- HCA has purchased MD Now Urgent Care, Florida’s largest urgent care chain, adding 59 urgent care centers to its existing 170. Meanwhile Tenet’s $1.1B deal to buy SurgCenter Development cements its position as the nation’s largest ambulatory surgery center (ASC) operator, eclipsing Envision-owned AMSURG and Optum-owned Surgical Care Affiliates.
The Gist: Healthcare services are increasingly moving outpatient and even virtual—a trend only accelerated by the pandemic. With this latest acquisition, Tenet will now own or operate nearly seven times as many ASCs as hospitals. Such national, for-profit systems are looking to add more non-acute assets to their portfolios, to capitalize on a shift fueled by both consumer preference for greater convenience, and purchaser pressure to reduce care costs.
Hospitals in the future will look far more tech-enabled and consumer-focused — when patients are actually even getting care in a hospital building itself.
Why it matters: Hospitals were already pushing more care outside their four walls before the pandemic. COVID accelerated that shift, forcing hospitals to reimagine what’s possible to deliver in patients’ homes, experts say.
The big picture: One way to picture what hospitals of the future will look like is to look at two brand new hospital buildings opened this fall by competing Pennsylvania health systems.
- The buildings, by Penn Medicine and Highmark Health both offer hotel-like amenities such as better food, streaming services, and better-positioned outlets for cell phone charging. They’ve also made medical records more accessible to patients, executives say.
- But they were also designed with the belief that, in the future, only the most complex care might be delivered in them.
State of play: Every medical room in Penn Medicine’s new $1.6 billion health pavilion can be turned into an ICU-capable room when needed.
- It added 7% in costs to the project, but made sense considering the ICU demands of the pandemic and “not knowing what the future will be,” CEO Kevin Mahoney told Axios.
- The hospital also offers patients bedside tablets that allow patients to control the light and temperature of the room, and to activate frosted privacy glass on the doors of their rooms.
- The benefits are two-fold: patients really like it and it can help free up staff to focus on more critical tasks, Mahoney said.
“The pandemic was an amplifier for natural trends that were already starting to develop,” Highmark CEO David Holmberg told Axios. “The complexity of medical procedures [in hospitals] is going to be significantly higher.”
The bottom line: Tech advances will change the entire hospital experience no matter where the care is delivered.
- Wearables will provide digital biomarkers to allow better patient monitoring from the home. “Smart” infrastructure will help patients find parking and navigate massive hospital campuses when they need to go into the hospital.
- And 5G will allow doctors to pull up massive amounts of personalized data on a wireless screen in seconds, Hon Pak, chief medical officer at Samsung Electronics told Axios.
- “The perspective we want to bring to the smart hospital is it’s not just about caring for the condition or the disease, but it’s about caring for the whole,” Pak said.
Given regulatory barriers and structural differences in practice, private equity firms have been slow to acquire and roll up physician practices and other care assets in other countries in the same way they’ve done here in the US. But according a fascinating piece in the Financial Times, investors have targeted a different healthcare segment, one ripe for the “efficiencies” that roll-ups can bring—small veterinary practices in the UK and Ireland.
British investment firm IVC bought up hundreds of small vet practices across the UK, only to be acquired itself by Swedish firm Evidensia, which is now the largest owner of veterinary care sites, with more than 1,500 across Europe. Vets describe the deals as too good to refuse: one who sold his practice to IVC said “he ‘almost fell off his chair’ on hearing how much it was offering. The vet, who requested anonymity, says IVC mistook his shock for hesitation—and increased its offer.” (Physician executives in the US, take note.) IVC claims that its model provides more flexible options, especially for female veterinarians seeking more work-life balance than offered by the typical “cottage” veterinary practice.
But consumers have complained of decreased access to care as some local clinics have been shuttered as a result of roll-ups. Meanwhile prices, particularly for pet medications like painkillers or feline insulin, have risen as much as 40 percent—and vets aren’t given leeway to offer the discounts they previously extended to low-income customers. And with IVC attaining significant market share in some communities (for instance, owning 17 of 32 vet practices in Birmingham), questions have arisen about diminished competition and even price fixing.
The playbook for private equity is consistent across human and animal healthcare: increase leverage, raise prices for care, and slash practice costs, all with little obvious value for consumers. It remains to be seen whether and how consumers will push back—either on behalf of their beloved pets, or for the sake of their own health.
A new study out this week revived an old argument about whether telehealth visits spur more downstream care utilization compared to in-person visits, potentially raising the total cost of care. Researchers evaluated three years of claims data from Blue Cross Blue Shield of Michigan to compare patients treated for an acute upper respiratory infection via telemedicine versus an in-person visit, finding that patients who used telemedicine were almost twice as likely to have a related downstream visit (10.3 percent vs. 5.9 percent, respectively).
They concluded that these increased rates of follow-up likely negate any cost savings from replacing an in-person encounter with a less costly telemedicine visit.
Our take: so what? The study failed to address the question of whether a telemedicine visit was easier to access, or more timely than an in-person visit. Further, it evaluated data from 2016-2019, so the results should be caveated as pertaining to the “pre-COVID era”, before last year’s explosion in virtual care. Moreover, it’s unsurprising that patients who have a telemedicine visit may need more follow-up care (or that providers who deliver care virtually may be more aggressive about suggesting follow-up if symptoms change).
This focus on increased downstream care as a prima facie failure also ignores the fact that telemedicine services likely tap into pent-up, unmet demand for access to care. More access is a good thing for patients—and policymakers should consider that limiting reimbursement for virtual access to primary care (which accounts for less than 6 percent of total health spending) is unlikely to deliver the system-wide reduction in healthcare spending we need.
The annual J.P. Morgan Healthcare Conference is one of the best ways to diagnose the financial condition of the healthcare industry. Every January, every key stakeholder — providers, payers, pharmaceutical companies, tech companies, medical device and supply companies as well as bankers, venture capital and private equity firms — comes together in one exam room, even when it is virtual, for their annual check-up. But as we all know, this January is unlike any other as this past year has been unlike any other year.
You would have to go back to the banking crisis of 2008 to find a similar moment from an economic perspective. At the time, we were asking, “Are banks too big to fail?” The concern behind the question was that if they did fail, the economic chaos that would follow would lead to a collapse with the consumer ultimately picking up the tab. The rest is history.
Healthcare is “Too Vital to Fail”
2020 was historic in too many ways to count. But in a year when healthcare providers faced the worst financial crisis in the history of healthcare, the headline is that they are still standing. And what they proved is that in contrast to banks in 2008 that were seen by many as “too big to fail,” healthcare providers in 2020 proved that they were “too vital to fail.”
One of the many unique things about the COVID-19 pandemic is we are simultaneously experiencing a health crisis, where healthcare providers are the front line in the battle, and an economic crisis, felt in a big way in healthcare given the unique role hospitals play as the largest employer in most communities. Hospitals and health systems have done the vast majority of testing, treating, monitoring, counseling, educating and vaccinating all while searching for PPE and ventilators, and conducting clinical trials. And that’s just the beginning of the list.
Stop and think about that for a minute. What would we have done without them? Thinking through that question will give you some appreciation for the critical, challenging and central role that healthcare providers have had to play over the past year.
Simply stated, healthcare providers are the heart of healthcare, both clinically (essentially 100 percent of the care) and financially (over 50 percent of the $4 trillion annual spend on U.S. healthcare). Over the last year they stepped up and they stepped in at the moment where we needed them the most. This was despite the fact that, like most businesses, they were experiencing calamitous losses with no assurances of any assistance.
Healthcare is “Pandemic-Proof”
This was absolutely the worst-case scenario and the biggest test possible for our nation’s healthcare delivery system. Patient volume and therefore revenue dropped by over 50 percent when the panic of the pandemic was at its peak, driving over $60 billion in losses per month across hospitals and healthcare providers. At the same time, they were dramatically increasing their expenses with PPE, ventilators and additional staff. This was not heading in a good direction. While failure may not have been seen as an option, it was clearly a possibility.
The CARES Act clearly provided a temporary lifeline, providing funding for our nation’s hospitals to weather the storm. While there are more challenging times ahead, it is now clear that most are going to make it to the other side. The system of care in our country is often criticized, but when faced with perhaps the most challenging moment in the history of healthcare, our nation’s hospitals and health systems stepped up heroically and performed miraculously. The work of our healthcare providers on the front line and those who supported them was and is one thing that we all should be exceptionally proud of and thankful for. In 2020, they proved that not only is our nation’s healthcare system too vital to fail, but also that it is “pandemic proof.”
Listening to Front Line at the 2021 J.P. Morgan Healthcare Conference
There has never been a more important year to listen to the lessons from healthcare providers. They are and were the front line of our fight against COVID-19. If there was a class given about how to deal with a pandemic at an institutional level, this conference is where those lessons were being taught.
This year at the J.P. Morgan Healthcare Conference, CEOs, and CFOs from many of the most prestigious and most well-respected health systems in the world presented including AdventHealth, Advocate Aurora Health, Ascension, Baylor Scott & White Health, CommonSpirit Health, Henry Ford Health System, Intermountain Healthcare, Jefferson Health, Mass General Brigham, Northwell Health, OhioHealth, Prisma Health, ProMedica Health System, Providence, Spectrum Health and SSM Health.
I’ve been in healthcare for 30 years and this is my fifth year of writing up the summary of the non-profit provider track of the conference for Becker’s Healthcare to help share the wisdom of the crowd of provider organizations that share their stories. Clearly, this year was different and not because the presentations were virtual, but because they were inspirational.
What did we learn? The good news is that they have made many changes that have the potential to move healthcare in a much better direction and to get to a better place much faster. So, this year instead of providing you a nugget from each presentation, I am going to take a shot at summarizing what they collectively have in motion to stay vital after COVID.
10 Moves Healthcare Providers are Making to Stay Vital After-COVID
As a leader in healthcare, you will never have a bigger opportunity to drive change than right now. Smart leaders are framing this as essentially “before-COVID (BC)” and “after-COVID (AC)” and using this moment as their burning platform to drive change. Credit to the team at Providence for the acronym, but every CEO talked about this concept. As the saying goes, “never let a good crisis go to waste.” Well, we’ve certainly had a crisis, so here is a list of what the top health systems are doing to ensure that they don’t waste it and that they stay vital after-COVID:
1. Take Care of Your Team and They’ll Take Care of You: In a crisis, you can either come together as a team or fall apart. Clearly there has been a significant and stunning amount of pressure on healthcare providers. Many are fearing that mental health might be our nation’s next pandemic in the near future because they are seeing it right now with their own team. Perhaps one of their biggest lessons from this crisis has been the need to address the mental, physical and spiritual health of both team members as well as providers. They have put programs in place to help and have also built a tremendous amount of trust with their team by, in many cases, not laying off and/or furloughing employees. While they have made cuts in other areas such as benefits, this collective approach proved incredibly beneficial. And the last point here that relates to thinking differently about their team is that similar to other businesses, many health systems are making remote arrangements permanent for certain administrative roles and moving to a flexible approach regarding their team and their space in the future.
2. Focus on Health Equity, Not Just Health Care: This was perhaps the most notable and encouraging change from presentations in past years at J.P. Morgan. I have been going to the conference for over a decade, and I’ve never heard someone mention this term or outline their efforts on “health equity” — this year, nearly everyone did. In the past, they have outlined many wonderful programs on “social determinants of health,” but this year they have seen the disproportionate impact of COVID on low-income communities bringing the ongoing issue of racial disparities in access to care and outcomes to light. As the bedrock of employment in their community, this provides an opportunity to not just provide health care, but also health equity, taking an active role to help make progress on issues like hunger, homelessness, and housing. Many are making significant investments in a number of these and other areas.
3. Take the Lead in Public Health — the Message is the Medicine: One of the greatest failings of COVID, perhaps the greatest lesson learned, is the need for clear and consistent messaging from a public health perspective. That is a role that healthcare providers can and should play. In the pandemic, it represented the greatest opportunity to save lives as the essence of public health is communication — the message is the medicine. A number of health systems stepped into this opportunity to build trust and to build their brand, which are essentially one in the same. Some organizations have created a new role — a Chief Community Health Officer — which is a good way to capture the work that is in motion relative to social determinants of health as well as health equity. Many understand the opportunity here and will take the lead relative to vaccine distribution as clear messaging to build confidence is clearly needed.
4. Make the Home and Everywhere a Venue of Care: A number of presenters stated that “COVID didn’t change our strategy, it accelerated it.” For the most part, they were referring to virtual visits, which increased dramatically now representing around 10 percent of their visits vs. 1 percent before-COVID. One presenter said, “Digital has been tested and perfected during COVID,” but that is only considering the role we see digital playing in this moment. It is clear some organizations have a very narrow tactical lens while others are looking at the opportunity much more strategically. For many, they are looking at a “care anywhere and everywhere” strategy. From a full “hospital in the home” approach to remote monitoring devices, it is clear that your home will be seen as a venue of care and an access point moving forward. The pandemic of 2020 may have sparked a new era of “post-hospital healthcare” — stay tuned.
5. Bury Your Budget and Pivot to Planning: The budget process has been a source of incredible distrust, dissatisfaction and distraction for every health system for decades. The chaos and uncertainty of the pandemic forced every organization to bury their budget last year. With that said, many of the organizations that presented are now making a permanent shift away from a “budget-based culture” where the focus is on hitting a now irrelevant target set that was set six to nine months ago to a “performance-based culture” where the focus is on making progress every day, week, month and quarter. Given that the traditional annual operating budget process has been the core of how health systems have operated, this shift to a rolling forecast and a more dynamic planning process is likely the single most substantial and permanent change in how hospitals and health systems operate due to COVID. In other words, it is arguably a much bigger headline than what’s happened with virtual visits.
6. Get Your M&A Machine in Motion: It was clear from the presentations that activity around acquisitions is going to return, perhaps significantly. These organizations have strong balance sheets and while the strong have gotten stronger during COVID, the weak have in many cases gotten weaker. Many are going to be opportunistic to acquire hospitals, but at the same time they have concluded that they can’t just be a system of care delivery. They are also focused on acquiring and investing in other types of entities as well as forming more robust partnerships to create new revenue streams. Organizations that already had diversified revenue streams in place came through this pandemic the best. Most hospitals are overly reliant on the ED and surgical volume. Trying to drive that volume in a value-based world, with the end of site of service differentials and the inpatient only list, will be an even bigger challenge in the future as new niche players enter the market. As I wrote in the headline of my summary two years ago, “It’s the platform, stupid.” There are better ways to create a financial path forward that involve leveraging their assets — their platform — in new and creative ways.
7. Hey, You, Get into the Cloud: With apologies for wrapping a Rolling Stones song into a conference summary, one of the main things touted during presentations was “the cloud” and their ability to pull clinical, operational and financial dashboards together to monitor the impact of COVID on their organization and organize their actions. Focus over the last decade has been on the clinical (implementing EHRs), but it is now shifting to “digitizing operations” with a focus on finance and operations (planning, cost accounting, ERPs, etc.) as well as advanced analytics and data science capabilities to automate, gather insight, manage and predict. It is clear that the cloud has moved from a curiosity to a necessity for health systems, making this one of the biggest areas of investment for every health system over the next decade.
8. Make Price Transparency a Key Differentiator: One of the great lessons from Amazon (and others) is that you can make a lot of money when you make something easy to buy. While many health systems are skeptical of the value of the price transparency requirements, those that have a deep understanding of both their true cost of care and margins are using this as an opportunity to prove their value and accelerate their strategy to become consumer-centric. While there is certainly a level of risk, no business has ever been unsuccessful because they made their product easier to understand and access. Because healthcare is so opaque, there is an opening for healthcare providers to build trust, which is their main asset, and volume, which is their main source of revenue, by becoming stunningly easy to do business with. This may be tough sledding for some as this isn’t something healthcare providers are known for. To understand this, spend a few minutes on Tesla’s website vs. Ford’s. The concept of making something easy, or hard, to buy will become crystal clear as fast as a battery-driven car can go from zero to 60.
9. Make Care More Affordable: This represents the biggest challenge for hospitals and health systems as they ultimately need to be on the right side of this issue or the trust that they have will disappear and they will remain very vulnerable to outside players. All are investing in advanced cost accounting systems (time-driven costing, physician costing, supply, and drug costing) to truly understand their cost and use that as a basis to price more strategically in the market. Some are dropping prices for shoppable services and using loss leader strategies to build their brand. The incoming Secretary of Health and Human Services has a strong belief regarding the accountability of health systems to be consumer centric. The health systems that understand this are working to get ahead of this issue as it is likely one of their most significant threats (or opportunities) over the next decade. This means getting all care to the right site of care, evaluating every opportunity to improve, and getting serious about eliminating the need for expensive care through building healthy communities. If you’re worried about Wal-Mart or Amazon, this is your secret weapon to keep them on the sideline.
10. Scale = Survival: One of the big lessons here is that the strong got stronger, the weak got weaker. For the strong, many have been able to “snapback” in financial performance because they were resilient. They were able to designate COVID-only facilities, while keeping others running at a higher capacity. To be clear, while most health systems are going to get to the other side and are positioned better than ever, there are many others that will continue to struggle for years to come. According to our data at Strata, we see 25 percent operating at negative margins right now and another 50 percent just above breakeven. They key to survival moving forward, for those that don’t have a captive market, will be scale. If this pandemic proved one thing relative to the future of health systems it is this — scale equals survival.
When Will We Return to Normal?
Based on what the projections that these health systems shared, the “new normal” for health systems for the first half of 2021 will be roughly 95 percent of prior year inpatient volume with a 20 percent year-over-year drop in ED volume and a drop of 10-15 percent in observation visits. So, the pain will continue, but given the adjustments that were already made in 2020, it looks like they will be able to manage through COVID effectively. While there will be a pickup in the second half of 2021, the safe bet is that a “return to normal” pre-COVID volumes likely won’t occur until 2022. And there are some who believe that some of the volume should have never been there to begin with and we might see a permanent shift downward in ED volume as well as in some other areas.
With that said, I’ll steal a quote from Bert Zimmerli, the CFO of Intermountain Healthcare, who said, “Normal wasn’t ever nearly good enough in healthcare.” In that spirit, the goal should be to not return to normal, but rather to use this moment as an opportunity to take the positive changes driven by COVID — from technology to processes to areas of focus to a sense of responsibility — and make them permanent.
Thanking Our “Healthcare Heroes”
We’ll never see another 2020 again, hopefully. With that said, one of the silver linings of the year is everything we learned in healthcare. The most important lesson was this — in healthcare there are literally heroes everywhere. To each of them, I just want to say “thank you” for being there for us when we needed you the most. We should all be writing love letters to those on the front line who risked their lives to save others. Our nation’s healthcare system has taken a lot of criticism through the years from those on the outside, often with a blind eye to how things work in practice vs. in concept. But this year we all got to see first-hand what’s happening inside of healthcare — the heroic work of our healthcare providers and those who support them.
They faced the worst crisis in the history of healthcare. They responded heroically and were there for our families and friends.
They proved that healthcare is too vital to fail. They proved that healthcare is pandemic-proof.
Thank you to our healthcare heroes.
It turns out it’s not just the kids who aren’t getting snow days this year. This week, we spoke with an executive at a health system hit hard by Wednesday’s Nor’easter, and asked how the system was faring with the expected 18 inches of snowfall. He replied that the medical group was as busy as usual.
With all the work this spring to expand telemedicine capabilities, clinic staff were able to reach out to patients the day before the storm, and proactively convert a majority of scheduled in-person clinic visits to telemedicine. “Normally we would’ve been closed, and most appointments rescheduled for weeks down the road,” he told us. Instead, they were able to keep most of those visits in their scheduled time slot.
“Now that we have a systemwide process for telemedicine, I don’t think we’ll have a reason for the clinic to take a snow day again.” It’s a clear win-win for the system and patients: patient care seamlessly goes on. It’s easy to see the many use cases for the ability to toggle between in-person and virtual visits. A parent is stuck at home with a sick kid, and can’t make her endocrinologist appointment? Moved to virtual! A patient has an unexpected business trip taking him out of town? Don’t cancel, let’s do that follow-up visit via telemedicine.
We’ve been worried about the slowdown in progress made on telemedicine as patients switched back to in-person visits across the summer and fall. The ability to continue patient care during a record-breaking snowstorm is a perfect illustration of why it’s critical not to “backslide” with virtual care: meeting patients where they are, regardless of circumstances, is an essential part of building long-term loyalty and care continuity.