Working to steady the ship: 4 takeaways from the Not-for-Profit Healthcare Investor Conference

As described at a recent conference, hospitals and health systems are retaining a sense of optimism while navigating some of the biggest challenges the industry has seen.

Pressures on both revenue and expenses require leaders to try innovative solutions while also continuing to master the nuts and bolts of hospital operations, C-suite executives said May 20-21 in Manhattan at the Not-for-Profit Healthcare Investor Conference, sponsored by HFMA, Barclays and the American Hospital Association.

Here are a few of the trends that featured most prominently in the presentations at the event, which also included remarks by Mehmet Oz, MD, the new administrator of CMS.

1. Hospitals continue to feel strain in payer relations

Reimbursement is an increasingly unsustainable proposition, especially given government payment rates that come in well under costs and are trending downward as a percentage, along with a growing administrative burden in Medicare Advantage.

Health systems are looking to adjust their business models in response. In a few cases, that has meant taking on payvider capabilities. If mastered, that approach serves as a hedge against volume downturns and other headwinds that affect provider revenues.

For health systems that are disinclined to expand their operations directly into the payer space, ramping up value-based payment contracting still can diversify revenue by allowing providers to gain a share of the premium dollar. When implemented successfully, such models also inherently mitigate some of the conflict between providers and payers.

Health systems eventually can advance into global-risk models that promote upfront investments in appropriate clinical care, along with team-based solutions to social and behavioral risk factors.

“Being able to move up-premium with some of the largest national Medicare plans in our market was a way of changing the revenue model, the paradigm,” said one health system CFO.

More broadly, organizations with harmonious payer relationships have a chance to shift resources from the back end of the revenue cycle to the front end, allowing for a strategic focus on ensuring the right care at the right time for patients and health plan members.

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Participating health systems

Organizations that gave presentations or were represented in panel discussions at the Not-for-Profit Healthcare Investor Conference included:

Allina Health, Baylor Scott & White Health, ChristianaCare, Cleveland Clinic, CommonSpirit Health, Corewell Health, Froedtert ThedaCare Health, Indiana University Health, Intermountain Health, Johns Hopkins Medicine, Kaiser Permanente, Mass General Brigham, Memorial Hermann Health System, Northwestern Medicine, Novant Health, OhioHealth, Providence, Risant Health, Scripps Health, Sentara Health, Sutter Health, WVU Medicine, Yale New Haven Health

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2. The impact of policymaking is hard to project

Hospitals and health systems are attempting to gauge the long-term impact of potential cuts in Medicaid spending and the increase in costs stemming from tariff policies.

Unfavorable trends also are being seen in the 340B Drug Pricing Program, where drug manufacturers are looking to add constraints and the Trump administration’s level of support for 340B covered entities such as hospitals remains uncertain.

When considering the policy pressures, a sustained increase in labor costs and the antagonism with payers, hospitals are confronting a “poly crisis,” said Eric Wexler, president and CEO of Providence.

With the policy forecast murky, health systems at the conference generally did not share details of their planned responses. As described, the focus is on shoring up their fundamentals and resilience to potential shocks.

Among industry analysts, “We’re really focused in on what’s going to happen with the [Medicaid] directed payment programs across the states and what the general landscape is going to look like from an insured lives perspective,” Eric Bringardner, research analyst with Fidelity Investments, said during a panel discussion of municipal bond investors.

The lack of clarity is negating what otherwise would figure to be a robust market for mergers and acquisitions in a high-cost environment.

“Maybe [activity will pick up in the] second half of this year, but I wouldn’t be surprised if it’s more into next year whenever policy kind of works its way through,” said Jennifer Soule, a managing director with Wellington Management.

3. Capacity challenges are looming

In what one organization’s chief operating officer described as “a good problem,” hospital and health system volumes appear to be at or beyond pre-pandemic levels. The industry is in the early stages of seeing the long-anticipated demographic impact of an aging population.

One health system said its hospitals all are averaging about 95% capacity, with extended waiting lists for virtually all sites and services. The organization is responding by expanding its portfolio of ambulatory surgical centers and imaging centers.

Another system has opened eight clinics in roughly the last six months, and schedules are full at each of the new locations. Within the next year, 15 more clinics are set to open.

Also incumbent in that effort, as described in a panel discussion of health system chief strategy officers, are initiatives to integrate digital and physical access. The goal is to view hospital patients more as healthcare consumers.

Service line optimization is emerging as a key initiative. That might mean examining whether the organization is duplicating services within a market and, if warranted, restricting services in one location to create a service continuum in which patients can be transferred as needed. The concept of care segmentation (e.g., senior centers, women’s clinics) is getting a close look.

Such strategies require careful consideration to ensure all markets and demographics retain optimal access, but they reflect a systemic emphasis rather than a view of facilities as self-contained entities.

4. GenAI is being embraced

Amid a status quo that appears to be untenable from a resource standpoint, hospitals and health systems are fully engaged in efforts to ensure ideal implementation of generative AI technology.

“We’ve essentially broken the healthcare sales cycle,” Harpreet Mangat, chief strategy officer with Hippocratic AI, said during a panel discussion. “Educating people on a new technology, getting to building trust, building credibility, showing them proof points — normally that’s a game that takes 18 months to two years. We are coming back sometimes with signed contracts within two weeks, deployed within a few months.”

Most notably, AI is a “capability that makes time and space for doctors,” said Allon Bloch, co-founder and CEO of K Health. “Doctors can be much more efficient. They can also manage patients very differently in the visit and after the visit.”

The technology also is paying dividends in the revenue cycle as a means to address the reported $250 billion per year that’s spent on waste in the healthcare system, said Judson Ivy, founder and CEO of Ensemble Health Partners.

“We [in the industry] do a lot of non-value-added work: millions of records that are sent to payers, tens of thousands of phone calls all around a small section of the patient population,” Ivy said. “We see AI as not just the tool that’s going to help solve this, but also the impetus for solving a lot of the friction that exists in healthcare.”