Building Back the Balance Sheet in the Age of COVID-19

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Now, providers face another crisis. Revenue losses associated with cancelling elective procedures and dramatic decreases in patient volumes, along with expenses in managing or preparing for the surge, have significantly impacted the financial stability of health systems. The implications are staggering, with a typical $1 billion health system losing as much as $1 million per day in the period prior to reactivating elective procedures.

Those that take control now and greet this challenge with the fortitude and commitment they have demonstrated over the past few months will position themselves to emerge stronger, leaner and better positioned to serve their communities in the future.


Health systems mounted an impressive response to the COVID-19 crisis: rapidly deploying emergency response plans, reconfiguring staffing and operating models, and engaging, empowering and protecting frontline workers.

Authors

Pam Damsky
Director, Performance
[email protected] 

Rob Gamble
Director, Performance
[email protected] 

Stephanie Hines
Senior Performance Practice Manager
[email protected] 

The Financial Recovery Outlook

It is not a stretch to contemplate that a $1 billion revenue health system emerges from the post- COVID-19 surge as an $850 million one.


While organizations are partially closing the margin gap by resizing operations to volume — through salary reductions, furloughs and reductions in force — these measures will not be sufficient to cover the gap caused by revenue losses of ~40 percent.


For a typical $1 billion health system, as much as 20 percent
of the margin gap must be closed through fundamental restructuring of the expense base.

Mobilizing the Recovery Effort

Time is of the essence. For a typical $1 billion health system, every day that goes by represents a loss of almost $1 million.

Those organizations that rapidly mobilize the appropriate resources and bandwidth to develop and execute a comprehensive margin improvement plan can achieve 30 percent greater financial impact in 40 percent less time.

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