COVID’s financial pain

Cris Collingwood//May 19, 2023

Ford Koles of the Advisory Board speaks at the LVBCH conference on Healthcare costs. PHOTO/CRIS COLLINGWOOD

COVID’s financial pain

Cris Collingwood//May 19, 2023

COVID left hospitals facing a financial crisis that has most spending through their cash reserves. 

“They aren’t banks, so that is what the cash is for,” Ford Koles, vice president and national spokesperson for Advisory Board, told about 300 attendees of the Lehigh Valley Business Coalition on Healthcare’s 43rd annual conference Wednesday at DeSales University in Center Valley. 

However, Koles said, those health care systems can’t sustain the outflow, so prices will increase. 

“Who pays for this? You, the employers, through increased insurance premiums,” he said, citing double-digit increases on the horizon. 

The good news, he said during the event entitled Innovation in Healthcare: Leading the Way in Quality & Cost Containment, is payors have power to direct the way health care is delivered. 

Koles, an economist with Advisory Board, a body that provides non-binding strategic advice to the management of a corporation, organization or foundation, said the power comes from companies deciding what type of health care they want for their company. 

That decision can influence the way insurance companies price their plans. 

He cited the traditional fee-for-service, fee-for-service linked to quality and value, shared savings and bundles, and population-based payments. 

While not suggesting any one as better, he said business owners need to look at their employee pool and decide what would work best for them. 

In the long term, Koles said, value-based payments can work well because there is an industry wide reimbursement standard.  

“Everyone I talk to thinks this is the wave of the future,” he said. “The risk is split between private and public payors.” 

Value-based payments are based on outcomes such as readmissions and can keep costs down, Koles said.  

Shared savings and bundles is where insurance companies pay one fee for a whole procedure from start to finish. Koles cited knee surgery as an example. The reimbursement to the hospital is for the diagnosis, testing, surgery, and follow-up care.  

If the hospital can manage the care for less than the payment, they profit. If not, they eat the cost of the overrun. 

That can be a good policy for employers because they know what the cost of a procedure will be up front.   

Koles said the hospital financial crunch, which came from increased labor and supply issues, is getting better, but with inflation at 7% and Medicare reimbursement at 2.3% adjusted, cash flow will remain an issue, at least through the end of the year. 

“That’s a long time,” he said. “And who covers the difference? You do.” 

Koles said he tells health care systems to “take a deep breath” and stay with their long-term strategies.” 

The leverage companies have gives them the power to direct the type of insurance offered at more affordable rates. Koles told the group to keep an eye on what the government is doing with Medicare and Medicaid plans because they are the drivers for pricing.