Future-proofing hospitals: Creating financially stronger hospital and health systems | Viewpoint

Managing hospital margins has always been a complex and daunting task, with a mix of factors adding pressure from every angle.

Thomas Lanvers

Inflation may be the most obvious culprit, but it’s far from the only one. Poor reimbursement rates and persistent staffing challenges create additional hurdles, making it harder for hospitals to stay financially stable.

A recent study cited 84% of health systems pointing to lower reimbursement as a top cause of lower operating margins and 96% of health system CFOs naming higher labor costs as the biggest drivers of margin pressure. These dynamics not only strain operational budgets, but also threaten the quality of patient care.

While it is encouraging that some hospitals and health systems are stabilizing, many still operate with little to no margin, and we are far from where we need to be to meet patient demand and prepare for the next global health crisis.

The question is: How can hospitals regain control and thrive in an environment of constant economic pressure? Let’s take a deeper look at some of the challenges and how healthcare organizations can better address them to improve operational efficiency.

The invoicing problem

Many hospitals currently manage multiple staffing vendors, and the chaos of handling hundreds of invoices each week, particularly when staffing locum tenens — temporary providers hired to fill gaps in care — can lead to big financial discrepancies.

Vendor invoices are often inaccurate costing healthcare organizations millions of dollars. Creating systems to consolidate these invoices into one single accurate invoice, can drastically reduce errors and save hospitals money. This can be achieved either by hiring or allocating more staff dedicated to this task or by looking at technology partners that can help streamline the invoicing process.

The importance of forecasting

Actionable analytics and effective staff forecasting are critical tools for hospitals striving to control costs and optimize financial outcomes. Currently, most hospital systems have zero forecasting ability, which makes it difficult to drive down future costs and limits the ability to predict and manage future expenses.

By understanding baseline costs, identifying spending patterns, and analyzing trends, hospitals can better position themselves to reduce unnecessary expenses and allocate resources more effectively.

Investing in forecasting tools is not just about cost control — it’s about making data-driven decisions that lead to improved operational efficiency. Hospitals can start by collaborating closely with their informatics teams to assess their current data capabilities. Alternatively, they can explore vendor management system platforms that offer real-time data access, predictive analytics, and workforce planning insights. These tools enable hospitals to make informed decisions that ultimately improve both financial performance and patient care delivery.

Effective float pool management

A method that has become increasingly popular within hospital systems to reduce the amount of contingent labor is to create their own float pools.

For example, if a physician retires, a hospital can then put that physician in their internal float pool and lean on that provider to pick up a few shifts a month. Hospitals end up paying these float pool physicians a fraction of what they would pay a staffing agency — an approximate 40% cost reduction by using their own internal float pool.

However, managing float pools without a centralized system in place can lead to under- or over-staffing and increased costs. Typically managed within an Excel spreadsheet, when shifts open up, it becomes extremely time-consuming to go through these lists and determine who is available; it becomes like staffing an agency.

While many hospitals have done a great job of getting doctors in their float pool, it’s extremely challenging to place them. A technology partner can assist with systems for coordinating with these physicians — for example, contacting via text message and going through the internal float pool first as the first line in an automated process.

Float pools can save hospitals money and help with labor shortages, but a technology partner is key. Integrating and managing float pools in the same systems a hospital uses for other staffing/locums can elevate float pool management by providing a holistic view of staffing needs, allowing for better allocation of resources and reducing reliance on expensive temporary staffing.

While the financial pressures facing hospitals and health systems are vast, there are clear steps that can be taken to improve operational efficiency and strengthen margins. From addressing invoicing inaccuracies to investing in forecasting tools, hospitals can gain better control over their finances and reduce unnecessary costs.

By leveraging these solutions and technology partnerships, hospitals can better navigate the complexities of healthcare delivery and ensure they are financially equipped to meet patient demands, even in the face of rising costs and economic uncertainty.

Thomas Lanvers is senior vice president at Locumsmart, a CHG Healthcare company.