Independence Health is actively working to cut its financial losses and improve patient care as it moves into its third year of operation. Formed by combining Excela and Butler health systems in 2023, Independence Health has become a smaller but significant player in Western Pennsylvania’s healthcare market, which includes giants like UPMC and Allegheny Health Network. In 2024, Independence Health managed to reduce its operating losses by almost 50%, bringing them down to $41.4 million from $74.1 million in 2023. However, the losses are still in the eight-figure range, leading Independence Health’s Chief Financial Officer, Tom Albanesi, to emphasize the need for continued expense reductions. Albanesi aims to cut losses by at least half again in 2025, with a goal of improving the operating margin to slightly better than break-even by 2026. This involves minimizing expenses by an additional 2.5%.
Financial Challenges and Strategies
Reimbursement Shortfalls
One of the major challenges Independence Health faces in balancing its operational finances is the reimbursement shortfalls from government healthcare plans like Medicare and Medicaid. These plans account for 70% of the insurance reimbursements Independence receives but do not entirely cover the costs of care. Albanesi and his team have been negotiating with major payors, seeking increased reimbursements to counter the inflationary environment. Brian Fritz, president of Westmoreland, Latrobe, and Frick hospitals, echoes these concerns, highlighting the difficulties faced by physicians who struggle with reimbursements that barely cover salaries and overhead costs. Additionally, Medicare reimbursement rates for physicians are expected to decrease by 2.8% in 2025. This anticipated reduction adds another layer of complexity to the financial landscape, requiring more strategic negotiations and policy advocacy to secure better rates.
Labor Costs and Staffing
The financial landscape for smaller healthcare systems like Independence Health is complex, involving factors like labor costs, patient volume, and the efficient use of hospital beds. A significant issue since the COVID-19 pandemic has been the shortage of nurses, pushing hospitals to raise salaries, which remain high as the crisis subsides. Despite these challenges, Independence Health does not plan to reduce staff further after cutting 226 positions in 2023. Instead, they aim to find efficiencies among nonclinical staff positions through attrition, ensuring clinical staff remain focused on patient care. For example, staff from the closed Latrobe Hospital’s EPIC inpatient rehabilitation center were offered positions elsewhere within the system, aligning with the trend in favor of outpatient rehabilitation services due to challenges in insurance authorization for inpatient care. This approach aims to optimize resources without compromising the quality of care provided to patients.
Enhancing Patient Care
Recruitment and Collaboration
The combined medical staff of Independence Health includes over 1,000 physicians and nurse practitioners. The health system continually recruits specialist physicians, particularly in psychiatry and neurology, to bolster their team. Collaboration across the Independence service areas is proving beneficial, with staff from Butler and Excela systems sharing knowledge and expertise to enhance patient care. For instance, Dr. Mary Elizabeth Kovacik Eicher leads an Alzheimer’s treatment program involving infusion therapy and collaborates with Butler colleagues to ensure access for all patients within the system. This type of cross-collaboration allows the healthcare network to leverage the strengths of its diverse medical staff, improving overall patient outcomes and ensuring that specialized care is accessible to all who need it.
Physical Improvements and Expansions
Independence Health is also seeing physical improvements and expansions across its hospitals. Latrobe Hospital is expanding its adolescent behavioral health unit, Westmoreland Hospital has opened a redesigned outpatient cardiology facility and is revamping its bariatric surgical unit and maternity center, and Frick Hospital has gained a women’s health outpatient clinic. Butler Hospital is renovating its drug and alcohol inpatient unit and has installed a new CT imaging machine. Additionally, the hospital’s Food Institute, which helps patients with food insecurity, has expanded to Clarion Hospital. These physical improvements and expansions are vital for providing comprehensive care and meeting the diverse needs of their patient population. By upgrading facilities and expanding services, Independence Health is positioning itself to better serve its community while also striving towards financial stability.
Technological Advancements
Data Platform Development
Technological advancements are a crucial focus for Independence Health, partnering with Mitsui & Co. to develop Avehealth USA. This data platform company aims to analyze patient medical and health system performance data to enhance patient care. Roger Lutz, Chief Information Officer, explains that the goal is to use technology to identify patients needing specific interventions, gather them into cohorts, and deliver timely care reports. This approach aligns with value-based care principles, aiming for better patient outcomes with minimal intervention. The emphasis on value-based care is a strategic move to improve patient outcomes while managing costs. By leveraging data analytics, Independence Health can identify trends and areas for improvement, ensuring that resources are allocated efficiently and effectively.
Value-Based Care
The focus on value-based care at Independence Health is not just a strategic initiative but a foundational change in how healthcare services are delivered. By utilizing data analytics through the Avehealth USA platform, Independence Health aims to identify patterns and insights that can lead to improved patient care and reduced costs. This proactive approach entails anticipating patient needs and addressing them with timely interventions, thereby preventing complications and hospital readmissions. Moreover, this system enables a more collaborative and transparent approach among healthcare providers within Independence Health, fostering a culture of continuous improvement. These technological advancements and the shift towards value-based care support the financial stability of the health system while ensuring superior patient care.
Independence Health is navigating financial challenges through strategic cost-cutting, collaboration within its medical staff, and investments in technology and physical infrastructure improvements. By addressing reimbursement shortfalls, optimizing operational efficiencies, and expanding patient services, Independence Health aims to achieve a sustainable financial position while continuing to provide high-quality healthcare to its communities by focusing on these core strategies.
