Financial difficulties for Swiss hospitals

Over a quarter of acute hospitals in Switzerland operate at a loss. Hospitals such as psychiatric institutions need to improve their results. Clinics will continue to vanish completely. This is proved by new data provided by PwC. The trend can be reversed by adopting solutions to increase efficiency such as speech recognition and dictation workflow systems in medical documentation.

“Our hospitals run pretty economically”. This is more or less the conclusion of a survey conducted by PwC Switzerland. Specialists from the auditing and consulting company examined financial data of 28 acute hospitals, including 15 cantonal hospitals and major establishments such as the University Hospital of Zurich (USZ), the University Hospital of Basel (USB) and the University Hospital of Bern.

Authors Patrick Schwendener and Philip Sommer summarise their key results: “The financial results of over half of the establishments examined are still not yet sufficient to ensure sustainable success”.

What does that mean exactly? It relates to the figures for 2014. That year on average, the 28 acute hospitals recorded obtained an EBITDA margin of 6.4%. This means that out of every 100 francs received, 6.40 francs were left over after deducting all personnel and office expenses. However, in order to finance or refinance the necessary facilities in the long term, this rate should be 10 francs, or 10%.

These averages do not imply very much about the security of individual hospitals. Six of the 28 acute hospital businesses examined made it over the target of 10%, with the “most efficient” hospital achieving 12.5% and the “most inefficient” achieving 0.7%.

More profit, less work, increased efficiency

In the end, eight out of the 28 hospitals examined reported a loss; in the previous two years, only three establishments had made losses.

Consequently, the new hospital study carried out by PwC shows us two things:

• In future, acute hospitals need to make further improvements – whether these be increasing profits, lower expenditure or through investments that increase their efficiency.
• In the Swiss hospital market, consolidation is expected to continue – hospitals will disappear.

According to Patrick Schwendener and Philip Sommer, hospitals finding themselves in a tight situation basically have three options: changing their strategic direction, selling to a successful hospital or hospital operator or, in extreme cases, closure. Thus Swiss hospitals will all be structures organised as concerns or mergers with full operational integration.

Psychiatry needs to be more profitable in Switzerland too
For the first time, the financing study carried out by PwC also included psychiatric clinics. Here the problem is somewhat different because psychiatry is not so capital intensive; on the other hand, the percentage of personnel costs is higher: around 80% of total expenditure. Key figures were calculated for nine Swiss psychiatric establishments in 2012 and 2014. The results showed an even lower EBITDA margin than that of the acute hospitals: they achieved 5.8%.

Increasingly tough competition

PwC expects the figure required for long-term survival to be more like 8% (slightly lower than acute hospitals given that psychiatry, as mentioned, requires less expensive buildings and equipment). “Swiss psychiatric institutions will also have to boost profitability in the medium term”, conclude PwC’s economists.

On the other hand, competition among psychiatric establishments – with a time lag – is likely to intensify over the coming years. Hospital managers will have to concern themselves more with their strategic positioning, processes or efficiency. Everything will intensify due to the introduction of the new Tarpsy tariff system, planned for 2018, which is to replace current remuneration using daily flat rates.

Is action required in your establishment? We offer a wide range of digital dictation, dictation management and speech recognition solutions. These enable you to save time, increase efficiency and optimise your working processes when preparing assessments, letters and reports. Please do not hesitate to contact us for a personal consultation.