Healthcare CFO’S Look to Technology and Automation for COVID-19 Recovery

Healthcare Finance (Jeff Lagasse)

Only 12% of CFO’s expect they will need to cut or defer spending on their financial systems’ digital transformation.

The Covid-19 coronavirus pandemic is forcing hospitals and health systems to tighten their belts due to plummeting revenues and shrinking margins but many CFO’s won’t be reducing spending in one key area: technology and automation.

In recent months of the crisis, 84% of hospitals surveyed by Black Book and 79% of large physician-practices have confirmed they performed audits on the existing state of digital transformation.

Ninety-three percent of all providers said that missing capabilities and redundant or conflicting systems were identified in second quarter and will drive immediate financial systems rationalization and acquisitions.

WHAT’S THE IMPACT?

While 100% of all CFO’s surveyed recognized they will experience a significant revenue drop this fiscal year and will have to adjust spending accordingly.  Only 12% expect they will need to cut or defer spending on their financial systems’ digital transformation.

With health system margins waning below 3% nationwide, providers are urgently seeking opportunities for digital transformations to capture all revenue through updated software solutions-and they anticipate industry shifts through innovative analytics and forecasting tools.

The latest wave of pandemic impacts on providers is also accompanying the decline of procedure utilization and the imminent shift to value-based care.

The survey found that most providers are navigating these challenges through empowering virtual health (87%), initiating highly positive patient experiences (73%) and confronting radically sinking margins with lay-offs and process changes (54%).

Eighty-one percent of CFO’s and senior leaders said there was an absolute and immediate need for digital transformations for the long-term survival of their organizations.

THE LARGER TREND

Data compiled for the month of April shows a harrowing decline on U.S. hospitals’ finances with volume and revenue in steep declines as the healthcare industry feels the effects of Covid-19’s impact.

Along with stagnant expenses, these declines drove margin performances so low that it broke records.

Despite $100 billion in funding allocated through the CARES Act, operating EBITDA margins fell to -19%.  They fell 174% or 2,791 basis points, compared to the same period last year, and 118% compared to March.  This shows a steady and dramatic decline as margins were as high as 6.5% in April.

ON THE RECORD

“It would seem most CFO’s understand what the pandemic has proved is the need to speed up digital transformation initiatives to not only survive but to prosper in the new normal,” said Doug Brown, president of Black Book Research.  “For CFO’s eager to expedite their organization’s digital transformation, the standardization and simplification leaders want in their back-end processes are allowing for less complicated, faster adoption despite the times.”