as the facts and circumstances change.” He said Sanford’s strategy focuses on three areas: access to care, quality of care and delivering care in a financially sustainable way.
Bonick outlined Ardent’s growth plans, which are a mixture of investing in existing markets but also looking for new opportunities.
At Children’s Health, planning for the current and future workforce is a central part of the system’s strategy.
“Healthcare is really driven by two things: people and capital,” Fries said. “We want to have the strongest workforce that we can afford.”
2. Capital investment remains a priority.
The executives also said investing in new facilities is a must, whether the goal is reaching more patients in rural areas or responding to high demand in fast-growing markets.
For example, Children’s Health is building a $5 billion pediatric campus in Dallas through a partnership with UT Southwestern to keep up with the area’s rapidly growing population.
“We’ve been out of inpatient bed capacity for quite some time,” Fries said. “That $5 billion project really is to add substantial capacity to the Dallas market and to ensure that we have enough beds to take care of the kids who will be here in the next decade.”
Ardent is spending much of its capital on outpatient projects, such as ambulatory surgery centers, urgent care clinics and imaging sites, Bonick said. “We’re putting a lot of money into developing those centers outside the four walls of the hospital,” he said.
Olson noted Sanford’s neonatal intensive-care unit expansion in Wisconsin, which is part of a $500 million capital commitment in the state over the next five years. The large investment follows Sanford’s merger with Marshfield Clinic that was completed in January.
3. Medicaid funding is ‘bedrock.’
Losing funding for programs such as Medicaid could have a devastating impact on some systems, the executives said.
Olson said Medicaid is the “bedrock of rural healthcare” and serves as a lifeline for many patients. He expressed concerns about Medicaid work requirements, which can lead to more uninsured patients and unpaid medical bills. He said that when patients lose coverage, it often leads to more emergency department visits, poorer health outcomes and higher care costs.
Bonick shared similar concerns about Medicaid coverage, in addition to patients possibly losing access to Medicare and the health insurance exchanges.
“It really puts people’s lives in danger and threatens the viability of the healthcare system,” he said.
4. Payer contract disputes persist.
Bonick said Ardent has seen an uptick in denials stemming from requests for more information.
Olson said Sanford is experiencing a similar trend, plus an increase in prior authorization requests. He noted Sanford’s decision last year to end its Humana Medicare Advantage contract as of Dec. 31.
“We have a few large national payers that continue to be problematic for us,” Olson said. “We’re going to continue to evaluate whether we need to make different decisions with some of our larger commercial payers going forward.”
Fries also cited denials as an ongoing issue and noted an uptick in accounts receivable over the last two years.
5. Operations are improving.
Inpatient volumes have been strong at Children’s Health, helping to boost the balance sheet, Fries said. He also said the system’s cash reserves have increased since December.
Bonick said Ardent’s operating leverage has decreased in the years following the COVID-19 pandemic, meaning fewer fixed costs and more flexibility for how the system deploys capital. He said the system is focused on margin improvement, which helps with operating leverage but also allows Ardent to reinvest into its communities.
Olson said Sanford still has a strong operating margin, although it has seen some downward pressure on investment income this year due to market volatility.