Like so many other sectors, healthcare has been hit hard by COVID-19. From my own experience, the primary revenue channel of the private healthcare industry of planned consultations and elective surgeries have been almost non-existent in the Middle East North Africa (MENA) region. Furthermore, according to a recent RSM survey, revenue from other significant channels has also suffered; outpatient is down 40%-60%, primary care by 70%-80%, and dentalcare down by an alarming 90%. Even without the impact of COVID-19, this is an industry that existed under immense financial pressure long before the lockdown.
In this article, we will explore five key opportunities that we have identified that can help hospitals and healthcare providers face the challenges of a new normal and bounce-back from the COVID-19 crisis.
The landscape, pre-and post-lockdown
A hospital is rarely in full control of its earnings. In private healthcare, it is an industry where the consumer of the service may not be the one who typically pays for it. The payment will normally come from a third-party, be it an insurer or a publicly funded care scheme. To complicate matters, the hospital does not get paid on the day. It takes weeks, sometimes months, for that payment to process. Moreover, some of this payment may even get rejected or refused by the payer.
The cost of running a hospital is very high, and the margins are razor thin. Hospital systems employ expensive, highly-skilled workforces. The hospital equipment overheads are high, as medical technology is expensive and must be replaced or updated every few years. Post-COVID-19, even if planned elective surgeries suddenly spiked overnight, there would be little impact on easing the cost pressures. Furthermore, with the delay in the payment process, the money would still not materialise until weeks later. The conundrum of cashflows will compound the troubles of hospitals for most of 2020 and even the beginning of 2021.
Here are five opportunities that private hospital leaders can take advantage of to help their businesses get back on track.
1 - Managing cash flow and finance in private healthcare following the impact of COVID-19
One of the first considerations is how to reorganise cash flow. Accounts payable should be managed diligently whilst accounts receivable should be fast-tracked immediately. In the current situation, it is likely that the hospital’s revenue cycle will need to be streamlined to increase efficiency in billing and cash collection processes, in accordance with best practices and industry benchmarks. Automation can also help improve efficiency and reduce the risk of human error in revenue cycle management.
On the other hand, as an adviser, we would look at fixed costs, such as salaries, and consider restructuring some of these into variable costs. A good strategy is to develop an allocation matrix to help prioritise what must be paid, and when. Scenario planning can also aid the understanding of which avenues can help you meet your internal requirements. For instance, if revenue goes up by “X” amount, then you will need “X” additional staff.
Another important factor to keep in mind is service line costing. For example, each procedure, like a Caesarean procedure, has a cost. This cost is not predictable for a number of reasons; doctors vary in their seniority and experience, and in turn earn different salaries; each may take different amounts of time to complete the procedure, etc. Tracking this data helps determine how to manage overhead costs and generate the most value.
2 - Workforce management when cashflow is in crisis
As a result of COVID-19, a hospital’s labour demands may not be the same as before, so a hospital or healthcare provider will need to assess how many people are needed for each department, and which employees are needed to be on-site.
There are three opportunities to explore:
- Remote, outsourced, or offshore workforce: To bring costs down, some departments can work remotely or be outsourced to more cost-effective offshore locations.
- Reduction in hours: Creating innovative work arrangements that reduce the number of hours for some roles could help bring down costs.
- Variable salaries: Some roles or functions could have a fixed salary plus a variable success-based salary component.
Labour needs may not be the same as before COVID-19, so hospitals need to be deliberate and demonstrate caution when planning and allocating the requirement of manpower. For remote workers, whether they work from home or from another country, a new set of KPIs and job descriptions would maximise the workforce and help us determine which are critical departments and which are not.
3 - Managing the supply chain, as a private healthcare provider in challenging times
One of the first things a hospital or healthcare provider should do is to review any contracts with its main vendors. These need to be assessed and scrutinised down to the minutiae, to help locate opportunities for renegotiation. If credit periods can be extended, then any pay-out to lenders will also get extended, which is good for cashflow.
Renegotiation of these contracts can bring costs down as much as 6%-7%. On that same topic, inventory levels must also be assessed. Scenario planning and predictive dashboards can help determine which inventory consumables, such as medicine, will be required if patient services or occupancy increases. These calculations must be very accurate, otherwise there is a risk of the hospital of healthcare provider being overstocked, placing an unnecessary burden on cashflow.
4 - The role of technology in reducing costs and improving operational efficiency
Like most other businesses, hospitals are integrating more technology into their business operations. They are also trying to assess and determine when and how to introduce these new platforms, and how much to invest in them.
Some have already made the transition. Virtual consultations and remote health monitoring platforms were already common prior to the crisis and have grown exponentially during the ensuing lockdown. Hospitals will need to determine which additional technologies they want to invest in now, and which can be deferred to the future.
Furthermore, automation can cover many hospital functions, such as revenue cycle management, supply chain predictions, pharmacies and dispensaries, and even financial accounting.
5 - Attracting patients back into non-urgent private healthcare
Marketing and promotion are crucial functions for hospitals and healthcare providers that have not seen elective consultations, procedures, and surgeries for several months. Patients are actively staying away from these facilities, which leaves them less cash to invest in campaigns. This means the marketing function will have to do more with less.
The entire marketing function will need a careful reorganisation, including redefining scope, assessing resources, and optimising budgetary allocation. Based on our findings, we have helped private healthcare providers and hospitals develop a one-year marketing plan, consisting of a new strategy, new activations, and a timeline. The goal will be to drive the shift from traditional channels (outdoor and print) onto digital platforms such as social media, online marketing, and digital channels, which are more targeted, have a much higher potential for engagement and are far more measurable.
Of all the expectations on the revamped marketing team, none will be greater than retention of patients. Retention is crucial, as it is less expensive and brings in more money. Having a strategy for patient retention and a strategy for attracting new patients, will be critical to overall sustainability of the business.
Reimagining a new way forward for private healthcare and hospitals
Right now, hospitals all over the world, in every type of healthcare system, are reinventing themselves. They are exploring the benefits of new technologies, conducting remote consultations, devising money-saving tactics, and reorganising their manpower. The healthcare industry as we know it may never look the same. But it is not all bad news. Although healthcare may be the most in need of a reboot, this crisis may have provided the opportunity and impetus it needed to update, upgrade, redesign, and reimagine this vital sector.
In an era when hospitals are doing everything they can to bounce back, some are succeeding. And their survival may just redefine the entire industry.