The COVID-19 pandemic has been an incredibly trying time for the healthcare field. Hospitals are facing an unprecedented financial crisis driven by labor and supply chain issues as case numbers and breakthrough infections continue to surge. Kaufman Hall estimates that hospitals across America experienced about $54 billion in losses in 2021.
The US government estimates that more than half a million American healthcare workers were infected with COVID-19, with over 2,500 dying from the novel coronavirus. Subsequently, significant numbers of nurses and other healthcare workers took early retirement, sought more lucrative travel nurse opportunities, or transitioned to other careers as hospital management issues continued to compound.
However, the shortage of skilled healthcare labor is also exacerbated by supply chain problems. Congested ports, disruptions in the trucking industry, and severe shortages of microchips and certain plastics and metals have had a deleterious impact on healthcare organizations’ supply chains with critical medical supplies running low or being unavailable.
As an accounting management partner to several healthcare organizations, Lavoie CPA has found that the following methods can help hospitals avoid crisis mode as they weather these difficult times.
Find Ways to Streamline Payments from Patients & Insurers
While revenue generation is crucial, a mistake commonly made by healthcare organizations of all types is placing too much emphasis on revenue fluctuations rather than cash flows.
The cash flow statement is one of the four financial reports that accounting departments and outsourced accounting firms provide to management. It analyzes how effectively an organization collects cash proximal to how much goes out for operating expenses, as well as major investments like equipment and real estate.
Expenses can be incurred but not paid, and revenue can be generated but not yet collected. The cash flow statement clarifies how much cash is actually being received. More advanced cash flow analytics can provide a breakdown of how quickly cash is received in the average reporting period.
Healthcare organizations frequently face delays and staggering in cash collection due to inherently onerous billing practices, delayed processing of payments, and negotiations with both patients and payers like insurance companies.
The pandemic created additional issues in individual insurance coverage, with both policy changes and the “great resignation” causing millions of Americans to experience last-minute changes in coverage, needing to go on Medicaid due to childcare or joblessness, increased denials from both private and government payers are compounding the cash flow problems experienced by healthcare organizations nationwide.
By closely analyzing cash flows on both lateral and micro levels, hospital administrators can determine where shortfalls lie in the current billing and payment systems and how they can be addressed. Training and skills updates for the billing department or new software can be the answer, if not a thorough examination of billing practices and departmental efficiency.
Assess Administrative Processes & Procedures to Address Inefficiencies
While the billing and accounting departments are often the first places a healthcare administrator will look when addressing cash flow issues, they aren’t the only departments that could have outdated infrastructure or staffing inefficiency.
52% of healthcare administrators state that COVID-19 caused their organizations to adopt new processes, including the creation of new positions or departments, that they expect to maintain after the pandemic concludes.
Poorly run departments, constrained human resources, and inefficient business processes contribute heavily to organizational financial waste. By thoroughly examining each department and division, unnecessary procedures, and duplicate positions can be eliminated or realigned to new posts that provide greater efficacy. Administrative processes that create waste may need to be simplified or modernized, or made compliant with healthcare and technological regulations if the organization is being repeatedly fined.
Renegotiate & Seek Agreements With Vendors to Save on Supply Costs
Supply chain squeezes are affecting the healthcare industry as a whole, with numerous hospitals across America completely lacking IV bags and other key medical supplies needed to care for patients. Worldwide microchip shortages have also increased the prices of computers and peripherals, which affects both medical devices and back-office operations.
While this puts healthcare organizations at a disadvantage in vendor negotiations, agreements can still be negotiated to get through this crisis if the organization has had a long and thriving relationship with the vendor. They may provide a temporary or provisional discount depending on what is needed. If they take advantage of the leverage they currently have, finding new vendors can provide immense cost savings.
For supplies that are less critical to have on hand, the purchasing department can take more time to contact multiple vendors to find the best deals.
Seek Opportunities to Increase Revenues
Cost-cutting is often the first method that managers turn to in times of crisis. However, medical supplies are seriously needed despite supply chain problems and cutting hours for healthcare workers leads to both higher turnover and poorer patient outcomes.
Some costs can be cut without harming the organization’s long-term viability if inefficiencies are addressed. But not all financial crises will be ameliorated by cutting costs alone. New revenue sources should also be considered.
By approaching the financial crisis in terms of increasing revenue, what are opportunities that best fit your healthcare organization, with the constraints of the pandemic in mind? Start with allocating more resources to following up on denied claims. After billing department issues have been addressed, insurers may have denied claims in error or proper appeals for medical necessity can be made.
Even as more employers shift to hybrid or fully remote operations, medical benefits can go beyond medical and dental coverage. Hospitals and primary care practices can bring wellness programs directly to workplaces, creating a new revenue stream for the organization while the employer provides a benefit that attracts and retains quality talent.
Nonprofit hospitals and clinics have the ability to appeal for individual, corporate, and estate donations. With fundraiser balls and other live events being less viable during the pandemic, hosting livestreams and working with influencers and other digital forms of fundraising and community outreach can provide additional income.
Finding new ways to generate revenue can endure after the pandemic has passed and serve as a springboard for thriving and growing as an organization.
Healthcare Financial Assistance from Lavoie CPA
Lavoie CPA focuses on financial technology and business process solution assessments. As an outsourced accounting partner, Lavoie CPA can deliver value where internal accounting departments often fall short. We offer interim and project-based services for your cloud-based accounting needs and aim to address the big picture rather than just one process.
Contact us today to set up a healthcare organization financial assessment with Lavoie CPA.