COVID-19 has placed enormous financial pressures on healthcare provider organizations. The American Hospital Association estimates American hospitals experienced losses totaling $202.6 billion from March through June 2020.
That’s an average loss of $33 million per hospital in just four months. And based on the resurgence of COVID-19 across the country, we have a long way to go before losses subside and hospitals recover to levels anywhere near their prior financial position.
Health system leaders are making many difficult decisions to address the financial implications of COVID-19. Layoffs, furloughs, pay cuts, and overhead restructuring have become common among health systems trying to adjust to dramatically reduced revenue. But the reality is that many health systems were in financial trouble before anyone had ever heard of coronavirus. For years, health systems have been functioning on operating margins barely over 0% and relying on investment income to finance capital investment.
Many health systems are recognizing the need for not just short-term solutions to survive the financial challenges accompanying COVID-19, but also long-term strategies to rebuild, reposition, and recreate themselves. Some are making bold strategic moves related to their market position, service portfolio, and/or physician network. Others are building off lessons learned during their response to COVID-19 to change the way they engage patients and consumers and springboarding into new models of care delivery. Almost every hospital has had to reprioritize capital investments and focus on strategic and operational solutions that result in immediate margin improvement.
ECG conducted over 50 interviews with health system leaders to explore the impact of COVID-19 to their business model and discern those strategies deemed most essential to achieving a sustainable recovery. Five initiatives surfaced as those that health system leaders are pursuing to improve their financial and strategic position as they plan for the future of their organizations and how best to serve their communities.
Published August 17, 2020
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