Three reasons hospitals are losing revenue—and how to stop that immediately.
No one likes a downward trend—but when it comes to your hospital’s net revenue, it’s a whole other level of alarming.
Unfortunately, that’s exactly what’s happening all across the United States. The Kaufman Hall Operating Margin Index reported US hospitals lost an average of -3.45% in net revenue for February 2022.
That’s up slightly from January’s -4.52% rate, but it still leaves us operating deep in the red.
Yikes.
So, why are hospitals hemorrhaging revenue? Likely because they are making major mistakes when it comes to understanding their patients.
No, not medical mistakes. Patient care (or “caring”) mistakes. Hospitals are struggling to provide what patients actually want. So they’re leaving in droves.
Why Are Hospitals Losing Revenue?
1. Competition from Digital Entrants
Patients want convenience in their healthcare services. Telehealth brought that convenience to the market in April of 2020 — and we saw telehealth use spike 78x higher than pre-Covid baselines. In 2022, rates remain settled at around 38x higher than pre-Covid levels.
Hospitals and hospital networks, once dominant in their region, saw drops in service usage when location was no longer a primary consideration. Patients could go where they felt most taken care of…and in many cases, that turned out not to be their local hospital.
That’s not to mention digital entrants, which are slowly making a real footprint, too. Online health companies have taken to opening local clinics and care centers as they expand their “click and mortar” services.
Perhaps the most significant example of this is Amazon Care which will open 20 physical locations across the US in 2022. Hospitals need to understand, invest in and compete with technology as new competitors enter the scene.
2. Patient “Caring” Has Declined
Consumers believe in healthcare. Eighty-four percent of surveyed respondents said they trust individual doctors. But only 72% of respondents agreed they trust hospitals to keep their best interests at heart. That’s because we have only skimmed the surface of what it means to put patients first.
Patients don’t just want to be “satisfied.” They don’t just want a comfy bed and good food. They want you to take good care of them.
A patient’s health journey begins before they step through your doors — and it continues long after they leave. Yet, most hospitals focus on “one-off” episodic interaction with patients, which don’t always prioritize the patient.
This keeps them from returning to you when their next problem arises. Remember, the competition is getting much stiffer, and they are employing tried and true retail concepts to attract and retain patients.
A patient that trusts you is revenue in the bank. Here’s proof:
Mercury Healthcare, CommonSpirit Health, and Johns Hopkins Medicine completed a joint study that showed a 4% increase in total lifetime value for every 1% positive change in retention over five years. Hospitals are losing money because they aren’t focusing enough on creating a total patient experience both in and out of the hospital.
3. Lack of Digital Transformation
With the impending doctor shortage, the ongoing Great Resignation, and burnout on the rise, the thought of putting more into patient care seems daunting if not impossible.
But the rise of technology and AI is here to help. Dramatic improvements are much easier and quicker than you think.
One common issue cited when it comes to digital transformation is patient hesitancy toward the accumulation and distribution of online and networked private health information. But that simply isn’t true. Seventy-seven percent of consumers are willing to share this information when it benefits their health, such as to help them treat a chronic illness.
Digital trackers and remote patient monitoring devices are also becoming increasingly available, affordable, and useful to physicians and hospitals. These devices help patients better understand and take control of their health, and can integrate with options like push notifications on a patient’s cell phone that alert them to a diagnostic change or remind them to make an appointment.
All of this translates into better health management and happier clients.
But the real question is…what do we do about all of this?
Here are 3 proven strategies.
Your 3-Part Plan to Halt Revenue Loss:
1. Inventory your Patient satisfaction/experience scoring mechanisms
Most healthcare organizations have various methods, tools and measures for monitoring patient satisfaction – but keep in mind that satisfaction scores measure retrospectively, and your new business model looks at revenue prospectively. Turn your multiple satisfaction scores into one “experience” metric – with “how likely would you return for care with us” as the driving measure.
2. Increase Patient-First Care
Most healthcare organizations already have a “patient-centric” care model, making convenience and efficiency an important part of their clinical processes. This also helps with overall cost. However, these are primarily episodic models, focusing on a distinct encounter or admission. The “pre-care” and “post-care” processes also need to be as efficient, and as empathetic as the “on prem” care process.
3. Become a Patient Management Organization
The most effective way to put patients at the center of what you do is to form a Patient Management Organization. This is a model that focuses on improving lifetime health, creating attachment between care providers and patient families, and instilling trust, empathy and confidence that a health system “cares” – not just for that episode of care. These systems compete with other digital entrants, put patient needs first, and integrate with technology to capture patient/customer lifetime value.
What we’ve discovered (after poring over data from 1500+ hospitals) is that the long-term key to boosting revenue is actually quite simple: Change your business model to focus on patient/customer lifetime value. Patients want a guide for their lifetime medical journey, not a pit stop for an isolated instance of care.
This will help your patients grow to trust you. And when they trust you, they don’t go anywhere else.
