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Supply chain issues, labor costs and shortages are affecting hospitals of all size in the Abilene area, officials with Hendrick Health say.
And while there is hope for stabilization, work is especially required in nursing education and recruitment to deal with ongoing issues of hiring and retention, while hospitals will continue to deal with pandemic-related issues.
“Our costs have gone in the supplies that we have to buy for our patients and the labor that we have to pay for to take care of those patients has gone up,” said Susan Greenwood, chief nursing officer for Hendrick Health System. “We cannot pass those charges on to patients, we are subject to the prices payors set, whether that is Medicare, Medicaid or private insurance companies.”
Hendrick’s response came after a recent story by the USA TODAY network that half of Texas hospitals are operating in the red and that nearly one in 10 is at risk of closing due to COVID-19 fallout. The report stated the situation for rural hospitals in the state is more dire – a Texas Hospital Association officials stated that 26% of hospitals in rural areas are in danger of closing.
Small size matters when costs matter
The approve-or-deny approach is difficult even at a larger hospital system such as Hendrick, Greenwood said, but the system, which includes facilities in Brownwood, has a large enough patient census − and a history of financial stability − that it has been able to weather recent challenges such as the pandemic.
But by comparison, smaller hospitals may have a patient census, a measure of “patients in beds,” of six, 10 or 15, compared to a hospital system like Hendrick that might have 300, she said.
“So you can see that their costs have gone up the same as ours, or maybe even higher, because they don’t have the same purchasing power,” Greenwood said. “So, when you can’t buy in bulk, you don’t get the best prices. Their costs have gone up, the cost of labor has gone up. But they have very few patients with which to make up that ground.”
That also affects small hospitals’ ability to renegotiate rates with payors because their volume is so low, Greenwood said.
“None of us get the rates that we need from insurance companies, and it’s particularly hard on the rural hospitals,” she said. “So it is simply the cost and the supply issue that we’re dealing with throughout the country in every facet. But healthcare is unique in that we cannot raise our rates to cover our costs.”
Recently, Hendrick and Blue Cross Blue Shield of Texas entered into negotiations, as they have in the past, on rates.
If the two can’t reach an agreement by February, some Blue Cross patients may no longer be considered in-network at Hendrick.
Binding chains
Adam Wood, associate vice president of supply chain at Hendrick, agreed that hospitals of all sizes are being affected by inflation and supply chain issues.
Supply costs tend to make up around 22% of overall operating costs, at a time when inflation has hit historic levels.
“We’re seeing a lot of the same things that the whole country is deal with regard to pricing pressures, availability of product, increased transportation costs, all those things that are driving historical cost increases to our facility − and I’m sure to the facilities in the region, as well,” he said.
That includes suppliers exiting markets, driven by a lack of available of raw goods and cost pressures, Wood said.
“Those things have really put pressure on supply chains, and hospital supply chains, in particular,” he said. “Name a raw material, and we’ve found issues with it. I don’t think it’s particularly segregated to just anyone one area.”
That means hospitals are sometimes having to deal with suppliers they have not historically dealt with, another factor that can drive up general costs.
“You may have contracted with a vendor for a number of years on a specific product, and they can’t supply it to you anymore,” he said. “So, you have to by the next product from another vendor at a much higher price.”
Hospitals large and small have seen significant pressure from those increases and cancellations, he said, with a number of outside influences, such the potential of recently-averted rail strikes, also at play.
New normal?
While Wood believes there will be “slow, gradual improvements” in such conditions, there also is the reality of hospitals in some cases having to adjust to whatever the “new normal” is.
Companies themselves are attempting other strategies, moving operations “near shore,” rather than “far shore,” a strategy that might drive up short-term costs as those operations are ramped up.
“I don’t think there’s a quick, near-term fix,” Wood said. “But I do have hope that at some point, we’ll get to a manageable level. Right now, it’s not a manageable level.”
Larger hospital systems are able to leverage cost advantages smaller ones cannot.
“We do get reached out to by our regional friends often,” Wood said, asking for advice or help finding needed items. “The smaller you are, the higher your costs tend to be for a specific device or those type of things. … But it’s difficult to find things you need, especially at prices you’re accustomed to paying.”
Cost of labor
Beyond supply chain issue and costs, the cost of labor is increasing, said Greenwood, and current conditions also are affecting the ability of rural hospitals to accept transfers to other facilities.
“In the past, if a rural hospital couldn’t care for a patient or needed a service they couldn’t provide, they would transfer,” she said.
But with costs going up and labor shortages, larger systems aren’t always able to accept transfers, which has “really placed a strain on our region,” Greenwood said, especially in light of the ongoing shortage of nurses.
Prioritization is generally given to hospitals within the region first, but if that is not possible it causes patients to travel further afield for care.
It takes time to figure out where to transfer a patient to, and in the meantime, the rural hospital is having to provide care, she said.
“It’s a very expensive thing for them to have to do right now, and so it’s a challenge,” Greenwood said.
Larger systems, such as Hendrick, try to keep tabs on rural neighbors, and Hendrick has a team that meets with all the hospitals in the region, she said.
“We try to help as best we can to provide anything that they need, whether it’s a piece of equipment or supplies they’re not able to get their hands on, physician services (or) education,” Greenwood said.
Similarly, meetings are quarterly held with chief nursing officers from rural hospitals to talk about challenges and how to grow the area’s nursing workforce.
That includes working with Cisco College, Texas State Technical College), Ranger College and other programs in the are that train nurses.
Incentives such as scholarships, dual credit programs and engaging with potential students are among the strategies.
“That is where we are trying to look long-term: how do we grow that nursing workforce?” she said. “We know we need to take the lead on that.”
Ongoing issue
The nursing shortage already was present before the COVID-19 pandemic, Greenwood said.
“The reason that there’s an increasing need is that people are living longer,” she said. “And as they live longer, they have more chronic conditions. So, that generates doctor’s office visits, hospital stays and the need for surgery.”
But the nursing supply has not kept up, she said.
“We were already facing a shortage and knew that that shortage was going to peak in the mid-to-late ’20s − 2025, 2026, etc.,” she said. “The projections were growing.”
The pandemic saw more people getting sick, often critically, and requiring increased care.
“With that nursing shortage, the travel (nursing) industry really boomed because they were supplying those contracts to hospitals to provide nursing,” Greenwood said. “The hourly rate for a travel nurse, increased significantly. And when I say significantly, I mean tripled and quadrupled.”
That meant some nurses chose to work outside of their community, leaving local and rural hospitals in exchange for those higher wages.
On top of that, some nurses in various hospitals that were approaching retirement age simply left the profession altogether, further exacerbating the shortage.
Now, even with the need for COVID-19 care on the wane, “we aren’t always seeing nurses coming back to their community hospitals,” Greenwood said.
“Some of them made enough money they’re just taking a break,” she said. “Some of them want to stay traveling, and they just take assignments here and there. So, we’re seeing some nurses come back, but not not all of them.”
That has bumped up rates of pay for nurses at hospitals large and small, while many still choose to work elsewhere or travel.
Finding the right mix
The mixture of increased costs and higher personnel costs is particularly challenging in rural hospitals, Greenwood said.
“If costs don’t come down quickly and dramatically, we are going to be looking to our payors and to different groups to increase the rates that are paid to hospitals because we will not be able to afford to keep providing care if they don’t,” she said.
That’s the short-term fix, Greenwood said.
“The second thing is that we’ve got to retain our nurses and keep them from leaving,” she said, making certain personnel have good ratios to keep them from burnout and doing what can be do to retain them.
The next stage? More nurses.
“Even though we have several nursing programs in the region, it doesn’t seem like we’ve been able to dig ourselves out of the hole,” Greenwood said. “And so we are working with our area programs to do things differently, to say we can’t just keep training the same number of nurses and figure that we’re going to provide some stability.”
That includes working with nursing programs and at the state level, she said.
There are several projects and programs that have been funded at the legislative level, including nursing shortage reduction programs.
“We we are working with them to keep those programs going,” Greenwood said. “That is where the faculty are funded from, and so, you can’t train nurses without faculty. That is we need to support those state-funded programs.”
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