The COVID-19 pandemic hit at a time when many health systems were doing well financially or heading in the right direction thanks to years of disciplined efforts to offload debt or squeeze savings from consummated mergers. Then in March, they watched their revenue go over a cliff after being forced to suspend elective procedures.
Throughout the crisis, the health systems that have fared the best were able to swiftly and effectively trim expenses, the only lever at their disposal once volumes flatlined. In that respect, for-profit HCA Healthcare was the poster child, having managed to slash expenses by almost 17% in the quarter ended June 30. Aggressive, even radical cost cutting, while far from a new phenomenon, was the name of the game in 2020. Hospitals were suddenly forced to examine all aspects of their operations, from underutilized operating rooms to real estate, to find something, anything, to trim. In addition to savings from buying less supplies for procedures, hospitals sharpened their ability to quickly adjust the lever on their biggest line-item expense: labor.
For its part, for-profit Tenet Healthcare Corp. trimmed its salary, wage and benefit expenses by 13% in the quarter ended June 30, in part by using algorithms to ramp up and down staffing capacity as needed. Tenet’s ambulatory surgery subsidiary flexed down hours by about 65% when the pandemic hit. Most importantly, Tenet said the changes the company made to its cost structure during the pandemic are permanent.
