Becker's Hospital Review

12 CFO / FINANCE Big systems looking 'outside of the four walls of the hospital' By Andrew Cass L eaders of large nonprofit and for-profit health systems have detailed a growing emphasis on outpatient care during recent investor calls and healthcare conferences. "We have to embrace the duality of acute and ambulatory services as care shis outside of the four walls of the hospital," Trinity Health's chief strategy officer Ray Anderson, PhD, said on the Livonia, Mich.-based system's Oct. 15 investor call. Dr. Anderson said there is still growth within hospitals, but "we're seeing more shi from outside the four walls of the hospital to the ambulatory network, ambulatory surgery center, outpatient imaging centers, the growth of medical practices." He said it's critical to have a diversified portfolio to "better deliver on the health needs of patients and families in the communities that we serve." Dan Morissette, CFO of CommonSpirit Health, said that the Chicago-based system added 56 ambulatory care sites across the country in 2024. "As we look at our capital deployment for 2025, there are a wide range of ambulatory initiatives and physician partnerships in the pipeline," Mr. Morissette said on the company's Oct. 4 investor call. Sam Hazen, CEO of Nashville, Tenn.-based HCA Healthcare, said at a pair of healthcare conferences in September that building out the system's outpatient capabilities is a key part of its long-term plan. e for-profit system currently has an average of 13 outpatient facilities for each hospital. Mr. Hazen thinks that average will grow to between 17 and 20 by the end of the decade. He said HCA's approach is to "take as many outpatient facilities as we possibly can and make it closer to the patient." "at's convenient for the patient, different price points for the patient and so forth, very efficient for the patient, but for us as a system, what it does is it opens up the opportunity for us to interact with the patient upstream, and if they need acute care downstream, we can integrate them, hopefully by having the necessary programs, services or physicians in our network and receive them if they need acute care offerings," he said. Dallas-based Tenet Healthcare has sold off a number of hospitals in 2024. In addition to reducing its debt, proceeds from the sales are being used to expand its outpatient footprint through strategic ASC acquisitions and de novo developments. Tenet owns USPI, the largest ASC chain in the country with 520 ASCs and 24 surgical hospitals across 38 states. By the end of 2025, it plans to have 575 to 600 facilities in its portfolio, which would be almost double the outpatient footprint of its closest competitor, Deerfield, Ill.-based SCA Health, an affiliate of UnitedHealth Group's Optum. Tenet CEO Saum Sutaria, MD, said Sept. 9 during the Wells Fargo Healthcare Conference that there's still plenty of room to "grow with outpatient surgeries in orthopedics to move into a freestanding ASC setting, and to do it in a cost- effective way." "I remind people all the time that our ASC portfolio is virtually 100% freestanding. So the cost savings from moving into that setting, aside from the service and all that stuff is, is quite beneficial," he said. "And it opens the market when things are more affordable for more growth." n Hospital operating margins to stay low in 2025: Moody's By Laura Dyrda H ospital labor costs rocketed over the last four years, hitting margins and cash flow hard, according to Moody's. And the problem isn't going away any time soon. "The steep rise in healthcare wages over the last three years remains a structural problem and credit risk for the hospital industry," states Moody's Oct. 15 report on hospital financial performance. "While the wage growth rate will remain low in 2025, average hourly earnings will continue to top prior years. Reimbursement increases from payors, particularly government ones will not keep up with higher wages." Moody's noted the median operating cash flow margin was 8.5% for nonprofit hospitals in 2019, before the pandemic, and dropped since then to 5.3% in 2023. Growing expenses in labor and supply costs are driving the change, with salaries and benefits comprising 53% of nonprofit hospitals' expenses, according to Moody's. Supply costs comprise 21% of the expenses, based on 2023 medians. "We expect operating margins to remain below historical levels in 2025," the report states. Nonprofit hospital operating margins are 4.2% on average, according to Kaufman Hall's National Hospital Flash Report released Oct. 3. From January to August, operating margins are 14% above where they were in 2023 but down 11% from 2021. Labor costs shot up during the pandemic when hospitals needed expensive nurse staffing agencies to quickly increase staffing as they filled to capacity with COVID-19 patients. When the demand for nurses dropped, hospitals focused on hiring full time staff to reduce reliance on temporary labor. Hospitals now have more control over staffing costs and are offering more flexibility to permanent team members, according to the report, but it won't be enough to completely calm financial challenges. "While hospitals are reporting lower expected wage increases for coming years, the existing high rates will persist," the report states. "Hospitals are taking steps to offset this hurdle by aiming to reduce current costs through improving efficiencies, scrutinizing the hiring process more closely, decreasing patient length of stay and aiming to find a better fit between employees' roles and their skill set." n

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