The ultimate challenge: cutting costs without compromising care
Medical providers across the country are in the midst of a financial struggle, faced with ever-rising costs and operational complexities that threaten their viability and can even put patients at risk.
"From a business perspective, today's healthcare environment is probably the most challenging in history," said Ky Chaffin, managing director of healthcare banking at BOK Financial®. "Healthcare CFOs are always searching for ways to control costs so they can offer high-quality and affordable care. But meeting that mandate is increasingly difficult, and healthcare consumers are feeling the effects."
Multiple drivers have pushed higher costs through the healthcare industry, including: high inflation across the U.S. economy, a shortage of qualified healthcare workers, advancements in pharmaceuticals and medical devices, stricter regulations and reduced reimbursements from healthcare payers as they also work to cut costs.
As the pressure mounts, providers are continually working to streamline and optimize their operations, redirecting savings and efficiency gains toward the primary purpose of patient care, Chaffin said.
Strategies for savings
"Any business can cut costs at the expense of its customers; it's much harder to realize significant savings without sacrificing product quality and service," said Chaffin. "Hospitals are in a tough situation in that regard, but the good news is that most organizations still have opportunities to improve their financial efficiency away from the bedside."
He outlined several target areas where most hospitals could look to cut costs or increase income:
Shortening the revenue cycle. Simply put, getting paid in less time supports a healthy cash flow and working capital position. For healthcare providers, however, speeding up collections can be an extremely complex proposition given the sheer number of parties and processes involved.
For that reason, healthcare organizations are prime candidates for automation technologies. Robotic process automation (RPA) and other artificial intelligence (AI) solutions can help hospitals streamline their revenue cycle management by reducing manual taskwork. Automation routes information faster and minimizes human errors in processes like billing, claims management and payment reconciliation.
Offloading non-care and non-revenue-generating activities. Hospital administrators are looking for any opportunity to run a leaner operation and focus more intently on their core purpose of delivering high-quality care.
Accounting solutions such as payments automation are an increasingly common way to meet those goals, as are programs that can automate tasks related to purchasing and inventory management, regulatory compliance and reporting, human resources, and information technology.
Beyond these technological solutions focused on workforce efficiency, hospitals are also cutting costs by reducing or optimizing the physical facilities in which they operate. As larger healthcare organizations have expanded their footprints over the years, they have also taken on massive responsibilities in terms of real estate management and building maintenance. Transferring some of those burdens of ownership to third-party management firms can help hospitals get back to basics.
"Every dollar saved by streamlining or outsourcing non-core functions is a dollar that can be redirected to patient care," said Chaffin.
Emphasizing outpatient delivery models. Even as some healthcare organizations are working to get out of the business of real estate management, they are continuing to grow their offerings of outpatient care. This includes a wide variety of satellite facilities beyond the main hospital, such as standalone emergency rooms, storefront clinics, outpatient surgery centers, labs and imaging facilities. Instead of owning and maintaining these facilities, they may seek more flexible and cost-conscious lease agreements with real estate partners.
In recent years, scientific and technological advancements have enabled providers to offer more comprehensive services in these smaller, off-campus settings—and patients appreciate the convenience. To everyone's benefit, delivering care through this outpatient model is typically far more cost-effective than keeping patients overnight at a hospital.
"Developing relationships with financial services providers who understand the healthcare industry—whether it's a bank or a private equity investor—is an important part of this process," said Chaffin. "Access to capital is a necessity as organizations equip new facilities and optimize their existing real estate portfolio."
Enabling better outcomes for all
Chaffin emphasized how high-quality patient care and shrewd financial management often go hand-in-hand.
"By embracing technological efficiencies and cost-conscious delivery models, providers can free up the financial resources they need to serve patients more effectively," he said. "Over the long term, smart strategies like these can help make healthcare more affordable."