Aaron R. Crane, FHFMA, CPA, MHA, Healthcare Financial Management Association 2022-23 Chair, interviewed by Robert Fromberg, Chief Communications Officer, Kaufman Hall
Robert Fromberg: What is your sense of the short-term challenges that are most pressing for finance executives and provider organizations?
Aaron Crane: Workforce is probably the most pressing issue. There are two sides to it. One, people are stretched to the limit because there are so many vacancies and it's so hard to fill positions. The stressors of the pandemic have led to early retirements and departures from the industry. Baby boomers have started leaving the workforce. It all adds up to vacancy rates that may be higher than we’ve ever seen. Two, our ability to fill those spots is not what it used to be. A lot of organizations have poured money into sign-on bonuses, retention bonuses and extra pay. Plus agencies are charging premium rates because they can. So workforce costs are higher.
The impact of higher labor costs on health systems is compounded by lower surgical volumes. There's speculation that patients who used to come to hospitals for surgeries have realized through this pandemic that there are other options. When hospitals closed operating rooms they found better alternatives and they're not coming back. This may have a long-term impact on revenue. Coming on top of a higher cost basis due to workforce issues, this is a burning problem in the short term.
I don't think we’ll ever get back to where we were, in terms of workforce. Retention and recruitment are still critical, but you've got to have other strategies. The big strategies are artificial intelligence, machine learning and natural language processing. How can healthcare use those tools to drive efficiency and productivity as many other industries have done? If we don’t figure this out, it’s going to cause upheaval in the acute care sector.
Fromberg: Do you think the changes in cost structure as a result of the increased labor costs are going to be permanent?
Crane: Largely, yes. It's really hard to go backwards once you've moved the needle on compensation. So does that take the value proposition for offshoring and referring patients to other centers of excellence out of our hands? It probably does, in some cases. You can certainly invest in software and other technologies that will handle lots of routine administrative and clinical work.
Fromberg: What are some long-term challenges that you think are especially important for finance executives?
Crane: We're moving away from the word healthcare and talking about health, focusing on improving health and cost-effective health versus cost-effective healthcare. If you take that a step further and call it sick care instead of healthcare, I think that's what our industry has been built on. At some point, society said, "We value sick care. We want mechanisms to take care of us when we're sick." And we built all kinds of incentives around that. Part of the problem with these incentives is they don't necessarily value effectiveness. If you do something that you think might work, the system pays you to do that. So we've got a system that's really expensive and does a lot of things that don't add value. Some providers think that the sick care model and fee-for-service reimbursement is going to carry them one, two, even three decades forward. I don't believe that. I think the long-term perspective is asking yourself to what extent you embrace health and the cost effectiveness of health. Society is starting to move toward that as a value proposition.
Some people express this as, “Don't do harm. Do only things that improve my health and quality of life.” That's one view. But another view of cost-effective health is getting the best outcomes at the lowest cost or optimizing health with the lowest risk. If our acute care-driven industry continues to be built around sick care, it’s going to look very different. Disruptors are going to take away a lot of margin-generating services. If you’re doing sick care, you’re going to have very complex patients with multiple issues who require a very intensive setting. You may be able to charge a whole lot more for that, but your piece of the pie is going to be a whole lot smaller. Some providers might be pushed into that situation because they fail to act in a timely way.
How do we shift to focus on health? Our current model has perverse incentives. We pay for treatment rather than for healthy outcomes. So, health systems aren’t going to drive change in payment models. I’m not even sure payers will, yet. Government and society—maybe.
Our lifestyle is also causing problems. As a society, we’re comfortable eating poorly, not exercising, consuming tobacco and alcohol—all those things are contributing to the increase in chronic conditions, which are extremely expensive to treat, given the way our system is built. For an acute care system to start taking on social determinants of health, we need to build structures around that which are not centered around bricks and mortar. Disruptive innovators are probably going to take on social determinants.
The whole diagnostic business that acute care focuses on now will at some point be doable anywhere and it can be reported and shared everywhere. Also, at some point, the electronic health record will be owned by the patient, not by the healthcare system. Over the next 10 years, things are going to explode. If the world built around acute care hasn't shifted to focus on health, they might as well start creating their strategy to repurpose extra beds to become subacute care institutions.
We have overbuilt. We’re number two in the world in terms of MRI scanners per capita. Japan is number one. Many other countries deliver better quality outcomes at lower cost with far fewer MRIs. The initial capital investment in our excess capacity is at least $20 million, which pales in comparison to the excess revenue (cost) generated on those machines. And our country’s surgical suite count is huge because hospitals have maintained theirs even as the number of private outpatient surgery centers has grown. The economics are troubling because acute care beds used for nonsurgical purposes don't cover a hospital’s fixed costs. The cost structure hasn’t caught up with the payment structure and that's creating economic peril for a lot of health systems.
Fromberg: Looking at the health side of the coin as opposed to the sickness care side, hospitals have not always done a great job of being consumer friendly.
Crane: That is one of the biggest disconnects I’m seeing in health systems. We keep talking about consumerism and the power of the consumer, but we’re not really focused on what consumers want and delivering it in a way that guarantees their loyalty. We know consumers don't like to wait. We know they want more care closer to home or in their home. We know they don't understand our bills. And we understand they want to know what a service is going to cost in advance.
As an industry, we certainly contributed to the complexity with multiple billings for multiple providers, rather than one simple bill. We're not doing nearly enough to address the issues. That plays into the equation of losing business to disrupters that will take everything they can, and do it better, and focus on what consumers want.
Fromberg: Shifting to your role as HFMA chair, tell us about the theme you’ve chosen for your term.
Crane: The theme for my one-year term, which started on June 1, 2022, is “Ignite the Spark.” Being an Oregonian, I see how destructive wildfires are an increasing part of our lives. But fire in the forest isn’t always destructive. In fact, it can be a positive thing. That’s the case with prescribed burns, fires set by professional firefighters to eliminate the intensifying effects of overgrown underbrush and deadwood.
I think the U.S. healthcare system is like an unmanaged forest, frankly. Deadwood has built up over decades, and if we don’t tend this forest better, there’s going to be a big, massive, destructive fire. And we won’t be able to do anything about it.
Fromberg: What message are you carrying to HFMA members to address the challenges you've talked about?
Crane: What we need is a controlled burn. I ask finance leaders to find some underbrush, some deadwood in their area, so to speak, and start working on clearing it out.
I realize that we all have different levels of circles of influence and spheres of control.
If incentives are in your domain, can you change your managed care contracts to incentivize the right things?
If you’re interested in promoting healthy lifestyles, does your organization know what the big issues are in your community? What can health systems do to begin addressing those issues more effectively? Currently, 30% of ER visits are for chronic conditions. The ER is the wrong setting for that and we typically see patients in the ER with chronic conditions at an advanced stage, so it’s expensive care.
Then there’s the issue of health inequities. As just one example, there are huge disparities in cancer screening. With early detection of certain cancers, you can save a ton of money and improve someone's quality of life, productivity, ability to work. The opportunity goes on and on. Deloitte released a study in June concluding that health inequities account for about $320 billion in annual healthcare spending. That's huge.
Those are the three big areas I've been talking about and getting HFMA members to think about, including health systems, physicians and their staff, and the business partners who support the industry. I encourage them to think about the value propositions they're bringing. Are they really helping to address these issues? That has been my charge.
Cost effective health is what our society needs, and our country’s economic problems are largely driven by the lack of it. Ten years ago, Victor Fuchs, a professor emeritus at Stanford in health policy and economics, said that if we solve healthcare, our economic problems will go away. If we don't, nothing will fix our economic problems. I believe that. I don't know that the political will is there. I haven't seen corporate will, yet, either. No one wants to self-disrupt. They're going to keep their old payment models. It's frustrating.
Fromberg: In this context, do you see a changing role for healthcare finance executives?
Crane: Yes. If you truly own the idea that your role in your organization is to take it into the future, you have to answer the question: Are we going to continue to ride the fee-for-service wave or are we going to build new capabilities and think about ourselves not as a commodity for sick care but as a platform for health for our community?
What does that mean, and who do we partner with? Our mission statements say we want to improve health and make our communities healthy. If we're true to that, we better start understanding our consumers and delivering on our promise to them but also think about the sustainability of our model, about care disparities in our communities, and about a more effective way to address chronic illness.
We’re not there yet with value-based payment models. That's the difficult part. Health systems that own a health plan are in the best position in this regard. Having spent about five or six years on this as a provider, working with payers, it's hard to get a payer to change payment models. They have a model that works, and it’s really hard to move them off of that. Part of the problem also is that big data is really expensive. A huge amount of data analytics needs to be done and healthcare is behind in terms of standardizing its data and connecting it in a robust way.
Fromberg: What important HFMA initiatives should we know about?
Crane: HFMA has embraced driving cost effectiveness of health as a just cause, a cause that we can rally around for the long term. We are leveraging our strengths, our platform, our network, and our education materials to get more finance leaders moving on this. We're also very interested in innovation in healthcare and helping people fully understand where we are, where we could go, and what the possibilities are. I see a growing emphasis on innovation in HFMA’s future, too.
