Canadian hospitals must adopt innovative strategies to achieve long-term financial sustainability, according to a new report by KPMG.
The report "Achieving Financial Sustainability in Canadian Healthcare" highlighted hospitals' growing financial challenges and provides recommendations for addressing structural deficits through technology, efficiency improvements, and strategic partnerships.
A structural deficit occurs when a hospital's recurring operational expenses consistently exceed its revenue, creating a fundamental financial imbalance. The report identified several factors contributing to this issue, including workforce shortages, aging infrastructure, and rising operational costs. Health workforce shortages have led to increasing overtime expenses and costly recruitment efforts. Surgical backlogs have worsened, leading to longer wait times, higher patient acuity, and increased resource utilization.
Many hospitals also struggle with aging infrastructure, which demands frequent maintenance and upgrades to meet modern standards. The increasing sub-specialization of medical care has raised coordination costs. At the same time, digital transformation and the adoption of new technologies, such as genetic sequencing and AI-driven diagnostics, have added further financial strain. Capital constraints continue challenging hospitals as they rely on debt financing for modernization while operational expenses rise. Additionally, alternative revenue sources, such as retail operations, research, and parking, have declined due to changing patient and visitor behaviours. Social determinants of health, such as housing and income disparities, further contribute to rising healthcare demands and costs.
The report recommended six key areas of focus to achieve long-term financial stability. Hospitals should optimize clinical operations by improving patient care pathways, discharge planning, and operating room efficiency. Back-office optimization through centralization and outsourcing of non-core administrative services can enhance efficiency. The report also emphasized that hospitals must improve workforce management by implementing team-based care models, optimizing staff roles, and refining scheduling systems. Automation and digital adoption, including the enhancement of digital infrastructure, data standardization, and analytics integration, are essential for streamlining operations. Capital management requires strategic financing plans and the identification of new revenue streams to support hospital sustainability. Additionally, integrating care by strengthening partnerships across the healthcare continuum can help reduce costs and improve patient outcomes.
The report emphasized the critical role of data-driven decision-making in ensuring financial sustainability. Hospitals are encouraged to leverage predictive analytics and AI-driven tools to identify financial pressures and optimize resource allocation. Advanced data analytics can support more efficient financial planning and operational improvements. KPMG stressed that hospitals must act quickly to implement these strategies.