COVID-19 continues to strain hospitals as they face higher costs, lower revenues, staff burnout

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The pandemic continues to generate strain on hospitals at a time of increasing expenses and decreasing revenues.

These are the conclusions of Kaufman Hall's 2021 Healthcare Performance Improvement Report, which found supply chain disruptions and shortages have driven up prices and forced a return to the costs of carrying larger inventories of needed supplies.

Labor shortages are adding to hospital woes.  All respondents to the survey said they faced staff burnout, difficulty filling vacancies, wage inflation and high turnover rates.

Nearly all (92%) said they have had difficulty attracting and retaining support staff, and 90% said they have had to increase base salaries. This has led more than half (52%) of the hospitals to adopt new processes, positions or departments to lower their costs while maintaining control over all aspects of their operations.

These include measures that impact everything from supply chain management and patient flow optimization to workforce engagement and revenue cycle management.

Lance Robinson managing director and leader of the Performance Improvement Practice for Kaufman Hall said survey respondents described a wide range of new processes they've had to adopt in the wake of the pandemic to improve operations.

"For example, recruiting processes have been streamlined to make hiring decisions easier, data analytics and predictive modeling efforts have been enhanced to improve forecasting processes, and new inventory management and warehousing processes have been implemented to mitigate supply chain disruptions," he said.

Robinson also noted the pandemic created the need for new partnerships with health plans, other provider organizations, corporate partners, telehealth companies and community partners.

"These partnerships helped to educate consumers, stretch limited resources, provide new care delivery options, and assist in testing and vaccination efforts," he said.

WHY THIS MATTERS

The company's spring 2021 report, released in May, projected hospital margins could be down as much as 80% and revenues down as much as $122 billion in 2021 compared to pre-pandemic levels.

Going forward, Robinson said health system leaders should look for strategic partnerships that help them meet community needs most effectively by adding new skillsets or strengthening their capabilities in underperforming areas.

"Issues of operational and clinical decision-making and control will need to be structured in a way that best meets the needs of both partners," he said.

He pointed out health systems did an "amazing job" of quickly ramping up digital health services in the early weeks of the pandemic.

"Their efforts now will be focused on improving the patient experience with digital health," Robinson said. "Until we have a sense of where long-term demand for digital health will settle at, it is too early to predict whether digital health will be a 'silver lining' for performance improvement efforts."

THE LARGER TREND

Until labor force participation rates improve, healthcare organizations will face more difficult competition for a limited pool of workers, and in many nonclinical areas, will be competing against non-healthcare organizations for the same workers.

Meanwhile, heightened competition will likely translate into higher labor costs, as organizations increase wages and benefits to remain competitive.

"Frontline clinical staff have worked incredibly hard over the past 18 months," he said. "It will take some time to build the pipeline of clinical professionals that might be needed to replace those who have experienced burnout or have decided on early retirement."

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Email the writer: nathaneddy@gmail.com