Lake Washington Physical Therapy CEO Ben Wobker shares his approach to pursuing technology.
For CEOs at provider organizations, choosing where to put your technology investments is often a difficult decision.
Improving the patient billing experience, however, can be a surefire way to ensure payments are coming in a timely, efficient manner, leading to a healthier bottom line.
That's been the case for Kirkland, Washington-based Lake Washington Physical Therapy (LWPT), which has benefited from implanting electronic billing and mobile payment strategies.
Specifically, the rehabilitation facility has brought on PatientPay for convenient bill pay and Luma Health to coordinate the patient journey, and the investments are paying dividends, founder CEO Ben Wobker told HealthLeaders.
Wobker has always been someone who likes to be an early adopter and he's pushed his teams to beta test most of their technologies. For example, when many providers were still using paper for documentation, LWPT went online with HTML5.
"I've kind of always pushed our team, sometimes with the little resistance because there's always going to be mistakes and pitfalls and learning that occurs when you adopt a new technology," Wobker said. "But what we've seen across the board on everything that we've adopted, we've seen huge returns on that."
LWPT's experience with implementing PatientPay has been "shockingly awesome," with Wobker noting that the organization has decreased their accounts receivable by 47% in the first month.
"The way our staff is paid is they get a percentage of what they bring in, so this was a very welcomed change for them as well," he said.
When LWPT introduced Luma to improve their online waitlist text reminder system, cancellations decreased by 1.5% while capacity went up 11%.
"We saw more volume, better margins, and less open spaces," Wobker said. "PatientPay and our billing services have helped us get a best-in-class payment per visit, which is really important. We don't have to see as many people because we're getting what we actually are billing."
While LWPT's investments have led to ROI, that isn't necessarily happening for most provider organizations.
According to a recent survey by Ernst & Young, 71% of payer and provider executives said the implementation of new technologies hasn't lowered hospital expenses. Nonetheless, nearly all the respondents (96%) agreed that investment in new technology is still worth the cost.
The patient billing experience is an area CEOs should have near the top of their list as an area ripe for early ROI if there are identifiable processes to clean up.
Cash on hand will be useful to deal with whatever challenges are lurking around the corner.
While hospital finances on average continue to show encouraging signs, operators’ coffers are in serious need of building up to survive future turbulence.
Following the challenges of the past two years, hospitals’ days cash on hand has weakened and put many organizations in a financially unstable position, according to a report by Syntellis, now part of Strata.
The data from over 1,900 hospitals revealed that the median change in days cash on hand dropped 25.4% in February 2024, compared to February 2022. Year-over-year, cash reserves improved 0.6%, highlighting how difficult it has been for hospitals to create cash on hand in the current climate.
“The steep decrease versus two years ago highlights continued financial uncertainties for the sector, as having lower cash reserves means hospitals are less prepared for unexpected emergencies or sudden market changes, such as natural disasters or mass casualty events,” the report stated.
Matt Heywood, president and CEO of Aspirus Health, recently spoke to HealthLeaders about the importance of a strong balance sheet for hospitals right now, especially in the wake of the Change Healthcare attack.
What the American Hospital Association (AHA) deemed “the most significant cyberattack on the U.S. health care system in American history” is still wreaking havoc after taking place on February 21.
Based on a survey of nearly 1,000 hospitals by the AHA, 82% of operators reported impacts on their cash flow, of which 60% said that the impact to revenue is $1 million per day or greater.
“When you throw things like the cybersecurity incidents, you throw these other issues on, then the balance sheets are weakened from these last two or three years of challenges and it's just continuing to pound down the healthcare industry and that's where you're starting to have the 'have and have-nots,’” Heywood said.
Building up a cash reserve is no easy feat at the moment, but hospital leaders must do their best to manage their income statements and balance sheets to give themselves financial flexibility, according to Heywood.
It will be necessary to weather the storm because “God knows what's coming,” Heywood said.
If we as a country are okay with free-market healthcare, we have to let situations play out, says one CEO.
In this episode of HL Shorts, Matt Heywood, president and CEO of Aspirus Health, shares his views on private equity's presence in healthcare and what the industry can take away from those outcomes.
The antitrust agency is seeking a preliminary injunction on the sale after previously challenging through a lawsuit.
The Federal Trade Commission (FTC) has put on a full-court press to stop Novant Health’s proposed purchase of two Community Health Systems (CHS) hospitals.
Regulators are taking aim at more M&A of late and the deal between Novant and CHS is the latest case of the FTC trying to make an example out of a transaction for anticompetitive reasons.
The agency filed a request for a preliminary injunction to bar the $320 million sale from continuing, arguing that Winston-Salem, North Carolina-based Novant taking control of Mooresville, North Carolina-based Lake Norman Regional Medical Center and Statesville, North Carolina-based Davis Regional Medical Center “would irreversibly consolidate the market for hospital services in the Eastern Lake Norman Area in the northern suburbs of Charlotte.”
The action comes on the heels of the FTC suing to block the deal in January, almost a year after the proposed acquisition was announced.
The two aspects of the purchase that the FTC is contending are the resulting market share and the removal of direction competition.
According to the agency, the transaction is “unlawful” because it would create an “eye-popping 64% share of the market in the Eastern Lake Norman Area.” The FTC cited that the Supreme Court has previously held mergers presumptively unlawful if any single entity grabs a 30% market share.
Secondly, the FTC alleged that the sale would significantly threaten competition in the area, harming patients in several ways.
“Today, aggressive competition between Novant Huntersville and Lake Norman Regional benefits patients through lower prices, improved quality of care, and new service offerings,” the court documents read. “The proposed transaction would immediately wipe out this competition, reducing Defendants’ incentives to invest in quality and leaving fewer options for patients.”
In response to the FTC’s lawsuit in January, Novant said in a statement that it “will pursue available legal responses to the FTC's flawed position.”
The increased scrutiny of deals is partly due to regulators stepping in to challenge more often, but it’s also because of the M&A climate which is seeing organizations seek out partners at a greater rate and often to alleviate financial struggle.
As more health systems pursue M&A this year and beyond, regulators are likely to continue being heavily involved. However, that shouldn’t stop stressed organizations from being aggressive to work out deals that improve their long-term sustainability.
A study by the Lown Institute puts the spotlight on the value of nonprofits' community contributions.
Eighty percent of nonprofit hospitals are spending less on community support than what they're receiving in estimated tax breaks, according to a report by the Lown Institute.
The analysis by the think tank questions the value nonprofits are providing to their community while receiving tax breaks under federal, state, and local laws with the expectation that they'll pay it forward through financial aid and wellness programs.
Using 2021 IRS data for 2,425 nonprofit hospitals across the country, researchers found that more than 1,900 operators pay less than their "fair share." The combined fair share deficits of nonprofits totaled $25.7 billion, or enough to erase 29% of the country's medical debt, the report stated.
Only five states had a majority of hospitals with a fair share surplus: Delaware, Montana, Maryland, Texas, and Utah. Meanwhile, Michigan, West Virginia, Louisiana, Washington, and Rhode Island had 97% or more hospitals with a fair share deficit.
On average, hospitals spent 3.87% of their budget on charity care, but the proportion varied widely depending on the hospital.
Among the biggest offenders of skimping on community spending were Catholic health systems, which made up five of the top 10 systems with the greatest fair share deficits: Providence (-$1 billion), CommonSpirit (-$923 million), Trinity (-$784 million), Ascension (-$614 million), and Bon Secours Mercy (-$488 million).
Some of the hospitals the report highlighted for having significant fair share surpluses were Atlanta-based Grady Memorial Hospital, which had a fair share surplus for the third year in a row ($71 million), Chicago-based Mount Sinai Hospital ($67 million), and Los Angeles-based Martin Luther King Jr. Community Hospital ($14 million).
The Lown Institute also published a policy brief alongside the report to recommend changes for improving fair spending, including minimum thresholds for community spending and enforcement actions for noncompliance.
"Federal regulation of community benefit spending is woefully ineffective and in need of reform," Vikas Saini, president of the Lown Institute, said in the release. "Though hospitals are required to report their community contributions to the IRS, there is no minimum spend, there are many loopholes, and enforcement is practically nonexistent."
In response to the report, American Hospital Association president and CEO Rick Pollack released a statement saying the analysis "cherry-picks categories of community benefit and ignores other areas of great importance" and "suffers from the same biases, flaws and shortcomings as its previous reports."
The Lown Institute's findings don't fully take into account aspects like underpayments from Medicaid and Medicare, or Medicaid expansion, according to the AHA.
Nevertheless, nonprofit hospital leaders must focus on meeting charity goals to ensure the sustainability of not only their community, but of their own organization.
Michael Slubowski, president and CEO of Trinity Health, told HealthLeaders last year: "We're being very proactive in making sure that people realize that we are living out our charitable purpose, and for us being a faith-based health system, it's endemic to our mission."
Aspirus Health CEO Matt Heywood shares how to approach a potential merger.
As more health systems turn to M&A to achieve financial stability and growth, CEOs should be prepared to get the most out of a deal.
Matt Heywood, CEO of Wausau, Wisconsin-based Aspirus Health, just completed his own merger with Duluth, Minnesota-based St. Luke’s and believes hospital leaders must act with intent when bringing on a partner.
In a conversation with HealthLeaders, Heywood highlighted three key strategies fellow CEOs should utilize when taking steps towards a merger.
The Connecticut-based operator cut 60 positions to offset the costs associated with Medicare Advantage delays and denials.
Repeated Medicare Advantage (MA) claim denials left one Connecticut hospital in financial peril, causing it to significantly cut down on staff.
Bristol Hospital CEO Kurt Barwis told the Hartford Courant that in an effort to save on costs stemming from lack of reimbursement from insurers, the operator will eliminate 60 jobs, 21 of which will result in layoffs.
The MA “abuse” is the latest instance of the private program causing problems for providers, with Barwis reporting that MA insurers continue to increase their rate of denials while further delaying payments that aren’t denied.
Bristol Hospital, which operates 154 beds and physician and lab networks in 20 locations, has 63% of its Medicare patients on MA plans, while 5 to 6% of the hospital’s budget goes to insurer administrative expenses, the Courant reported.
The hospital has been facing a financial crunch in recent years and reported a $12.8 million operating loss in fiscal 2023. By slashing 60 jobs, Barwis revealed that the organization will save $6.1 million.
“We went through an extensive process to find ways to make our processes more efficient and find any opportunity to reduce positions that wouldn’t affect patient care,” Barwis told the Courant. “We don’t have a choice. All the nice-to-haves are being taken out by the lack of insurance payment and the lack of reimbursement.”
MA specifically has been criticized for delays and denials, with recent data by Kodiak Solutions finding that the value of claims taking longer than 90 days to be paid has increased by over 40% for MA plans since 2020.
“Our primary care is to take care of patients, their single focus is shareholder value and profits,” Barwis told the Courant. “The Medicare Advantage abuse is outrageous.”
Turning to termination
Many hospitals and health systems are resorting to terminating their MA contracts to counteract the financial and administrative burden of the program.
Scripps Health is one of those organizations, with two medical groups within the system ending their MA contracts for 2024 due to low payments and denials.
Chris Van Goder, president and CEO of Scripps, told USA Today that after failing to negotiate more favorable reimbursement rates, the system decided to cut loose to alleviate their $75 million in annual losses.
That strategy isn’t a viable path for every hospital, but providers may have more options than they think.
“Providers are becoming more capable in measuring the impact of the slow or rejected payments, and providers are looking at the actual cost of care by patient,” Britt Berrett, managing director and teaching professor at Brigham Young University and former CEO with HCA, Texas Health Resources, and SHARP Healthcare, told HealthLeaders. “Payers need to be aware that.”
The cyberattack is the latest event to force leaders to alter their approach.
Hospital and health systems have been going through the wringer for a few years now. The last thing CEOs needed on their plate was a cyberattack at the scale and magnitude of the one Change Healthcare suffered.
And yet, what is being called “the most significant cyberattack on the U.S. healthcare system in American history” is now the latest event in a series of twists and turns to send a shiver down hospital leaders’ spines and have them rethinking their strategies.
“Cybersecurity issues are just added icing on the cake,” Matt Heywood, CEO of Aspirus Health, told HealthLeaders.
The financial implications have been massive.
Change Healthcare processes 15 billion transactions annually and the lost payments from the attack are draining hospitals by the day. According to a survey by the American Hospital Association that collected responses from nearly 1,000 hospitals, 94% of operators are reporting financial impact, with more than half reporting “significant or serious” impact. Of the 82% of hospitals reporting impacts on their cash flow, nearly 60% report that the impacts to revenue is $1 million per day or greater.
It's never a good time for hospitals to be losing money, but the cyberattack has exacerbated the multiple financial challenges many operators have already been fighting. It’s creating somewhat of a perfect storm, Heywood stated.
“I coined that 2024 is going to be ‘the year of chaos.’ What I mean by that is you're going to have organizations that have had two to three years of financial issues really start struggle,” he said.
“You're going to have some of these issues with the for profits and hedge funds because the easy money is going away. And as that easy money goes away, the structures of some of those deals are not viable anymore. So you're seeing a lot of clean up and a lot of turmoil in 2024 and you're going to see it carry on in probably 2025, if not a little further out.”
The future is now
If there were any CEOs on the fence about investing in technology, especially on the cybersecurity and IT side, the Change Healthcare situation should have plenty reconsidering their stance.
When something is affecting the bottom line so drastically, hospital decision-makers have no choice but to re-strategize with the aim of both preventing future attacks and steadying the ship when it inevitably does occur.
“Hopefully it gets a lot of CEOs’ attention because they need to cross their T's and dot their I’s, close loopholes in their systems, and upgrade systems,” Ben Wobker, founder and CEO of Lake Washington Physical Therapy, told HealthLeaders. “It sounds like that's going to be the case here according to the headlines, but then again, you have to have that allocation of security spend and technology spend and make that a bigger budget line item.”
The AHA survey found that most hospitals are implementing workarounds to deal with the cyberattack, but those solutions are labor intensive and costly. Healthcare, as an industry, is known to be slow in implementing new technology, but with the rate tech is growing at, hospitals may not have much of a choice anymore for slow playing it.
Investment, of course, requires money and resources. That’s why Heywood believes it’s as important as ever to ensure you have some financial wiggle room to not only spend on technology, but to potentially throw capital at whatever is around the corner.
“You have to have a strong balance sheet,” he said. “You have to have cash on hand to be able to weather some of these storms that are coming. You're going to need to be in in this tight environment. You're going to need to be willing to spend money on cybersecurity and your IT. If you're already financially challenged, you do not want to be cutting your IT, your security, because that only further puts you in a bind.”
When it comes to dealing with the fallout of a cyberattack, however, technology is only one part of the equation.
You’re only as good as the systems you have in place and those systems aren’t immune to failure, Wobker noted. Updating and refreshing hardware and software should be the first step, but there also needs to be contingency plans in place to go offline.
Straying too far from traditional methods isn’t the answer either, according to Heywood.
“Now if you ask people to go back to paper, it's like, ‘Oh my gosh, I'm back in the stone age,’ he said. “So you have to have preparations to go back to paper in order to be able to get through a down time and you have to have backup systems so you could shut something down and turn it back on.”
There are few positives in the Change Healthcare attack, but the one silver lining may be the lessons that CEOs are forced to take away from it.
Whether it’s another cyberattack, pandemic, or anything else, those lessons should have hospitals better prepared for whatever is next.
Hospitals' bottom lines are under duress as a result of the crippling cyberattack.
The ramifications of the Change Healthcare cyberattack are wide-reaching, causing hospitals everywhere to weather the financial effects.
The subsidiary of UnitedHealth Group experienced the outage last month and since then, providers have had to pick up the pieces during a time when many organizations are already struggling with low operating margins.
Here’s a look at five numbers that illustrate the financial impact of the attack, based on survey responses from nearly 1,000 hospitals collected by the American Hospital Association:
Matt Heywood tells HealthLeaders what hospital leaders should consider when seeking out partnerships.
The current circumstances around healthcare are forcing hospitals to take a hard look at consolidation, maybe more than ever before.
Matt Heywood, CEO of Aspirus Health, is aware of that as much as anyone as the leader of a health system that just closed its own merger. Earlier this month, the Wausau, Wisconsin-based operator combined with Duluth, Minnesota-based St. Luke’s to create a 19-hospital organization that serves the systems’ two home states, as well as parts of Michigan.
The motivation behind a merger will differ depending on the health system, but Heywood believes that organizations should have a consistent approach to partnering if they want to get the most out of it—one that doesn’t over-leverage while also enabling a sense of urgency.
For Aspirus, the opportunity to combine with St. Luke’s allows the system to especially benefit on two fronts, Heywood told HealthLeaders.
“We knew as we were growing so fast that if we continue to make sure we held our company at a strong operating level, that we were able to look at other contiguous partners that would then help provide another tertiary center for us,” Heywood said. “We needed that other tertiary center because it would give us an ability to transfer patients within our service area somewhere else other than Wausau, which was already starting to get bottlenecked, and it would give some redundancy.”
The other area Heywood highlighted as benefiting from the merger is back-office capabilities, which he said will become more cost effective, safer, and more efficient. With the types of challenges facing hospitals these days, from financial stressors to cybersecurity, having stronger back-office functions can make all the difference on operating margins.
“We saw a lot of back-office synergies that we could provide by working with St. Lukes as well,” Heywood said. “So we're excited that by putting the two together, we can get that decompression of Wausau, we can get that back office, and we can improve the care for all our communities by being there for them when they need us.”
Matt Heywood, CEO, Aspirus Health.
In the case of many other health systems right now, financial distress is the catalyst for seeking out mergers. According to a recent report by Kaufman Hall, 28% of the 65 transactions announced in 2023 featured a partner under financial pressure, compared to 15% in 2022.
“What we're finding is that there are a lot of ‘have’ and ‘have-nots’,” Heywood said. “It was always there a little bit, but it's now really starting to separate. The people doing well are going to continue to do well and the ones not doing well will either have to make some tough choices to turn it around and some of them may or may not be able to do that, or be willing to do that, and the ones who can't are going to have to look at other alternatives and that might be a potential partner. This environment is going to create a potential increase in mergers over time.”
Making deals for the sake of dealmaking, however, isn’t a viable solution. The margin for error in transactions is decreasing, according to a recent report by Bain & Company, forcing organizations to consider whether potential deals are demonstrating enough value.
Proactively identifying the right partner is critical, Heywood stated. Even after finding one, the deal should be a fit for what you want to achieve.
“Don't just merge to merge,” he said. “You have to be willing to walk away from something that doesn't make sense.”
As a CEO, the job of carrying out a merger is far from finished once the deal is completed. Then comes the transition period, which is vital for getting your organization on track to be as efficient and effective as possible, as soon as possible.
“You have to actually get something from the merger and very fast,” Heywood said. “You can't do what a lot of companies do, which is merge, try to soft pedal, and tell everybody, ‘You know what, we don't want to change too much right now. We don't want to rock your world.’ You don't have that luxury, especially if the merger is a merger of individuals that may not be doing so well financially.
“You have to move fast to get the accretive value of a merger and you can't do what you used to do, which is just merge, take your time, and slowly do it. You have to be careful. You have to be thoughtful. But you have to be decisive and have some speed.”
CEOs should be all about purposeful action when it comes to M&A right now.
With that approach, dealmaking can be a fruitful strategy for both the ‘haves’ and 'have-nots’ in the fight against tight margins.
