Protecting a company's margin when revenue dries up means slashing expenses, and for-profit hospital chains tend to be better at cutting costs. HCA Healthcare, for example, shrunk its expenses by almost 17% in the second quarter. HCA's profit spiked a remarkable 38% in the quarter even amid the toughest quarter of the pandemic.
Tenet Healthcare cut expenses 11.3% year-over-year in the second quarter, and executives say the changes are permanent. Part of the reason is they use sophisticated analytics into their capacity system-wide to flex staffing up and down as needed and to manage their buying patterns for masks, gowns and other supplies.
A big part of cutting costs has been paring back employee hours, which doesn't necessarily have to involve furloughs or layoffs, said Glenn Melnick, a health economist with University of Southern California. For example, an emergency room physician might go from working five days a week to two, he said. Tenet, for example, said Tuesday it flexed down hours for its ambulatory surgery center physicians by about 65% when the pandemic hit, and is now using algorithms to ramp up staffing as needed.
NextGen Healthcare, a provider of EHR and revenue cycle management software for ambulatory practices, took a few cost-cutting measures amid the pandemic, including temporary voluntary executive salary cuts and suspended matching for 401(k) contributions. The company's revenue was down 0.7% year-over-year.
Successful companies didn't just cut costs; they did so quickly and in a way that was consistent with their forecasted revenue, said Kevin Locke, managing principal with DHG Healthcare. Providers that acted fast to ramp down operationally and clinically to prepare for the pandemic and then back up when procedures reopened fared better, he said. The pandemic is obviously unpredictable, but some providers still modeled several scenarios to prepare.