COVID-19 Shifts Future Strategic Planning Priorities

COVID-19 continues to impact the healthcare industry. From strategic planning to volume recovery to capital spending, the pandemic has changed the way facilities approach these initiatives. Advisory Board recently surveyed a group of strategic planners to gain a better understanding of what priorities will be fast-tracked and which will likely be put on hold along with volume and financial projections for 2022. Let’s take a closer look at the results and what healthcare leaders can expect in the year ahead.

Prioritize Digital Technologies

The survey found that 93% of the respondents will reprioritize capital expenditures in the next year because of COVID-19. Initiatives that gained importance throughout 2020 will receive most of the redirected funding, including digital technologies to grow telehealth volumes, full-time remote work for employees and expanded efforts to address social determinants of health. 

Avoid Last-Resort Cost Cutting

Curbed volumes and higher expenses put stress on most providers in 2020 and into 2021, forcing many hospitals and health systems to make cuts to employment, benefits and compensation. The year ahead proves to be different as facilities rank rationalizing services and renegotiating supplier contracts as the 2nd and 4th most likely actions to take in the next year.

Decreased Desire to Reduce Capacity

In contrast to Advisory Board’s first survey in May 2020, the most recent survey found that most hospitals are no longer looking to reduce capacity, instead, they want the flexibility to scale up their capacity when needed by using beds for a variety of reasons. Having that ability adds minimal costs when the beds aren’t needed. 

Suppressed Volume Recovery

The healthcare industry is still seeing volume performance below pre-pandemic numbers across all categories surveyed.  Emergency departments (ED) are expected to be hit the hardest and have lasting effects from COVID-19 volume suppression. Respondents are optimistic that volumes will recover across most types of services and sites by the end of 2021. However, nearly one-third of the respondents believe ED volumes will never fully recover. 

Financial Recovery by 2022

With volumes expected to be suppressed for the remainder of 2021, providers don’t expect to fully recover financially until 2022. The survey found that it will take on average 12 to 13 months to return to pre-COVID-19 revenue and margin performance, with only one-quarter of respondents hitting that mark at the time of the survey. There is hope as nearly 60% reported that they have hit pre-pandemic employment levels, indicating that things are moving in the right direction. 

CapEx to Increase

Even with the financial hardships most providers face in 2021, 47% of respondents expect capital expenditures to increase across the next year. With that said, changes will be small – 75% said expenditures will only change by plus or minus 10%. 

Ambulatory Exceeds Inpatient Investments

COVID-19 has caused most hospitals and health systems to reprioritize their spending toward new projects. New ambulatory care facilities ranked second in capex priorities, behind digital health technologies, with 82% of respondents increasing spending on ambulatory facilities compared to only 26% on inpatient facilities. 

As the healthcare industry focuses on the future, the year ahead will be one of change as providers will reprioritize how they spend their CapEx dollars to address new initiatives that the pandemic has brought to the forefront. The Advisory Board survey revealed that there is reason for cautious optimism; the industry is starting to see patient care revenue and operating margins bounce back to pre-pandemic levels, indicating that there is hope on the horizon for a full financial recovery. 

Source: 2021 Strategic Planner Survey Results