June 23, 2024
Hospitals financial health improves; still ‘anemic’
Hospitals financial health improves; still ‘anemic’ Listen to this article

Health care systems have started recovering from the pandemic, but the margins are not robust. 

So said Ford Koles, vice president and national spokesperson for the Advisory Board, speaking at the 44th annual Lehigh Valley Coalition on Healthcare at DeSales University Wednesday.  

“The average hospital has a margin now, but it’s anemic,” he said. “The labor situation is better but it’s not sustainable and that is a concern.” 

Koles, whose organization provides non-binding strategic advice to corporations, organizations and foundations, told the group of more than  250 that the picture isn’t all “gloomy” but needs to change for health care systems to thrive. 

Koles said with the aging population, workforce shortages and reimbursements for care, hospitals are facing a tough future. However, he emphasized that hospitals are not going to disappear. 

Koles said while inpatient care is slowly detracting, “We are going to need every hospital we have with the aging population and low birth rate.” 

The biggest expense for health care systems is labor at about 60%, followed by supplies and capital expenditures, he pointed out.  

“Everyone is going to have to reduce their margins to transition to a system that is less expensive,” he said, adding moving toward more government payors is an economic fact. 

“Thirty years ago, health systems received 120% of payments from Medicare subsidies,” he said. “Now that is 270%. We need to reinvent the system around the lower payment level.” 

Chuckling, Koles said while the American health care system won’t look like England, he said it needs to find what the American version will look like. 

A big part of that picture is bringing down the price of drugs in a way it doesn’t “kill” creativity, Koles said. 

He explained that the price of drugs per unit in the U.S. are set by pharmaceutical companies who don’t get that price elsewhere.  

“A company will go to say Brazil and set a unit price at say $140. Brazil says they will pay $5. The company will take that price to sell large units to Brazil, but that creates a strain here,” he said.  

Private payors in the U.S. will pay higher prices to make up for the shortfall, he added.  

Health systems will also need to use more AI and robots to operate more efficiently, Koles said.  

“Doctors and nurses are safe, but we need to augment their duties with A1,” he said.  

Using AI to monitor patients can free up nurses to care for other patients. Koles said monitoring can alert nurses when there is an abnormality. 

AI can also be used to help health systems get payment from providers by using coding to qualify for the payments, he said.  

“One of the biggest changes since COVID is virtual behavioral health,” he said. “All other services stayed in person.” 

While offering behavioral health virtually is a help, Koles said it is not a cure. 

“We also need more advanced practice providers,” he said, citing physician assistants and advanced practice registered nurses to fill the gap of a declining primary care physician population. 

“We have a shortage of primary care physicians because they make less than other doctors,” he said. “And they spend 65% of their day at the computer, which causes dissatisfaction.” 

He explained that primary care practices have a harder time investing in AI to help with note taking so they continue to document visits while seeing patients. 

“For profit companies are buying up these practices so the compensation is getting better,” he pointed out. “But the shortage remains.” 

To the employers who pay the bills, Koles said, “Hospitals are not crying wolf. They are in financial distress.” 

While he pointed out it’s not the employers’ fault, there needs to be a transition to a less expensive system.  

“Everyone takes a hit, and everyone’s price comes down,” he said.   

Kristen Begley, PharmaD, Capital Rx, spoke to the group about the remodeling of pharmaceutical purchasing, which she said is the fastest growing piece of health care. 

Capital Rx, she said, is tackling the infrastructure to create a plan designed on the individual that will change the way drugs are prices. 

Begley spoke about the way PBMs, the third-party companies that function as intermediaries between insurance providers and pharmaceutical companies. 

 Telling the participants to pay close attention to legislation, she said PBMs make more money when providers spend more. 

“That’s a conflict that resonates in this country,” she said.  

PBMs negotiate with manufacturers, mail order companies and retailers. Begley said they then started buying those entities and then started buying health plans and provider groups.  

“That makes them more money,” she said, adding it also creates a system where it is hard to compare data.  

Capital Rx has set out to change that, she said. 

“We look at specific costs and found if we find the right mix, drug pricing can go down,” she said.  

Employers need to understand what they spend per member per month to find a plan that serves their employees and controls costs.  

“You need to look at prior authorizations, low value drugs, trend rates, automatic refills and co-pay cards,” she said. “Find a consultant to help with the total costs and keep up with the language of new legislation.” 

Begley said it’s about management. 

 “There is hope, but not in the way we are doing it so far,” she said. “Recruiting and retaining employees is important and good benefits are good for that.” 




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