Becker's Hospital Review

16 CFO / FINANCE A leading money loser for hospitals: Kaufman Hall By Alan Condon O bstetrics and delivery services are one of the leading money losers of all hospital services, and a growing number of rural hospitals are closing obstetric departments to protect the financial viability of the overall enterprise, according to a recent analysis by Kaufman Hall. About 40% of rural hospitals are losing money on obstetrics programs, according to a recent study conducted by the University of Minnesota Rural Health Research Center. Many obstetrics programs hemorrhage money, and they are generally among the first services that financially struggling or low-volume rural hospitals cut. Several hospitals scaled back or eliminated labor and delivery services last year, and Becker's has reported on 15 hospitals that have cut these services so far in 2024. Ultimately, it's a money problem. Rising costs and staffing shortages have hit rural hospitals particularly hard, but low Medicaid reimbursement is the biggest challenge for obstetrics departments. "is is especially detrimental in rural areas where a higher number of births are covered by Medicaid," Eric Fish, MD, president and CEO of Schneck Medical Center, in Seymour, Ind., told Becker's. "In Indiana, over half of babies born on an annual basis are covered by Medicaid, which pays 57 cents on the dollar of the cost of providing care. is means hospitals, specifically in rural areas, are experiencing significant financial losses. Increasing Medicaid reimbursement is imperative to keep these services open and to preserve access in the future." Medicaid reimbursement rates set by states do not cover the full cost of providing obstetric services. is translates to financial losses for hospitals providing these services in rural areas, where a higher proportion of births are covered by Medicaid. Given that Medicaid funds 50% of deliveries in rural areas, hospitals would receive significant financial respite from improved Medicaid reimbursement for these services. "To help cover the losses associated with obstetrics, perhaps rural hospitals offering obstetrics could qualify for a special exception through Medicaid with an add-on payment program or an annual lump-sum payment, similar to [prospective payment system] hospitals that have received disproportionate numbers of low-income patients, based on the hospital's disproportionate OB patient percentage," Brett Altman, DPT, CEO of Atlantic, Iowa-based Cass Health, told Becker's. e other challenge, particularly in rural America, is the lack of staff and expertise when it comes to obstetrics nurses and physicians. "We have spent upwards of $3 million annually for traveling obstetric nurses to keep our unit staffed 24/7/365, but it is the right thing to do for southwest Iowans in order to decrease the excessive mileage required to reach the nearest obstetrics unit," Dr. Altman said. "Low volume obstetrics is not profitable and is one of the key drivers for why so many obstetric units have closed in rural areas as these hospitals hit financial headwinds in addition to concerns of competency." n Health system finance teams ripe for change By Laura Dyrda D ebra Thomas, senior vice president and CFO of the East Florida Division at AdventHealth, sees a big opportunity to transform her finance team in the coming years as the healthcare delivery system evolves. "Our finance teams will need to expand their roles beyond traditional cost and revenue management to include partnering with clinicians to lead interdisciplinary teams to execute on practical opportunities that reduce clinical variation that is focused on maintaining or improving quality and experience while right-sizing utilization of resources and partnering with clinicians to find mutually beneficial solutions," Ms. Thomas told Becker's She's not alone in her journey to find innovative solutions to rising costs. Around half of CFOs are prioritizing reducing costs and managing strategic and performance improvement in the next year, according to a Strata survey released earlier this year. But the cost cutting can't come at the expense of quality or supporting clinicians in care delivery. Expenses remain high for many health systems, as labor shortages and inflation boost expenses. While expense growth has slowed, supply costs were up 20.7% and labor expenses were 21.3% higher in 2023 than in 2019 Improving patient throughput and workflow is an area ripe for collaboration between the clinical and financial teams. Strata reported adjusted patient days at hospitals surveyed was up 7.4% last year compared to 2019, and operating room minutes are up 1.6%. Alignment and connection between the finance and clinical teams can spark meaningful change, Ms. Thomas said. "[These relationships] will require the financial teams to strengthen their influence, collaboration and problem solving skills as well as increase their understanding of the 'how and why' of physician practices and clinical operations beyond the traditional management of case management throughput, supply costs and productivity," said Ms. Thomas. n

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