Today’s COVID19 financial environment is completely unexpected and unprecedented. The hospital and university industries are two that may be feeling it the worst. The scramble to save finances in both industries is already happening full tilt, with workforce and human capital being an unwanted but unfortunate casualty.
In hospitals, revenue is down 15-20+% with the near term elimination of high revenue, voluntary surgical procedures that have been the lifeblood their financial bottom line.
Although voluntary procedure loss is likely temporary for most hospitals, costs across the board are escalating, sometimes as high as 20% year over year. Hospital margins, which are typically single digit at even the most profitable hospitals, are now almost across the board in the red.
In universities, enrollment is already down 15%+ in higher education institutions this year, with prospects of the same for the foreseeable future. Although many industries face similar challenges, one stark difference is that consumer buying behavior in the higher education landscape may be forever altered. Most hospitals (the ones that survive the next year of financial turmoil) will eventually resume collecting their bread and butter revenue streams. Universities and colleges on the other hand may be dealing with a permanent reduction in income, as the average American family is forced to reconsider if, how, and where to pay for their children’s higher education.
Traditionally effective cost reduction strategies are already underway. Hospitals and universities are doing things to leverage expanded buying power across systems. This includes getting departments and internal entities to coordinate their buying across broad systems. Both hospitals and universities are reigning in costs by buying and utilizing critical goods and services in a more cost-effective manner. However, with the spread of COVID rising, many families and students are reconsidering the value of an online education, universities will need to do more to stay in business. Where and how can hospitals and higher education institutions find new and innovative ways to save more? The answer may start by looking at each other for help.
Hospitals and universities in the Academic Medical Center (AMC) space have a unique opportunity to collaborate. Once considered taboo, university and hospital partnership is evolving beyond traditional joint marketing campaigns and branding. Areas like shared services and technologies are becoming a much more viable target area to join forces, and a frequent untapped well of value.
At face value, these types of cross-industry strategies make sense. Most AMCs and university systems are geographically co-located. In certain spend categories, they transact in the same regional vendor base, and sometimes the same vendors. They even deal with the same infrastructure needs.
Implementing these strategies are not without challenges, and it is up to the hospitals and universities themselves to work hard and make things happen.
Challenge of cross-industry collaboration
Let me start with a statement of the obvious: leveraging commonality across industries is not an easy task. There are several key challenges. Hospitals and universities serve different missions: one saves lives, the other educates them. They exist within entirely separate organizational structures. They have different cultures. Most especially, not everything they buy is common, not by a long shot.
Overcoming these challenges
These sorts of collaboration ideas are not new. When less than successful efforts of the past have failed, frustration and future trepidation have prevailed. In terms of mitigate these failure risks, here is what is required to effectively leverage AMC/University success in cross industry collaboration:
- Know where to look: Finding common areas of spend with substantial enough value to make an impact is critical. Technology is a great place to start looking. Common IT and network infrastructure (IT assets, data storage, security, and cloud computing) along with certain shared services (print management, document storage, and help desk) have been historically successful in generating meaningful results.
- Lead from the top: Without organizational and cultural buy in, there is zero follow through. It is therefore critical for hospital and university leadership to drive these types of efforts from the top down, even involving the C-suite at critical junctures of sponsorship and action.
- Follow through beyond purchasing: Getting a better negotiated contractual arrangement is only the start. Utilization of the contract, along with the goods and services they provide, is of equal importance. Value opportunity is created with a contract but substantiated in its stewardship.
- Be proactive: Responding to fire drills never works in this game. Predicted results should be pragmatic, noting specific timing and magnitude of results. These results must be monitored routinely and predicted failures should be dealt with before they become actual failures. This finger on the pulse should escalate all the way to the top of leadership.
Tying it all together
Despite past failures and apprehensions, cross industry collaboration between AMCs and their universities is still a great idea. Their past lack of success only underscores the value that remains. Looking in the right areas, leading from the top, thinking beyond purchasing, and being proactive are all necessities, but not impossible tasks.
Not every hospital has a university to leverage, and vice versa. For the ones that do, take advantage of the situation and substantiate the extra results that everyone so sorely needs these days.