Nashville, Tenn.-based HCA Healthcare saw strong growth in revenue and profit in the third quarter of 2021 compared to the same period last year.
The 183-hospital system posted revenue of $15.3 billion in the quarter ended Sept. 30, up 14.8 percent from the $13.3 billion recorded in the third quarter of 2020.
Compared to the third quarter of 2020, HCA said same-facility admissions increased 6.8 percent; emergency room visits increased 31.2 percent; inpatient surgeries declined 4.9 percent; and same-facility outpatient surgeries increased 6.4 percent.
Revenue per equivalent admission increased 5.2 percent because of increases in the acuity of patients and favorable payer mix, HCA said.
After factoring in expenses and nonoperating items, HCA’s net income totaled $2.3 billion in the third quarter of 2021, more than triple the $688 million recorded in the third quarter last year.
HCA said the results of the third quarter include more than $1 billion in gains on the sale of four hospitals in Georgia and other money from investments.
For the nine months ending Sept. 30, HCA recorded a net income of $5.1 billion on $43.6 billion in revenue. In the same nine-month period in 2020, HCA saw a net income of $2.3 billion on $37.2 billion in revenue.
“During the third quarter we experienced the most intense surge yet of the pandemic, and our colleagues and physicians delivered record levels of patient care to meet the demand caused by the delta variant,” said Sam Hazen, CEO of HCA Healthcare. “Once again, the disciplined operating culture and strong execution by our teams were on display. I want to thank them for their tremendous work and dedication to serving others.”
The stress, disruption, isolation, and lives lost during the pandemic have exacerbated longstanding challenges in access to mental healthcare. In the graphic above, we highlight how COVID has impacted the state of mental health across generations.
Younger Americans are faring much worse. This week, the nation’s leading pediatric professional societies declared a national mental health emergency for children and adolescents, and nearly half of “Generation Z” reports that their mental health has worsened during COVID.
Mental health-related emergency department (ED) visits increased in 2020 across all age groups, with the steepest rise among adolescents. Because of a national shortage of inpatient psychiatric beds, patients with mental health needs are increasingly being “boarded” in the ED—even asnearly two-thirds of EDs lack psychiatric services to adequately manage patients in crisis.
Case in point: research on behavioral health access in Massachusetts shows one in every four ED beds is now occupied by a patient awaiting psychiatric evaluation. ED boarding of patients in mental health crisis not only delays necessary care, but leads to throughput backups in hospitals, and increases caregiver stress and burnout.
Access to inpatient treatment is most challenged for children and adolescents, as well as “med-psych” patients, who also have significant physical health needs that must be managed. New solutions have emerged during the pandemic: burgeoning telemedicine platforms don’t just increase access to outpatient therapy, they also enable psychiatrists to evaluate emergency patients virtually.
In the long term, a three-part approach is needed—new virtual solutions, expanded inpatient capacity, and greater community resources to address the social needs that often accompany a behavioral health diagnosis.
Clinical labor costs are up by an average of 8% per patient day, translating to $17 million in additional annual labor expenses.
As the delta variant pushes COVID-19 caseloads to all-time highs, hospitals and health systems across the country are paying $24 billion more per year for qualified clinical labor than they did pre-pandemic, according to a new PINC AI analysis from Premier.
Clinical labor costs are up by an average of 8% per patient day when compared to a pre-pandemic baseline period in 2019. For the average 500-bed facility, this translates to $17 million in additional annual labor expenses since the beginning of the public health emergency.
The data also shows that overtime hours are up 52% as of September. At the same time, the use of agency and temporary labor is up 132% for full-time and 131% for part-time workers. The use of contingency labor – positions created to complete a temporary project or work function – is up nearly 126%.
Overtime and the use of agency staff are the most expensive labor choices for hospitals – usually adding 50% or more to a typical employee’s hourly rate, Premier found.
And hospital workers aren’t just putting in more hours – they’re also working harder. The analysis shows that productivity, measured in worked hours per unit of departmental volume, increased by an average of 7% to 14% year-over-year across the intensive care, nursing and emergency department units, highlighting the significance of the increases in cost-per-hour.
Another complicating factor is that hospital employees are more exposed to COVID-19 than many other workers, with quarantines and recoveries requiring the use of sick time. The data shows that use of sick time, particularly among full-time employees (FTEs) in the intensive care unit, is up 50% for full-time clinical staff and more than 60% for part-time employees when compared with the pre-pandemic baseline.
WHAT’S THE IMPACT
The combined stressors of working more hours while under the constant threat of coronavirus exposure are pushing many hospital workers to the breaking point. In fact, the data shows clinical staff turnover is reaching record highs in key departments like emergency, ICU and nursing.
Since the start of the pandemic, the annual rate of turnover across these departments has increased from 18% to 30%. This means nearly one-third of all employees in these departments are now turning over each year, which is almost double the rate from two years ago.
This is a number that could increase as new vaccination mandates take effect. Already, one Midwestern system reported a loss of 125 employees who chose not to be vaccinated, while a New York facility reported another 90 resignations. Overall, staffing agencies are predicting up to a 5% resignation rate once vaccine mandates kick in.
While a minority of the overall workforce, losses of even a few employees during times of extreme stress can have a ripple effect on hospital operations and costs.
THE LARGER TREND
According to the American Hospital Association, hospitals nationwide will lose an estimated $54 billion in net income over the course of the year, even taking into account the $176 billion in federal CARES Act funding from last year. Added staffing costs were not addressed as part of CARES and are further eating into hospital finances.
As a result, some are now predicting that more than half of all hospitals will have negative margins by the end of 2021 – a trend that could be dire for some community hospitals.
Prior to the pandemic, about one quarter of hospitals had negative margins, the Kaufman Hall data showed. At the beginning of 2021, after almost a year of COVID-19, half of hospitals had negative margins.
Meanwhile, the most potentially disruptive forces facing hospitals and health systems in the next three years are provider burnout, disengagement and the resulting shortages among healthcare professionals, according to a March survey of 551 healthcare executives.
Nurses and other healthcare workers have voted to authorize a strike at Kaiser Permanente in Southern California, according to a union news release.
The vote covers 21,000 registered nurses, pharmacists, midwives, physical therapists and other healthcare professionals represented by the United Nurses Associations of California/Union of Health Care Professionals, as well as 7,000 members of United Steelworkers. It does not mean a strike is scheduled. However, it gives bargaining teams the option of calling a strike. Unions representing the workers would have to provide a 10-day notice before striking.
The vote comes as Oakland, Calif.-based Kaiser is negotiating for a national contract with UNAC/UHCP, along with about 20 other unions in the Alliance of Health Care Unions. The alliance, which has been in negotiations with Kaiser since April, covers more than 50,000 Kaiser workers nationwide.
UNAC/UHCP said union members are facing “protracted understaffing” amid record levels of burnout during the COVID-19 pandemic.
“While healthcare workers are facing record levels of burnout after 18 months of the COVID pandemic, they continue to deal with protracted understaffing. Talks at the table center on how to recruit to fill open positions that impact patient care and service,” the union said in a news release. “Kaiser Permanente … wants to slash wages for new nurses and healthcare workers and depress wages for current workers trying to keep up with rising costs for food, housing and other essentials.”
Kaiser has defended its pay amid a challenging pandemic, saying its proposal includes wage increases for current employees “on top of the already market-leading pay and benefits,” as well as a market-based compensation structure for those hired in 2023 and beyond.
In a statement shared with Becker’s Oct. 11, the system also emphasized its continued focus on high-quality, safe care.
“In the event of any kind of work stoppage, our facilities will be staffed by our physicians along with trained and experienced managers and contingency staff,” the system said.
This strike would affect Kaiser hospitals and medical centers in Anaheim, Bakersfield, Baldwin Park, Downey, Fontana, Irvine, Los Angeles, Ontario Vineyard, Panorama City, Riverside, San Diego, West Los Angeles and Woodland Hills, as well as various clinics and medical office buildings in Southern California.
Hospitals across the country have spent more than $3 billion on personal protective equipment since the start of the COVID-19 pandemic, though costs have steadily declined since the worst shortages experienced during the second quarter of 2020, according to an analysis from Premier, a group purchasing organization.
Before the pandemic, hospitals normally spent about $7 on PPE costs per patient per day. That figure shot to $20.40 during the second quarter of last year, and during the first quarter of this year was around $12.45 per patient per day, according to Premier.
Hospitals are also still paying more for qualified clinical labor — roughly $24 billion more in total per year compared to before the pandemic, according to another Premier analysis out last week.
Dive Insight:
PPE was in short supply early in the pandemic, spurring bidding wars and financially straining hospitals as they suffered from the budgetary fallout of canceled elective surgeries and other lucrative services.
While supply chain challenges have since eased and costs are down since their peak, hospitals are still spending more on PPE than before the pandemic, and consumption and demand remains strong in light of the delta variant, according to the report.
Premier used a database representing 30% of U.S. hospitals across all regions from September 2019 through last month to track spending trends, looking at costs for eye protection, surgical gowns, N95 respirators, face masks, exam gloves and swabs. It then calculated total costs measuring quantities used per patient, per day, multiplied by the percent change in pricing for the quarter.
Ultimately, hospitals are still using far more N95 respirators than they were prior to the pandemic.
Demand is still up for eye protection, surgical gowns and face masks, though pricing is close to pre-pandemic levels for those items. Costs for surgical gloves and N95 respirators are still above pre-pandemic levels, according to the analysis.
While most PPE costs have steadily declined for hospitals, other expenses have not, namely labor costs.
Contract labor costs have fluctuated, though they reached record highs amid COVID-19 surges, commanding record rates from providers. And nursing shortages, especially, have been so dire that hospitals are spending more on recruiting and retaining for the positions, boosting benefits and offering steep sign on bonuses.
Clinical labor costs are up 8% on average per patient, per day compared to before the pandemic, according to the earlier Premier analysis. That translates to about $17 million in additional annual labor expenses for the average 500-bed facility.
As of last month, overtime hours are up 52% since before the pandemic. The use of agency and temporary labor is up 132% for full-time employees and 131% for part-time employees.
The most expensive labor choices for hospitals are contract labor and overtime, typically adding 50% or more to an employee’s hourly rate, according to Premier.
For that report, Premier used a database with daily data from about 250 hospitals, bi-weekly data from 650 hospitals and quarterly data for 500 hospitals from October 2019 through August to analyze workforce trends among employees in emergency departments, intensive care units or nursing areas.
The delta variant of the coronavirus continues to pile on staffing challenges for hospitals as they spend more resources on recruiting and retaining employees, jack up benefit options and offer steep sign-on bonuses, according to a Tuesday report from Moody’s Investors Service.
Those expenses will strain hospital profitability at a time when lucrative non-emergency procedures are on hold in some areas to handle incoming COVID-19 inpatients. Moody’s expects the weight on hospital budgets to continue through next year.
Although demand for temporary nursing staff dipped last week, it is still well beyond pre-pandemic levels, according to data gathered by Jefferies analysts. Crisis jobs — those that are rapid response or bill more than $100 an hour — represent more than three quarters of staffing firm Aya Healthcare’s openings, the third highest percentage Jefferies has recorded.
Dive Insight:
The highly contagious delta variant is wreaking havoc on the U.S. healthcare system as mostly unvaccinated people are filling ICUs more than a year and half into the pandemic. Clinicians who have throughout that time been stressed working long and difficult hours are reporting intense burnout as some mull leaving the profession altogether.
Meanwhile, vaccine mandates have gone into effect for many hospitals. Although they report that the vast majority of employees are complying, even the small losses of those who refuse can take a hit to staffing resources. This need has driven increases to the salaries nurses can command, as well as to benefit packages, sign-on bonuses and the offer of services like child care, Moody’s said.
The report also noted that the current shortage — unlike previous ones — also includes nonclinical staff such as dietary and environmental services workers.
While Moody’s focuses on nonprofit operators, expense challenges will be an important metric to watch during the upcoming earnings season. Although all major for-profit hospital operators beat Wall Street expectations on earnings and revenue in Q2 and most posted profit increases, expenses were a rising line item.
Hospital labor expenses rise
For-profit health systems’ labor costs year over yearhttps://datawrapper.dwcdn.net/G7DCw/2/
And consultancy Kaufman Hall has warned U.S. hospitals will lose about $54 billion in net income this year, while an earlier Moody’s report predicted impacts to the country’s health system from COVID-19 will last for decades.
As the Biden administration works to encourage more vaccinations through a combination of carrots and sticks, it remains unclear when delta may peak and what future variants could bring. Even after hospitals are on more stable ground in terms of capacity, further challenges will remain as patients return for care they deferred earlier.
And there are more long-term concerns as well. “Even after the pandemic, competition for labor is likely to continue as the population ages — a key social risk — and demand for services increases,” according to the Moody’s report.
Jefferies analysts agreed, saying the demand for temp nurses will go down but remain elevated. “Additionally, the fundamental demand drivers for nurses that existed even before COVID (i.e., nurse population demographics) have been boosted by the lingering effects of the pandemic on the profession and are likely to boost demand for temp staffing post-2022,” they wrote in the Wednesday note.
n addition to treating an influx of Covid-19 patients, many hospitals are struggling with what one administrator calls a “triple whammy” of financial burdens—stemming from plummeting revenue, higher labor costs, and reduced relief funds, Christopher Rowland reports for the Washington Post.
Hospitals in less-vaccinated areas face spiking labor costs
In areas with low vaccination rates, particularly in southern and rural communities, hospitals have been overwhelmed with Covid-19 patients, exacerbating labor shortages as workers burn out or leave for more lucrative positions, Rowland reports.
“The workforce issue is just dire,” Stacey Hughes, EVP of government relations and policy for the American Hospital Association (AHA), said. “The delta variant has wreaked significant havoc on hospitals and health systems.”
In Louisiana, Mary Ellen Pratt, CEO of St. James Parish Hospital, said many nurses quit due to the grueling conditions as Covid-19 cases spiked. “I didn’t have any extra money to incentivize my staff to pick up additional shifts,” she said. “This is coming out of bottom-line money I don’t have.”
Separately, Lisa Smithgall, SVP and chief nursing executive at Ballad Health, said the health system—which has 21 hospitals in eastern Tennessee and southwestern Virginia—has faced similar problems retaining staff amid Covid-19 surges.
“We knew we were at risk in our region because of where we live and because of our vaccination rate being so poor,” Smithgall said. “At one point, we were seeing four or five nurse resignations per week. They couldn’t do it again; they emotionally didn’t have it. They were so upset with our community.”
To fill in these growing gaps in their workforce, many hospitals have had to turn to costly contract workers, Rowland reports—a significant financial burden that further strains hospitals’ resources.
For example, Ballad Health went from hiring fewer than 75 contract nurses before the pandemic to 150 in August 2020 and 450 in August 2021. Moreover, according to Smithgall, contract nurses previously made double or triple what permanent staff nurses made, but now Ballad sometimes has to pay up to seven times as much for contract nurses as hospitals compete for workers to fill shifts.
Many hospitals, including those in areas with high vaccination rates, have delayed elective surgeries, a crucial source of revenue, amid nationwide surges in Covid-19 cases, Rowland reports—further compounding financial struggles for many organizations.
On Aug. 26, Ballad Health postponed a long list of elective surgeries—including hernia repair, cardiac and interventional radiology procedures, joint replacements, and nonessential spine surgery—to preserve space in its hospitals and conserve workers. Ballad is now allowing elective surgeries again, but only for a limited number of procedures that do not require overnight stays.
Similarly, St. Charles Health System in Oregon postponed elective surgeries in August “while we responded to a surge that was significantly greater and much more sudden than the surge in 2020,” Matt Swafford, the health system’s VP and CFO, said.
According to Swafford, the health system lost $5 million a week through August and September, around $1 million of which was repayment of emergency advances on Medicare reimbursements from last year.
“I don’t think anybody saw this level of surge coming in 2021 after what we saw in 2020,” he said. “We’re just not equipped to be able to simultaneously respond to the urgent needs of the community [for more typical surgeries and care] at the same time that a third of our beds are occupied by highly infective Covid patients.”
Many hospitals likely to end the year at a deficit
Further compounding the issue, according to Moody’s Investors Service, is that the provider relief funds that previously made up 43% of operating cash flow at nonprofit and government-run hospitals in the United States are now dwindling down.
In addition, the latest portion of provider relief funds to be distributed must be based on expenses incurred by hospitals before March 31, 2021, which don’t account for months of the delta surge, Rowland reports.
Premier, a group purchasing and technology company serving more than 4,000 hospitals and health systems, analyzed payroll data of 650 hospitals and found that U.S. hospitals have spent a total of $24 billion a year during the pandemic to cover excess labor costs, primarily for overtime and contract nurses. This was an increase of 63% from October 2019 to July 2021, Rowland reports, with hospitals in the Upper Midwest and across the South seeing the largest increases.
“It’s going to leave them huge deficits that they are going to have to work out of for years to come,” Michael Alkire, Premier’s CEO, said.
We recently shared an updated perspective on the independent physician landscape. Notably absent from this map, but an important player in this space, are entities, like health plans, private equity, and health systems, who partially or wholly fund some independent physician groups.
We intentionally left these funders off the map because they don’t work in a uniform way with all physician groups. The reality is that funders have their handprints all over this map—and just knowing what type of funder you’re working with doesn’t necessarily tell you how they work with physician groups.
Funders work across the physician landscape because they recognize two things:
First, in order to play in today’s physician market, funders need to be flexible in how they work with physicians in order to appeal to the wide variety of groups and build a bigger market presence.
Second, building or buying these physician group archetypes outright is not the only way to work with them. Many funders instead opt to invest in them—either through dollars or resources.
Key funders to watch
There are three key funders we track the closest: private equity, health plans, and health systems. Below are brief overviews of how they commonly work with independent groups and our predictions for where you might see them go next.
Private equity (PE): Consistent approach with still to be proven outcomes
The goal of PE firms is to make money on their investments. To do this, these firms buy shares of practices in order to have partial ownership. In return, physician groups get the capital they need to make investments—investments that in theory drive profits for both the physician shareholders and the PE investors. Unlike other funders, PE is rarely associated with full acquisition.
Two of the places we’ve seen the most private equity investment are in consolidation of specialty practices (usually at the national level) or value-based care investments in primary care practices (across all archetypes).
Private equity is gaining traction as a physician group partner because they often try to preserve some degree of physician autonomy and they’ve learned to nuance their investments and pitches based on the group they’re seeking to work with.
We predict: PE will continue to back the full range of archetypes on this map—investing in both independent groups directly and the national archetypes.
What we’ll be watching:
What will happen to the handful of major PE investments in the independent physician group space that will be reaching their 5-7 year mark
What level of physician autonomy will PE firms continue to preserve as PE gains stronger footholds in the physician landscape
Health plans: The most eager to transform (incrementally)
Health plans are often predominantly associated with a single physician archetype for a given plan. For example, when you think about UnitedHealthcare, you might think of their sister company, OptumCare, and an aggregation strategy. Or, you might think of Blues plans most commonly as service partners.
However, when you dig deeper, the story is much more nuanced. Plans and their parent companies like UnitedHealth Group do often aggregate practices, but they also sell and integrate services via service partner models. And several Blues plans are now building practices from the ground up. To top it off, some plans are even adopting an investment strategy like Anthem with Privia.
Perhaps more than any other funder, health plans often adopt a range of strategies to develop their physician strategy and maintain their existing networks. And even cases where plans aren’t funding entities themselves, they’re thinking of new ways to work with the growing range of physician groups.
We predict: Health plans will move away from a uniform approach to physician practice partnership and towards more multifaceted approaches to appeal to a wide range of providers.
What we’ll be watching:
Will health plans diversify their suite of approaches based on the groups they’re pursuing
Will health plans tailor their value proposition for each partnership approach
Health systems: Playing catch up to evolve
We often tend to think about health systems as aggregators—they buy independent physician groups and add them to their employed medical groups. But we’re seeing two physician market shifts that are causing health systems to move away from a one-size-fits-all approach.
One, the remaining independent groups are growing in size and, two, they are less willing to be acquired. On top of that, as private equity firms and payers continue to diversify their strategies, health systems must adapt to keep pace—or risk being seen as the least attractive partner.
As a result, more health systems are telling us about their new approaches to physician partnerships, like starting an MSO to act as a service partner or convening coalitions between themselves and independent groups.
We predict: Health systems will face increasing pressure to diversify how they are operating with physician groups. Similar to health plans, we expect to see a pivot away from an aggregation-only approach. To learn more, read our take on how health systems and independent groups should think about partnership.
What we’ll be watching:
How quickly will health systems stand up additional partnership approaches
Will health systems in markets where they’re the dominant partner proactively adjust their partnership approach versus wait for the market to shift first
Your checklist to work successfully with today’s physician groups
As you evaluate your partnership strategy, here’s our starter list of questions to ask yourself:
Clarify your partnership goals:
What are my organization’s goals for physician partnership broadly?
What are the archetypes I currently fund or partner with?
Do these archetypes serve my organization’s stated goals?
Identify the right partnership approaches for your organization
What new archetypes should I build or work with to advance my organization’s goals and target new physician groups?
Do I need to build this archetype myself or is it better to fund one that exists?
If funding, should I wholly own or invest in the archetype?
Define your value proposition to physicians
Have I adjusted my value proposition for each of the archetypes I fund or partner with?
Am I clearly articulating my value proposition in a way that speaks to physicians’ needs and wants?
Does my value proposition align with what I’m actually delivering? For example, if I say I’m preserving autonomy, how am I doing that?
How does my value proposition compare and compete with others in the market?
Map out the power dynamics of the archetypes you want to work with
Who has the ultimate decision-making power in the organization? (Hint: Decision-making power gets more diffuse as you move from right to left, national chain to service partner.)
Who are the key stakeholders who influence decision-making?
We’ve historically divided the physician landscape in two parts: hospital-employed or independent. But over time, the “independent” segment has become more complex and inclusive of more types of groups who don’t fit the traditional definition of shareholder-owned and shareholder-governed. Even true independent groups don’t look like they once did, adapting in ways like receiving funding from a range of investors or adding more employed physicians.
So our standard way of thinking—hospital-employed or independent—has become obsolete. It’s time for a more nuanced approach to a diversified market.
When the pace of investment and aggregation in the independent space picked up, we conceptualized the changes primarily in terms of funder: private equity, a health plan, a health system, or another independent group.
That made sense at the time because each type of funder was using similar methods to partner with groups—health systems acquired, private equity invested directly in the independent group, and so forth.
But the market has shifted such that remaining independent groups are both stronger and more committed to independence. So organizations who want to partner with these groups have had to refine and diversify their value propositions—and often times are doing so without all-out acquisition. For more information on themes within these funder organizations, see our companion blog.
We set out to make sense of an ever-changing independent physician landscape in a way that would make it easier to understand for both independent groups and for those who work with them. Instead of dividing the landscape by funder, we assessed organizations based on their level of autonomy vs. integration, their growth model, and their geographic reach.
The map above has five physician practice archetypes and is oriented around two axes: local to national and autonomy to integration. The four archetypes on the top are larger in scale than a traditional independent medical group, often moving regionally and then nationally.
The archetypes are also ordered based on the degree of physician and practice autonomy, with organizations on the right using more of an integrated and standardized model for care delivery and sharing a brand identity.
So far, we’ve tracked two types of trends within this landscape. First, independent groups partner with national archetypes in one of two ways. Either the groups continue to exist as both independent groups and as part of the corporate identity OR they get integrated into the corporate entity. The exception is that we have not seen national chains integrate existing medical groups—though they may in the future.
The other trend we have seen is the evolution of some of these archetypes. We currently see service partners in the market shift to look more like coalitions. We assume we may see coalitions that start to look more like aggregators, and we know many aggregators have ambitions to function more like national chains.
Below you will find a brief description of each archetype as well as a more robust table of key characteristics.
Definitions of physician archetypes
Independent medical group
Independent medical groups are traditional shareholder-owned, shareholder-governed practices. They are governed by a board of physician shareholders, and shareholders derive direct profits from the group.
Service partner
A service partner is an organization whose primary ambition is to make profits through providing a service, such as technology, data, or billing infrastructure, to physician groups. This type of partner may create some sort of alignment between practices since it sells to like-minded practices (e.g., those deep in value-based care, within the same specialty), but that alignment is more of a byproduct than the primary goal.
Coalition
Coalitions are formed from physician practices who want to get benefits of scale without giving up any individual autonomy. They join a national organization to share resources, data, and/or knowledge, but each practice also retains its individual local identity and branding. Common coalition models include IPAs, ACOs, and membership models.
Aggregator
Aggregators are the most traditional approach to getting scale from independent medical groups. They acquire practices and usually employ their physicians. The range of aggregators is very diverse. It includes health plans, health systems, private equity investors, and independent medical groups who have shifted to become aggregators themselves.
National chain
We have historically referred to national chains as disruptors, but that name is inclusive of many organizations who are not physician practices and what qualifies as “disruptive” is ever-changing—so we needed a new name that better suited these groups. National chains are corporate organizations who develop a model (e.g., consumerism, value-based care, virtual health) and bring that model to scale, usually by building new practices or hiring new providers. These are highly integrated organizations, with each new location using the same care delivery model and infrastructure.
As the independent physician landscape evolves, it has implications not only for independent groups but for those who work with them. We hope that a shared terminology helps bridge some of the gaps in understanding this complex landscape.
For those who partner with independent groups, we’d suggest reading our companion blog for our take on the three biggest funders and questions to ask yourself to work successful with today’s physician groups.
As more companies consider implementing insurance surcharges for their unvaccinated employees,Ochsner Health plans to add a $200 monthly surcharge for employees with unvaccinated spouses and domestic partners covered by the organization’s health plan.
Unvaccinated employees face potential insurance surcharges
While many companies have relied on incentives to encourage employee Covid-19 vaccination, some have recently opted to implement penalties, such as premium surcharges, for those who remain unvaccinated instead.
Recent polling suggests that these surcharges could spur a significant portion of unvaccinated employees to get the Covid-19 vaccine. According to an Affordable Health Insurance poll of 1,000 unvaccinated individuals with employer-based health plans, nearly 75% said a health insurance surcharge could motivate them to get vaccinated, with 43% saying a surcharge would definitely motivate them to get vaccinated.
“As they say, the vaccine is not mandatory, but if people have extra charges with their insurance due to not being vaccinated, people will surely push themselves to be vaccinated,” Nick Schrader, insurance agent at Texas General Insurance, said.
So far, Delta Airlines is the largest employer to implement an insurance surcharge for unvaccinated employees, and it has already seen significant increases in employee vaccination.
In August, Delta announced unvaccinated employees would have to pay a $200 monthly health insurance surcharge to remain on the company’s health insurance plan beginning Nov. 1.
According to Delta, the surcharge will protect the company from lost revenue due to unvaccinated employees being hospitalized with Covid-19—which costs the company an average of $50,000 for each case.
Henry Ting, Delta’s chief health officer, said almost 20% of the company’s unvaccinated employees received the Covid-19 vaccine in the two weeks after the surcharge was announced. In addition, the company did not see any employee turnover or resignation due to the announcement, Ting said.
Ochsner Health’s ‘spousal Covid vaccine fee’
Ochsner Health, Louisiana’s largest health system with nearly 32,000 employees and more than 4,500 physicians, plans to implement a $200 monthly surcharge for employees with unvaccinated domestic partners and spouses on the organization’s health insurance plan, the Associated Press reports.
Ochsner is the first health system to apply insurance surcharges to unvaccinated family members, not just employees. Other Louisiana health care organizations, such as Our Lady of the Lake Regional Medical Center and LCMC Health, said they would ask families of employees to be vaccinated, but did not plan on implementing a surcharge for unvaccinated spouses or partners, the Times-Picayune/New Orleans Advocate reports.
According to a letter sent from Ochsner leaders to employees, the surcharge, called the “spousal Covid vaccine fee,” will begin in 2022 and could deduct up to $2,400 a year from an employee’s paycheck. The surcharge will only apply to domestic partners or spouses, not other dependents covered by an employee’s health plan like children.
Warner Thomas, Ochsner’s president and CEO, said the surcharge for unvaccinated spouses and partners is similar to a surcharge for tobacco users and will be used to help keep health premiums low for employees. As a self-insured organization, Ochsner is responsible for the cost of Covid-19 treatment for patients on its health insurance plan, the Associated Press reports.
“The reality is the cost of treating Covid-19, particularly for patients requiring intensive inpatient care, is expensive, and we spent more than $9 million on Covid care for those who are covered on our health plans over the last year,” Thomas said.
“We know that Covid-19 vaccination dramatically reduces transmission, severity of symptoms, hospitalizations, and death. Approximately 90% of those hospitalized with Covid in our facilities have been unvaccinated since vaccines were approved in December 2020,” he added. “Widespread vaccination is critical to stopping the spread of Covid-19, and we hope this change will encourage even more community members to get vaccinated.”
Thomas also clarified that unvaccinated spouses and partners are not required to be vaccinated because of the surcharge. “This is not a mandate as non-employed spouses and domestic partners can choose to select a health plan outside of Ochsner Health offerings,” he said.
Unvaccinated spouses and partners can also apply for medical or religious exemptions for the Covid-19 vaccine, Thomas said. Currently, around 300 Ochsner employees have applied for medical or religious exemptions, the Times-Picayune/New Orleans Advocate reports.
HENRY KOTULA 