1 in 5 Hospital Execs Expect Revenue Declines of Over 30% in 2020

Nearly all hospital and health system executives recently surveyed by the Healthcare Financial Management Association (HFMA) anticipated their organizations’ revenues to be lower at the end of 2020, compared to pre-coronavirus levels.

The coronavirus pandemic has had a significant impact on hospital finances in the last couple of months, with organizations reporting volume declines of up to 99 percent for some revenue-driving procedures. But these temporary effects are likely to have lasting implications for hospital revenues this year, survey respondents indicated.

In a Guidehouse analysis of the survey, researchers found that half of the 174 hospital and health system executive respondents said it will take through the end of the year or longer for their hospitals and health systems to see elective procedure volumes return to pre-coronavirus levels.

And this will have a lasting effect on hospital revenue, respondents indicated. Almost two-thirds of the hospital and health system executives said they expect revenue decreases of more than 15 percent by the end of 2020. About one in five executives forecasted decreases of over 30 percent.

"Healthcare has largely been insulated from previous economic disruptions, with capital spending more acutely affected than operations," stated David Burik, partner and payer/provider consulting division leader at Guidehouse. "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.”

Lawmakers are currently distributing a total of $175 billion to healthcare organizations to help offset the financial losses incurred during the unprecedented public health emergency. More federal funds are also being given to providers through other means, including the Federal Emergency Management Agency (FEMA) and other agencies.

However, only 11 percent of executives responding to HFMA said they believed federal funding will be enough to cover expenses related to COVID-19. That percentage dropped to just 3 percent when Guidehouse accounted for only health system executives.

Xtelligent Healthcare Media also recently found that providers are unsure of federal funding they are receiving from coronavirus stimulus packages, with nearly 20 percent of respondents neither agreeing nor disagreeing that the funds would help their organizations. Only 17 percent of respondents either disagreed or strongly disagreed with the statement. Another 40 percent agreed or strongly agreed.

Providers may be hesitant to say federal funding will help their organizations considering executives predict the pandemic to have lasting effects on their organizations’ bottom lines.

"Providers are facing a long-term decrease in commercial payment, coupled with a need to boost caregiver and consumer-facing digital engagement, all during the highest unemployment rate the U.S. has seen since the Great Depression," Burik explained. "For organizations in certain locations, it may seem like business as usual. For many others, these issues and greater competition will demand more significant, material change."

For now, hospital and health system executives are looking to cut costs, the analysis of the HFMA survey showed.

About three-quarters (76 percent) of executives said their organizations are reducing capital expenditures including new and existing construction. Another 76 percent of respondents also cited labor adjustments such as furloughs, layoffs, and hiring freezes as a way their organizations are offsetting COVID-19’s financial impact.

Additionally, 69 percent of executives reported canceling or renegotiating contracts and co-management agreements as another area that they will most likely target for immediate and long-term cost reduction.

Looking more long-term, hospital and health system executives also anticipated greater use of telehealth and other consumer-facing digital tools. For example, 67 percent of respondents predicted that their organizations would use telehealth at least five times more than they did pre-coronavirus.

Digital strategies, including telehealth and contact centers, were also the most often cited strategies executives plan to implement or enhance to grow future revenues.

Service line strategies as growing core businesses and exiting losing businesses and revenue cycle improvements including enhancing accounts receivable and collections were also cited frequently by respondents, the analysis stated. Notably, 29 percent of executives stated that the pandemic has increased the likelihood that their organization will engage in merger and acquisition activity or new partnerships.

"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," concluded Chuck Peck, MD, a Guidehouse partner former health system CEO. "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 proven to be successful in improving back-office operations in other industries. Providers will need to follow suit."