Taking on Healthcare’s Greatest Challenges in 2023
Six Reasons 3-Way Matching is a Must at Your Health System
December 27, 2022
5 Accounts Payable (AP) Benefits of a Recovery Audit
February 27, 2023Nonprofit health systems and hospitals will take years to recover from the effects the pandemic has on their labor force, cash flow, and supplies. In fact, high labor and supply costs are adding unprecedented debt to hospitals leaving one health system reporting their debt as high as $6.34 billion in December 2022.
However, 2023 is projected to relieve some of the strain on health system finances, but may be too little too late for many rural hospitals at risk of immediate closure and leaving other hospitals cutting services and workforce numbers.
As healthcare leaders look to rein in spending while still delivering exceptional care, reviewing internal operational processes may be a key component of lowering debt and saving revenue.
in debt at one health system in December 2022
Labor Supply and Demand
As the biggest challenge facing healthcare, labor costs and shortages continue to grow prompting Finch Ratings to evaluate the healthcare sector as “deteriorating” moving into 2023. The issue lies in high turnover due to worker fatigue and burnout as well as heightened pay demands – especially for contracted or traveling nurses. In fact, the average hospital lost $7.1 million in 2021 to high turnover rates alone.
With nurse staffing shortages soaring to over 2 million at the end of 2022, health systems must not only create strategies that lessen their dependence on contracted or travel nurses. They must also create internal control processes to ensure the staffing expenses of staffing are on contract and compliant.
TAG TIPS:
To minimize the risk of overpayments and overcharges from staffing vendors, we can help you review your tracking and payment process to ensure all checks and balances are in place. We can also perform analysis on your line item invoices, summary statements, and contracts to ensure all the expensive contracted staff are billed at the correct rate and for the correct hours.
With purchased services contracts, health systems not utilizing a purchase order (PO) put their hospital at risk of erroneous transactions such as duplicate payments and overcharges. If discrepancies are found, we can work with your servicer to get credited the correct amount. Reach out now to get started.
Cash Flow Challenges
Labor is not the only issue plaguing healthcare. Health systems are struggling to improve cash flow. With large debt, higher labor and supply costs, rising inflation, and the end of the COVID relief funds, cash is becoming much more difficult to keep on hand.
While operating cash flow will grow in 2023, the high expense environment, coupled with modest revenue gains, will limit the profit margin for the not-for-profit healthcare sector. This level of operating cash flow production will likely prove insufficient over the long term to enable adequate reinvestment in facilities, maintain investment in programs, or support organizational growth – key considerations that drive our negative outlook.
Moody also warns the healthcare industry of increased inflation driving up all costs and leading to further decreases in operating margins. Traditionally, healthcare systems do not have the ability to respond to the changing market with price increases for their services to make up for challenges in cash flow and labor impacts.
We can help bring much-needed cash to your health system by performing a Recovery Audit. Let’s get started!
More Challenges Facing Healthcare in 2023
Cash flow and labor threats are not the only instances threatening health systems in 2023. Higher drug costs, increased supply costs, and minimizing the exposure to cyber threat risks and ransom attacks round off the top issues healthcare leaders are battling.
2023 will be a year of response and managing these threats to keep hospital doors open.
Often internal controls and efficiency gains can lead to lowering labor needs and keep processes on track. We can partner with Internal Audit, Finance, and Supply Chain to aid in our specialized Procure to Pay space, to cut costs, optimize processes, and perform a retroactive recovery audit to bring back cash to your health system. Reach out now.
