Healthcare leaders predict lower hospital revenues by end of 2020

Healthcare leaders predict lower hospital revenues by end of 2020

by John R. Fischer, Senior Reporter | May 22, 2020
Business Affairs
Healthcare system executives predict revenue for hospitals and healthcare systems to be lower at the end of 2020 due to the COVID-19 pandemic.
The vast majority of hospital and healthcare system executives expect their organization's revenues to be lower by the end of 2020, according to a Guidehouse analysis of a survey conducted by the Healthcare Financial Management Association.

That’s the sentiment shared by 89% of the 174 respondents in the report, with almost two-thirds expecting decreases of more than 15% and one in five projecting declines greater than 30%.

"Healthcare has largely been insulated from previous economic disruptions, with capital spending more acutely affected than operations," said David Burik, partner and payer/provider consulting division leader at Guidehouse, in a statement. "But this time may be different, since the COVID-19 crisis started with a one-time significant impact on operations that is not fully covered by federal funding.”

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Executives say a number of intermediate and long-term cost reductions in capital expenditures would be needed to offset the financial strain of the pandemic on their institutions. Among them are new and existing construction (76%); labor adjustments such as furloughs, layoffs, and hiring freezes (76%); and canceling or renegotiating contracts and co-management agreements (69%).

Half of the survey’s respondents do not expect elective procedures at their organizations to return to pre-COVID levels until the end of the year, while 11% of all executives — only 3% of health system respondents — believe federal funding will be enough to cover COVID-19-related costs. Another 15% say they are more likely to participate in M&A activities as a result of the pandemic, and 14% are more likely to seek new partnerships.

Despite their losses, executives do see a greater adoption of digital technologies in the long-term, particularly telehealth, which along with contact centers is one tactic organizations often say they will implement or improve to enhance future growth revenues. Sixty-seven percent predict they will use at least five times more than they did prior to the pandemic, and more than 22% have already decided to increase work-from-home options and reassess future space-use. One third believe their organizations have all needed telehealth capabilities, while one in five expect their organizations will return to primarily onsite work arrangements set up before the pandemic.

"Through all the uncertainty COVID-19 has presented, one thing hospitals and health systems can be certain of is their business models will not return to what they were pre-pandemic," said Guidehouse partner Dr. Chuck Peck, a former health system CEO, in a statement. "A comprehensive consumer-facing digital strategy built around telehealth will be a requirement for providers. Moreover, shifting hardware and physical assets to the cloud and use of robotic process automation has proved to be successful in improving back office operations in other industries. Providers will need to follow suit.”

Organizations should also consider investing in service line strategies, and according to 57% of respondents, improve revenue cycles, including enhancing accounts receivable and collections, to promote further growth.

The survey was conducted between May 4 and May 8.

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