In facing significant proposed changes in public health funds, academic medical centers (AMC) should determine and employ strategies that mitigate the potential impact on hospital operations, preparedness programs for disasters and emergencies, research activities, staff engagement, financial sustainability and equitable patient care and health outcomes. Academic institutions play a key role in fostering a new generation of medical students, residents and fellows as well as implementing programs tailored to their community care needs.
How the Government Allocates Healthcare Spending
The U.S. federal government allocates healthcare spending into several categories serving distinct populations and purposes to provide coverage, support public health initiative and promote medical research. The following is an overview of the federal healthcare spending:
- Mandatory spending is expenditure regulated by existing legislation and is not determined by annual appropriations bills, unless Congress enacts new legislation to modify the underlying laws. The major programs are Medicare, Medicaid, Affordable Care Act (ACA) and Children’s Health Insurance Program (CHIP).
- Discretionary spending is allocated annually through the annual appropriation process that includes funding for agencies and programs such as Veterans Health Administration, Centers for Disease Control and Prevention (CDC), National Institutes of Health (NIH) and Health Resources and Services Administration (HRSA).
- Tax subsidies provide tax exclusions for employer-sponsored health insurance premiums, meaning that premiums paid by employers are not considered taxable income for employees.
How Academic Medical Centers Can Prepare for Upcoming Financial Challenges
Transparency: Communication Strategy – Openly communicate with stakeholders about the impact of cutbacks and the measures being implemented to tackle this matter. Such communication should include how to prevent financial challenges from undermining the AMC’s mission, and that the quality and safety of patient care and academic training are central considerations in every strategic decision, especially for underserved populations. Also, establish forums for staff to voice concerns and contribute ideas for continuous operational efficiencies in identifying cost-saving measures.
Impact Analysis: Assessing the Organization’s Current Financial Landscape – Conduct a comprehensive analysis of financial sources and percentage originated from federal, state and local resources, including short-term and long-term impacts of reduced fundings on patient care revenue, research grants and education funding. AMCs should consider a zero-based budget revie that defines metrics based on potential adjustments, and from there then formulate contingency plans for each scenario. Also, assess the impact of funding cutbacks might have on services, clinical staff ratios and quality of patient services, and review underperforming programs for potential wind-down. Lastly, evaluate discretionary spending, non-essential capital investments, non-urgent infrastructure upgrades and initiatives for new construction.
Operational Efficiency: Cost Management and Integration – A comprehensive review of operational expenses—guided by data analytics—can help optimize resource allocation without compromising the quality of patient care. Streamlining supply-chain management is also essential, including minimizing inventory waste, negotiating favorable supplier terms and exploring group purchasing options. Clinical staffing levels should be assessed carefully to ensure continuous, high-quality patient care, while care management practices can be refined to improve outcomes and reduce costs. Integrating coordinated care and expanding ambulatory services can enhance care delivery efficiency. Programs with low volume and high subsidy requirements should be evaluated for potential consolidation. Maintaining accreditation and compliance remains a priority, requiring sustained focus on quality, safety and educational standards. Finally, cross-training staff and leveraging part-time personnel can help manage workload fluctuations and reduce reliance on temporary hires, all while maintaining a high standard of care.
Revenue Generation: Increase Reimbursement and Diversifying Revenue Streams – Assess end-to-end revenue cycle operations to identify opportunities in front-end collection, coding and billing accuracy to minimize rejections and denials, missed charges, clinical documentation practices, outdated chargemaster and underpayments. Also, consider the implementation of weekly financial dashboards for tracking KPIs such as net patient revenue, non-patient revenue, margins, days cash on hand and expense ratios. Prioritize population health and value-based care models that align with payer incentives at a lower cost, and engage with private healthcare providers, community organizations, regional health systems and industry partners to coordinate and advocate for alternative funding. Fundraiser efforts can be enhanced by engaging more private foundations, corporations and not-for-profit organizations that align with the AMCs clinical initiatives.
While government funding cutbacks can post significant challenges for AMCs, the right deployment of strategies can help these institutions continue to deliver exceptional and reliable care, education and research in their communities. At Windham Brannon, we offer a comprehensive range of integrated services that include tax, accounting, chargemaster integrity and comprehensive regulatory compliance support for hospitals and physician groups. We not only offer advisory services but also aid your organization to implement workplans and metrics designed to achieve your operational and financial goals amid financial constraints. For questions or more information, contact your Windham Brannon advisor today, or contact Denise Gaulin.
