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Health care was the first industry to be affected by the pandemic and the last to recover. Asante is not alone in its struggle to balance expenses, revenue and access to care. Many of our key services are exceeding budget; however, our financial losses are not a reflection of the incredibly hard work our teams are doing or the volume of patients and communities we are serving.
Health systems big and small are reorganizing administrative expenses and scaling down services out of financial necessity. Becker’s Hospital CFO Report states more than 85 hospitals and health systems have trimmed their workforce in the past year due to financial and operational challenges. This reorganization is happening at the state level as well. Our friends to the east, St. Charles Health System, laid off more than 100 nonmedical staff members and eliminated another 76 vacant positions this past May.
As we strive to recover financially, Asante is considering both growing our core services and reducing expenses. Closing services or eliminating personnel as we did in mid-September are incredibly painful decisions, but unfortunately necessary in today’s health care environment.
You may recall that Asante lost $61.2 million from operations in the 2021-22 fiscal year. This was due to significant increases in contract labor, including travelers; long hospital lengths of stay due to bed shortages at long-term care facilities; lower reimbursements; higher supply and pharmaceutical costs.
Asante made significant financial improvements in fiscal year 2022-23, which ended on Sept. 30. Even so, we have lost $4.9 million from operations as of Aug. 30 and will end the year with roughly a $40 million negative variance from our budgeted target.
For the 2024 fiscal year, Asante has set an operating margin target of 2%, or a positive $26.9 million from operations. To achieve this margin (lower than the typical 3% goal), it’s likely we will need both to increase revenue and reduce expenses.
It is critically important for Asante and other nonprofits to generate a positive bottom line so that we may invest in our greatest resource — our people — and enhance our services to our communities. The 2024 budget incorporates higher than normal merit and market salary adjustments than in past years along with Asante absorbing most of the medical benefit plan increases.
To meet our financial target, there are a number of key initiatives planned, which we will share throughout the coming year. (Note that Asante’s capital projects, including the new patient pavilion at ARRMC, are funded largely through bond proceeds and are not part of our operating budget.)
Going forward, Asante’s financial situation will be part of our everyday conversations. Our goal is to build trust among employees, respect your feedback and contributions, and be transparent in our actions.
We want to hear from you. Please share with your leaders your ideas about efficiency, revenue growth and cost savings for both your department and the health system. All ideas are welcome!
If you have a question, please contact the author or relevant department directly.
