Supply chain issues creating challenges for healthcare

Nearly all respondents to a Kaufman Hall survey have experienced challenges in supply procurement.

The COVID-19 pandemic continues to impact the healthcare industry as supply chain issues, patient volumes, and staff shortages restrain the sector’s recovery.

According to a news release, the Kaufman Hall 2021 State of Healthcare Performance Improvement Report reveals an industry in need of transformative operational changes with bold, new thinking needed in nearly every area of operations.

The survey found that 99 percent of respondents have experienced challenges in supply procurement leading to shortages of key items and significant price increases. All respondents say that they have faced staff burnout, trouble filling vacancies, wage inflation, and high turnover rates. A further 92 percent say it is difficult to attract and retain support staff, while nearly 90 percent have increased base salaries.

Experts are pushing hospital leaders to rethink the approach to performance improvement by revisiting the premise that nor-for-profit hospitals and health systems can lower costs while maintaining control over all aspects of operations, the release says.

“The pandemic has created a perfect storm of increasing expenses and decreasing revenues,” Kaufman Hall Managing Director Lance Robinson, who leads the firm’s performance improvement practice, says in the release. “For most institutions, navigating today’s financial and operational challenges and positioning for future growth requires radical change that is achieved only with new thinking and partnerships. Now more than ever, hospitals need to build relationships with physician groups, insurers, retailers, vendors, and other providers. It’s increasingly apparent that most organizations don’t have the resources they need to evolve on their own.”

Other notable findings in the survey results include:

  • Patient volumes remain low in many service lines with only 44 percent of respondents in cardiology and cardiovascular services reporting a return to pre-pandemic levels
  • 23 percent of respondents say the ratio of administrative staff working remotely is likely to return to pre-pandemic levels, 66 percent say that ratio will remain the same as during the pandemic, and 11 percent saying it will increase
  • 52 percent say the pandemic has driven their organization to adopt new processes, positions, or departments which will continue beyond the public health emergency
  • 75 percent of respondents say they’ve seen adverse revenue cycle impacts during the pandemic including an increased number of Medicaid patients and increased insurance denials

The results of this survey comes hot on the heels of another Kaufman Hall analysis which estimated that hospitals across the country will lose about $54 billion in net incomes this year.

Specifically, the analysis projects that median hospital margins could be 11 percent below pre-pandemic levels by the end of the year, but warns that the recent increase in COVID-19 cases tied to the Delta variant was not a factor considered in the study.

The actual performance results show that the percentage of hospitals with negative operating margins had decreased from the first to second quarters, the analysis see it improving to 35 percent in the third quarter and then stay flat in the fourth. It’s worth noting that the surge in cases tied to the Delta variant was also not included in this analysis, according to the report.

Contributing factors to the continued losses are:

  • More high acuity, inpatient cases which require longer stays than before the pandemic.
  • Increasing costs for labor, drugs, purchased services, personal protective equipment, and other supplies have led to higher expenses for hospitals.
  • Profitable outpatient visits have continued to grow from the depths of the early pandemic but are still below 2019 levels.