As the story begins, a woman goes to visit her grandmother. She is stressed and frustrated by the way that her life has been going— in a way that many can relate. No sooner is one problem dealt with than another one rises in its place.
The woman tells her grandmother that she’s reaching the end of her rope and doesn’t know how she can go on.
Without a word, the grandmother goes to her kitchen, fills three pots with water, and puts the pots on the stove to boil. Once the water is bubbling away, the grandmother puts a few carrots in one pot, several eggs in the second pot, and ground coffee beans in the third.
After about twenty minutes or so, the grandmother turns off the heat and puts the contents of each pot in a bowl.
She then asks her granddaughter what she sees.
The answer seems obvious. “Carrots, eggs, and coffee,” the granddaughter replies.
The grandmother then tells her granddaughter to feel the softened, boiled carrots, to crack the hard-boiled egg and look at it, and to take a sip of the coffee.
Having done so, the granddaughter asks what it all means. The story continues:
“Her grandmother explained that each of these objects had faced the same adversity — boiling water — but each reacted differently.
“The carrot went in strong, hard and unrelenting. However, after being subjected to the boiling water, it softened and became weak. The egg had been fragile. Its thin outer shell had protected its liquid interior. But, after sitting through the boiling water, its inside became hardened.
“The ground coffee beans were unique, however. After they were in the boiling water, they had changed the water.”
The question for the granddaughter — and for the reader as well — is which one represents how you respond to adversity. Are you the egg? The carrots? Or the coffee?
“Think of this: Which am I? Am I the carrot that seems strong, but with pain and adversity? Do I wilt and become soft and lose my strength?
“Am I the egg that starts with a malleable heart, but changes with the heat? Did I have a fluid spirit, but after a death, a breakup, a financial hardship or some other trial, have I become hardened and stiff? Does my shell look the same, but on the inside am I bitter and tough with a stiff spirit and a hardened heart?
“Or am I like the coffee bean? The bean actually changes the hot water, the very circumstance that brings the pain. When the water gets hot, it releases the fragrance and flavor of your life. If you are like the bean, when things are at their worst, you get better and change the situation around you. When the hours are the darkest and trials are their greatest, do you elevate to another level?”
Of course, the question is posed not just as a way to examine how you respond to adversity now, but in order to learn how to adapt in the future.
We are not permanently carrots or eggs or coffee. Perhaps you have responded as an egg before. Perhaps you’re currently feeling a bit carrot-y. But that doesn’t mean that you can’t make a change.
As the U.S. heads toward the winter, the country is going round in circles, making the same conceptual errors that have plagued it since spring.
Army ants will sometimes walk in circles until they die. The workers navigate by smelling the pheromone trails of workers in front of them, while laying down pheromones for others to follow. If these trails accidentally loop back on themselves, the ants are trapped. They become a thick, swirling vortex of bodies that resembles a hurricane as viewed from space. They march endlessly until they’re felled by exhaustion or dehydration. The ants can sense no picture bigger than what’s immediately ahead. They have no coordinating force to guide them to safety. They are imprisoned by a wall of their own instincts. This phenomenon is called the death spiral. I can think of no better metaphor for the United States of America’s response to the COVID-19 pandemic.
The U.S. enters the ninth month of the pandemic with more than 6.3 million confirmed cases and more than 189,000 confirmed deaths. The toll has been enormous because the country presented the SARS-CoV-2 coronavirus with a smorgasbord of vulnerabilities to exploit. But the toll continues to be enormous—every day, the case count rises by around 40,000 and the death toll by around 800—because the country has consistently thought about the pandemic in the same unproductive ways.
Many Americans trusted intuition to help guide them through this disaster. They grabbed onto whatever solution was most prominent in the moment, and bounced from one (often false) hope to the next. They saw the actions that individual people were taking, and blamed and shamed their neighbors. They lapsed into magical thinking, and believed that the world would return to normal within months. Following these impulses was simpler than navigating a web of solutions, staring down broken systems, and accepting that the pandemic would rage for at least a year.
These conceptual errors were not egregious lies or conspiracy theories, but they were still dangerous. They manifested again and again, distorting the debate around whether to stay at home, wear masks, or open colleges. They prevented citizens from grasping the scope of the crisis and pushed leaders toward bad policies. And instead of overriding misleading intuitions with calm and considered communication, those leaders intensified them. The country is now trapped in an intuition nightmare: Like the spiraling ants, Americans are walled in by their own unhelpful instincts, which lead them round and round in self-destructive circles.
“The grand challenge now is, how can we adjust our thinking to match the problem before us?” says Lori Peek, a sociologist at the University of Colorado at Boulder who studies disasters. Here, then, are nine errors of intuition that still hamstring the U.S. pandemic response, and a glimpse at the future if they continue unchecked. The time to break free is now. Our pandemic summer is nearly over. Now come fall, the season of preparation, and winter, the season of survival. The U.S. must reset its mindset to accomplish both. Ant death spirals break only when enough workers accidentally blunder away, creating trails that lead the spiraling workers to safety. But humans don’t have to rely on luck; unlike ants, we have a capacity for introspection.
The spiral begins when people forget that controlling the pandemic means doing many things at once. The virus can spread before symptoms appear, and does so most easily through five P’s: people in prolonged, poorly ventilated, protection-free proximity. To stop that spread, this country could use measures that other nations did, to great effect: close nonessential businesses and spaces that allow crowds to congregate indoors; improve ventilation; encourage mask use; test widely to identify contagious people; trace their contacts; help them isolate themselves; and provide a social safety net so that people can protect others without sacrificing their livelihood. None of these other nations did everything, but all did enough things right—and did them simultaneously. By contrast, the U.S. engaged in …
1. A Serial Monogamy of Solutions
Stay-at-home orders dominated March. Masks were fiercely debated in April. Contact tracing took its turn in May. Ventilation is having its moment now. “It’s like we only have attention for only one thing at a time,” says Natalie Dean, a biostatistician at the University of Florida.
As often happens, people sought easy technological fixes for complex societal problems. For months, President Donald Trump touted hydroxychloroquine as a COVID-19 cure, even as rigorous studiesshowed that it isn’t one. In August, he switched his attention to convalescent plasma—the liquid fraction of a COVID-19 survivor’s blood that might contain virus-blocking antibodies. There’s still no clear evidence that this century-old approach can treat COVID-19 either, despite grossly misstated claims from FDA Commissioner Stephen Hahn (for which he later apologized). More generally, drugs might save some of the very sickest patients, as dexamethasone does, or shorten a hospital stay, as remdesivir does, but they are unlikely to offer outright cures. “It’s so reassuring to think that a magic-bullet treatment is out there and if we just wait, it’ll come and things will be normal,” Dean says.
Other strategies have merit, but are wrongly dismissed for being imperfect. In July, Carl Bergstrom, an epidemiologist and a sociologist of science at the University of Washington, argued that colleges cannot reopen safely without testing all students upon entry. “The gotcha question I’ve handled most from reporters since is: This school did entry testing, so why did they get an outbreak?” he says. It’s because such testing is necessary for a safe reopening, but not sufficient. “If you do it and screw everything else up, you’ll still have a big outbreak,” Bergstrom adds.
This brief attention span is understandable. Adherents of the scientific method are trained to isolate and change one variable at a time. Academics are walled off into different disciplines that rarely connect. Journalists constantly look for new stories, shifting attention to the next great idea. These factors prime the public to view solutions in isolation, which means imperfections become conflated with uselessness. For example, many critics of masks argued that they provide only partial protection against the virus, that they often don’t fit well, or that people wear them incorrectly. But some protection is clearly better than no protection. As Dylan Morris of Princeton writes, “X won’t stop COVID on its own is not an argument against doing X.” Instead, it’s an argument for doing X along with other measures. Seat belts won’t prevent all fatal car crashes, but cars also come with airbags and crumple zones. “When we layer things, we give ourselves more wiggle room,” Dean says.
Several experts I’ve talked with have been asked: What now? The question assumes that the pandemic lingers because the U.S. simply hasn’t found the right solution yet. In fact, it lingers because the familiar solutions were never fully implemented. Despite claims from the White House, the U.S. is still not testing enough people. It still doesn’t have enough contact tracers. “We have the playbook, but I think there’s a confusion about what we’ve actually tried and what we’ve just talked about doing,” Dean says. A successful response “is never going to be one thing done perfectly. It’ll be a lot of different things done well enough.” That resilience disappears if we create…
2. False Dichotomies
A world of black and white is easier to handle than one awash with grays. But false dichotomies are dangerous. From the start, COVID-19 has been portrayed as a disease that mostly causes mild symptoms in people who quickly recover, and occasionally causes severe illness that leads to hospitalization and death. This two-sided caricature—severe or mild, sick or recovered—has erased the thousands of “long-haulers” who have endured months of debilitating symptoms at home with neither recognition nor care.
Meanwhile, as businesses closed and stay-at-home orders rolled out, “we presumed a trade-off between saving lives and saving the economy,” says Danielle Allen, a political scientist at Harvard. “That was foolishness of the most profound degree.” The two goals were actually aligned: Epidemiologists and economists largely agree that the economy cannot rebound while the pandemic is still raging. By treating the two as opposites, state leaders rushed to reopen, leading a barely contained virus to surge anew.
Now, as winter looms and the pandemic continues, another dichotomy has emerged: enter another awful lockdown, or let the virus run free. This choice, too, is false. Public-health measures offer a middle road, and even “lockdowns” need not be as overbearing as they were in spring. A city could close higher-risk venues like bars and nightclubs while opening lower-risk ones like retail stores. There’s a “whole control panel of dials” on offer, but “it’s hard to have that conversation when people think of a light switch,” says Lindsay Wiley, a professor of public-health law at American University. “The term lockdown has done a lot of damage.” It exacerbated the false binary between shutting down and opening up, while offering …
3. The Comfort of Theatricality
Stay-at-home orders saved lives by curtailing COVID-19’s spread, and by giving hospitals some breathing room. But the orders were also meant to buy time for the nation to ramp up its public-health defenses. Instead, the White House treated months of physical distancing as a pandemic-ending strategy in itself. “We squandered that time in terms of scaling up testing and contact tracing, enacting policies to protect workers who get infected on the job, getting protective equipment to people in food-processing plants, finding places for people to isolate, offering paid sick leave … We still don’t have those things,” says Julia Marcus, an infectious-disease epidemiologist at Harvard Medical School and regular Atlantic contributor. The country is now facing the fall with many of the same problems that plagued it through the summer.
Showiness is often mistaken for effectiveness. The coronavirus mostly spreads through air rather than contaminated surfaces, but many businesses are nonetheless trying to scrub and bleach their way toward reopening. My colleague Derek Thompson calls this hygiene theater—dramatic moves that appear to offer safety without actually doing so. The same charge applies to temperature checks, which can’t detect the many COVID-19 patients who don’t have a fever. It also applies to the porous and inefficient travel bans that Trump and his allies still tout as policy successes. These tactics might do some good—let’s not conflate imperfect with useless—but they cause harm when they substitute for stronger measures. Theatricality breeds complacency. And by emphasizing solutions that can be easily seen, it exacerbated the American preference for …
4. Personal Blame Over Systemic Fixes
SARS-CoV-2 spread rapidly among America’s overstuffed prisons and understaffed nursing homes, in communities served by overstretched hospitals and underfunded public-health departments, and among Black, Latino, and Indigenous Americans who had been geographically and financially disconnected from health care by decades of racist policies. Without paid sick leave or a living wage, “essential workers” who earn a low, hourly income could not afford to quarantine themselves when they fell ill—and especially not if that would jeopardize the jobs to which their health care is tied. “The things I do to stay safe, they don’t have that as an option,” says Whitney Robinson, a social epidemiologist at the University of North Carolina at Chapel Hill.
But tattered social safety nets are less visible than crowded bars. Pushing for universal health care is harder than shaming an unmasked stranger. Fixing systemic problems is more difficult than spewing moralism, and Americans gravitated toward the latter. News outlets illustrated pandemic articles with (often distorted) photos of beaches, even though open-air spaces offer low-risk ways for people to enjoy themselves. Marcus attributes this tendency to America’s puritanical roots, which conflate pleasure with irresponsibility, and which prize shame over support. “The shaming gets codified into bad policy,” she says. Chicago fenced off a beach, and Honolulu closed beaches, parks, and hiking trails, while leaving riskier indoor businesses open.
Moralistic thinking jeopardizes health in two ways. First, people often oppose measures that reduce an individual’s risk—seat belts, condoms, HPV vaccines—because such protections might promote risky behavior. During the pandemic, some experts used such reasoning to questionthe value of masks, while the University of Michigan’s president argued that testing students widely would offer a “false sense of security.” These paternalistic false-assurance arguments are almost always false themselves. “There’s very little evidence for overcompensation to the point where safety measures do harm,” Bergstrom says.
In times of uncertainty and upheaval, “people crave a return to familiar, predictable rhythms,” says Monica Schoch-Spana, a medical anthropologist at the Johns Hopkins Center for Health Security. That pull is especially strong now because the pandemic’s toll is largely invisible. There’s nothing as dramatic as ruined buildings or lapping floodwater to hint that the world has changed. In some circles, returning to normal has been valorized as an act of defiance. That’s a reasonable stance when resisting terrorists, who seek to stoke fear, but a dangerous one when fighting a virus, which doesn’t care.
The powerful desire to re-create an old world can obscure the trade-offs necessary for surviving the new one. Keeping high-risk indoor businesses open, for example, helps the virus spread within a community, which makes reopening schools harder. “If schools are a priority, you have to put them ahead of something. What is that something?” says Bill Hanage, an epidemiologist at Harvard. “In an ideal world, they would be the last to close and the first to open, but in many communities, casinos, bars, and tattoo parlors opened before them.” A world with COVID-19 is fundamentally different from one without it, and the former simply cannot include all the trappings of the latter. Cherished summer rituals like camps and baseball games have already been lost; back-to-school traditions and Thanksgiving now hang in the balance. Change is hard to accept, which predisposes people to …
6. Magical Thinking
Back in April, Trump imagined the pandemic’s quick end: “Maybe this goes away with heat and light,” he said. From the start, he and others wondered if hot, humid weather might curb the spread of COVID-19, as it does other coronavirus diseases. Many experts countered that seasonal effects wouldn’t stop the new virus, which was already spreading in the tropics. But, fueled by shaky science and speculative stories, people widely latched on to seasonality as a possible savior, before the virus proved that it could thrive in the Arizona, Texas, and Florida summer.
This brand of magical thinking, in which some factor naturally defuses the pandemic, has become a convenient excuse for inaction. Recently, some commentators have argued that the pandemic will imminently fizzle out for two reasons. First, 20 to 50 percent of people have defensive T-cells that recognize the new coronavirus, because they were previously exposed to its milder, common-cold-causing cousins. Second, some modeling studies claim that herd immunity—whereby the virus struggles to find new hosts, because enough people are immune—could kick in when just 20 percent of the population has been infected.
Neither claim is implausible, but neither should be grounds for complacency. No one yet knows if the “cross-reactive” T-cells actually protect against COVID-19, and even if they do, they’re unlikely to stop people from getting infected. Herd immunity, meanwhile, is not a perfect barrier. Even if the low thresholds are correct, a fast-growing and uncontrolled outbreak will still shoot past them. Pursuing this strategy will mean that, in the winter, many parts of the U.S. may suffer what New York City endured in the spring: thousands of deaths and an untold number of lingering disabilities. That alone should be an argument against …
7. The Complacency of Inexperience
When illness is averted and lives are spared, “nothing happens and all you have is the miracle of a normal, healthy day,” says Howard Koh, a public-health professor at Harvard. “People take that for granted.” Public-health departments are chronically underfunded because the suffering they prevent is invisible. Pandemic preparations are deprioritized in the peaceful years between outbreaks. Even now, many people who have been spared the ravages of COVID-19 argue that the disease wasn’t a big deal, or associate their woes with preventive measures. But the problem is still the disease those measures prevented:The economy is still hurting, mental-health problems are growing, and educational futures have been curtailed, not because of some fearmongering overreaction, but because an uncontrolled pandemic is still afoot.
If anything, the U.S. did not react swiftly or strongly enough. Nations that had previously dealt with emerging viral epidemics, including several in East Asia and sub-Saharan Africa, were quick to take the new coronavirus seriously. By contrast, America’s lack of similar firsthand experience, combined with its sense of exceptionalism, might have contributed to its initial sloppiness. “One of my colleagues went to Rwanda in February, and as soon as he hit the airport, they asked about symptoms, checked his temperature, and took his phone number,” says Abraar Karan, an internist at Brigham and Women’s Hospital and Harvard Medical School. “In the U.S., I flew in July, and walked out of the airport, no questions asked.”
Even when the virus began spreading within the U.S., places that weren’t initially pummeled seemed toforget that viruses spread. “In April, I was seeing COVID patients in the ER every day,” Karan says. “In Texas, I had friends saying, ‘No one believes it here because we have no cases.’ In L.A., fellow physicians said, ‘Are you sure this is worse than the flu? We’re not seeing anything.’” Three months later, Texas and California saw COVID-19 all too closely. The tendency to ignore threats until they directly affect us has consigned the U.S. to …
8. A Reactive Rut
In March, Mike Ryan at the World Health Organization advised, “Be fast, have no regrets … The virus will always get you if you don’t move quickly.” The U.S. failed to heed that warning, and has repeatedly found itself several steps behind the coronavirus. That’s partly because exponential growth is counterintuitive, so “we don’t understand that things look fine until right before they’re very not fine,” says Beth Redbird, a sociologist at Northwestern. It’s also because the coronavirus spreads quickly but is slow to reveal itself: It can take a month for infections to lead to symptoms, for symptoms to warrant tests and hospitalizations, and for enough sick people to produce a noticeable spike. Pandemic data are like the light of distant stars, recording past events instead of present ones. This lag separates actions from their consequences by enough time to break our intuition for cause and effect. Policy makers end up acting only when it’s too late. Predictable surges get falsely cast as unexpected surprises.
This reactive rut also precludes long-term planning. In April, Michael Osterholm, an epidemiologist at the University of Minnesota, told me that “people haven’t understood that [the pandemic] isn’t about the next couple of weeks [but] about the next two years.” Leaders should have taken the long view then. “We should have been thinking about what it would take to ensure schools open in the fall, and prevent the long-term harms of lost children’s development,” Redbird says. Instead, we started working our way through a serial monogamy of solutions, and, like spiraling army ants, marched forward with no sense of the future beyond the next few footsteps.
These errors cropup in all disasters. But the COVID-19 pandemic has special qualities that have exacerbated them. The virus moved quickly enough to upend the status quo in a few months, deepening the allure of the hastily abandoned past. It also moved slowly enough to sweep the U.S. in a patchwork fashion, allowing as-yet-untouched communities to drop their guard. The pandemic grew huge in scope, entangling every aspect of society, and maxing out our capacity to deal with complexity. “People struggle to make rational decisions when they cannot see all the cogs,” says Njoki Mwarumba, an emergency-management professor at the University of Nebraska at Omaha. Full of fear and anxiety, people furiously searched for more information, but because the virus is so new, they instead spiraled into more confusion and uncertainty. And tragically, all of this happened during the presidency of Donald Trump.
“It’s like mass gaslighting,” says Martha Lincoln, a medical anthropologist at San Francisco State University. “We were put in a situation where better solutions were closed off but a lot of people had that fact sneak up on them. In the absence of a robust federal response, we’re all left washing our hands and hoping for the best, which makes us more susceptible to magical thinking and individual-level fixes.” And if those fixes never come, “I think people are going to harden into a fatalistic sense that we have to accept whatever the risks are to continue with our everyday lives.”
The pandemic is now in its ninth month. Uncertainties abound as fall and winter loom. In much of the country, colder weather will gradually pack people into indoor spaces, where the coronavirus more readily spreads. Winter also typically heralds the arrival of the flu and other respiratory viruses, and although the Southern Hemisphere enjoyed an unusually mild flu season, that’s “because of the severe precautions they were taking against COVID-19,” says Eleanor Murray, an epidemiologist at Boston University. “It’s not clear to me that our precautions will be successful enough to also prevent the flu.”
Schools are reopening, which will shape the path of the pandemic in still-uncertain ways. Universities are more predictable: Thanks to magical thinking and misplaced moralism, the U.S. already has at least 51,000 confirmed infections in more than 1,000 colleges across every state. These (underestimated) numbers will grow, because only 20 percent of colleges are doing regular testing, while almost half are not testing at all. As more are forced to stop in-person teaching, students will be sent back to their communities with COVID-19 in tow. “I expect this will blow up outbreaks in places that never had outbreaks, or in places that had outbreaks under control,” Murray says. Further spikes will likely occur after Thanksgiving and Christmas, as people who yearn to return to normal (or who think that the country overreacted) travel to see their family. Despite that risk, the CDC recently dropped its recommendation that out-of-state travelers should quarantine themselves for 14 days.
But many of the experts I spoke with thought it unlikely that “we’ll have cities going full New York,” as Bergstrom puts it. Doctors are getting better at treating the disease. States like Massachusetts, New York, and New Jersey have managed to avoid new surges over the summer, showing that local leadership can at least partly compensate for federal laxity. A new generation of cheap, rapid, paper-based tests will hit the market and make it easier to work out who is contagious. And despite the spiral of bad intuitions, many Americans are holding the line: Mask use and support for physical distancing are still high, according to Redbird, who has been tracking pandemic-related attitudes since March. “My feeling is that while things are going to get worse, I’m not sure they’ll be catastrophic, because of situational awareness,” Bill Hanage says.
Meanwhile, Trump seems to be teeing up a vaccine announcement in late October, shortly before the November 3 election. Moncef Slaoui, the scientific head of Operation Warp Speed, told NPR that it’s “extremely unlikely” a vaccine will be ready by then, and many scientists are concerned that the FDA will be pressured into approving a product that hasn’t been adequately tested, as Russia and China already have. Many Americans share this concern. A safe and effective vaccine could finally bring the pandemic under control, but its arrival will also test America’s ability to resist the intuitive errors that have trapped it so far. Vaccination has long been portrayed as the ultimate biomedical silver bullet, separating an era when masks and social distancing mattered from a world where normality has returned. This is yet another false dichotomy. “Everyone’s imagining this moment when all of a sudden, it’s all over, and they can go on vacation,” Natalie Dean says. “But the reality is going to be messier.”
A third of Americans already say they would refuse a vaccine, whether because of existing anti-vaccine attitudes or more reasonable concerns about a rushed development process. Those who get the shot are unlikely to be fully protected; the FDA is prepared to approve a vaccine that’s at least 50 percent effective—a level comparable to current flu shots. An imperfect vaccine will still be useful. The risk is that the government goes all-in on this one theatrical countermeasure, without addressing the systemic problems that made the U.S. so vulnerable, or investing in the testing and tracing strategies that will still be necessary. “We’re still going to need those other things,” Dean says.
Between these reasons and the time needed for manufacturing and distribution, the pandemic is likely to drag on for months after a vaccine is approved. Already, the event is exacting a psychological toll that’s unlike the trauma of a hurricane or fire. “It’s not the type of disaster that Americans specifically are used to dealing with,” says Samantha Montano of Massachusetts Maritime Academy, who studies disasters. “Famines and complex humanitarian crises are closer approximations.” Health experts are burning out. Long-haulers are struggling to find treatments or support. But many Americans are turning away from the pandemic. “People have stopped watching news about it as much, or talking to friends about it,” Redbird says. “I think we’re all exhausted.” Optimistically, this might mean that people are becoming less anxious and more resilient. More worryingly, it could also mean they are becoming inured to tragedy.
The most accurate model to date predicts that the U.S. will head into November with 220,000 confirmed deaths. More than 1,000 health-care workers have died.One in every 1,125 Black Americans has died, along with similarly disproportionate numbers of Indigenous people, Pacific Islanders, and Latinos. And yet, a recent poll found that 57 percent of Republican voters and 33 percent of independents think the number of deaths is acceptable. “In order for us to mobilize around a social problem, we all have to agree that it’s a problem,” Lori Peek says. “It’s shocking that we haven’t, because you really would have thought that with a pandemic it would be easy.” This is the final and perhaps most costly intuitive error …
[Readers’ Note: This is the first of two articles on the Future of Hospitals in Post-COVID America. This article
examines how market forces are consolidating, rationalizing and redistributing acute care assets within the
broader industry movement to value-based care delivery. The second article, which will publish next month,
examines gaps in care delivery and the related public policy challenges of providing appropriate, accessible
and affordable healthcare services in medically-underserved communities.]
In her insightful 2016 book, The Gray Rhino: How to Recognize and Act on the Obvious Dangers We Ignore,
Michelle Wucker coins the term “Gray Rhinos” and contrasts them with “Black Swans.” That distinction is
highly relevant to the future of American hospitals.
Black Swans are high impact events that are highly improbable and difficult to predict. By contrast, Gray Rhinos are foreseeable, high-impact events that we choose to ignore because they’re complex, inconvenient and/or fortified by perverse incentives that encourage the status quo. Climate change is a powerful example
of a charging Gray Rhino.
In U.S. healthcare, we are now seeing what happens when a Gray Rhino and a Black Swan collide.
Arguably, the nation’s public health defenses should anticipate global pandemics and apply resources
systematically to limit disease spread. This did not happen with the coronavirus pandemic.
Instead, COVID-19 hit the public healthcare infrastructure suddenly and hard. This forced hospitals and health systems to dramatically reduce elective surgeries, lay off thousands and significantly change care delivery with the adoption of new practices and services like telemedicine.
In comparison, many see the current American hospital business model as a Gray Rhino that has been charging toward unsustainability for years with ever-building momentum.
Even with massive and increasing revenue flows, hospitals have long struggled with razor-thin margins, stagnant payment rates and costly technology adoptions. Changing utilization patterns, new and disruptive competitors, pro-market regulatory rules and consumerism make their traditional business models increasingly vulnerable and, perhaps, unsustainable.
Despite this intensifying pressure, many hospitals and health systems maintain business-as-usual practices because transformation is so difficult and costly. COVID-19 has made the imperative of change harder to ignore or delay addressing.
For a decade, the transition to value-based care has dominated debate within U.S. healthcare and absorbed massive strategic, operational and financial resources with little progress toward improved care outcomes, lower costs and better customer service. The hospital-based delivery system remains largely oriented around Fee-for-Service reimbursement.
Hospitals’ collective response to COVID-19, driven by practical necessity and financial survival, may accelerate the shift to value-based care delivery. Time will tell.
This series explores the repositioning of hospitals during the next five years as the industry rationalizes an excess supply of acute care capacity and adapts to greater societal demands for more appropriate, accessible and affordable healthcare services.
It starts by exploring the role of the marketplace in driving hospital consolidation and the compelling need to transition to value-based care delivery and payment models.
COVID’s DUAL SHOCKS TO PATIENT VOLUME
Many American hospitals faced severe financial and operational challenges before COVID-19. The sector has struggled to manage ballooning costs, declining margins and waves of policy changes. A record 18 rural hospitals closed in 2019. Overall, hospitals saw a 21% decline in operating margins in 2018-2019.
COVID intensified those challenges by administering two shocks to the system that decreased the volume of hospital-based activities and decimated operating margins.
The first shock was immediate. To prepare for potential surges in COVID care, hospitals emptied beds and cancelled most clinic visits, outpatient treatments and elective surgeries. Simultaneously, they incurred heavy costs for COVID-related equipment (e.g. ventilators,PPE) and staffing. Overall, the sector experienced over $200 billion in financial losses between March and June 20204.
The second, extended shock has been a decrease in needed but not necessary care. Initially, many patients delayed seeking necessary care because of perceived infection risk. For example, Emergency Department visits declined 42% during the early phase of the pandemic.
Increasingly, patients are also delaying care because of affordability concerns and/or the loss of health insurance. Already, 5.4 million people have lost their employer-sponsored health insurance. This will reduce incremental revenues associated with higher-paying commercial insurance claims across the industry. Additionally, avoided care reduces patient volumes and hospital revenues today even as it increases the risk and cost of future acute illness.
The infusion of emergency funding through the CARES Act helped offset some operating losses but it’s unclear when and even whether utilization patterns and revenues will return to normal pre-COVID levels. Shifts in consumer behavior, reductions in insurance coverage, and the emergence of new competitors ranging from Walmart to enhanced primary care providers will likely challenge the sector for years to come.
The disruption of COVID-19 will serve as a forcing function, driving meaningful changes to traditional hospital business models and the competitive landscape. Frankly, this is long past due. Since 1965, Fee-for-Service (FFS) payment has dominated U.S. healthcare and created pervasive economic incentives that can serve to discourage provider responsiveness in transitioning to value-based care delivery, even when aligned to market demand.
Telemedicine typifies this phenomenon. Before COVID, CMS and most health insurers paid very low rates for virtual care visits or did not cover them at all. This discouraged adoption of an efficient, high-value care modality until COVID.
Unable to conduct in-person clinical visits, providers embraced virtual care visits and accelerated its mass adoption. CMS and
commercial health insurers did their part by paying for virtual care visits at rates equivalent to in-person clinic visits. Accelerated innovation in care delivery resulted.
THE COMPLICATED TRANSITION TO VALUE
Broadly speaking, health systems and physician groups that rely almost exclusively on activity-based payment revenues have struggled the most during this pandemic. Vertically integrated providers that offer health insurance and those receiving capitated payments in risk-based contracts have better withstood volume losses.
Modern Healthcare notes that while provider data is not yet available, organizations such as Virginia Care Partners, an integrated network and commercial ACO; Optum Health (with two-thirds of its revenue risk-based); and MediSys Health Network, a New Yorkbased NFP system with 148,000 capitated and 15,000 shared risk patients, are among those navigating the turbulence successfully. As the article observes,
…providers paid for value have had an easier time weathering the storm…. helped by a steady source of
income amid the chaos. Investments they made previously in care management, technology and social
determinants programs equipped them to pivot to new ways of providing care.
They were able to flip the switch on telehealth, use data and analytics to pinpoint patients at risk for
COVID-19 infection, and deploy care managers to meet the medical and nonclinical needs of patients even
when access to an office visit was limited.
Supporting this post-COVID push for value-based care delivery, six former leaders from CMS wrote to Congress in
June 2020 calling for providers, commercial insurers and states to expand their use of value-based payment models to
encourage stability and flexibility in care delivery.
If value-based payment models are the answer, however, adoption to date has been slow, limited and difficult. Ten
years after the Affordable Care Act, Fee-for-Service payment still dominates the payer landscape. The percentage of overall provider revenue in risk-based capitated contracts has not exceeded 20%
Despite improvements in care quality and reductions in utilization rates, cost savings have been modest or negligible. Accountable Care Organizations have only managed at best to save a “few percent of Medicare spending, [but] the
amount varies by program design.”
While most health systems accept some forms of risk-based payments, only 5% of providers expect to have a majority (over 80%) of their patients in risk-based arrangements within 5 years.
The shift to value is challenging for numerous reasons. Commercial payers often have limited appetite or capacity for
risk-based contracting with providers. Concurrently, providers often have difficulty accessing the claims data they need
from payers to manage the care for targeted populations.
The current allocation of cost-savings between buyers (including government, employers and consumers), payers
(health insurance companies) and providers discourages the shift to value-based care delivery. Providers would
advance value-based models if they could capture a larger percentage of the savings generated from more effective
care management and delivery. Those financial benefits today flow disproportionately to buyers and payers.
This disconnection of payment from value creation slows industry transformation. Ultimately, U.S. healthcare will not
change the way it delivers care until it changes the way it pays for care. Fortunately, payment models are evolving to
incentivize value-based care delivery.
As payment reform unfolds, however, operational challenges pose significant challenges to hospitals and health
systems. They must adopt value-oriented new business models even as they continue to receive FFS payments. New
and old models of care delivery clash.
COVID makes this transition even more formidable as many health systems now lack the operating stamina and balance sheet strength to make the financial, operational and cultural investments necessary to deliver better outcomes, lower costs and enhanced customer service.
MARKET-DRIVEN CONSOLIDATION AND TRANSFORMATION
Full-risk payment models, such as bundled payments for episodic care and capitation for population health, are the
catalyst to value-based care delivery. Transition to value-based care occurs more easily in competitive markets with many attributable lives, numerous provider options and the right mix of willing payers.
As increasing numbers of hospitals struggle financially, the larger and more profitable health systems are expanding their networks, capabilities and service lines through acquisitions. This will increase their leverage with commercial payers and give them more time to adapt to risk-based contracting and value-based care delivery.
COVID also will accelerate acquisition of physician practices. According to an April 2020 MGMA report, 97% of
physician practices have experienced a 55% decrease in revenue, forcing furloughs and layoffs15. It’s estimated the
sector could collectively lose as much as $15.1 billion in income by the end of September 2020.
Struggling health systems and physician groups that read the writing on the wall will pro-actively seek capital or strategic partners that offer greater scale and operating stability. Aggregators can be selective in their acquisitions,
seeking providers that fuel growth, expand contiguous market positions and don’t dilute balance sheets.
Adding to the sector’s operating pressure, private equity, venture investors and payers are pouring record levels of
funding into asset-light and virtual delivery companies that are eager to take on risk, lower prices by routing procedures
and capture volume from traditional providers. With the right incentives, market-driven reforms will reallocate resources to efficient companies that generate compelling value.
As this disruption continues to unfold, rural and marginal urban communities that lack robust market forces will experience more facility and practice closures. Without government support to mitigate this trend, access and care gaps that already riddle American healthcare will unfortunately increase.
WINNING AT VALUE
The average hospital generates around $11,000 per patient discharge. With ancillary services that can often add up to
more than $15,000 per average discharge. Success in a value-based system is predicated on reducing those discharges and associated costs by managing acute care utilization more effectively for distinct populations (i.e. attributed lives).
This changes the orientation of healthcare delivery toward appropriate and lower cost settings. It also places greater
emphasis on preventive, chronic and outpatient care as well as better patient engagement and care coordination.
Such a realignment of care delivery requires the following:
A tight primary care network (either owned or affiliated) to feed referrals and reduce overall costs through
better preventive care.
A gatekeeper or navigator function (increasingly technology-based) to manage / direct patients to the most
appropriate care settings and improve coordination, adherence and engagement.
A carefully designed post-acute care network (including nursing homes, rehab centers, home care
services and behavioral health services, either owned or sufficiently controlled) to manage the 70% of
total episode-of-care costs that can occur outside the hospital setting.
An IT infrastructure that can facilitate care coordination across all providers and settings.
Quality data and digital tools that enhance care, performance, payment and engagement.
Experience with managing risk-based contracts.
A flexible approach to care delivery that includes digital and telemedicine platforms as well as nontraditional sites of care.
Aligned or incentivized physicians.
Payer partners willing to share data and offload risk through upside and downside risk contracts.
Engaged consumers who act on their preferences and best interests.
While none of these strategies is new or controversial, assembling them into cohesive and scalable business models is something few health systems have accomplished. It requires appropriate market conditions, deep financial resources,
sophisticated business acumen, operational agility, broad stakeholder alignment, compelling vision, and robust
Providers that fail to embrace value-based care for their “attributed lives” risk losing market relevance. In their relentless pursuit of increasing treatment volumes and associated revenues, they will lose market share to organizations that
deliver consistent and high-value care outcomes.
CONCLUSION: THE CHARGING GRAY RHINO
America needs its hospitals to operate optimally in normal times, flex to manage surge capacity, sustain themselves
when demand falls, create adequate access and enhance overall quality while lowering total costs. That is a tall order requiring realignment, evolution, and a balance between market and policy reform measures.
The status quo likely wasn’t sustainable before COVID. The nation has invested heavily for many decades in acute and
specialty care services while underinvesting, on a relative basis, in primary and chronic care services. It has excess
capacity in some markets, and insufficient access in others.
COVID has exposed deep flaws in the activity-based payment as well as the nation’s underinvestment in public health.
Disadvantaged communities have suffered disproportionately. Meanwhile, the costs for delivering healthcare services
consume an ever-larger share of national GDP.
Transformational change is hard for incumbent organizations. Every industry, from computer and auto manufacturing to
retailing and airline transportation, confronts gray rhino challenges. Many companies fail to adapt despite clear signals
that long-term viability is under threat. Often, new, nimble competitors emerge and thrive because they avoid the inherent contradictions and service gaps embedded within legacy business models.
The healthcare industry has been actively engaged in value-driven care transformation for over ten years with little to
show for the reform effort. It is becoming clear that many hospitals and health systems lack the capacity to operate profitably in competitive, risk-based market environments.
This dismal reality is driving hospital market valuations and closures. In contrast, customers and capital are flowing to
new, alternative care providers, such as OneMedical, Oak Street Health and Village MD. Each of these upstart
companies now have valuations in the $ billions. The market rewards innovation that delivers value.
Unfortunately, pure market-driven reforms often neglect a significant and growing portion of America’s people. This gap has been more apparent as COVID exacts a disproportionate toll on communities challenged by higher population
density, higher unemployment, and fewer medical care options (including inferior primary and preventive care infrastructure).
Absent fundamental change in our hospitals and health systems, and investment in more efficient care delivery and
payment models, the nation’s post-COVID healthcare infrastructure is likely to deteriorate in many American communities, making them more vulnerable to chronic disease, pandemics and the vicissitudes of life.
Article 2 in our “Future of Hospitals” series will explore the public policy challenges of providing appropriate, affordable and accessible healthcare to all American communities.
New approaches need to recognize patients’ wants and needs
In 1985, the very first Blockbuster store opened in Dallas — a new, modern videotape rental business with an expansive selection of video titles and computerized check-out. It was an immediate success. Demand quickly grew, customers were eager and willing to travel to the Blockbuster store, investors jumped in and three more stores opened after only one year. Blockbuster became the leading video tape rental chain with more than 9,000 stores around the world.
One component of Blockbuster’s financial model was the late fees it charged to customers who did not return a video tape to the store in time. These fees accounted for up to 16% of its revenue. In 1997, Reed Hastings was one of the customers affected by these fees. After one late rental, he was charged a hefty $40 late fee. His frustration inspired him to help create a company that would have no late charges. This new company also had the audacious idea to send DVDs straight to the customer’s home for a flat monthly fee. The company that Reed Hastings co-founded was Netflix.
Over time, Netflix changed and adapted with new technology and shifting consumer preferences.It moved on from mailing DVDs to using a streaming platform. It developed an algorithm to help make personalized video recommendations to Netflix users. It started producing its own video content. Over time, the company planted itself firmly within many homes and routines. Conversely, Blockbuster adapted to new platforms too slowly and too late. After its peak in 2004, Blockbuster started losing market share and relevance. Today, there is only one Blockbuster store left, a curious tourist attraction in Bend, Oregon.
Markets and industries change all the time. Distinguishing these important changes from temporary fads is essential. History has many examples of companies and organizations that did not sense important changes, did not change their approach, and as a result, ended up obsolete and irrelevant. A similar shift is happening today in healthcare, but there is more at stake than a late fee. Like Netflix, the healthcare industry needs to shift and adapt to consumer preferences.
The COVID-19 pandemic has had an immediate impact on the health of our country and has also indelibly changed how patients interact with the healthcare system. Hospitals and providers around the country have had to quickly develop new strategies to connect with patients – to comply with social distancing guidelines, in an effort to slow down the spread of the virus. Consistent communication and accessibility is vital, especially given the disturbing trends in decreased preventive care visits and delayed emergency care. One solution is telehealth.
During this pandemic, we have seen that remote patient monitoring is valuable for patients with a wide variety of needs: certainly, those quarantined with coronavirus, but for healthy patients too – children in need of regularly scheduled well-child visits and adults who need routine care. Many patients have experienced telehealth for the first time and many have positive impressions, with nearly three quarters of patients who had a recent telehealth visit describing it as good or very good, according to a recent survey.
Even after the COVID-19 pandemic settles, these “temporary” approaches will permanently change patient attitudes towards technology and force healthcare providers to reexamine their approach to care. Telehealth will remain a convenient option and, in some cases, a necessary way to receive care. Embedding telehealth into standard practice of care enables providers to expand the access to people who otherwise might forgo care, and to people who may face barriers getting to a clinic, for example patients with inflexible job schedules or limited transportation.
Patients and providers are not the only people recognizing the benefits; government officials are too. While reimbursement rules were temporarily expanded to include telehealth, some states, such as Colorado and Idaho, are making COVID-19 telehealth expansions permanent.
There are many parallels to borrow from the Blockbuster example. As healthcare providers, we cannot be complacent and stick with old business models because they are what we are used to. We cannot wait for people to come to us. We cannot ignore these changing times and consumers’ changing preferences. In fact, if we adapt and provide care in ways that patients prefer, we could improve health outcomes.
The healthcare institutions that will grow and be successful during this time are those who are more like Netflix. Instead of waiting for patients to decide to seek healthcare when it may be too late (e.g., just like a Blockbuster “late fee”), we will actively reach out and remind our patients about the importance of timely healthcare services. Instead of ignoring changes in patient preferences and new technology, we will adapt quickly to new platforms for healthcare visits. Instead of waiting for patients to feel comfortable to return to a healthcare facility, we will show patients what our healthcare system is doing to ensure patient safety and protection from COVID-19. Most importantly, instead of being complacent, we will accept and develop new ways of providing care.
There was once a time that we thought that getting in a car, driving to a strip mall, and walking through aisles with thousands of video tapes was the only option to watch a movie at home. Now, many of us can get thousands of titles on our televisions, computers, and phones through several movie streaming platforms. The COVID-19 pandemic has forced healthcare systems to quickly adapt to new constraints; however, it may really be an opportunity to develop new models of care, to engage with our patients, and to make healthcare more accessible. As healthcare providers, we need to make the choice to be more like Netflix, and less like Blockbuster.