Healthcare organizations have been struggling with significant financial instability over the last couple of years due to rising supply costs, continued labor shortages, rapid IT changes and costs, cybersecurity threats, and money pouring into healthcare ventures rather than into health systems.
These challenges give the impression that there are few opportunities for healthcare’s financial leaders to navigate past them and find pathways for growth and gain. But this isn’t the case. Some healthcare organizations are finding innovative ways to run operations, manage staff, and serve patients.
HealthLeaders spoke with two hospital systems that are setting themselves apart from the competition—Edward-Elmhurst Health in Naperville, Illinois, and Bellin Health in Green Bay, Wisconsin. They are making hard decisions to contain and cut costs where possible. They are looking for new sources of revenue. They are using data to drive better decision-making, and they are changing their culture to become leaner and smarter while maintaining quality patient care.
A focus on innovation and data at Edward-Elmhurst Health
When Edward-Elmhurst Health merged with NorthShore University HealthSystem several months ago, the health system boasted nine hospitals and over $5 billion in total net patient revenue. Pre-merger, Edward-Elmhurst Health had included three hospitals, with 700 beds total, and $1.68 billion in net patient revenue. Edward-Elmhurst Health has also been named a Top 15 Health System in the country for the fourth year in a row by IBM Watson Health/Fortune.
Edward-Elmhurst Health took a significant financial hit because of the pandemic, but it is counting on strategic moves around innovation and data insights to bounce back stronger.
"Pre-pandemic, Edward-Elmhurst Health had stabilized financial results with a 3% margin and approximately a year’s worth of cash on hand," says Edward-Elmhurst Health CFO Denise Chamberlain, FACHE. "The pandemic and the changes that came with it, including inflation and workforce stresses, have seriously challenged us. Excluding pandemic relief funds—which are assumed not to continue—margins are currently break-even on a good month, and negative on a bad one."
Unlike other businesses or industries, healthcare providers cannot simply pass on rising costs, Chamberlain notes.
"We have multiyear contracts with payers that include year-over-year increases substantially less than the cost increases we are seeing," she says.
From strong financial health to needing life support
When the pandemic began, executives at Edward-Elmhurst Health made a difficult diagnosis—revenues at the health system would likely go on life support, at least for a while. Edward-Elmhurst Health needed new ways of cutting operational costs, looking for new revenue sources, and using data for improved decision-making.
The healthcare system has found it can accomplish this through three top strategies: the creation of a financial road map that focuses on a return to sustained profitability; the formation of an Innovation Steering Committee to spearhead business strategies; and a focus on data-driven decisions to Strengthen financial performance.
"Our financial road map includes a return to sustainable profitability," Chamberlain says. "Without the ability to 'raise rates,' we must make this turnaround by finding new ways to grow, alternative revenue streams, and ways to reduce the costs associated with delivering care."
That means paying attention to the three top financial challenges. First is labor, including turnover and escalating payroll costs.
"Our HR division has assembled a team that works closely with operations leaders to monitor our labor situation," says Chamberlain. "We track genuine data, both internally and compare it to national and regional trends, for things like turnover and vacancy rates. We compare that to what we are hearing from our staff during interviews."
Edward-Elmhurst Health also assembled a task force to anticipate what the organization’s "workforce of the future" will look like.
"We want to take a longer view of what the demands of our industry will be, what consumers will want, and what the workforce will want, and begin to build a map to align it all," Chamberlain explains. "This map will include decisions about investments in education partnerships, the redesign of care models, and long-range recruiting and retention strategies. The goal is to ensure that NS-EE remains an employer of choice."
Regarding inflation and supply chain disruption, Chamberlain acknowledges that Edward-Elmhurst Health has limited ability to impact these external forces.
"Therefore, our response has been actions such as increasing inventory levels to avoid shortages and finding other cost-saving initiatives to offset the increases in supply spend," she says.
"Our Continuous Improvement Committee leads this work," Chamberlain explains. "As an example, we have consolidated supply spend in certain areas to enhance our ability to negotiate better pricing of some supplies."
A strategic focus on creative financial solutions
About two years ago, Edward-Elmhurst Health formed an Innovation Steering Committee to help reach its goals of recovery and growth by finding creative ways to uncover new revenue opportunities.
"Since all leaders were being bombarded by startups and other vendors pushing the existing 'shiny thing' to help them, we organized to have all innovation funnel through this committee, which is an interdisciplinary group of leaders," Chamberlain explains.
The Innovation Steering Committee sets priorities each year to address pain points, looks for new technologies that can help with those challenges, and sets priorities for new investments.
"Through this committee, we just introduced robots to our nursing units to deliver supplies. We feel this type of infrastructure and focus on innovation will help us be in front of others to adopt tech that will reduce expenses through artificial intelligence [AI]," Chamberlain says.
To aid with revenue diversification, Edward-Elmhurst Health also formed its venture capital fund in 2020.
"Our fund director sources investment opportunities for us. She also works closely with the Innovation Steering Committee so that she knows the types of technology that we think, as a health system, will be important," Chamberlain explains.
The Edward-Elmhurst Health fund is currently small—approximately $15 million. The healthcare system has made approximately 18 direct investments so far, plus invested in other healthcare venture funds.
"These investments are still early," Chamberlain says. "So, although all of them seem to be doing well, we have not recorded any gains from them yet."
Robust and trustworthy data drives decision-making
One of the most important initiatives that Edward-Elmhurst Health is undertaking to ensure success is placing greater focus on data management and data analytics. Edward-Elmhurst Health executives recognize that robust and trustworthy data is critical to making intelligent decisions to help the organization succeed and grow.
"We rely heavily on data to help us identify opportunities to Strengthen our financial performance," Chamberlain says.
"Our decision support system provides us information by expense type, by department, by service line, by entity to see where margins have deteriorated, expenses have increased, volumes are rising or falling," Chamberlain explains. "With this information, we can target areas for reductions and work with the appropriate leaders to find the opportunities and develop plans to execute and deliver the improvements."
A few areas where Edward-Elmhurst Health has identified and executed financial improvements include orthopedic spine implant utilization, instrument usage in general surgery, and staffing ratios and mixes in physician offices.
The decision support system can also show Edward-Elmhurst Health where it has variances in expenditures among physicians or locations, such as in supply utilization or higher-cost supply choices and in length of stay—which affects cost.
"This information enables us to identify best practices and strive to both Strengthen patient experience and outcomes, but also reduce costs as well," Chamberlain says.
Edward-Elmhurst Health also utilizes benchmarking services to compare its labor, supply spend, and other expenses to healthcare peers across the country.
"This data allows us to see where opportunities may exist that we were not aware of. In some cases, we connect with other health systems in the benchmark database to see how they may be doing things differently than us to achieve lower costs or resource utilization," Chamberlain says.
These investments in systems, software, and data analytics tools are paying off.
"We have built an infrastructure to mine the data, turn it into usable information, identify appropriate teams to harvest the opportunity, then monitor, measure, and report results across leadership monthly through our Continuous Improvement Committee and our monthly financial report—which includes a page specific to these initiatives and results versus targets," says Chamberlain. "In FY21, our target was $48 million, and our genuine results were in excess of $100 million."
The role of AI, automation, and machine learning
Edward-Elmhurst Health is also making substantial investments in advanced technologies, such as automation, AI, and machine learning.
"We have contracted with automation vendor Catalytic," says Chamberlain, "[which] is helping us automate various nonclinical workflows that are repetitive, high-touch activities. We are using an AI-powered chatbot to help our patients navigate to the right clinical and nonclinical endpoints within our health system."
The healthcare system is looking to use AI to assist with clinical initiatives such as remote patient monitoring and falls prevention. It is introducing robots within its acute care hospitals to assist with non-patient-facing transport tasks, thereby easing the burden on patient care staff.
A strong focus on digital health technologies is a must
Telemedicine skyrocketed during the pandemic, and Edward-Elmhurst Health has placed a great deal of focus on its road map for digital health.
The healthcare system has six product teams carved out under its digital health strategy, Chamberlain says. They are digital marketing and consumer relationship management (CRM); digital front door; digital patient access; virtual care; remote patient monitoring; and hospital at home.
"We have been executing on various digital health initiatives over the years," explains Hiral Patel, innovation program manager at Edward-Elmhurst Health. "With the marked advance of digital health in the last few years, we wanted to have a more focused and intentional approach to advancing our efforts in this area. The formation of our product teams is helping us draw out road maps under each product with tight collaboration among product leaders and a consistent organizational vision."
"By this, we mean that we were taking on smaller-sized projects to advance digital health within the organization without one centralized governance or team," Patel says. "For example, the IT team would initiate a project based on upgrades that were coming from our EMR vendor. Operations would ask for small optimizations to assist with the provider or patient workflows."
These initiatives, teams, strategies, and investments have taught Chamberlain that "righting the ship" financially at any hospital or healthcare center requires an all-hands-on-deck effort.
"Finance cannot do this alone," Chamberlain says. "It needs to be a team effort with participation across the organization, including strategy, HR, IT, and operations. Designing a process that includes everyone ensures all relevant factors are brought to light, decisions on what to prioritize are agreed upon, there is an understanding of the 'why' behind the financial goals, and the entire organization understands and buys into the road map, which is the only way it can be achieved."
Transforming the mission, operations, and culture at Bellin Health
Bellin Health is an integrated healthcare delivery system with three hospitals based in Green Bay, Wisconsin: an acute care hospital, a behavioral health inpatient facility, and a critical care access hospital. The health system also has an ambulatory surgery center.
Approximately 680,000 residents are served by Bellin Health across northeastern Wisconsin to the upper peninsula of Michigan. Bellin Health has approximately $800 million in net patient revenue and over $1 billion in assets.
In the dozen or so years before the COVID-19 pandemic, Bellin Health had experienced significant growth, and it had achieved great success in lowering the total cost of care.
"We saw continued declines in hospitalizations and more growth in ambulatory and outpatient care," explains Bellin Health CFO James Dietsche. "We did all that while being very successful financially through the process."
The pandemic took a significant toll on the health system and its revenues. In its effort to recover and grow, Bellin Health is focused on a multiprong strategy: becoming a population health organization, transforming operations, placing greater emphasis on home care and outpatient services, and better using data to drive business decisions.
Moving to a total population health operating model
Of all these goals, one stands out. "We’re trying to transform ourselves into a population health organization," Dietsche explains. "We want to be able to take care of an individual or a population—such as an employer, a municipality, or a school district—from birth to death."
Bellin Health executives realize that this strategy is key to growing its patient population, market share, and new sources of revenue. But the healthcare system can’t meet this goal alone. It needs the involvement and complementary services of social service agencies, specialty care providers, and even competitors.
The health system is looking for opportunities where such partnerships make sense, benefit all parties, and Strengthen the delivery of care. These partnerships also present opportunities to reduce the cost of providing certain services and procedures.
"We need other partners, including our competitors, involved because our focus is on keeping our communities in our region economically sustainable for the long term," Dietsche says. "So, our financial road map has focused on lowering the total cost of care. That means moving more services to the right sites for the most appropriate care."
One way the system is doing this is by moving outpatient procedures that are currently done in the hospital to freestanding ambulatory surgery centers, Dietsche explains.
Patient demands for services factor heavily in the road map
When the pandemic started, Bellin Health found that the demand for certain services—especially those related to telehealth—rose dramatically. The health system has made addressing those demands a major part of its financial road map going forward.
"It starts with the voice of the customer and how we can better serve them. What does the patient need? How do we make it easier for them to get access? Then we design our products and programs and services around the answers to those questions," Dietsche says.
Patients and employers want more on-site services, easier access to primary care services, and resources that can be offered remotely and during the day.
"Our hospitals continue to be extremely busy. And we want to provide the right care in the right setting," Dietsche says. "Before the pandemic, we had a hospital-at-home program. That has definitely taken off—we’ve probably grown it fourfold—and other services are being delivered in the home setting."
The good news is that not only does the greater focus on home care services increase customer satisfaction, but it also helps decrease the cost of providing care, Dietsche says.
Tackling changes as a series of manageable projects
To ensure that Bellin Health is making the best changes and investments, the health system has broken down its goals into a series of related projects and scorecards. This makes the changes more manageable. It is also easier to explain to employees why certain things are being done and how each project will hopefully result in improved business processes, operational efficiencies, revenue enhancements, and quality of patient care.
"Bellin is a much-disciplined organization when we take on an initiative," Dietsche says. "First, we establish the objectives, and then the criteria for measuring success and return on investment. In many instances, we do these things in a pilot or PDSA setting. We might try it with an employer or a population health group. We identify what we expect to see. We set up the scorecard measures. We determine what resources are needed. And then we go through the process."
That "process" might be short term, long term, or very long term.
"It could be 30 days, and sometimes 120 days. It could be even longer than that, depending on what the project is," Dietsche says. "At the end of the process, we bring scorecard information back to a group and evaluate it. Some things get refined, some things get more refined, and the program expands."
The health system must address certain key points with each project, Dietsche says. Questions it asks include:
• What are we trying to accomplish?
• What things will Strengthen the patient experience?
• What things will Strengthen our business processes?
• What is the baseline measure of success for either?
But the most important question to ask is, "What’s the return on that investment?" Dietsche says.
Cost containment is a key element in recovery and profitability
An important aspect of growing financially in these turbulent times is cost containment.
"All healthcare organizations go through economic cycles, and it’s no different than any other industry," Dietsche says. "In my 17 years at Bellin, we’ve been through multiple cycles. So, our process on this has been tried-and-true. We’re in that process right now."
The cost containment process requires evaluating what’s going on within the service lines and within support operations, and factoring in inflation and labor costs.
"We set targets related to those things. We ask the leaders to be accountable to those targets. We ask them to provide ideas and suggestions of how to either Strengthen their specific areas of work, to remove inefficiencies, or to have operational processes flow better through the system," Dietsche explains.
Providers also participate in that process, he says. Some initiatives take longer, but Bellin Health measures its performance against those results every month.
"We report that information at a minimum every month to our leadership group, and on a monthly or semi-bimonthly basis to our finance committee and, ultimately, to our board of directors," Dietsche explains. "It has led to successful results."
Growing financial challenges
As with most hospitals and healthcare systems, Bellin Health is facing several tough financial challenges, not the least of which is the cost of labor and the scarcity of talent. Staffing is absolutely challenge number one, Dietsche says.
"Our volumes continue to remain elevated, particularly in the hospital setting," he says. "So, we just need more clinical staff. Fortunately, we have a college that trains nurses and imaging techs and those kinds of [staff], and that helps a lot. But we need more. And it’s not like we can move workforce from one care-type setting to another."
"We’ve had some of our competitors increase labor rates significantly, so we have to compete with that," Dietsche says. "So labor is a challenge. And when roughly 60% of your expense base is focused on labor or labor-related benefits, it is hard to be effective in lowering the cost of care."
Fortunately, the health system’s reputation with the public goes a long way toward recruiting and retaining workers, and that saves money in the long run.
"We’re rooted in our community, we’re rooted in our values, and we have generally done a good job of retaining and attracting talent. We were just named a best place to work by U.S. News & World Report," Dietsche says.
In terms of revenue diversification, Bellin Health is expanding its base of partners that provide complementary care and services.
"We don’t provide every service to the people that we serve, so we have to partner," Dietsche says. "End-of-life care is an example. We have a partnership with our competitor in Unity Hospice."
"From our perspective, revenue diversification means that if people need healthcare services, and we offer that service, we want people to utilize our service. But when I say ‘our service,’ it could be from the network of providers that we have partnered with.
Bellin Health is also looking to grow its number of patients by providing complementary services to its clinical care. Along those lines, the health system has entered the insurance business through a small partnership. The expectation is that Bellin Health will be able to provide insurance at lower premiums as a care provider as well.
Better data is key for driving better business and clinical decisions
Ultimately, quality data collection is at the heart of success. Bellin Health depends on trustworthy data to drive decisions on what new services to provide, which ones to cut, which site should host what services, what tools and resources care providers need, which potential partners are worth pursuing, and how the quality of patient care is affected by each investment.
The health system is making several technology tool investments as well, especially around patient engagement.
"We’ve implemented things like chatbots, and we’re looking at other technology projects as well," Dietsche says. "We have a digital access tool to make it easier for the patient to either navigate the system or interact with the organization."
Bellin Health is just starting to use digital therapeutics, and it will use the same criteria outlined above to gauge its desired levels of investment.
"As we start implementing some of the digital therapeutics, we want to know with each, what’s the level of convenience for the patient, how effective is it, what is the clinical quality value that we expect to see, and what’s the return on investment?" says Dietsche.
In the meantime, Bellin Health has also invested in a couple of healthcare digital tool manufacturers.
"Both of those organizations are on the cutting edge in terms of looking at utilization of those tools to incorporate into our daily work. Providing more care, via digital technology or video visits, are the things that we’re investing in right now. Those digital access tools make it easier for patients to navigate our system," Dietsche says.
Collaborate to ensure success
Success with these initiatives requires an all-hands-on-deck approach. It is especially important to have executive support and to bring the business and technology sides together, Dietsche notes.
"We have learned that you can’t take a strategy road map forward without bringing the leaders on the clinical side together with the business groups and your information technology staff. You need to bring all three groups together to understand what the road map should look like," Dietsche stresses.
"If you don’t, there can be competing differences. We learned that quickly," Dietsche says. "Also, anything related to digital capability or digital technology has to fit in with our organizational strategic objectives. If they don’t, they’re not going to go forward. It’s plain and simple."
Ultimately, the discipline around creating a financial road map to navigate tough times is no different than pitching any other project.
If you’re going to implement digital therapeutics, for example, you need to be able to stand in front of the leadership team or the finance committee and articulate what they’re being asked to invest in, Dietsche says.
"They are ultimately the owners of those programs, so you get them engaged right away. Explain what your road map goals hope to accomplish, what they are in reaction to, what they can do to Strengthen business processes and healthcare decisions, and once implemented, what the overall results will be."
If these points are properly explained, business, financial, and clinical leaders will be supportive, Dietsche says.