The Challenge of Remaining Profitable as a Hospital

Verity Health System of California, Inc., which operates 6 hospitals in northern and southern CA, filed for bankruptcy on August 31, 2018. The system did not find itself in this situation for lack of capable leadership. It is managed by billionaire and former surgeon Patrick Soon-Shiong, who also founded and sold multiple biotech companies and recently purchased the LA Times newspaper. Verity Health CEO Richard Adcock has stated that they are reexamining all of its contracts, including the management deal with Soon-Shiong, as it seeks to restructure and find a potential buyer. (https://www.beckershospitalreview.com/finance/6-hospital-verity-health-files-for-bankruptcy.html)

Verity Health System’s filing for bankruptcy is not as uncommon an event as many might think. In the first six months of 2017, a total of nine US hospitals filed for bankruptcy. Many factors can lead to a hospital’s bankruptcy, including reimbursement landscape challenges and dwindling patient volumes. (https://www.beckershospitalreview.com/finance/9-hospital-bankruptcies-so-far-in-2017-070617.html)

However, the all-encompassing issue remains clear:

According to Moody’s credit rating agency, “US hospitals are suffering from costs that are rising faster than revenue and the industry is on an unsustainable path.”  (https://www.reuters.com/article/us-verity-bankruptcy/california-hospital-chain-with-ties-to-billionaire-files-for-bankruptcy-idUSKCN1LG24F)

Berkshire Hathaway’s Warren Buffett told CNBC this year that health-care spending is a “tapeworm on the economic system.” (https://www.cnbc.com/2018/03/02/no-frills-micro-hospitals-emerge-as-a-new-way-to-cut-health-care-costs.html)

According to an annual survey conducted by the American College of Healthcare Executives, “financial challenges” ranked, for a third consecutive year, as the top concern for hospital CEOs in 2017. Click To Tweet

“Governmental Mandates” and “Personnel Shortages”, which directly impact the financial environment of a hospital, ranked as the second and third concerns, respectively. “Assuring patient safety and providing quality care is the No. 1 job of hospital leaders,” says Deborah J. Bowen, FACHE, CAE, president/CEO of ACHE. In their efforts to accomplish these goals, hospital CEOs face increasing pressure as the financial burdens of their hospitals grow.

Within the category of Financial Challenges, the CEOs who were surveyed identified more specific concerns:

  • Medicaid reimbursement (including adequacy and timeliness of payment, etc.): 71%
  • Increasing costs for staff, supplies, etc.: 64%
  • Reducing operating costs: 57%
  • Competition from other providers (of any type—inpatient, outpatient, ambulatory care, diagnostic, retail, etc.): 48%
  • Transition from volume to value: 47%
  • Managed care and other commercial insurance payments: 46%
  • Inadequate funding for capital improvements: 42%
  • Medicare reimbursement (including adequacy and timeliness of payment, etc.): 42%
  • Revenue cycle management (converting charges to cash): 37%
  • Moving away from fee-for-service: 36%
  • Emergency Department overuse: 28%
  • Pricing and price transparency: 24%

(https://www.ache.org/pubs/research/ceoissues.cfm)

Partnering with VIE Healthcare will empower CEOs to tackle the financial challenges of their organizations.

VIE Healthcare’s expertise and attention to detail will help your organization decrease cost and improve value and efficiency, easing the financial burden that every hospital faces.

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