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How to manage demand spikes in healthcare

Blog By Duncan Khoury – 05 December 2020

2020 has been a challenging year for organisations in the healthcare industry. Caught by surprise by the pandemic, and sudden spikes in demand, pharmaceutical, biotechnology, equipment, distribution, facilities and managed health care organisations around the world had to quickly adapt. This led to rapid adoption of new protocols and collaboration across the sector.

With the healthcare industry playing a fundamental role in our collective physical, mental, and economic health, it’s important for the sector to be as secure and stable as possible.

In this article we review the challenges the industry met in 2020, the healthcare finance issues that arose in the face of fluctuating demand, and how we can future-proof the industry. 

A system tested to its limits 

COVID-19 is the first truly global pandemic since the Spanish Flu. While some international healthcare systems have been pushed beyond their limits, Australia managed to limit the impact thanks to a prudent public health response. Precautionary measures and advanced tracking helped contain further case spikes. But containing COVID wasn’t the healthcare systems’ only challenge. Supply shortages of PPE equipment, a growing demand for telehealth, and the required creation of new COVID health clinics were just some of the additional obstacles. 

The Australian healthcare sector rose to the occasion, and the industry looks very different today, than it did a year ago.

Innovation and fast evolution however have a financial impact. The need to balance social influences with healthcare finance outcomes has become more challenging than ever.

Planning beyond a one-off event

While some view COVID-19 as an isolated event, history suggests otherwise. Infectious diseases have always been a part of our world, and pandemics of different sizes have occurred throughout millenia. Future pandemics are therefore likely.

When these pandemics do arrive they’re also likely to present more of a challenge. With our global population growing, cities becoming more densely populated, urbanisation increasing, and the ease and accessibility of global travel expanding, viruses will be able to spread faster and easier. 

With pandemics predicted to come more frequently, the pressure increases on the healthcare industry. As with most sectors, its ability to manage it will likely hinge on its financial strength.

The biggest financial challenges in healthcare

A healthcare organisation requires constant balance – optimal patient care must be continually weighed against ongoing financial viability.

Without ongoing financial viability, the system collapses.

Here are some of the financial challenges that were highlighted during 2020:

  • Declining revenues – The cancellation and delay of patient visits and non-essential procedures saw revenues take a hit in some cases. 
  • Increased costs – Spikes in demand increased immediate costs, while new protocols added to the expense of both supplies and labour. 
  • Narrowing margins – Reduced revenue and higher costs impacted the profitability of many companies in the industry. 
  • Funding challenges – Traditional lenders reviewed and tightened their policies as a result of future uncertainty. 
  • Cash-flow pressures – Large, unplanned, but necessary one-off investments placed significant pressure on finances and working capital, with cash-flow becoming tight.

How to strengthen healthcare finance

To better alleviate these financial challenges in years to come, there are a number of solutions healthcare providers can explore.

1) Growing supplier lists

A key challenge in a pandemic is the ability to source the right supplies when needed. Securing a range of suppliers, both locally and internationally, spreads risk and reduces disruption. By building a group of reliable, trusted suppliers, and being able to pay them quickly and efficiently, the healthcare industry can better manage unexpected spikes in future demand.  

2) Negotiating better payment terms

Negotiating better payment terms can bring a host of financial benefits. Securing early payment discounts can lead to cost savings, improve cash flow, and build stronger stakeholder relationships to help see businesses through tough times. By bringing the different parties together (buyer, seller, and financier), healthcare providers can also create more transparency and control over their supply chain.

3) Creating ongoing working capital

By securing sustainable access to working capital and flexible cash flow solutions, it’s possible to establish a buffer against unexpected future events. With cash reliably available when needed, healthcare providers will have increased purchasing power, be better able to meet demand, and have removed the strain on their cash flow. 

Preparing for the future

There is no doubt that 2020 has been a tough year for the healthcare industry.

As for the future, it remains uncertain. Being financially prepared, however, does help. By taking measures to protect your supply chain and secure sustainable working capital solutions, you can ensure your organisation will be ready to respond no matter the change in circumstances.  

To learn more, take a closer look at our healthcare finance solutions or contact us to discuss.



Disclaimer: The following comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.