John William Doll, CPA, CFO of RWJBarnabas Well being, detailed the place the well being system stands financially, why it hasn’t but reached a ‘new regular,’ and the way it will navigate a altering trade.
For RWJBarnabas Well being, the 11-hospital system based mostly in West Orange, New Jersey, rising from the pandemic is difficult.
On the finish of April, there have been solely 350 sufferers contaminated with COVID-19 throughout the group’s services and properly under expectations, in keeping with John William Doll, CPA, CFO of RWJBarnabas.
Doll mentioned that the supplier group utilized predictive modeling in anticipation of a troublesome Q1 and “ready for the worst.” Nonetheless, RWJBarnabas has benefited from a better understanding of the way to deal with the virus, developments in-home monitoring care, and a robust nationwide vaccination effort.
“We have been in a position to deal with if you wish to name the ‘second wave’ of the pandemic in New Jersey way more effectively than we have been a 12 months in the past,” Doll mentioned. “So, we’ve had an identical variety of sufferers, however so much much less ventilator utilization and so much [fewer] sufferers within the hospital.”
Nonetheless, RWJBarnabas, like different well being techniques throughout the nation, has endured greater than a 12 months of medical, monetary, and operational challenges associated to the pandemic. Doll pointed to staffing up for acute care and the ICU, which resulted within the group counting on costly company sources that exacerbated monetary strains.
“For the primary quarter, all in, we’re nearly to interrupt even from operations, which is properly under our historic efficiency,” Doll mentioned. “Nonetheless, we predict it’s fairly good given the continued slowdown of restoration efforts and after funding within the infrastructure essential to take care of that second wave and a bunch of different elements.”
In a latest dialog with HealthLeaders, Doll detailed the place the well being system stands financially, why it hasn’t but reached a ‘new regular,’ and the way it will navigate a altering trade.
Balancing long-term and short-term priorities
When wanting on the group’s technique going ahead, Doll burdened that there’s “no crystal ball.”
Within the short-term, RWJBarnabas has dedicated to sustaining staffing ranges with out large-scale reductions, Doll mentioned, noting that the group doesn’t know when volumes will return to regular and that the medical crew was dependable in the course of the pandemic.
Doll mentioned one of probably the most insightful discoveries is that from July 2020 to the tip of the 12 months, RWJBarnabas noticed progressive enhancements in exercise, trending again to historic ranges. Nonetheless, he acknowledged declines from November via January as COVID-19 instances spiked nationwide, adopted by a rebound in February.
Doll mentioned that management is making an attempt to grasp the patterns related to the coronavirus, noting that there’s variability by facility and never a transparent stabilization of historic actions.
“What we now have deduced is that we’ve not but reached ‘a brand new regular;’ there’s nonetheless quite a lot of volatility and we should be versatile in response to that,” Doll mentioned. “Lengthy-term, I might say it is most likely not till the tip of this 12 months earlier than we get an actual sense of what ‘regular’ seems like.”
Doll outlined a number of indicators throughout the enterprise that RWJBarnabas executives are following to find out when tendencies normalize.
In acute care, there’s a better deal with whole surgical exercise, he mentioned, in addition to go to volumes in key areas such as oncology, radiation remedy, infusion therapy, cardiac catheterization procedures, and the “key drivers” of the in-person hospital enterprise.
Doll talked about that he’s analyzing the system’s free-standing imaging volumes and making an attempt to correlate that to routine doctor workplace visits. He added that RWJBarnabas is monitoring its telehealth choices, noting that digital care utilization has stabilized to about 30% of the group’s exercise.
What’s going to drive M&A?
Whereas many anticipate that COVID-19 will accelerate provider consolidation, Doll mentioned believes that what makes transactions profitable is cultural and strategic alignment. Even when well being techniques of an identical measurement pursue a mega-merger, Doll mentioned the transaction can in the end fail as a result of an absence of complementary cultures.
Popping out of the pandemic, Doll acknowledged that having a scale as a corporation shall be essential, including that he thinks smaller suppliers will look to bigger techniques for help.
Doll additionally referenced a Kaufman Hall report launched final month that discovered there have been fewer healthcare M&A transactions in Q1 2021 in comparison with Q1 2020 however the measurement of the offers was bigger.
He mentioned it was “outstanding” to see the tendencies of diminished ER volumes and various restoration by service line throughout the trade, reiterating the necessity for scale to beat these obstacles whereas emphasizing the significance of cultural alignment.
When requested what influence elevated supplier consolidation might imply for the trade total, Doll highlighted the native nature of healthcare and the challenges dealing with small hospitals that fold into a bigger system. Nonetheless, he additionally mentioned that being affiliated with a system might make sense for rural hospitals that have to present the proper help to superior care in ways in which the group could not do by itself.
Wanting on the New Jersey market, Doll mentioned that the majority smaller healthcare acquisitions have “come and gone,” leaving competition mainly among the systems. He added that past provider-provider mergers, well being techniques have an incentive to scale up and associate with firms that may improve the alternatives to leverage large information in care supply.
“I feel larger-scale organizations fascinated by [the] supply of service is in the end a part of the answer,” Doll mentioned. “When it comes to entry, availability of high-end specialists, and rationalization of these issues, you want a coordinated method. That usually is best addressed by a bigger supplier protecting a bigger area.”
“Now, it is onerous to say, ‘Does that enhance in scale have the identical influence as a few small suppliers coming collectively,’ if you have a look at multi-state organizations which are pushing collectively throughout state strains,” Doll mentioned. “I feel time will inform.”
“My opinion is that if you consider well being insurers, they’ve rolled up nationally and a supplier community that is complementary of that would make quite a lot of sense.”
Recommendation for friends
Past the continuing efforts to ramp up vaccinations and curb the unfold of COVID-19, Doll mentioned that his CFO friends ought to stay targeted on the reemergence of tendencies that have been going down previous to the pandemic, comparable to value and entry points.
He pointed to the impact of the price transparency rule that presently applies to suppliers and can have an effect on payers in the beginning of 2022, in addition to the “unsustainable” nature of the price curve in healthcare.
“I feel because the nation and world strikes to restoration, we’re going want to deal with the final word value of care and that is one thing that I feel will proceed to be on the forefront,” Doll mentioned. “We have misplaced deal with it for a short while, appropriately in order we handled a disaster, however I feel we’re getting again into the actual want to alter that as an trade.”
Jack O’Brien is the Content material Workforce Lead and Finance Editor at HealthLeaders, an HCPro model.