Becker's Hospital Review

7 CFO / FINANCE Why health system C-suites are nervous about 2030 By Laura Dyrda H ospitals and health systems are in the midst of financial recovery aer the pandemic, but potentially bigger challenges loom in the next five years. Margin growth has slowed and rising expenses continue to pressure health systems, especially those without strong cash reserves to invest in digital transformation and capital projects to stay afloat. Health systems in high growth margins are seeing patient volumes grow alongside the shi from inpatient to outpatient care, according to Fitch's 2025 outlook published in December. "To support this, capital spending is increasingly focused on IT and developing ambulatory networks, as improving access points is a top priority. It remains uncertain if healthcare operating margins will rebound to pre-pandemic levels, or if the 'new normal' will be metrics somewhere below those levels," the report notes. Experts at Fitch expect margins to have a slow, steady rebound this year and noted that balance sheets are healthy for many systems. During the pandemic, healthcare teams became much more nimble and agile, changing quickly to meet the needs of the broader patient population. Many health systems have integrated nimbleness and resilience into their broader culture. Margy Sargeant, CEO of Keck Medical Center of USC, told Becker's that razor-thin margins are still a big challenge for health systems. "Nonprofit hospital operating margins nationally are hovering around 4% and are projected to stay low in 2025," he told Becker's. "Reimbursement increases are not keeping pace with increases in labor and supply costs. Finding resources for strategic investments, especially technology, has become increasingly difficult and isn't likely to ease in 2025." is shi is essential, and not a moment too soon. Because even as financial trends slowly trend upward and health systems unveil 5-year strategic plans, more big roadblocks are ahead. "As we approach 2030, when the final 'baby boomers' will reach age 65, this will result in a smaller workforce serving a larger and older population with a heightened need for care, which will contribute to sector headwinds," the Fitch report notes. "Moreover, at some point the realities of continued federal fiscal deficits and growing federal debts may pressure Medicare and Medicaid reimbursement through such challenges are beyond the scope of the current sector outlook." Many hospitals now have capacity challenges and are unable to discharge patients to post-acute settings. ey're finding creative partnerships and opportunities overcoming these challenges, including hospital-at-home. e expected big patient volume growth will come on the heels of increased capacity issues. "Over the past five years, our health system has experienced a 54% rise in the number of unique patients seeking its services," said Craig Kent, MD, CEO of UVA Health. "Since 2019, surgical procedures have increased by 65%, hospital admissions have risen by 62% and emergency department visits have quadrupled." e influx of patients will also be Medicare beneficiaries, an oen challenging payer for hospitals. e rising popularity of Medicare Advantage plans is forcing hospital leadership to think differently about their balance sheets. WVU Medicine's 'secret sauce' to success By Madeline Ashley M organtown, W.Va.-based WVU Medicine saw a busy year of growth in 2024, bringing the health system's portfolio to 25 hospitals after it finalized the purchase of Weirton (W.Va.) Medical Center on Jan. 1. The system also received board approval to invest $400 million into new healthcare facilities across the state. It's this kind of growth that WVU Medicine CFO Nick Barcellona told Becker's Healthcare Podcast he wants to carry into 2025. "We would like to see more of that," he said. "We want to be doing those types of announcements every year, continuing to invest in our physical plan and in the communities, as we regionalize and continue those investments." With growth comes integration. Along with the Weirton hospital acquisition, WVU Medicine has acquired 12 other hospitals over the last three to four years. The goal now is to get the facilities onboard with Epic's EHR platform. Mr. Barcellona said integration starts with open and transparent communication, and while the goal is "seamless integration," it's important to set realistic timelines and expectations. "It's really trying to shift that mindset from integration to optimization, and in parallel with that, investing in breadth and depth across all of these new members of the WVU Medicine family," he said. Another way the system plans to expand is through Peak Health, a health insurance service company that WVU Medicine launched in January 2023 with Huntington, W.Va.-based Marshall Health Network and Winchester, Va.- based Valley Health. Mr. Barcellona said Peak Health plans to continue expansion on the number of people covered by its services. "We're evolving and growing, and we're an organization that's never satisfied," he said. "We're always looking to improve. All of the things we're working on are focused on the future, which can be exhausting sometimes, but for me as one of the leaders part of this great team, our culture is key, that's our secret sauce for future success." n

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