Financial Crisis Management ch 18

Financial Management in Times of Uncertainty, Shortages, and Change

Overview

• The chapter emphasizes the importance of financial stewardship for Doctor of Nursing Practice (DNP) students and graduates, especially during uncertain times.
• The recent global events, including environmental disasters, political instability, economic uncertainty, civil and racial unrest, and the COVID-19 pandemic, have highlighted the need for effective financial management in healthcare.
• Challenges arising from crises include inadequate capacity, supply disruptions, staff shortages, and financial losses that require communication, collaboration, innovation, agility, and resilience.
• DNP-prepared nurses should focus on interventions that improve healthcare settings and systems, particularly during crisis and recovery.
• The chapter refers to the American Association of Colleges of Nursing (AACN)'s 2021 publication, "The Essentials: Core Competencies for Professional Nursing Education," integrating its domains and competencies throughout the discussion.

AACN Essentials for Advanced-Level Nursing Education

• AACN has consistently defined the educational framework for professional nurses since 1986, with the latest publication in 2021 identifying 10 essential domains and their associated competencies.
• These domains are crucial for nursing practice, enabling nurse leaders to face new challenges amidst change, uncertainty, and shortages.
• Nurse leaders often lack the necessary financial management skills, knowledge, and competencies. Therefore, competency frameworks, like the one in the Essentials, are necessary.
• The DNP-prepared nurse is uniquely positioned to proactively and constructively address these challenges.
• All 10 domains apply to financial management during times of crisis, some being more relevant for short-term responses and others for long-term economic sustainability.

Natural Disasters

• The United States has experienced over 291 weather and climate disasters since 1980, costing over $1.9 trillion$. Each state has experienced at least one billion-dollar disaster.
• In 2020, the U.S. had a record of 22 billion-dollar events, including hurricanes, storms, droughts, heatwaves, and wildfires.
• Globally, climate-related disasters have tripled in the past three decades.
• According to the Food and Agricultural Organization of the United Nations (FAO), disasters occur 3 times more often than in the 1970s and 1980s.
• Natural disasters impact healthcare systems by damaging infrastructure, limiting services, disrupting operations and finances, and causing large influxes of patients.
• Understanding potential costs and resource demands can inform financial decisions.
• Nurse leaders should collaborate with C-suite members to develop and regularly review disaster mitigation, response, and recovery plans.
• DNP-prepared nurses are crucial for crisis intervention and emergency preparation.

Communicable Disease Pandemics

• An epidemic is defined as a higher-than-expected incidence of injury, disease, or other health conditions within a specific group or area, while a pandemic is an epidemic occurring across multiple countries or continents.
• The United States has experienced several epidemics and pandemics, including:
  • H1N1 influenza pandemic (1918)
  • Diphtheria epidemic (1921-1925)
  • Polio (1916-1955)
  • H2N2 influenza pandemic (1957)
  • H3N2 influenza pandemic (1968)
  • Measles outbreak (1981-1991)
  • Cryptosporidiosis water contamination (1993)
  • H1N1 influenza (2009)
  • Whooping Cough/Pertussis (2010, 2014)
  • HIV and AIDS (the 1980s to present)
  • H1N1 ("Swine flu") influenza pandemic (2009)
  • COVID-19 (2020-present)
• Contagious disease outbreaks now occur more frequently and intensely due to global interconnectedness.
• The COVID-19 pandemic has had a significant human, social, and economic impact, becoming the most extensive and expensive public health emergency in over a century.
• COVID-19 revealed capacity constraints and supply shortages could cripple healthcare infrastructure, necessitating better planning for staff redeployment, care redesign, and supply chain management.
• Schwarzburg (2021) estimated that annual economic losses due to COVID-19 for the top eight most affected countries would exceed $242.5 billion$, which is 4 times larger than any economic fallout from an epidemic ever recorded.
• Weaknesses in healthcare systems put the entire population at risk, with over 30 million uninsured and another 44 million underinsured Americans.

Financial Concerns Resulting from COVID

• Financial concerns include the direct cost of care, supply acquisition costs, staff shortages, pay premiums, intensity-of-care requirements, and loss of prior revenue streams (e.g., elective surgeries).
• Congress enacted two laws to address the economic impact of the COVID-19 pandemic:
  • The Coronavirus Aid, Relief, and Economic Security (CARES) Act (2020) provides $75 billion$ to reimburse hospitals and healthcare providers.
  • The Paycheck Protection Program and Health Care Enhancement (PPHCE) Act (2020) provides $100 million$, including $75 billion$ to reimburse healthcare providers and $25 billion$ for COVID-19 testing-related activities.
• The CARES Act funds were distributed based on 2019 net patient revenues.
• Ongoing government support is needed given the financial health of hospitals and health systems.
• Economic challenges require nurse leaders to manage operations differently, reducing costs, optimizing staffing models, and leveraging technology while maintaining care quality and patient experience.

Emergency Preparedness

• Hospitals and health systems are the backbones of a country's health, and nurses play a key role in emergency preparedness and response.
• Nurses often lack the necessary education, training, and competence in emergency preparedness.
• Effective response depends on a workforce skilled and knowledgeable in:
  • the incident command system
  • clinical decision-making
  • epidemiology including isolation, quarantine, and decontamination
  • accessing and allocating scarce resources
  • reporting and tracking requirements
  • managing the psychological impact of these events.
• The American Nurses Association (2021) considers disaster preparedness and response a part of nursing practice.
• Nurse leaders need to advocate for a more significant role in planning and decision-making before, during, and after critical events.
• A systematic literature review highlighted a gap in disaster competency focus, despite AACN emphasizing population health protection during emergencies.
• During crises, healthcare leaders must minimize disruption, ensure sustainability, and remain flexible.
• DNP-prepared nurses can create and execute plans to help their staff and organizations during adverse situations.
• Understanding the micro and macro contexts is essential for nurse leaders to align capabilities and capacities.
• Emergency response plans should address communication, health equity, supply adequacy, and workforce protection.

Financial Impact of COVID-19

• The COVID-19 pandemic has revealed vulnerabilities in the healthcare system, including inequities in care access, financing problems, racism, and supply chain weaknesses.
• Nearly 50% of the world's global workforce is at risk of losing their livelihood across all economic sectors.
• The healthcare sector accounts for nearly one-fifth of the U.S. gross domestic product (GDP).
• A Brookings Institution analysis highlighted:
  • U.S. per capita spending nearly quadrupled between 1980 and 2018.
  • U.S. healthcare spending is nearly double that of other large, advanced economies.
  • Five percent of Americans accounted for half of all U.S. healthcare spending in 2017.
  • Healthcare spending varies widely by geography.
  • Competition is weak, leading to high market concentrations.
• The No Surprise Act was signed into federal law on December 27, 2020, to protect consumers from surprise medical billing.
• Most hospitals operated on thin operating margins before the pandemic, with a median of 3.5%.
• Kaufman, Hall & Associates (2020) reported that nearly half of the hospitals experienced negative margins in the second quarter of 2020.
• Sustained negative EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margins require healthcare leaders to rethink their strategic financial plans.

Staffing Shortages

• Healthcare worker shortages are projected to be unprecedented.
• The World Health Organization (WHO) projects a shortfall of 18 million health workers worldwide by 2030.
• The United States is projected to experience a shortage of up to 139,000 primary care and specialty physicians by 2033.
• The U.S. Bureau of Labor Statistics (BLS) predicts an increase in demand for qualified nurses, especially those with a BSN degree.
• Between 2019 and 2029, the RN workforce is expected to increase by 7% (n = 221,900), with the most significant shortages in the West and South.
• Factors contributing to these shortages include:
  • Advances in medicine leading to longer lifespans.
  • Aging population requiring more care.
  • Aging workforce with high retirement and turnover rates.
  • Increased demand for healthcare services.
  • Limited faculty for new entrant education.
  • Insufficient staffing and increased demand for productivity.
• An additional 175,900 RNs will be needed each year between 2019 and 2029.
• A net shortage of seven million nurses globally is estimated between 2014 and 2030.
• Competencies from Essentials-Domain 5 (Quality and Safety) and Domain 6 (Interprofessional Partnerships) will aid the DNP-prepared nurse in addressing these shortages.
• Improvements in health equity and access, population health, and health systems' sustainability depend on a stable nursing workforce.

Labor Strikes

• Employees can choose to be represented by a labor union under the U.S. National Labor Relations Act of 1935 (NLRA).
• Approximately 13.6% of healthcare practitioners and technical occupations were represented by unions in 2020, including 20.4% of RNs.
• A collective bargaining agreement is a legally binding contract between an employer and the union.
• Labor strikes can occur due to employee grievances, failed negotiations, economic conditions, or unfair labor practices.
• Healthcare leaders have seen an increase in labor uprisings in response to claims of unsafe working conditions, inadequate labor standards, and concerns around worker health and safety.
• The COVID-19 pandemic has emboldened unions to organize new chapters and seek negotiations for improved wages and working conditions.
• On June 21, 2021, the Occupational Safety and Health Administration (OSHA) published a final rule for an emergency temporary standard (ETS) to protect healthcare workers from occupational exposure to COVID-19, adding to the financial burden.
• Labor disputes can affect hospital finances, quality of care, organizational culture, and community reputation.
• Examples of the financial impact of labor strikes:
  • Allina Health (Minneapolis, MN) spent $105 million$ on two strikes in 2016.
  • Valley Memorial Health System in Salinas, CA, incurred $1.6 million$ in expenses for a one-day strike.
  • Brigham and Women's Hospital (Boston, MA) lost $8 million$ preparing for a one-day strike and another $16 million$ in revenue.
• Preparation is key to surviving a labor strike, including business continuity insurance and collaboration between the chief nursing officer, nurse leaders, and the CFO.

The Importance of Leadership

• During crises, people turn to leaders for reassurance and guidance.
• Managing uncertainty is a crucial leadership skill.
• Leaders must focus on employees and community engagement with as much energy as they do on financial profitability and quality-of-care outcomes.
• DNP graduates are adaptive leaders capable of driving transformative change through planning and action.
• Leaders need to be transparent and ready for difficult decisions, providing employees with hope and a sense of control.
• Communication is crucial, addressing fears and questions while helping people make sense of changing conditions.
• Nurse leaders should seize the opportunity to take a more significant role in decision-making and garner partnerships at all levels.

Operational Challenges

• Disasters, crises, and periods of change place significant operational challenges on the healthcare system and its leaders.
• These operational challenges require the DNP nurse to rely on all the Essentials' competencies.

Financial Losses

• Nurse leaders need to develop relationships and collaboration with leaders at all levels, especially in the C-suite.
• Many hospitals were facing economic challenges before COVID due to diminishing reimbursements, shifts in payer mix, and increased costs of care.
• A disciplined approach to financial management is needed, based on fundamentals (financial operations, liquidity, supply chain, productivity, and labor management).
• The American Organization of Nurse Executives (AONE) describes executive nurse financial management competencies under the Knowledge of the Health Care Environment and Business Skills domains.

People Strategy

• Begin with a people-first strategy: Keep people safe and balance financial stability with patient/staff satisfaction.
• Anticipate and address factors contributing to staffing shortages.

Strategic Thinking

• Revisit strategic initiatives to focus on essential goals and increase the speed of decisions and progress.
• Prioritize resources, including human capital, financial resources, supplies, and physical plant.
• Implement risk management strategies focused on improving utilization of nursing resources, RN satisfaction, and reduced turnover and labor costs.

Manage Expenses

• Tightly manage cost to volumes.
• Balance cost reduction and strategic growth opportunities.
• Identify areas of inefficiencies and address them.
• Leverage management and analytics tools and lower the barriers to innovation.
• Work collaboratively and proactively with supply chain leaders.
• Implement review of contracts and renegotiate to lower costs.
• Consider conservation efforts and reusable supplies.

Maintain High-Quality Care Delivery

• Sustain operations and care through innovative care models and innovation teams.
• Reinvent care delivery and work to get reimbursed.
• Promote patient safety by streamlining complex processes.
• Align operations with regulations, including information sharing, compliance training, routine audits and reporting, and implementation of control processes.
• Collaborate with other leaders to synchronize business and clinical operations.

Think Like a CFO and Partner

• Transition from an adversarial relationship between nursing and finance to a collaborative one.
• Engage proactively in discussions regarding ways to conserve cash, maximize revenue capture, and manage capital needs.
• Pause, cancel, or delay to preserve cash and carefully track disaster-related expenses.
• Develop joint goals and principles around patient safety, operational efficiencies, cost reductions, and revenue enhancements.
• Understand key financial terms and take action to maintain timely billing and collections.

Variable Costs

• Implement travel bans.
• Impose meeting restrictions.
• Apply hiring freezes.
• Introduce restrictions on discretionary spending.
• Reduce labor spending to avoid layoffs by:
  • Reducing contract labor usage.
  • Redistributing permanent staff.
  • Adjusting hours of operation based on demand.
  • Encouraging staff to use available leave balances.
  • Offering voluntary or involuntary leave without pay to conserve cash.

Nonessential projects

• Nonessential projects, construction projects, and other major expenditures without an immediate or rapid ROI should be deferred or delayed.
• Revisit capital investment plans and minimize working capital requirements by focusing on payables, receivables, and inventory.
• Focus on inventory management to maintain par levels during periods of increased demand.
• Cost reduction and asset redeployment will be essential.

Managing in Times of Crisis

Data-Driven Decision-Making

• Situational awareness is necessary.
• Reprioritizing interactions and activities brings clarity and value.
• Data should analyze, interpret, inform, and support decisions.
• Data-driven decision-making uses facts, metrics, and data to guide business decisions.
• The Essentials Domain 8: Information and Healthcare Technologies require the DNP-prepared nurse to gather and use data to drive decision-making.
• Performance can be monitored using analytics and dashboards.

Innovation and Use of Technology

• Nurse leaders must create environments that support innovation.
• During times of unprecedented change, opportunities are created.
• The recent COVID-19 pandemic accelerated the need for innovation.
• Innovation requires the organization to implement it by identifying, securing, allocating, controlling, and utilizing resources.
• Innovation does not have to be a net new invention; it could enhance an existing process, service, or technology.
• Strategic use of technology and innovation will help an organization gain a competitive edge.

Creative Staffing

• Staff illness or injury increases with the number of furlough requests.
• Transparency in decision-making is key.

Considerations When Designing and Implementing New Care Models

• Be prepared for the unexpected and plan for contingency and crises.
• Each organization will need to determine the best skill mix and qualification mix based on available resources.
• Increased requests for paid time off, hazard pay, and the use of contingency/contracted labor can increase labor costs.
• Leverage and build the capacity of nursing students by investing in skills training and clarification of roles and responsibilities.
• Identify and minimize unexpected tasks that take up staff time.
• Consider a nurse pair or nurse extender model.
• Redeploy staff from areas of low volume to higher need and acuity areas, providing just-in-time training as needed.

Traditional Staffing Models:

• Budget-based model: Nurses are allocated based on a nursing hours per patient day formula.

• Nurse-to-patient ratio model: Staffing ratios are determined by state law, hospital policies, or collective bargaining agreements.

• Patient acuity model: The patient's needs determine the requirements for each shift.

• A sound nurse staffing plan positively addresses clinical needs, patient experience, staff engagement, financial impacts, and regulatory compliance.

• Redeployment, or shifting of staff, may help to balance staffing inequities or shortages.

Temporary Staffing Plans

• Develop alternative staffing plans to augment existing resources and staff competencies.
• Consider care needs of the patient population served and staffing mix.
• Anticipate travel nurse needs and plan early.
• Consider reaching out to retired nurses, current advanced practice providers (APPs), and others.
• During a pandemic, consider creating a dedicated unit or care area where patients can be cohorted.
• Offer upskilling/cross-training opportunities to staff.
• Develop a visual cue to identify staff deployed to a unit and the skills they are competent to perform.
• Do not forget training for documentation in the electronic health record (EHR).
• Staff should meet urgent/emergent and unplanned emergency case volumes.
• Interdisciplinary team-based care improves outcomes and patient experience while reducing costs.
• Nurse leaders must work collaboratively with members of the interdisciplinary team.
• The costs of nursing care should be estimated for each patient.
• Also, telehealth technology is used by APRNs to provide virtual care visits, which helps to improve access to care and specialists, especially for patients in rural and underserved areas.
• Nurse leaders should work with their CFOS to determine the financial and employee recruitment and retention benefits of implementing or expanding a remote work option.

Conclusions

• Managing and leading an organization through times of uncertainty, shortages, and change can be a daunting task.
• DNP graduates receive education to help them build the competencies as defined in the Essentials.
• The application of these competencies ensures nurse leaders are well positioned to lead and respond effectively during difficult times.
• The Essentials apply to all scenarios as they serve as the foundation for nursing professional practice.
• Thinking like a CFO, using common language to improve communications and understanding, and engaging staff and key stakeholders in planning processes will serve the DNP nurse well in managing fiscal responsibilities.