Scale, Efficiency Key to Provider Success in 2021 and Beyond

February 02, 2021 - The COVID-19 pandemic has permanently changed the healthcare business model, causing providers to rely more on scale and efficiency to maintain financial stability in 2021 and beyond.

At least those are the strategies industry leaders at Providence and UW Health are implementing to adapt to a more virtual, leaner environment as the pandemic continues, health system leaders shared at Xtelligent Healthcare Media’s Reimbursement Virtual Summit last week.

“We’ve come too far and learned too much to go back to all of the old ways that we had,” said Bob Flannery, CPA, vice president and CFO of UW Health. “We'll continue to see a reduction in our physical footprint for administrative operations and clinical operations, and that's just an example of efficiency.”

The number of facilities and square footage a system like UW Health needs for in-person care will look different and likely smaller in 2021, Flannery explained.

COVID-19 had a significant impact on the system at the start of the pandemic, driving down monthly in-person ambulatory care by 60 percent, surgical cases by 58 percent, and inpatient days by 40 percent. UW Health is recovering from the dramatic declines, but transformations to get there, including remote work when appropriate and the explosion of virtual care are also leading executives to rethink the number of in-person care sites they need to deliver high-quality, patient-friendly, affordable care.

READ MORE: Healthcare Revenue Cycle Recovery After the COVID-19 Pandemic

“Location, location, location,” Flannery joked. “We, as providers, need to be as accessible and convenient as we can be for our patients. That being all care services: digital care, in-person care, hospital-at-home, micro-hospitals, pharmacy services, home health, revenue cycle, patient business services, and the list goes on and on.”

“Patient convenience is going to be a much bigger thing than it has historically been,” Flannery stated. “We know that the younger generation wants to do things on devices and from their homes, more so than the older generation has.”

But while some efficiencies are being found by shifting more employees to remote work when appropriate and right-sizing capabilities in light of new virtual care options, other efficiencies can be leveraged through expansion.

“Bigger is better,” asserted Joseph Walker, CFA, senior vice president and corporate treasurer at Providence. “Now, that's possibly controversial as it introduces challenges around the locus of governance and decision-making, but I can assure you a rational balance can be struck.”

Scale signifies economic viability, the former Microsoft employee explained.

READ MORE: Key Strategies for Health Systems to Achieve Economies of Scale

“The healthcare industry in the US is massively fragmented with no provider having greater than a three percent market share. Yet we see consolidation among our payers, so greater scale can help balance the playing field. But probably the more important, capabilities that size unlocks are around diversification,” Walker stated.

“If we were a single-market operator in an overwhelming surge like we're seeing in select markets that would represent a far more existential threat to operations, so we've seen the benefit of a footprint spanning several different regions buffering the impact of any specific economic, biological, or social threat to operations at any one given time.”

Additionally, size has enabled “dynamic resource allocation,” giving the large health system the ability to shift personal protective equipment, personnel, and other resources across the system.

“When built on and formed by powerful interconnected IT systems and the predictive modeling they enable, size creates agility rather than burdening agility. And related to that, size also represents a larger sensor network. In an unprecedented crisis like COVID-19 you have no longitudinal data, you're learning by doing in the moment. However, with a large, interconnected footprint, you can learn from cross-sectional experience, accelerating learnings and insights, and then best practices can propagate faster across the same sensor network that is creating new refinements,” Walker stated.

But scale should also account for the system’s strengths and weaknesses. For example, if an organization is not world-class in one area, then a partnership with a peer could be the right path.

READ MORE: Efficiency Key to Health System Financial Stability After COVID-19

“There may be organizations to partner with for that function, building in greater diversification and risk-sharking, and leaping forward in terms of both process evolution and data insight capture to world-class standards and usually realizing cost savings along the way,” Walker explained.

While scale has benefitted both Providence and UW Health throughout the pandemic, it is a strategy, like increased efficiency, value-based care, and patient experience, that will play a larger role as the healthcare industry moves on from the COVID-19 pandemic.

“These were priorities from before the crisis, but COVID has accelerated the demands to future-proof our business and the challenging environment we’ve experienced and expect going forward,” Walker stated.