As Patient Volume Returns, Hospital/Health Plan CFOs Prepare to Take on a More Strategic Role | Deloitte US has been saved
By Tina Wheeler, Health Care sector leader, Deloitte, LLP
Many large health plans are beginning to see a spike in medical claims. While this likely indicates that patients feel more comfortable returning to medical facilities, the traditional role of the health plan or health system CFO might be forever changed.
It has been 18 months since the pandemic began, and financial leaders from health systems and health plans say they expect to take on a far more strategic role in the post-pandemic era, according to a new report from the Deloitte Center for Health Solutions. Survey respondents and interviewees told us that the traditional role of finance (e.g., reporting monthly, quarterly, and annual performance) was no longer their main focus. The vast majority of financial leaders (77%) said they are moving beyond the traditional finance function to partner in organizational decision-making to boost business growth.
US Hospitals and health systems lost an estimated $323 billion last year as the threat of COVID-19 infection persuaded patients to hold off on non-emergency procedures, according to the American Hospital Association.1 Health system and health plan financial leaders say that while patients are returning, it might take another year or two before volume reaches pre-pandemic levels, according to the results of our latest survey. And while health plans benefited from the delayed procedures and fewer claims,2 they now face challenges in premium rate setting, rebates, and reserves as volume returns.3, 4
Pandemic stalled VBC progress
Along with a significant reduction in volume, the pandemic might have stalled the already sluggish transition from a fee-for-service (FFS) payment model to value-based care (VBC).5 In many cases, negotiating, contracting, and reporting quality measures stalled as hospitals and health systems tested and treated COVID-19 patients. Close to 60% of survey respondents said the transition to new reimbursement models was a top priority for the next three years.
VBC seeks to remove low-value and unnecessary care. Hospitals, health systems, and health plans have been preparing for this transition for more than a decade. However, VBC might not do much to reduce unnecessary low-value care during a health emergency. As of July 27, health care providers and labs in the US had administered and processed more than 525 million COVID-19 tests—far more than any other country in the world.6 Many of these tests were not prescribed by a physician, and some tests might not have been needed at all.
Case in point: Last summer, my 75-year-old mother decided to get a COVID-19 test because she felt tired and had developed a little bit of a cough (symptoms that didn’t indicate an infection). She was probably more curious than concerned, and the test was free to her. Under a VBC model, her care team likely would have discouraged a test. Instead, they would have urged her to quarantine for a few days to see if other symptoms developed. Millions of tests are still being administered to kids going to camp, athletes competing in sports, or people who have mild cold symptoms, like my mom.
While it’s important to identify people who have been infected, some diagnostic tests might not be necessary or appropriate. A friend and colleague told me her child has had more than 20 COVID-19 tests. She paid a $25 copay for each test. Prices charged by hospitals to administer COVID-19 diagnostic tests range from $20 to more than $1,400, according to an analysis of prices charged by the two largest hospitals in each state and Washington, D.C.7 These prices do not include the cost of a provider visit, facility fee, or specimen collection. Unnecessary tests can be costly and are considered “low-value care,” which runs contrary to the concept of VBC.
Financial uncertainty could drive change
Financial uncertainty has always been an issue for financial leaders, but the pandemic is pushing health care organizations to make changes. Here are a few highlights from the 2021 health care CFO study:
- Digital technologies: CFOs will likely need more timely data around cost containment as they take on more of a strategic role. Some of them might need to invest in upgraded or new digital systems. Good digital data is key to making more informed decisions about patient care. Nearly 70% of survey respondents said digital technologies, such as virtual health, are now a top area for capital spending. As I noted in my 2021 Outlook for hospitals, health systems, and medical professionals, some medical schools are already teaching web-side manners to future physicians, recognizing that telehealth is here to stay.
- Growth and expansion: Nearly 70% of respondents said growth and expansion is now the top strategy for their organization. They acknowledged that they will likely need to invest in core digital technologies such as virtual health, artificial intelligence, and automation. In addition, interviewed CFOs discussed addressing supply chain issues structurally. Some organizations are now layering sophisticated analytics and a cloud-based approach to their enterprise resource planning (ERP) systems to help them address pricing, vendor issues, and other supply chain bottlenecks in real time.
- Lower payments: Despite the uptick in patient volume, two out of three surveyed hospital/health system financial leaders predicted only slight or no improvement in margins due to continuing growth in costs and a shift toward lower-cost services (such as virtual health visits). Moving to a VBC reimbursement model could help hospitals and health systems offset this trend.
- Health equity: 60% of surveyed finance leaders said health equity initiatives are a top organizational priority. To achieve desired scale, they are focused on three key areas—aligning health equity investments with desired outcomes and goals (85%); improving workforce diversity, equity, and inclusion in their own function (85%); and compliance and reporting of initiatives (81%). Many acknowledged that the disparities uncovered during the pandemic put a spotlight on how much more work needs to be done. Both surveyed and interviewed finance leaders said that their specific role in health equity initiatives for their organization was to help identify opportunities to achieve scale and sustainability.
New financial strategies could help with future health emergencies
I’m personally excited knowing that many health system and health plan CFOs are preparing to take on a more strategic role. These executives can have a significant impact on the future of their organizations specifically, and on the Future of Health more broadly. This emerging data-centric evolution will likely be demonstrated by the influence financial leaders have on care delivery models, digital transformation, the future of work, and health equity. As many CFOs focus on margin deterioration and cost containment in the near term, their long-term strategies could help position their organizations to effectively evaluate and manage health care costs generated by any future health emergencies.
Endnotes:
1. Hospitals face continued financial challenges one year into the COVID-19 pandemic, American Hospital Association, March 2021
2. Hospitals and health systems continue to face unprecedented financial challenges due to COVID-19, American Hospital Association, June 2020
3. Despite large profits in 2020, health insurers see volatility ahead, Managed Healthcare Executive, March 11, 2021
4. Fourth quarter COVID-19 costs catch up to insurers, Healthcare Finance, February 16, 2021
5. COVID-19 will upend hospital reporting and value-based programs for years to come, Health Affairs, May 24, 2021
6. Number of COVID-19 tests performed in the most impacted countries worldwide, statista, July 27, 2021
7. COVID-19 test prices and payment policy, Kaiser Family Foundation, April 28, 2021
