Moody’s reports ‘unsustainable path’ for hospital systems. Cleveland Clinic, Ascension and Verity are proof

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Number one rule of successful business: profits must exceed losses. Yet for hospitals, the opposite has been happening for several years. And it’s not just community hospitals. The big boys are taking major hits. If they are suffering, everyone is.

Take Verity Health Systems’ recent Chapter 11 bankruptcy filing. According to CEO Richard Adcock in the company’s bankruptcy announcement, “‘After years of investment to assist in improving cash flow and operations, Verity’s losses continue to amount to approximately $175 million annually on a cash flow basis,’ and more than $1 billion overall.”[1]

Financially struggling Ascension has joined the ranks of other major health systems to divest, selling off a Washington-based hospital as it moves toward a long-term strategy in outpatient care. HealthCareDive reports huge losses for Ascension:

For the first nine months of FY2018, Ascension Health reported year-over-year drops in operating income ($282 million from $749 million) and revenue ($17.09 billion from $17.15 billion) as it undergoes restructuring. The system has divested hospitals, cut leadership and dropped ancillary businesses, saving $400 million in administrative costs and hoping to cut $61 million in that area over the next fiscal year.”[2]

Then there’s Cleveland Clinic, one of the most renowned and well-known hospital systems. This giant saw its operating income spiral down by 80% due to increased expenses.[3]

Verity, Ascension and Cleveland Clinic join the ranks of other large providers experiencing huge losses in operating income. You cannot indefinitely spend more than you earn and expect to survive. Yet so many hospitals are doing just that, prompting Moody’s to state that nonprofit hospitals are on an “unsustainable path” and report: “Not-for-profit and public hospitals spent more than they gained in revenues for the second consecutive year in fiscal 2017.”[4] A bad rating from Moody’s puts hospitals in an even more precarious situation because bonds will become more expensive for them, making their loans pricier than if they were healthy.

When you look at closures, the writing is on the wall. Over the past five years, 2.5% of all hospitals closed. A recent Morgan Stanley report puts that figure in perspective, stating that “about 18% of more than 6,000 hospitals studies were at a risk of closure or are performing weakly. About 8% of studied hospitals were at risk of closing and 10% were called “weak,’ according to that report.

Why are hospitals failing? Moody’s attributes part of it to “lower reimbursements, the shift to outpatient care, increased M&A activity and additional ambulatory competition.”[5] Moody’s also noted that the trend in moving away from inpatient to outpatient services is into its fifth year.

Competition among providers is more than simply ambulatory. Many corporations are fed up with rising costs and are directly contracting with providers. The news of JPMorgan, Amazon and Berkshire Hathaway is one of many such arrangements. Comcast is another large company directly contracting with providers. And the company is seeing major savings. By going direct, Comcast has seen yearly cost increases in its healthcare expenditures of only one percent in the past five years as compared with 10% increases of one-fifth of the nation’s other big companies, according to an article in HealthCareDive. [6] The article cites that by going direct, companies strive to ”step up their cost management strategies and replace the traditional employer-insurer-provider model with an employer-provider relationship.”[7]

Shift to outpatient. Going direct by big corporations. At the heart of it? Consumerism. When consumers account for 30% of hospital revenue – and they have choices in where they go – the pressure mounts to an irreversible tide. Follow the money. People spend it with providers who make it easy for them, who give them the Amazon experience in healthcare. Math doesn’t lie.

If businesses contract with your competitor, you’ve lost. You’ve got to get into this game and you need the infrastructure to do it.

HealthQRS gives you what you need to compete on many levels. Our solution provides people a full retail experience in healthcare just like they are used to receiving from Amazon for retail goods. (And it’s not a portal because employers don’t want their employees to be forced into portals.) From their smartphones, consumers can search for services and procedures in their network, see true prices – not just estimates – schedule the service, search for discounts, pay for the service or set up payment plans, find transportation, receive appointment alerts, wellness alerts, and even see a doctor via telemedicine. You name it. We offer it.

HealthQRS provides you with the infrastructure to create an online marketplace that provides a full retail experience for consumers including accurate pricing (not just estimates). We enable telehealth connectivity as well. Our technology enables people to connect to more cost-effective, consumer-oriented healthcare options and we keep them in-network. HealthQRS integrates fully to your EHR and can also enhance your existing portals and other patient engagement solutions. Our user-friendly app points them to your portals which will improve your meaningful use numbers and increase meaningful use funds.

HealthQRS is the perfect vertical application for integrated delivery networks. We provide regulation compliance and serve as a marketing tool for your facilities. In addition, HealthQRS allows you to be compliant with the new CMS transparency rules beginning Jan. 1, 2019.

We are a software-as-a-service (SaaS), so you have no capital investment, just a low monthly fee. We also have a smartphone application that consumers can use to shop, see actual costs, schedule and pay for services with a few finger taps.

HealthQRS has over 15 years of experience developing healthcare retail experiences for people and our founders have over 50 combined years of e-commerce experience. We invite you to watch our user-friendly app video that you can use to win consumers. We also have a point-of-service solution video that may interest you. You can also check out our E-Commerce Medical Marketplace Flyer for more information. Why not contact us right now to schedule a personalized demo? Follow the money and it will lead you to consumers. We can help you win them and keep them.

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[1] Rebecca Pifer, “California’s Verity system files bankruptcy, faces $175M in annual losses,” HealthCareDive, Sept. 4, 2018, https://www.healthcaredive.com/news/californias-verity-system-files-bankruptcy-faces-175m-in-annual-losses/531524/

[2] Samantha Liss, “Ascension exits Northwest with sale of Washington hospital,” HealthCareDive, Sept. 6, 2018, https://www.healthcaredive.com/news/ascension-exits-northwest-with-sale-of-washington-hospital/531663/

[3] Meg Bryant, “Cleveland Clinic’s operating income plummets 80% in Q2,” HealthCareDive, Aug. 31, 2018, https://www.healthcaredive.com/news/cleveland-clinics-operating-income-plummets-80-in-q2/531364/

[4] Les Masterson, “Nonprofit hospitals ‘on an unsustainable path,’ Moody’s says,” HealthCareDive, Aug. 30, 2018, https://www.healthcaredive.com/news/nonprofit-hospitals-on-an-unsustainable-path-moodys-says/531245/

[5] Les Masterson, “Nonprofit hospitals ‘on an unsustainable path,’ Moody’s says,” HealthCareDive, Aug. 30, 2018, https://www.healthcaredive.com/news/nonprofit-hospitals-on-an-unsustainable-path-moodys-says/531245/

[6] Rebecca Pifer, “Amazon-Berkshire-JPM healthcare venture picks COO,” HealthCareDive, Sept. 5, 2018, https://www.healthcaredive.com/news/amazon-berkshire-jpm-healthcare-venture-picks-coo/531618/

[7] Rebecca Pifer, “Amazon-Berkshire-JPM healthcare venture picks COO,” HealthCareDive, Sept. 5, 2018, https://www.healthcaredive.com/news/amazon-berkshire-jpm-healthcare-venture-picks-coo/531618/

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