Navigating Financial and Operational Challenges in the Post-COVID Era: Healthcare System Diversification Strategies

The healthcare industry has faced unprecedented challenges in the wake of the COVID-19 pandemic. With financial and operational performance becoming increasingly difficult to generate, many hospitals have shifted their focus towards evolving into comprehensive health systems.

This strategic move aims to diversify revenue streams while simultaneously energizing and supporting the core hospital business. However, the path to healthcare system diversification is fraught with its own set of operational complexities and risks.

Let's explore these challenges and opportunities, with a particular focus on primary care practices, and how companies like Lucerna Health are helping health systems navigate this landscape.

The Drive Towards Health System Diversification

The transformation from a hospital-centric model to a diversified health system involves integrating various healthcare segments, such as primary care clinics, specialty care services, ambulatory surgery centers (ASCs), and accountable care organizations (ACOs)/clinically integrated networks (CINs).

Each of these segments comes with unique operational requirements and nuances distinct from the core hospital operations. The rationale behind this horizontal expansion is to create a more robust and resilient revenue base that can withstand market fluctuations and changing healthcare dynamics.

Balancing Rewards and Risks

While the potential rewards of diversification are substantial, so are the risks. Managing new operations requires meticulous planning and execution. Health systems must achieve true integration across all segments to realize their investment fully. This integration is not just about aligning operational processes but also about creating a cohesive organizational culture and ensuring seamless patient care transitions.

The Primary Care Example

Primary care practices are a critical component of any healthcare system diversification strategy. Primary care practices play a pivotal role in patient acquisition and retention, which directly impacts the financial health of the system. However, the financial performance of primary care practices has been a significant challenge.

Revenue Potential and Financial Losses

Owning primary care practices can be lucrative, with the potential to generate up to $2 million in revenue per physician for a health system. Additionally, a new system patient can contribute approximately $1,400 in first-year revenue. Despite this potential, the hospital industry is currently losing over $1.5 billion annually on primary care practices, equating to a loss of around $250,000 per physician.

Operational Opportunities

The financial difficulties faced by primary care practices also present substantial opportunities for improvement. One of the key issues is the underutilization of physician schedules. Most primary care physicians (PCPs) have 35% or more availability in their daily schedules. By filling these slots, each PCP can become a positive contributor to cash flow and profitability. For example, adding just one appointment per day for 100 PCPs can generate approximately $4.5 million in new annual revenue.

Addressing the Leakage Problem

Another significant issue is patient leakage. According to a recent study, over 55% of referred patient care does not stay within the home system, a concern for 94% of hospital CFOs. This leakage is a major barrier to financial stability, with 65% of hospital executives believing it prevents them from achieving their financial goals. Keeping patients within the health system that initiated their care is one of the quickest ways to close the profitability gap.

The Role of IT Infrastructure

Effective management of primary care practices, especially in a value-based care (VBC) environment, is often hindered by inadequate IT infrastructure.

Key challenges include:

• Patient Data Management: Efficiently collecting, storing, and analyzing patient data is crucial for making informed decisions and providing high-quality care.

• Operational Productivity Management: Tracking and optimizing the productivity of healthcare providers and administrative staff is essential for maintaining financial viability.

• Patient Attribution: Properly attributing patients to the correct care providers ensures accurate performance measurement and incentive alignment. Connecting patients with the right physicians who have availability for the patient will improve patient retention, which is a problem within primary care.

Lucerna Health: Partnering for Success

At Lucerna Health, we specialize in helping health systems overcome these challenges through our comprehensive suite of solutions. Our approach combines advanced data management, integration, and analytics technology with patient engagement, patient experience, and physician operational applications and support services.

Data Management and Integration

Our data management solutions enable health systems to collect, organize, and analyze vast amounts of patient data. This capability is crucial for identifying trends, predicting patient needs, and making evidence-based decisions. Our integration technology ensures that data flows seamlessly across the health system, facilitating coordinated care and improving operational efficiency.

Analytic Technology

Our analytic technology empowers health systems to gain deep insights into their operations and patient populations. By leveraging advanced analytics, health systems can identify areas for improvement, track performance metrics, and make strategic adjustments to enhance both clinical and financial outcomes.

Patient Engagement and Experience

Engaging and effectively navigating patients through the health system is essential for retaining them and improving health outcomes. Our patient engagement solutions include personalized communication tools, appointment scheduling, and follow-up care coordination. By enhancing the patient's experience, health systems can reduce leakage and foster long-term patient loyalty.

Physician Operational Support

Supporting physicians in their day-to-day operations is critical for maintaining high levels of productivity and job satisfaction. Our physician operational applications provide tools for task management, performance tracking and operational improvements. Additionally, our support services offer training and resources to help physicians navigate the complexities of a VBC environment.

Case Study: Transforming Primary Care Practices

To illustrate the impact of our solutions, consider the following case study of a health system that successfully transformed its primary care practices with Lucerna Health's support.

Background

The health system was struggling with underutilized physician schedules, high patient leakage rates, and inadequate IT infrastructure. These issues were leading to significant financial losses and operational inefficiencies.

Intervention

Lucerna Health implemented a comprehensive solution that included:

• Data Management and Integration: We integrated patient data across all primary care practices, enabling the health system to gain a unified view of patient interactions and care pathways.

• Analytic Technology: Our analytics tools helped the health system identify underutilized physician schedules and opportunities to improve patient retention.

• Patient Engagement: We deployed patient engagement tools that streamlined appointment scheduling and enhanced communication between patients and providers.

• Physician Support: We provided training and resources to help physicians optimize their schedules and improve patient care delivery.

Results

Within six months of implementing our solutions, the health system achieved the following results:

• Increased Revenue: By filling underutilized physician schedules, the health system generated over $4 million in annual top-line revenue.

• Reduced Leakage: Patient leakage rates decreased by 20%, resulting in improved financial stability and patient retention.

• Enhanced Operational Efficiency: The integration of data and analytics tools streamlined operations, reducing administrative burden, and improving overall productivity.

Conclusion

The post-COVID era has brought significant challenges to the healthcare industry, prompting many hospitals to evolve their healthcare system diversification. While this strategy offers the potential for enhanced financial stability and operational performance, it also requires careful management and integration of various healthcare segments. Primary care practices present both significant opportunities and challenges.

At Lucerna Health, we are committed to helping health systems navigate this complex landscape. Our comprehensive solutions in data management, integration, analytics, patient engagement, and physician support are designed to address the unique needs of each healthcare segment. By partnering with us, health systems can achieve better outcomes and improved financial results, ultimately fulfilling their mission of providing high-quality care to their communities.

By embracing diversification and leveraging advanced technology and support services, health systems can overcome the financial and operational challenges of the post-COVID era and thrive in an increasingly complex healthcare environment.

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