This Week Health

Today: The Financial State of the Industry

Well the numbers are out and they look good, but as you know, that isn't the whole picture.

Transcript

Today in health, it, the Kaufman hall report is out the flash report, which gives us an idea of how the industry is doing financially. And there's good news and bad news. I'll get to that in a minute. My name is bill Russell. I'm a former CIO for a 16 hospital system and creator of this week health instead of channels and events dedicated to transform healthcare. One connection at a time. We want to thank our show sponsors who are investing in developing the next generation of health leaders. Short test artist, site parlance. Certify health, notable and service. Now check them out at this week. Health. Dot com slash today. Share this podcast with a friend or colleague use it as a foundation for daily or weekly discussions on the topics that are relevant to you and the industry. They can subscribe wherever you listen to podcasts. All right. Let's take a look at the flash report. If you're not familiar, Kaufman hall does a lot of financial work within the healthcare industry and they now publish a monthly report of how the industry is doing for the most part. What we're looking at is the operating margin. Index, which gives us an idea of what's going on. We can. Delve into some of the deeper financial numbers, but for the most part this is where we're going to live and discuss today. So just to give you some idea, we were just came off a Rocky. Three years, the pandemic was not good. It was offset somewhat by federal dollars and. The the trend continued well past COVID in fact, earlier this year September, October, November, December, January, February. We're all close to 1% negatives in terms of the the average Operating margin. For the industry. It's it changed for the positive in March. Barely a 0.2, 5%. Point three in April. In may went up to 0.7 and June one over a little over 1%. And July a little less than 1%. And now. In August, you're looking at a little bit more than 1%. The good news, bad news on this. The good news is it's positive. We're heading in the right direction. The bad news is most budgets have been baked based on the bad. So, I'm hearing things from various CEOs and other people within the industry. That the budgets are tight. That there's been a lot of reductions that have had to happen a lot of belt-tightening that has had to happen. And it's it's interesting. The approaches. Are, are varied to a financial challenge like this. Some people are able to get it just from operating dollars, doing things like. Reviewing all your contracts. Things like auditing your use of cell phones and telecommunications and those kinds of things. And identifying some dollars there. Obviously there's contract negotiations. And really looking at your contracts. Identifying redundancies within those contracts, things that you're paying for multiple times, application rationalizations is another thing. That people are doing so people are able to find enough operating dollars to get by. Others are being asked for what. I would consider draconian cuts. Essentially. Because a lot of the health, it costs are fixed. Right. You're not going to go back and renegotiate with epic. Typically those are multi-year agreements. You're not going to renegotiate. Much with Microsoft. Now you can look at the you're licensed to use. A lot of times we have the higher end licenses being used. In ways that are sub optimal. And so there's a lot of ways to work that that Microsoft license, but for the most part, you're not going back to Microsoft and saying, Hey, reduce my costs. And they're going to go along with that. Plus, a lot of our costs now are cloud-based right? So if you've gotten a Workday, you have a Workday price in the cloud.

If you call it to Salesforce, you have a Salesforce. Price in the cloud. And storage. In the various cloud providers and whatnot. We have a lot of contracts now that are operating contracts, not capital contracts. And those are a little harder to squeeze money out of. And so what you're left with is staff. What are, where are you going to point to cut staff? And so, I've had some conversations recently with some CEOs. About, where do we feel automation is going to have the most impact within health. It. Right. So we were all talking about where it can help. In the nursing shortage in the In the clinician shortage just across the board. Even in the tech shortage. The health text shortage. We're able to identify ways to reduce the burden on them, give them hours back in their day. The reality is some of this technology we're talking about can be pointed at healthcare and health it and reduce the costs. So for example when we put automation in place.

We can provision servers with less staff. That's just a, it's just a reality. It used to take a person. We used to have receiving somebody, receive a server, somebody put it in the rack, somebody's tested, spin it up, do all those things. When you go to a cloud model and you go to a true cloud model where you can software provision the services. It is as simple as clicking a couple buttons and away you go and you've provisioned to server. Again, that's another area where there's operating dollars to be had. It's making sure that the cloud implementation that you're doing is not being over-provisioned and that it's right sized for what you're doing. But anyway we ended up talking about. Where are the possibilities for staff reductions? The service desk, the help desk is one area. That People felt like we could do a lot more. Self-service. Then we had done in the past that there is some triage that's done ahead of time. There is again, some automation. That can be done that will reduce the amount of time identity and access management was one of those areas where we feel like it was over staffed. Like if we are able to do it well and do it effectively, and we put the right. Architecture in place and we put the right automation tools in place. That's another area where there could be some staffing changes the problem with all this is, if you haven't done that, if you haven't planned ahead, if you haven't put the right infrastructure in place. If you haven't put the right software in place, if you haven't. Put the right automation. Services in place. All of this is a moot point. When they come to you and say, Hey, we need you to reduce staff. You're not going to be able to do that. And so I think one of the key roles of a CIO. In this kind of environment is to be planning for the next downturn. Whenever you're putting new infrastructure in whenever you're putting new platforms in, it is to say, can we run this with fewer people? Can we can we provision services with fewer people? Because that's just the raw reality of the world that we live in. And we, as leaders have to prepare the organization for that eventual reality. And so anyway. As we're looking at this national hospital flash report for September. Which shows things are actually getting better and that's great. I hope we never feel comfortable. I hope we never look at it and go, oh, we're back to where we were before and positive margins. And we're just going to spend like, like, like it's a, I'm trying to think what years were good in healthcare, but anyway, You get the picture? I hope we never feel comfortable. I hope we're always looking to reduce costs because at the end of the day, if we're able to reduce costs and provide the same level of service. That's affective leadership for starters, and it will help to drive down the cost of health care, which we know is a burden on our communities. So. Just thought I'd look at the financial situation that we are currently living through. You're living through it. It better than I do right now. The discussions are hard. I hope. Maybe one or two of these thoughts or ideas might help you to navigate. This terrain that's all for today. Don't forget to share this podcast with a friend or colleague, keep the conversation going. We want to thank our channel sponsors who are investing in our mission to develop the next generation of health leaders short test artist, site parlance certified health notable and 📍 service now check them out at this week health.com/today. Thanks for listening That's all for now

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