COVID-19: The “Prescription” to Recover Faster Financially in Healthcare
Everyone has spent the last few weeks reacting to the COVID-19 crisis, both personally and professionally. However, as new virus cases start to flatten, and states begin to reopen, people are starting to think about the recovery. And anyone who is thinking about recovery likely wants to recover as fast as possible: mentally, physically, emotionally, financially, etc. Companies are also looking to recover faster: their employees, customers, finances and growth. While there is no way to know what the true economic impact to businesses will be, research indicates that we can position our organizations to recover faster, but the time to act is before the crisis ends.
In a Harvard Business Review (HBR) study of 4,900 companies across several recessions (economic shocks like this crisis), the authors found that the optimal strategy being a combination of balanced cuts (play defense) with selective investments (play offense) before the shock or crisis is over. This approach leads to a 76% higher chance of pulling ahead of the competition when times get better than just cost-cutting. Unfortunately, most companies tend to focus on cost-cutting only during the crisis and make offensive moves too late, after the crisis ends.
So what investments should you consider before the crisis end? To uncover best practices for healthcare organizations, I spoke with many healthcare finance professionals about how they are preparing their organizations to recover faster. Jane Bray Sidler, Chief Financial Officer at Accelerated Claims and Dr. Virginia Jones, COO at Village Family Dental provided some especially insightful examples that I will share.
Let’s review the 4 proactive moves that healthcare organizations can do before the crisis ends to ensure a faster recovery:
- Double down on remote work
As the news of COVID-19 became a clear risk to ACI, Jane did not delay in getting her employees out of the office and securely working from home. “This took a concerted effort of obtaining additional equipment and engaging our entire IT staff to ensure every employee had what they needed to be successful at home. Because we were able to implement this in less than a week, there was no down time for processing our claims for our customers which will not only ensure ACI’s financial success but also help our customers continue to have a revenue stream during such a tumultuous time.”
Jane has seen an increase in productivity of 15% across the board because of the shift and plans to expand remote work to recover faster. “This has proven to our shareholders that remote work is in fact feasible, profitable and beneficial, and because of this we are capable of eliminating some office space and have more flexibility in a telecommuting environment for future recruiting.”
Jones added that having cloud applications, especially for accounting, in place during these unprecedented times has been a “life saver”, since it allows her lean accounting staff to keep financial operations humming from the comfort of their own homes.
- Enhance Visibility to “Sense and Respond” Faster
Understanding the clinical, financial and operational metrics of your business is vital to coming out of the pandemic posed for growth. According to a McKinsey article on recessions, “Don’t let a good crisis go to waste …seize [the] opportunity.” Most importantly, you should plan for the end of the downturn now. As Bain & Company authors Tom Holland and Jeff Katzin wrote in Beyond the Downturn: Recession Strategies to Take the Lead, “Think of a recession as a sharp curve on an auto racetrack—the best place to pass competitors, but requiring more skill than straightaways. The best drivers apply the brakes just ahead of the curve (they take out excess costs), turn hard toward the apex of the curve (identify the short list of projects that will form the next business model), and accelerate hard out of the curve (spend and hire before markets have rebounded).” Thus, being able sense and respond faster is critical to a faster recovery, rather than being caught flat-footed.
Jones noted that she benefits from having everything she needs on her custom COO dashboard and can drill into whatever she needs. This includes all sorts of critical performance indicators, from the dental group’s EBITDA, cash balance, cash flow statement, collections per month, production per month, daily net income, and weekly A/P, to operational data like its number of cases for the month, equivalent operating room days, cost per case, revenue per case, and performance versus budget. And since it’s no longer a chore to get consolidated financial statements out the door, Jones now puts her energy into answering questions like, “What is this telling me? Who made what? How do I know which provider and provider types are most profitable? What practice areas generate the most costs?”
“Our financial reporting by location is accurate and real, which is huge for us,” said Jones. “We can identify which offices or service lines are making money, which ones aren’t, and then quickly determine the cause and where we stand. For instance, after we decided to start offering new lines of business like frenectomies and sleep apnea services, we were able to evaluate each one’s profitability and determine whether it was a good or bad idea.” In another instance, she remembers, “We had a specialist who was producing very large dollars. However, once we got down to all the costs associated with him—including his fees, the number of assistants he required, and the fact that his equipment and supplies were more expensive—we discovered that he was our lowest profit provider, so we figured out ways to improve the situation.”
At ACI, Jane developed a new daily productivity report to assist managers in tracking the progress of their teams so as to provide coaching opportunities where needed. In doing so, using dashboards and tracking throughput and revenue per FTE on a weekly basis allowed her to closely monitor future profitability and potential downside to the impact of COVID-19 to our business.
“With this crisis, our opportunity to become a stronger force in the marketplace was only enhanced. While it was inevitable that incoming business would be disrupted by this situation, this forced period of adaptation has unintentionally provoked us to be creative and take advantage of this time. We used this opportunity to really take the time to evaluate our processes in place and look for specific areas in need of improvement. We have already found plenty of opportunities to restructure some team workflows or capitalize on implementing new technologies.”
Find New Opportunities
In Seize Advantage in a Downturn, David Rhodes and Daniel Stelter write, “Inaction is the riskiest response to the uncertainties of an economic crisis. But rash or scattershot action can be nearly as damaging. Rising anxiety (how much worse are things likely to get? how long is this going to last?) and the growing pressure to do something often produces a variety of uncoordinated moves that target the wrong problem or overshoot the right one. A disorganized response can also generate a sense of panic in an organization. And that will distract people from seeing something crucially important: the hidden but significant opportunities nestled among the bad economic news. To paraphrase Alexander Graham Bell, when one door closes, another opens. As we have seen several weeks into the pandemic, many healthcare organizations have found new ways to operate, evolve and grow their businesses .
“I think the current environment may generate opportunities for consolidation and efficiencies of scale in the dental industry. There are practices that were looking at from a performance and profitability perspective before COVID-19 hit, and because we had detailed information on key performance indicators of each practice, we have been able to react quickly. Because of this, we may be in a position to acquire some existing practices for our portfolio, which has always been our growth model,” said Jones.
“Ultimately, we understand that our partners are dealing with unimaginable dilemmas as COVID-19 continues to interrupt their business; however, we have taken this opportunity to dive into our current clients' needs. We saw the opportunity to expand our scope of work to encompass Veteran Affairs coupled with our complex claims model. We realize that our current clients would like to delegate these difficult claims to vendors to lighten the burden on staff,” offered Jane.
Some other ways healthcare organizations can evolve and grow their businesses in response to the “new normal”:
Online visits – many of our healthcare customers have begun offering telemedicine visits and are taking advantage of the COVID-19 Telehealth Program which provides$200 million in funding to help health care providers provide connected care services to patients at their homes or mobile locations. If you have not recently added online visits, consider adding it now. If you have added them, consider extending (and refining) it well past the end of the crisis. Online visits could be a higher volume, higher margin service for long-term profitability and patient satisfaction.
Cosmetics – Struggling with low margin re-imbursements for their core services, many healthcare organizations started to add high-margin elective and cosmetic services before the crisis. As the economy opens back up and in-person visits resume, this area should rebound quickly because of pent-up demand. If you don’t have any cosmetics services, consider adding them now if appropriate. If you already have cosmetic services, consider expanding them now. Medical Economics wrote in February, just before the COVID-19 pandemic became known, “Aesthetic medicine is a growing force across medical specialties because it combines patient demand and the opportunity to grow a new revenue stream that could help offset declining reimbursements in other areas of a practice. Among the popular cosmetic options that doctors of different specialties now offer: neurotoxins, dermal fillers, laser photo rejuvenation, laser hair removal, microdermabrasion and chemical peels.”
New Payment Models – Contracting directly with the patient or employer and not accepting insurance, can be a new way to generate revenue. Additionally, healthcare organizations are beginning to take a page from the software industry-charging a monthly subscription fee (i.e., capitated model), rather than the typical fee-for-service. Because of office closures or patient volume declines, many healthcare organizations saw steep declines in revenue under a fee-for-service model during the crisis. Under a capitated model, revenue would have been much more stable. One of our customers, Vera Whole Health, takes advantage of two of these payment approaches: they work directly with employers and charge a recurring per member per month fee.
The quicker you act, the quicker you can begin earning revenue. Keep in mind, some of these opportunities will require hiring additional or credentialed/experienced staff. You’ll need time to recruit, hire, and build out your facilities before you can begin.
“In dark times, we are very fortunate to be in our current position and still able to find some good. Witnessing the catastrophic impact of this pandemic on businesses gives us more motivation to strengthen our operations and corporate culture and gives us plenty for which to be thankful. As a company, we have great faith in our organization to not only survive but to prosper. Maintaining this outlook during the course of these events has been realized to be crucial to our ongoing success,” according to Jane.
Napoleon Hill addresses this in an excerpt from his book Harnessing the Power of Positive Thinking to Grow Your Business, “Success is based on recognizing and going after opportunities as they present themselves–and that often requires having the inner fortitude to take a chance and navigate difficult waters. The more you exude positivity, the better your chances of finding lasting success and happiness. You have to focus on having a positive outlook in your present moment. You can do this through the practice of mindfulness, which is being aware of your thoughts and feelings in the present moment.”
So what are the business advantages of staying positive? This article in Entrepreneur Magazine sums them up nicely:
A Positive Work Environment is More Productive and Efficient
Employees Carry the Right Attitude
Happiness is Directly Proportional to Creativity
Employees Believe in Risk Taking
Positive Employees are Strong Believers of Teamwork
A Multiplying Effect of Happiness
Successful Employees Leading to Business' Success
A positive culture leads to stronger morale and happier employees, which can boost productivity by 20% and help them better weather crisis now and creatively respond through the recovery.
Tom Holland and Jeff Katzin wrote “Well-prepared companies emerged as winners during and after past recessions. They managed a strong defense and offense in parallel, reining in costs while simultaneously reinvesting in growth. The winners grew at a 17% compound annual growth rate (CAGR) during the downturn, compared with 0% among the losers. What’s more, the winners locked in gains to grow at an average 13% CAGR in the years after the downturn, while the losers stalled at 1%.” How big of a deal is that? At 13% CAGR for winner after recession (vs 1% for losers), the winners will double in revenue in about 5-6 years, while the losers barely grow. In other words, the winners leave the losers “in the dust”.
- Play offense and defense
- Double down on remote work
- Enhance Visibility to “Sense and Respond” Faster
- Find New Opportunities
- Stay Positive
- Act before the crisis ends!
Thank you to Jane Bray Sidler and Virginia Jones for their insight. The actions both have taken to reignite growth are applicable to a wide range of healthcare organizations, as we all do our best to adapt to the rapidly changing realities of the pandemic.
In response to the crisis, Sage Intacct has created a COVID-19 resource page to support our community during this time. We’ve gathered information and resources including details on how we are supporting Sage Intacct customers and partners, as well as business advice to help you navigate the current business environment. For more information, please visit https://www.sageintacct.com/coronavirus
 The Harvard Business Review found that progressive companies (offense & defense) have a 37% chance of pulling ahead of their competition while prevention-focused (defense) companies only have a 21% percent chance of pulling ahead at the end of a recession. So progressive companies are 76% (37%/21% – 1 = 76%) more likely than prevention-focused companies to pull ahead of their competition after a recession.
Brian is the Director of Healthcare Industry Marketing at Sage Intacct