During this crisis, the revenue of health and human service organizations is down. That is always a shock to my friends who do not work in the field. But those of us in the field are experiencing this firsthand.
For hospitals, 40% report that revenue has declined by more than half, with nearly all hospitals reporting declines of 25% or more (see Medical Groups And Integrated Health Systems Face Closure Without Immediate Financial Relief; Initial CARES Act Fund Covered Less Than A Week Of Lost Revenue). Seventy percent of primary care practices have had a significant decrease in consumer volume, which is threatening the practices’ financial viability (see 35% Of Primary Care Professionals Believe A Majority Of Independent Practices Could Close By End Of COVID-19 First Wave) and over half of primary care practices only have enough cash on hand to stay open for another month (see Primary Care Practices Endangered From Steep Declines In Revenue And Staff, New Survey Shows). Sixty-eight percent of provider organizations providing intellectual and developmental disabilities (I/DD) support services report closing at least one program and those closed programs account for 32% of revenue (see Impact Of COVID-19 On Organizations Serving Individuals With Intellectual And Developmental Disabilities). And finally, 62% of behavioral health provider organizations have closed at least one program (see The Sound Of Closing Doors).
To balance budgets over the crisis period, there are only two possible actions for executive teams. One is to cut expenses and manage cash (see Short-Term Cash Management – To Assuring Continued Operations – An Overview). The other is to find new revenue opportunities during the crisis. For more revenue, executives have the option to “go virtual”—driving more demand for virtual services through enhanced virtual marketing. My colleague OPEN MINDS Executive Vice President Tim Snyder has developed a great framework for this, which he presented in his recent web briefing, Going ‘Virtual’ For Revenue Generation: Assuring Consumers & Referral Sources Can Find You.
The other option for more revenue is to step up your business development efforts by looking for new opportunities in this time of turbulence. That sounds like a challenge, and it is. But my colleague and OPEN MINDS Senior Associate Paul Duck discussed the business development options that you should be considering in yesterday’s web briefing, Aggressive Business Development Strategies – Adding To The Top Line With Breakthrough Services – An Overview.
Repurposing and repositioning for a crisis market—The most obvious way that specialty provider organizations have done this is the rapid shift to telehealth. But the crisis presents other opportunities as well, including more home-based services for consumers who want to leave (or prevent admission) to a residential or acute care facility. Alternatives are needed for the most frequently terminated programs: school-based services, day treatment, hospice, and intensive outpatient services, to name a few. Specialty care coordination will take on a new twist in this period of crisis.
Geographic expansion—Now is the time to think of geographic expansion. The first step is to identify high-performing, profitable programs that payers/health plans currently need. Then find geographies where those payers have a need for that solution. This is a time when many organizations are cash-strapped and can’t consider adding new services, even in their own backyard.
Fundraising for the short-term—With fewer in-person opportunities, provider organizations need to throw a one-two fundraising punch: eliminate old programs that can’t function in the current environment, and move to online and telephonic efforts. Your donor targets may not change that much, but the method in which you target them will. Continue to target individual donors in your community, as well as foundations, charitable organizations, and locally headquartered corporations with community giving programs. And talk to your health plans, renegotiate rates and contracts. Invest in social media campaigns, virtual tours, private conference calls, direct personal calls, and even personalized notes to engage current and potential donors. Consider an online “GoFundMe” campaign to solicit donations toward specific needs such as extra pay for your at-risk staff. You could also ask for in-kind donations—from personal protective equipment to laptops and phones to meet virtual care and operations needs.
Explore avenues for government support—From the federal stimulus response, to state and local initiatives, there are a variety of avenues for landing government support. Executives need to regularly check their local and state websites for program opportunities, including funding, paycheck protection programs, small business loans, and more. Be prepared to share data that shows your cashflow position, as well as the crisis-related service volume and revenue decline. Many government programs are awarding grants based on your previous year’s fee-for-service volume. And check with grant agencies to see if you can channel funds from any current grants to meet crisis-related needs, while maintaining the original intent of the grant.
Identify competitors at risk—The sad reality is that many provider organizations won’t have the resources, agility, or strategy to survive in the pandemic crisis. But this is really just an acceleration of the pre-pandemic trends. Potential competitor closures present two opportunities. First, there are the “diamonds in the rough” or the financially-threatened organizations with great programming that would be a strategic addition to your own service line portfolio (and would be a problem if acquired by a larger competitor). The second is understanding what consumers and contracts might be lost if threatened organizations close. Prepare your organization to assume that role in the market.
My advice is to include these near-term business development strategies as part of your post-crisis recovery. The demand for health and human services is not going to diminish, but the delivery system (and the financing system) will be altered. Rebuilding revenue streams is a key part of remaining relevant in the year head.
For a deep dive into Mr. Duck’s “strategy for strategy”, check out Aggressive Business Development Strategies – Adding To The Top Line With Breakthrough Services – An Overview. And for more on business development, diversifying, and strategic planning, check out these resources from The OPEN MINDS Industry Library:
- Got Gatorade? And Other Plans For Business In The Era Of COVID-19
- Disrupt Your Own Business Before Someone Else Does
- Collaborations Demand ‘Proving Your Business Case’
- Forget The Sizzle – We Need New Technology Business Models & Business Cases
- Diversifying Your Revenue Streams: How To Successfully Launch A New Service Line
- How Are You Positioning Your Organization For The Changing Market?
- Taking The Risk On A New Service
- Sustainability Management = Portfolio Management
- Web Briefing: Strategic Planning For Sustainability
- A Chaotic Environment Demands Fluid Strategic Planning
For more on managing a business during a crisis, join OPEN MINDS Senior Associate, Ray Wolfe on May 21, 2020 for the web briefing, How To Improve Your Cash Management Program – The Five Steps To Manage Cash More Aggressively.