The Road to Better Financial Health: Solving Complex Margin Challenges

Key takeaways:

• Health system finances are being impacted by the after-effects of COVID-19 in addition to soaring inflation, interest rates and labor costs.
• In a recent Modern Healthcare podcast, Premier’s Roger Weems discussed how healthcare leaders are using PINC AI™ technology and PINC AI™ clinical, financial, operational and supply chain data to overcome these challenges, improve margins and rebuild their organization’s financial stability.
• Listen to the podcast above or continue reading below.

The impacts of the COVID-19 pandemic reverberated across our nation’s healthcare system, overwhelming our providers and taking a toll on their financial sustainability. Add to that skyrocketing inflation, rising interest rates and the high cost of labor, it’s no surprise healthcare leaders are in overdrive to find ways to improve margins and rebuild their organizations’ financial stability.

Roger Weems, Vice President, Advisory Services Market Leader at Premier, recently participated in a podcast discussion with Camille Baxter of Modern Healthcare on these market realities. Roger shared how Premier is helping providers solve their complex challenges and drive business forward through a holistic approach to margin improvement.

Camille: Financial pressures on healthcare providers are at an all-time high. What are you hearing from the providers you work with in terms of their current state and the challenges they're facing?

Roger: In normal times, the healthcare industry operates on very thin margins. What’s happening now, post-COVID-19, has added a layer of challenges that makes the normal financial stress the industry is under somewhat abnormal and, for lots of health systems across the country, these challenges have pushed that stress level to an all-time high.

When working with health systems, we typically talk about clinical variation and how to make their care delivery models more consistent in order to maximize quality and efficiency from a cost-of-care delivery perspective. What we're hearing from providers now is that they still want to do that kind of work because it's important (care delivery is their core business); however, they’re also telling us that they have urgent financial turnaround needs.

Providers are asking us for additional solutions that can make a financial impact more quickly because they’re feeling inflation, soaring interest rates – all of the things affecting business today – making their operating environment even more challenging.

Camille: Can you talk a little bit about how Premier has evolved given these market dynamics and what's your approach to helping providers navigate these unprecedented challenges?

Roger: We try to make sure that our businesses evolve with the challenges our members are facing. For us, that centers on how we can technology-enable our solutions so that we not only solve their short-term challenges, but also provide longer-term sustainability.

Over the last few years, we've added technologies and partners to help us solve revenue-side challenges because that's something we've heard loud and clear from our members across the country. Our advantage is that our technology – together with access to unique clinical, operational and financial data – enables us to look at efficiency and the effectiveness of care delivery models.

This work is time consuming and given our current environment, our members don't necessarily have much time from a financial pressure perspective. To help on that front, we've looked to create businesses that can provide shorter-term relief from a financial improvement perspective.

And so, managed services, for instance, is a new business that we've brought to market, helping our members look at potential non-clinical areas that they may be able to outsource or that we can help manage from afar.

Camille: Let’s dig into that a little bit deeper. Can you talk about the specific areas related to margin improvement that Premier addresses?

Roger: When it comes to the clinical aspect of a health system’s operations, we bring truly differentiated assistance, whether that be focused on quality performance or overall clinical care delivery and the variation that might exist in that care delivery model. That’s where Premier has built a reputation with our members.

We're able to roll our sleeves up, do the hard work and utilize technology and data to truly drive changes in the care delivery model that will result in higher quality as well as a more cost-effective model for a sustained period of time. After we do that work, our technology lives on with those members internally so they can maintain and sustain those care delivery model changes in order to be more efficient.

In addition, over the last couple of years, we've looked at non-clinical solutions for our members that may enable some shorter-term improvements. One of these is our Remitra™ solution, which is helping to automate back-office accounting processes, particularly accounts payable, to streamline and modernize the way providers do business with their suppliers, helping them to reduce both waste and costs.

We also have a partnership called Long 80, which brings managed services and even a complete outsourcing of information technology services and operations for those members looking for that kind of a solution. All in all, we've created new businesses across Premier and PINC AI™ to help solve our members’ margin improvement issues.

Camille: Let's take this a little further down that path. Can you provide some examples of Premier's margin improvement work with providers?

Roger: Two really good examples come to mind. One is much further along having started this journey with us about three years ago, and the other started just under a year ago. The first example is a large health system (11 hospitals) in the upper Midwest.

Over a two-year period, the health system invested in our entire technology portfolio, but with a particular interest in understanding how we could maximize the utilization of our INsights platform, which is our platform that can ingest all Premier and PINC AI™ data feeds that come from a particular member, but also other third-party feeds that we might want to combine to create business intelligence capabilities for a particular member.

We spent two years really focused on the technology and the data and analytics build out with that member. And then over the last year and a half, we've transitioned into utilizing those platforms and business intelligence customizations in order to drive specific margin improvement initiatives. I think we're on track to hit $25-40 million in annualized impact with that customer.

The other example is a health system comprised of 14 hospitals in the South that was the product of a merger. In this case, the member started from scratch building a customized technology and business intelligence platform. They utilized our INsights platform in combination with our consulting capabilities to look at a multi-hundred-million-dollar margin improvement initiative over a three-year period.

This project is particularly exciting. We're still in the early stages of it, not quite a year into a three-year consulting engagement, but we're making a lot of progress. We're very excited that we get to do this kind of work as we're able to showcase what our integrated capabilities can bring to bear for members that are weathering a very difficult market with lots ahead in the post-COVID-19 environment.

Camille: Looking to the future, what opportunities do you see for providers to maintain healthy margins?

Roger: The opportunity to maintain healthy margins is in Premier’s newly minted brand, PINC AI™. I think we're all firm believers of technology and particularly that AI-driven technology should be a big part of the strategy moving forward for health systems.

Whenever there's a process that continues to be manual, there are always going be opportunities to automate and look at more effective ways to scale that operation through technology. So for us, we’re continually challenging ourselves to look at other opportunities to expand our technology footprint. We've partnered with some new solutions in the market today that we're evaluating for potential longer-term relationships.

At a fundamental level, we believe wholeheartedly that health systems should continue to look at non-clinical areas where automation can be used. And then in addition to that, look at how technology can be inserted into the care delivery model. Technologies that aren’t new, such as telehealth, have grown pretty rapidly from being somewhat novel ideas to new thinking.

We went through this very strange period of COVID-19 and, all of a sudden, now telehealth is almost like table stakes for health systems moving forward. In other words, many health systems have invested in some sort of telehealth technology, whether that be in the physician office or across another segment of their business.

But now it's incumbent on those health systems to look at how telehealth can really be leveraged to create efficiencies from a cost perspective in care delivery, and also how it can expand and help solve some of the labor challenges health systems have, providing leverage for the very valuable caregivers that are experiencing burnout in a lot of settings.

Camille: Roger, thank you so much for this conversation, for being here with us and for sharing the impact Premier is making.

Roger: Thank you so much again for having me, Camille. We’re always interested in talking about how we’re helping members in the market, especially in this very challenging period across healthcare.

For more on this topic:

• Check out ways Premier’s Consulting team can partner with you to improve performance and quality across your organization.
• See how forward-looking health system leaders are addressing ongoing financial pressures with Remitra™ accounts payable automation.
• Dive deeper into INsights, our solution that gives users the ability to access mission-critical clinical, financial and operational data from a central framework.
• Discover how PINC AI™ Clinical Decision Support is helping providers tackle clinician burnout and bring the joy back to medicine.

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