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As the health care landscape shifts, some hospitals and health care systems may find themselves running on leaner budgets. This new financial reality may spur administrators to reexamine their financial strategies and identify areas for cost savings.
Here's a closer look at some of the recent health care financial management challenges affecting hospital and health care systems, insight into how expense management can help address these issues, and the role that digital tools could play in optimizing expense management.
Challenges Affecting Health Care Finances
Several potential causes have been attributed to this rise in health care expenditures, from the aging population to increasing labor costs, to other ancillary costs, such as medication, medical equipment, and medical supplies.
Administrative costs associated with complying with insurance policies may further add to the financial burden, potentially impacting an already strained system where reimbursement may not be keeping pace with growing expenses. Additionally, some hospitals and health systems may find that lower reimbursement from payers could contribute to low hospital margins, and these providers might be at risk of ongoing negative operating margins that may affect their ability to continue to offer care.
Looking Inward: Health Care Financial Management
What is financial management in health care? While hospitals don’t have direct control over external drivers like labor and inflation, there is an area where they could exert oversight — and that’s in their internal expense management. Cost management in health care could be a critical factor to the hospital’s overall economic performance and long-term financial stability.
As CFOs aim to preserve fiscal health in challenging financial times, hospitals and health care systems might consider focusing on back-office transformations in areas like expense management as an avenue for boosting operating margins. Here, the much-quoted business adage of “what gets measured gets managed” may ring true. An effective and easily accessible system for tracking and measuring expenses in a timely manner may help give the hospital's senior management a clearer and more realistic view of how money is spent, where it's wasted, and where it could be more effectively allocated.
An expense management software (EMS) system can help simplify the expense journey while potentially offering ROI through decreased labor costs, increased productivity, and reduced potential for error.
The ability to identify inefficient or excessive spending may be a key driver that can help hospital administration discover new efficiencies — including fresh cost savings opportunities — and help identify better ways to leverage existing resources. Diving into real-time data may help hospital administration make more informed decisions about budgeting and strategic priorities. This intelligence may be further leveraged to help develop optimal policies and processes related to expense management, and then help develop guidelines to measure the resulting impact more effectively.
Optimizing expense management may also enable senior management to help establish better control over capital and operational spending, potentially freeing up extra cash flow that could be set aside for financial reserves. This might be especially relevant for not-for-profit hospitals that may have more limited funding sources. This could enable them to continue providing health care throughout up-and-down cycles with the ability to draw on financial reserves that provide expanded elasticity and resilience.
The Role of Digital Tools
Health care is a complex, regulated industry that requires hospitals to track and process disparate expense-related documentation while adhering to a thicket of legal and financial guidelines, acts, and requirements.
Manual approaches to expense management can be time-, labor-, and paper-intensive and may have a high potential for error. Resolving errors could require more time and effort — and potentially additional funds — which may further erode a hospital’s budget.
One option might be adopting or upgrading digital and technology tools. For example, an expense management software (EMS) system can help simplify the expense journey, while potentially offering ROI through decreased labor costs, increased productivity, and reduced potential for error. There are several different platforms and products on the market, so it’s wise to conduct ample research to help you choose one with the most relevant features.
At a time when hospitals are pressed to do more with less, an enterprise-wide EMS system that can generate in-depth financial reports could prove to be an indispensable tool for hospital staff. Armed with accurate and up-to-date data, hospital decision-makers may be better able to make solid, data-driven expense forecasting decisions that may benefit the hospital in both the short and longer term.
Another option to consider could be investing in enterprise-wide digital transformation initiatives. Adopting a unified digital strategy may help hospitals address multiple solutions, such as facilitating patient care and assisting the workforce to help facilitate processes and identify efficiencies.
Emerging digital technologies like automation could be integrated across the hospital ecosystem and may be used to perform a range of use cases, from predicting patient demand and staffing needs to improving supply and revenue cycle management. While digital solutions may require an initial upfront cost, their potential long-term benefits — such as reduced clinical burnout, enhanced patient care, and increased margins and efficiency — could make them a valuable investment.
The Takeaway
Expense management policies and processes could be a key tool to help alleviate financial pressures on hospitals when they act as a hedge against ongoing external forces that may threaten to undermine a health care system’s budget — and, ultimately, its stability and continuity. Tapping into the robust features and benefits of digital solutions that automate the entire process might be the antidote, helping to provide a cost-effective and seamless approach.
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