Healthcare challenges and opportunities: Consolidate financial management to streamline operations

The healthcare industry earned $4.3 trillion in revenue in 2021, according to Zippia, but only 65% of that revenue came from patient care. In the face of rising costs and increased competition from digital natives,¹ healthcare organizations are supplementing the conventional “fee-for-service” business model with new revenue streams, from incubating startups to offering consulting services.² The industry is transforming, and with this new complexity comes the need for companies to engage with financial institutions that can offer more than just traditional banking and financial management.

A financial institution that understands the sector’s evolutionary path and offers a range of healthcare-specific services can be a game changer as companies adapt to new economic realities and an ever-changing competitive landscape. Here’s how:
 

Navigating challenges

While health system revenue increased 12.5% from 2021 to 2022, operating expenses rose by more than 17% over the same period, according to an analysis by S&P Global. This imbalance highlights the need to find solutions to financial and operational challenges, such as raising capital, maintaining staff, and optimizing the patient experience. Being able to work with a single financial institution to address these problems, rather than having to “clue in” multiple advisors, is the key to solving them more quickly, efficiently, and cost-effectively.

Capital

While the macroeconomic environment has certainly improved, many healthcare organizations are struggling to build capital and increase and manage cash flow. Investment bankers who specialize in the healthcare space can use creative modeling to put together financial arrangements for healthcare organizations that maximize their cash position to extend or increase capital.

Staffing

Healthcare organizations are struggling with a shortage of nurses, clinicians, and operations staff to fill out revenue cycle management (RCM) teams. When there’s a workforce crunch, management should seek to keep labor costs low and increase throughput with the staff that’s available. Banking with a financial institution that offers innovative healthcare payments solutions can help providers accomplish these goals. Some banks can even leverage strategic health tech initiatives that deliver digital engagement automation and patient self-service. Offloading this work from staff gives clinicians more time to focus on care and allows administration to do more with less.

Patient Experience

Regardless of how diversified a healthcare company becomes, it’s north star will always be quality of care. There is usually a correlation between financially stable healthcare organizations and a better patient experience. Financially stable organizations often experience a decreased risk of adverse quality and safety outcomes for both medical and surgical patients. Working with a financial institution that has the capability to provide financing for growth and capital improvements can help providers maintain that financial stability. Banks with dedicated healthcare payments and institutional advisory teams can also assist businesses with reducing financial operating costs and streamlining RCM to increase reimbursement and patient revenue.

Overcoming obstacles is important, but organizations can’t grow unless they are also prepared to take advantage of opportunities. A trusted banking advisor that knows your business — and your industry — inside and out can help organizations do both.
 

Capitalizing on opportunities

Most banks carve out healthcare as a vertical to focus on, but they still approach healthcare clients from a traditional treasury perspective. They’re concerned mainly with traditional banking and financial management, but most don’t have the desire or expertise to get involved with technology, operations, or efficiency decisions.

Technology, in particular, has changed the provision of healthcare dramatically over the past few years, and innovations in artificial intelligence and machine learning promise even greater innovations in the industry. It’s in the best interest of healthcare businesses to work with a financial institution that understands the operational advantages of emerging health tech solutions, like automating reimbursement, creating claims processing contingencies, helping to make the process of communicating and paying for healthcare less stressful for patients.
 

Reducing friction in healthcare

Shopping for healthcare is not like a typical retail experience, where a customer has a variety of choices and can make decisions based on value and added features. In healthcare, the stakes are higher, advanced knowledge of outcomes is limited at best — and there are also many more parties involved beyond the purveyor and the consumer.

Before care can be performed, the parties must address multiple contingencies — and then following care, before payment is resolved, even more contingencies and coordination are required. Top reasons for patient dissatisfaction include poor communication, bad billing experiences, and lack of self-service options, according to a 2023 survey by RevSpring.

A financial institution that possesses deep expertise in healthcare and the tech sector can work with healthcare organizations to reduce these and other sources of friction and make the consumption of healthcare more like a traditional retail experience, where the patient can purchase an item without having to understand how it was manufactured, packaged, shipped, labeled, and stocked.

A healthcare-focused bank can help implement payment solutions that keep all those moving parts behind the curtain and present a seamless process that the patient can trust. 

Conclusion

To overcome challenges and capitalize on opportunities, healthcare organizations need a trusted financial services advisor with professionals who are not only financial experts but also experts in the field of healthcare.

Financial institutions today can support clients with a range of services including lending, investing, and payments, while helping them confidently embrace new technologies that transform the way they grow and improve their business. When they sit down with a client to review their financial operations, they know what they’re looking at and can approach opportunities holistically, across treasury, financial, and revenue cycles. When all these disparate functions are managed by one trusted entity, it can help save healthcare providers an enormous amount of time, cost, and effort.

About Key Healthcare^®

Key Healthcare provides a holistic approach and deep industry expertise customized to our clients’ needs. Key Healthcare’s comprehensive capabilities include investment banking, real estate, treasury management, and financing solutions. Nearly 10,000 clients rely on Key Healthcare to deliver strategic and innovative solutions that address today's healthcare challenges and opportunities. Visit key.com/healthcare to learn more.

Interested in hearing more about payments solutions at KeyBank? Talk to a Payments Advisor today.