During last week’s CHA Board meeting, members were joined by Ken Kaufman, founder of the nationally renowned health care financial consulting firm Kaufman Hall, for a candid and enlightening conversation about the future of hospital care.
At a time when hospitals are facing new and in some cases, existential challenges, Kaufman was able to provide valuable insight on the factors affecting hospitals’ viability and ways they can take control of their own fate in this difficult environment.
He touched on similar themes in a recent blog post, “Table Stakes,” where he laid out what hospitals will need to do to be successful given recent federal Medicaid cuts, hostile state and federal policy changes and future considerations, and new technologies and patient expectations.
At a high level, Kaufman believes hospitals are in their “third financial crisis” of the past two decades as the Affordable Care Act continues to be degraded (the first two were the Great Recession and the COVID-19 pandemic). Between 20 million and 30 million Americans will lose insurance as a result of federal policy changes, a drain on revenue that hospitals will not be able to recoup.
Policymakers need to hear from hospital leaders directly about what is at stake should these state and federal policy decisions continue unabated. In addition, hospitals will need to address several key issues in the coming years to continue to be able to serve their communities:
Money — According to Kaufman, to remain competitive, hospitals will need significant investments in facilities, clinical capabilities, virtual convenience for patients, and AI modernization. However, 40% of hospitals nationwide have been breaking even or losing money for quite some time.
Those numbers track with the 44% of California hospitals that lose money every day caring for patients. And when those federal cuts are paired with the state Office of Health Care Affordability that is draining tens of billions from patient care over the next three years, California hospitals are in an even more precarious position.
This is related to another point Kaufman touched on: scale. As hospitals struggle to stay open, this will drive consolidation, where the primary way to survive and create savings for needed investments is to create partnerships and larger systems. California policymakers have largely looked at mergers with scorn, but they will need to ask themselves serious questions about whether preconceived notions are worth the loss of access to patient care.
Quality — Kaufman notes that hospitals have been focused on improving quality (largely outcomes and other traditional quality metrics) for years, but there are new variables.
Given the internet, and now AI, patients can identify the best doctors and hospitals for a particular condition and can determine whether they prefer to be treated locally or need to travel for care.
This will create new ways that hospitals will need to distinguish themselves and will create new patterns for patient volume that will differ significantly from current catchment models.
Welcoming Journey — The final major factor for hospitals to wrestle with is something Kaufman calls the “welcoming journey,” where patient experience informed by and supported with AI will be front and center when it comes to patient choice. According to Kaufman, gaining a reputation for an exceptional level of patient service will translate into a competitive advantage.
Kaufman’s remarks were resonant, and while every hospital leader recognizes the challenges of the current environment, he was able to provide something that’s been more elusive: concrete strategies to be successful and to enable hospitals to continue to do what they’ve done for decades — care for patients and communities.
