Category Archives: Hospital Industry

Beyond Hype: Getting the Most Out of Generative AI in Healthcare Today

Posted on by • Posted in Artificial Intelligence, Artificial Intelligence Generative, Charge Capture, Clinical Documentation Improvement (CDI), Cost Management, Cost Reduction, Health System, Hospital, Hospital Industry, Investment, Productivity • Leave a comment

https://www.bain.com/insights/getting-the-most-out-of-generative-ai-in-healthcare/

Generative AI applications can already help health systems improve margins, yet only 6% have a strategy ready.

At a Glance
  • In the wake of their most challenging financial year since 2020, US hospitals are desperately searching for margin improvements.
  • Generative AI can increase productivity and cost efficiency, but only 6% of health systems currently have a strategy.
  • Leading providers and payers will start with highly focused, low-risk generative AI use cases, generating the funds and experience for more transformative future applications.

While Covid-19 may no longer be dominating the global news cycle, healthcare providers and payers are still feeling its reverberations. More than half of US hospitals ended 2022 with a negative margin, marking the most difficult financial year since the start of the pandemic.

CEOs and CFOs remember the challenges all too well: The Omicron surge halted nonurgent procedures in the first half of the year, government support tapered off, and labor expenses ballooned amid staffing shortages. There was also the record-high inflation that continues to intensify margin pressures today. According to a recent Bain survey of health system executives, 60% cite rising costs as their greatest concern.

Payers and providers are now on the hunt for margin improvements. In our experience, the most successful companies won’t merely reduce costs, but also ramp up productivity. When done right, modest technology investments can accomplish both.

Artificial intelligence (AI) may hold part of the answer. With the costs to train a system down 1,000-fold since 2017, AI provides an arsenal of new productivity-enhancing tools at a low investment.

Many executives recognize the growing opportunity, especially with the recent rise of generative AI, which uses sophisticated large language models (LLMs) to create original text, images, and other content. It’s inspiring an explosion of ideas around use cases, from reviewing medical records for accuracy to making diagnoses and treatment recommendations.

Our survey reveals that 75% of health system executives believe generative AI has reached a turning point in its ability to reshape the industry. However, only 6% have an established generative AI strategy.

It’s time to play offense—or be forced to play defense later. But choosing from the laundry list of generative AI applications is daunting. Companies are at high risk of overinvesting in the wrong opportunities and underinvesting in the right ones, undermining future profitability, growth, and value creation. A wait-and-see approach is a tempting prospect.

However, we believe the next generation of leading healthcare companies will start today, with highly focused, low-risk use cases that boost productivity and cost efficiency. Over the next three to nine months, these companies will improve margins and learn how to implement a generative AI strategy, building up the funds and experience needed to invest in a more transformative vision.

Endless potential—and high hurdles 

The excitement around generative AI may feel akin to the hype around other recent digital and technology developments that never quite rose to their promised potential. Well-intentioned, well-informed individuals are debating how much change will truly materialize in the next few years. While developments over the past six months have been a testament to the breakneck speed of change, nobody can accurately predict what the next six months, year, or decade will look like. Will new players emerge? Will we rely on different LLMs for different use cases, or will one dominate the landscape?

Despite the uncertainty, generative AI already has the power to alleviate some of providers’ biggest woes, which include rising costs and high inflation, clinician shortages, and physician burnout. Quick relief is critical, considering that the heightened risk of a recession will only compound margin pressures, and the US could be short 40,800 to 104,900 physicians by 2030, according to the Association of American Medical Colleges.

Many health systems are eyeing imminent opportunities to reduce administrative burdens and enhance operational efficiency. They rank improving clinical documentation, structuring and analyzing patient data, and optimizing workflows as their top three priorities (see Figure 1).

Figure 1

In the near term, generative AI can reduce administrative burdens and enhance efficiency

Some generative AI applications are already streamlining administrative tasks and allowing thinly stretched physicians to spend more time with patients. For instance, Doximity is rolling out a ChatGPT tool that can draft preauthorization and appeal letters. HCA Healthcare partnered with Parlance, a conversational AI-based switchboard, to improve its call center experience while reducing operators’ workload. And there are new announcements seemingly every week: Consider how healthcare software company Epic Systems is incorporating ChatGPT with electronic health records (EHRs) to draft response messages to patients, or how Google Cloud is launching an AI-enabled Claims Acceleration Suite for prior authorization processing. 

These applications only scratch the surface of potential. In the future, generative AI could profoundly transform care delivery and patient outcomes. Looking ahead two to five years, executives are most interested in predictive analytics, clinical decision support, and treatment recommendations (see Figure 2).

Figure 2

Predictive analytics, clinical decisions, and care recommendations are long-term generative AI priorities

It’s hard not to catch AI “fever.” But there are real challenges ahead. Some are already tackling the biggest questions: Organizations such as Duke Health, Stanford Medicine, Google, and Microsoft have formed the Coalition for Health AI to create guidelines for responsible AI systems. Even so, solutions to the greatest hurdles aren’t yet keeping up with the rapid technology development.

Resource and cost constraints, a lack of expertise, and regulatory and legal considerations are the largest barriers to implementing generative AI, according to executives (see Figure 3).

Figure 3

A lack of resources, expertise, and regulation are the biggest barriers to generative AI in healthcare

Even when organizations can overcome these hurdles, one major challenge remains: focus and prioritization. In many boardrooms, executives are debating overwhelming lists of potential generative AI investments, only to deem them incomplete or outdated given the dizzying pace of innovation. These protracted debates are a waste of precious organizational energy—and time. 

Starting small to win big 

Setting the bar too high is setting up for failure. It’s easy to get caught up, betting big on what seems like the greatest opportunity in the moment. But 12 months later, leaders often find themselves frustrated that they haven’t seen results or feeling as if they’ve made a misplaced bet. Momentum and investments slow, further hindering progress. 

Leading companies are forming a more pragmatic strategy that considers current capabilities, regulations, and barriers to adoption. Their CEOs and CFOs work together to enforce four guiding principles: 

  • Pilot low-risk applications with a narrow focus first. Tomorrow’s leaders are making no-regret moves to deliver savings and productivity enhancements in short order—at a time when they need it most. Gaining experience with currently available technology, they are testing and learning their way to minimum viable products in low-risk, repeatable use cases. These quick wins are typically in areas where they already have the right data, can create tight guardrails, and see a strong potential return on investment. Some, like call center and chatbot support, can improve the patient experience. However, given the current challenges around regulation and compliance, the most successful early initiatives are likely to be internally focused, such as billing or scheduling. Most importantly, executives prioritize initiatives by potential savings, value, and cost.
  • Decide to buy, partner, or build. CEOs will need to think about how to invest in different use cases based on availability of third-party technology and importance of the initiative.
  • Funnel cost savings and experience into bigger bets. As the technology matures and the value becomes clear, companies that generate savings, accumulate experience, and build organizational buy-in today will be best positioned for the next wave of more sophisticated, transformative use cases. These include higher-risk clinical activities with a greater need for accuracy due to ethical and regulatory considerations, such as clinical decision support, as well as administrative activities that require third-party integration, such as prior authorization.
  • Remember generative AI isn’t a strategy unto itself. To build a true competitive advantage, top CEOs and CFOs are selective and discerning, ensuring that every generative AI initiative reinforces and enables their overarching goals.

Some health systems are already seeing powerful results from relatively small, more practical investments. For instance, recognizing that clinicians were spending an extra 130 minutes per day outside of working hours on administrative tasks, the University of Kansas Health System partnered with Abridge, a generative AI platform, to reduce documentation burden. By summarizing the most important points from provider-patient conversations, Abridge is improving the quality and consistency of documentation, getting more patients in the door, and cutting down on pervasive physician burnout.

Although it will require some upfront investment, in the long run it will be more costly to underestimate the level and speed at which generative AI will transform healthcare. The next generation of leaders will start testing, learning, and saving today, putting them on a path to eventually revolutionize their businesses.

Citing lax enforcement, senators ramp up scrutiny of nonprofit hospitals’ tax exemptions

Posted on by • Posted in Charity Care, Community Benefit, Health Policy, Health System, Hospital, Hospital Industry, Non-Profit Healthcare Industry, Tax-Exempt Status, Uncompensated Care • Leave a comment

https://www.fiercehealthcare.com/providers/citing-lax-enforcement-senators-ramp-scrutiny-nonprofit-hospitals-tax-exemptions

A bipartisan quartet of influential senators is tapping tax regulators within the U.S. Treasury for detailed information on nonprofit hospitals’ reported charity care and community investments, the latest in legislators’ increasing scrutiny of tax-exempt hospitals’ business practices.

In a pair of letters (PDF) sent Monday, Sens. Elizabeth Warren, D-Massachusetts, Raphael Warnock, D-Georgia, Bill Cassidy, M.D., R-Louisiana, and Chuck Grassley, R-Iowa, wrote they “are alarmed by reports that despite their tax-exempt status, certain nonprofit hospitals may be taking advantage of this overly broad definition of ‘community benefit’ and engaging in practices that are not in the best interest of the patient.”

The missives referenced a bevy of news reports as well as an investigation conducted by Grassley’s office detailing tax-exempt hospitals and health systems’ aggressive debt collection practices.

They also outlined studies from academic and policy groups highlighting that the tax-exempt status of the nation’s nonprofit hospitals collectively was worth about $28 billion in 2020 and how this tally paled in comparison to the charity care most of those hospitals had provided during that same period.  

Such studies have been quickly contested by the hospital lobby, which highlights that charity care is just one component of the broader activities that constitute a nonprofit hospital’s community benefit spending.

However, that ambiguity was squarely in the crosshairs of the legislators who said the long-standing community benefit standard “is arguably insufficient in its current form to guarantee protection and services to the communities hosting these hospitals.”

They cited a 2020 report from the Government Accountability Office that found oversight of nonprofit hospitals’ tax exemptions was “challenging” due to the vague definition of community benefit.

Though the IRS implemented several of the office’s recommendations from the report, “more is required to ensure nonprofit hospitals’ community benefit information is standardized, consistent and easily identifiable.” Included here could be additional updates to Form 990’s Schedule H, where nonprofits detail their community benefits and related activities.

To get a better handle on the agencies’ current oversight, the legislators requested from the IRS and the Treasury’s Tax Exempt & Government Entities Division a laundry list of information related to nonprofits’ tax filings from the last several years, including “a list of the most commonly reported community benefit activities that qualified a nonprofit hospital for tax exemptions in FY2021 and FY2022.”

They also sought lists of the nonprofit hospitals that were flagged, penalized or had their tax-exempt status revoked for violating community benefit standard requirements.

In another letter to the Treasury’s inspector general for tax administration, they asked the auditor to update their upcoming reviews to evaluate existing standards for financial assistance policy and other “practices that reduce unnecessary medical debt from patients who qualify for free or discounted care.”

The lawmakers also asked the inspector general to explore how often nonprofit hospitals bill patients with “gross charges” and to make sure the IRS is doing enough to ensure hospitals are making “’reasonable efforts’ to determine whether individuals are eligible for financial assistance before initiating extraordinary collection actions.”

Both letters from the senators gave the tax regulators 60 days to provide the requested information.

RELATED

As nonprofit hospitals reap big tax breaks, states scrutinize their required charity spending

Kaiser Permanente reports $2.1B profit, 2.9% operating margin in Q2 2023

Posted on by • Posted in Geisinger Health, Health System, Hospital, Hospital Industry, Kaiser Permanente, Net Income, Nonoperating Income, Operating Expense Reduction, Operating Expenses, Operating Income, Operating Margin, Operating Metrics, Operating Performance, Operating Revenue, Risant Health • Leave a comment

https://www.fiercehealthcare.com/providers/kaiser-permanente-reports-21b-profit-29-operating-margin-q2-2023

Kaiser Permanente built on 2023’s strong start with $2.08 billion of net income during the quarter ended June 30, bringing its midyear total to about $3.29 billion, the integrated system announced late Friday.

Operating income was also strong at $741 million (2.9% margin) and raised the organization’s six-month performance to $974 million (1.9% margin).

The numbers are both a sequential improvement and a stark turnaround from 2022. By the midpoint of that year, Kaiser Permanente was reporting a $1.3 billion net loss for the quarter and an $89 million operating gain (0.4% margin). Across 2022’s first half, the system had been down a total of $2.26 billion and added just $17 million from operations (0.0% margin).

The Oakland, California-based nonprofit is likely safe from repeating the nearly $4.5 billion net loss and $1.3 billion operating loss of full-year 2022.

Leadership, however, noted that the integrated system historically sees higher operating margins during the first half of the year “due in part to the annual enrollment cycle and seasonal care.”

“Our second-quarter financial results reflect operational improvements that, together with our ongoing expense reduction efforts, will help us face additional financial pressures in the second half of the year,” Kathy Lancaster, executive vice president and chief financial officer at Kaiser Permanente, said in a release. “The process of building our financial performance back to pre-pandemic levels requires that we continue to redesign our cost structure to support investments in our facilities, technology and people while staying competitive in a dynamic healthcare marketplace.”

Kaiser Permanente reported $25.17 billion in operating revenues for the second quarter, a 7.2% increase year over year. Operating expenses increased 4.5% year-over-year to $24.42 billion.

“Like all health systems, Kaiser Permanente is experiencing ongoing cost headwinds and volatility driven by inflation, labor shortages, and the lingering effects of the pandemic on access to care and service,” the system wrote in a release.

Kaiser Permanente’s membership has increased by more than 81,000 members since the start of the year and sits at almost 12.7 million as of June 30. The organization noted that it has kicked off an outreach campaign for Medicaid members “to ensure they have critical enrollment information as states go through the mandated process of eligibility redetermination.”

The largest impact on Kaiser Permanente’s bottom line came from investments. Owing to “favorable financial market conditions,” the organization recorded $1.34 billion in “other income and expense,” nearly a full reversal of the $1.39 billion loss on the same line item it’d logged during the same period last year.

The system’s capital spending reached $824 million for the quarter, which was up from $789 million during the second quarter of 2022 but a pullback from the first quarter of 2023’s $930 million.

“The post-pandemic financial pressures have led many in the industry to cut back on care and service,” CEO Greg Adams said in an accompanying statement. “At Kaiser Permanente, we remain focused on improving access and affordability for our patients, members and communities, which requires continued investment in care and coverage. … I want to thank all employees and physicians for turning the disruptions and challenges of the past three years into opportunities to make our healthcare system stronger and more equitable, with improved outcomes for all.”

Kaiser Permanente is the largest nonprofit health system in the country by revenue with more than $95 billion in annual revenues. As of June 30, it spanned 39 hospitals, 622 medical offices and 43 clinics in addition to its millions of covered health plan members.

Earlier in the year the system highlighted efforts to trim administrative and discretionary spending as well as a workforce push that improved clinical hiring by 15% year over year. It is in the midst of negotiating a new labor contract covering 85,000 unionized healthcare workers who are seeking workforce development investments and higher staffing levels across clinical settings.

The organization is also working toward its high-profile acquisition of fellow integrated nonprofit Geisinger Health, which Kaiser Permanente said would be the first step toward a cross-country value-based care organization called Risant Health.

Federal drug discount program faces renewed scrutiny

Posted on by • Posted in Center for Medicare and Medicaid Services (CMS), Health System, Hospital, Hospital Industry, Medicare 340B Drug Discount Program, Pharmaceutical Industry, Supreme Court • Leave a comment
https://www.axios.com/2023/08/11/340b-federal-drug-discount-scrutiny?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosvitals&stream=top

A federal drug discount program for safety-net providers that’s been a perennial source of fierce disputes among health care industry powerhouses is back in the spotlight, with billions of dollars at stake.

The big picture: 

Separate but coinciding issues are generating renewed focus on the decades-old 340B program, which requires that drugmakers give large discounts on outpatient drugs to health care providers serving low-income patients.

  • A Biden administration proposal to issue hefty back payments due to 340B providers, drugmakers’ efforts to limit discounts, and rebooted congressional interest in broader reforms are again igniting debate about the program’s scope.

Context: 

The Supreme Court last year unanimously sided with hospitals who challenged a nearly 30% reduction to their 340B payments by the Centers for Medicare and Medicaid Services that began under the Trump administration.

  • In response to the court decision, CMS last month announced a $9 billion plan to repay 340B providers that’s generated some controversy. While 340B hospitals are happy they’re getting paid back, industry groups are upset that the payments are funded by clawing back money to other hospitals.
  • Meanwhile, the Biden administration is battling drugmakers in court over restrictions they’ve placed on where hospitals can use their 340B discounts.
  • A bipartisan group of senators this summer also released a request for information on how to improve stability and oversight within the program.
  • Hospitals could face further cutbacks if Congress or the courts place new limits on 340B.

Flashback: 

The 340B program began in 1992 to help providers serving patient populations who struggled to afford their prescription drugs. It allows hospitals and other safety-net providers like community health clinics to save an average of 25% to 50% on drug purchases, according to the federal government.

  • When hospitals partner with off-site pharmacies to dispense drugs, the pharmacies also benefit financially from 340B savings.
  • The program has grown significantly since its inception, increasing from 8,100 participating safety-net providers in 2000 to 50,000 in 2020.

Between the lines: 

The expansive program growth has drawn lawmakers’ scrutiny and complaints from pharmaceutical companies, who accuse providers of using the program to pad their profits rather than help vulnerable patients. Providers dispute those accusations and say the program helps them stretch limited federal resources.

  • More than 20 drug companies have placed restrictions on when providers can use 340B discounts at off-site pharmacies. Drug companies say the limits help prevent them from having to give duplicate discounts, which occurs when both the provider and state Medicaid agency receive a discount on the same drug.
  • The Biden administration asked several drugmakers to lift their 340B restrictions and threatened fines if they don’t comply.
  • Several drugmakers have sued the administration, arguing federal officials didn’t have the right to stop them from limiting discounts. One appellate judge ruled in favor of drugmakers earlier this year, and two other cases are pending in federal appellate courts. Experts say the cases could go all the way to the Supreme Court.
  • As the legal fight plays out, 340B providers are urging Congress to approve new measures to prevent drugmakers from restricting access to discounts.
  • The other side: Drugmakers, meanwhile, want lawmakers to tighten hospital eligibility standards and place stronger limits on how 340B pharmacies can profit from the program.
  • Of note: Rural hospitals, some of which were spared from the 340B cuts made years ago, are especially concerned about the hit they would take from CMS’ proposed funding clawbacks.
  • Rural facilities today rely heavily on 340B to offset other financial losses, Brock Slabach, chief operations officer at the National Rural Health Association, told Axios.
  • “You can’t get out of this problem without harming those who were helped,” Slabach said.
  • What we’re watching: Expect to keep hearing about 340B in the coming months.
  • CMS still needs to finalize the 340B repayment plan after the public comment ends Sept. 5.
  • The D.C. Circuit Court of Appeals and the 7th Circuit Court of Appeals will issue rulings on whether the Biden administration can reverse drugmakers’ 340B restrictions.
  • Congress could take up a serious reform effort following the Senate’s information request, though that would take time.

Seniors’ medical debt soars to $54 billion in unpaid bills

Posted on by • Posted in Collection Agency, Collection Practices, Health System, Hospital, Hospital Industry, Medical Debt, Out of Pocket Expenses, Rev Cycle Management, Revenue Cycle • Leave a comment
Seniors’ medical debt soars to $54 billion in unpaid bills

Seniors face more than $50 billion in unpaid medical bills, many of which they shouldn’t have to pay, according to a federal watchdog report.

In an all-too-common scenario, medical providers charge elderly patients the full price of an expensive medical service rather than work with the insurer that is supposed to cover it. If the patient doesn’t pay, the provider sends the bill into collections, setting off a round of frightening letters, humiliating phone calls and damaging credit reports.

That is one conclusion of a recent report titled Medical Billing and Collections Among Older Americans, from the Consumer Financial Protection Bureau.

The report recounts a horror story from a patient in southern Pennsylvania over a hospital visit, which should have been covered by insurance.

“I never received a bill from anyone,” the patient said in a 2022 complaint. Then came a phone call from a collection agency. “The woman on the phone started off aggressively screaming at me,” saying the patient owed $2,300.

“I told her there must be some mistake, that both Medicare and my supplement insurance would have covered it. It has in the past. She started screaming, very loud, ‘If you don’t pay me right now, I will put this on your credit report.’ I told her, ‘If you keep screaming at me, I will hang up.’ She continued, so I hung up.”

Nearly 4 million seniors reported unpaid medical bills in 2020, even though 98 percent of them had insurance, the report found. Medicare, the national health insurance program, was created to protect older Americans from burdensome medical expenses.

Total unpaid medical debt for seniors rose from $44.8 billion in 2019 to $53.8 billion in 2020, even though older adults reported fewer doctor visits and lower out-of-pocket costs in 2020.

Medical debt among seniors is rising partly because health care costs are going up, agency officials said. But much of the $53.8 billion is cumulative, they said, debt carried over from one year to the next. Figures for 2020 were the latest available.

Millions of older Americans are covered by both Medicare and Medicaid, a second federal insurance program for people of limited means. Federal and state laws widely prohibit health care providers from billing those patients for payment beyond nominal copays.

Yet, those low-income patients are more likely than wealthier seniors to report unpaid medical bills. The agency’s findings suggest that health care companies are billing low-income seniors “for amounts they don’t owe.” The findings draw from census data and consumer complaints collected between 2020 and 2022.

Many complaints depict medical providers and collection agencies relentlessly pursuing seniors for payment on bills that an insurance company has rejected over an error, rather than correcting the error and resubmitting the claim.

“Many of these errors likely are avoidable or fixable,” the report states, “but only a fraction of rejected claims are adjusted and resubmitted.”

When a patient points out the error, the creditors might agree to fix it, only to ignore that pledge and double down on the debt collection effort.

An Oklahoma senior recounted a collection agency nightmare that followed a hospital stay. After paying all legitimate bills, the patient discovered new charges from a collection agency on a credit report. In subsequent months, additional charges appeared.

The patient assembled billing statements and correspondence, hoping to clear the bogus charges. “I then proceeded to spend every weekday, all day, for two weeks on the phone, trying to find out who was billing me and why,” the patient said in a 2021 complaint.

The Oklahoman eventually paid the bills, “even though I don’t owe them.” Then, more charges appeared.

“Nice racket they have going,” the patient quipped.

As anyone with health insurance knows, medical providers occasionally charge patients for services that should have been covered by the insurer. Someone forgets to submit the claim, or types the wrong billing code or omits crucial documentation. Some providers charge patients more than the negotiated rate, a discounted fee set between the provider and insurer.

Americans spend hours of their lives disputing such charges. But many seniors aren’t up to the task.

“It’s tiring to have multiple conversations, sitting on the phone for an hour, chasing representatives,” said Genevieve Waterman, director of economic and financial security at the National Council on Aging.

“I think technology is outpacing older adults,” she said. “If you don’t have the digital literacy, you’re going to get lost.”

Older adults are more likely than younger people to have multiple chronic health conditions, which can require more detailed insurance documentation and face greater scrutiny, yielding more billing errors and denied claims, the federal report says.

Seniors are also more likely to rely on more than one insurance plan. As of 2020, two-thirds of older adults with unpaid medical bills had two or more sources of insurance.

Multiple insurers means a more complex billing process, making it harder for either patient or provider to file a claim and see that it is paid. With Medicaid, “you have 50 states, plus the territories,” said one official from the federal agency, speaking on condition of anonymity. “They each have their own billing system.”

In an analysis of Medicare complaints filed between 2020 and 2022, the agency found that 53 percent involved debt collectors seeking money the patient didn’t owe. In a smaller share of cases, patients reported that collection agents threatened punitive action or made false statements to press their case.

The complaints “illustrate how difficult it is to identify an inaccurate bill, learn where it originated, and correct other people’s mistakes,” the report states. “Some providers refuse to talk to consumers because the account has already been referred to collections. Even when providers seem willing to correct their own mistakes, debt collectors may continue attempting to collect a debt that is not owed and refuse to stop reporting inaccurate data.”

Rather than carry on a fight with collection agents over multiple rounds of calls and correspondence, many seniors become ensnared in a “doom loop,” the report says, convinced their appeal is hopeless. They pay the erroneous bill.

“I think some people get to the point where they just throw up their hands and give up a credit card number just to make the problem go away,” said Juliette Cubanski, deputy director of the Program on Medicare Policy at KFF.

Debt takes a toll on the mental and physical health of seniors, research has shown. Older adults with debt are more prone to a range of ailments, including hypertension, cancer and depression.

As the Oklahoma patient said, recalling a years-long battle over unpaid bills, “It nearly sent me back to the hospital.”

Thinking Long-Term: Changes in Five Domains will Impact the Future of the U.S. System but Most are Not Prepared

Posted on by • Posted in Change, Change Mindset, Health System, Hospital, Hospital Industry, Market Consolidation, Market Power, Market Trends, Market Uncertainty, Private Equity, Regulation, Regulatory Pressures, Strategic Change, Strategic Imperative, Strategic Leadership, Strategy Sustainable Long Term • Leave a comment
Thinking Long-Term: Changes in Five Domains will Impact the Future of the U.S. System but Most are Not Prepared

The U.S. health system is big and getting bigger. It is labor intense, capital intense, and highly regulated. Each sector operates semi-independently protected by local, state and federal constraints that give incumbents advantages and dissuade insurgents.

Competition has been intramural:

Growth by horizontal consolidation within sectors has been the status quo for most to meet revenue and influence targets. In tandem, diversification aka vertical consolidation and, for some, globalization in each sector has distanced bigger players from smaller:

  • insurers + medical groups + outpatient facilities + drug benefit managers
  • hospitals + employed physicians + insurance plans + venture/private equity investing in start-ups
  • biotech + pharma + clinical data warehousing,
  • retail pharmacies + primary & preventive care + health & wellbeing services + OTC products/devices
  • regulated medical devices + OTC products for clinics, hospitals, homes, workplaces and schools.

The landscape is no man’s land for the faint of heart but it’s golden for savvy private investors seeking gain at the expense of the system’s dysfunction and addictions—lack of price transparency, lack of interoperability and lack of definitive value propositions.

What’s ahead? 

Everyone in the U.S. health system is aware that funding is becoming more scarce and regulatory scrutiny more intense, but few have invested in planning beyond tomorrow and the day after. Unlike drug and device manufacturers with global markets and long-term development cycles, insurers and providers are handicapped. Insurers respond by adjusting coverage, premiums and co-pays annually. Providers—hospitals, physicians, long-term care providers and public health programs– have fewer options. For most, long-range planning is a luxury, and even when attempted, it’s prone to self-protection and lack of objectivity.

Changes to the future state of U.S. healthcare are the result of shifts in these domains:

They apply to every sector in healthcare and define the context for the future of each organization, sector and industry as a whole:

  • The Clinical Domain: How health, diseases and treatments are defined and managed where and by whom; how caregivers and individuals interact; how clinical data is accessed, structured and translated through AI enabled algorithms; how medication management and OTC are integrated; how social determinants are recognized and addressed by caregivers and communities: and so on. The clinical domain is about more than doctors, nurses, facilities and pills.
  • The Technology Domain: How information technologies enable customization in diagnostics and treatments; how devices enable self-care; how digital platforms enable access; how systemness facilitates integration of clinical, claims and user experience data; how operating environments shift to automation lower unit costs; how sites of care emerge; how caregivers are trained and much more. Proficiency in the integration of technologies is the distinguishing feature of organizations that survive and those that don’t. It is the glue that facilitates systemness and key to the system’s transformation.
  • The Regulatory Domain: How affordability, value, competition, choice, healthcare markets, not-for-profit and effectiveness are defined; how local, state and federal laws, administrative orders by government agencies and executive actions define and change compliance risks; how elected officials assess and mitigate perceived deficiencies in a sector’s public accountability or social responsibility; how courts adjudicate challenges to the status quo and barriers to entry by outsiders/under-served populations; how shareholder ownership in healthcare is regulated to balance profit and the public good; et al. Advocacy on behalf of incumbents geared to current regulatory issues (especially in states) is compulsory table stakes requiring more attention; evaluating potential regulatory environment shifts that might fundamentally change the way a system is structured, roles played, funded and overseen is a luxury few enjoy.
  • The Capital Domain: how needed funding for major government programs (Medicare, Medicaid, Children’s, Military, Veterans, HIS, Dual Eligibles et al) is accessed and structured; how private investment in healthcare is encouraged or dissuaded; how monetary policies impact access to debt; how personal and corporate taxes impact capitalization of U.S. healthcare; how value-based programs reduce unnecessary costs and improve system effectiveness; how the employer tax exemption fares long-term as employee benefits shrink; how U.S. system innovations are monetized in global markets; how insurers structure premiums and out of pocket payments: et al. The capital domain thinks forward to the costs of capital it deploys and anticipated returns. But inputs in the models are wildly variable and inconsistent across sectors: hospitals/health systems vs. global private equity healthcare investors vs. national insurers’ capital strategies vary widely and each is prone to over-simplification about the others.
  • The Consumer Domain: how individuals, households and populations perceive and use the system; how they assess the value of their healthcare spending; how they vote on healthcare issues; how and where they get information; how they assess alternatives to the status quo; how household circumstances limit access and compromise outcomes; et al. The original sin of the U.S, health system is its presumption that it serves patients who are incapable/unwilling to participate effectively and actively in their care. Might the system’s effectiveness and value proposition be better and spending less if consumerization became core to its future state?

For organizations operating in the U.S. system, staying abreast of trends in these domains is tough. Lag indicators used to monitor trends in each domain are decreasingly predictive of the future. Most Boards stay focused on their own sector/subsector following the lead of their management and thought leadership from their trade associations. Most are unaware of broader trends and activities outside their sector because they’re busy fixing problems that impact their current year performance. Environmental assessments are too narrow and short-sighted. Planning processes are not designed to prompt outside the box thinking or disciplined scenario planning. Too little effort is invested though so much is at risk.

It’s understandable. U.S. healthcare is a victim of its success; maintaining the status quo is easier than forging a new path, however obvious or morally clear.  Blaming others and playing the victim card is easier than corrective actions and forward-thinking planning.

In 10 years, the health system will constitute 20% of the entire U.S. economy and play an outsized role in social stability. It’s path to that future and the greater good it pursues needs charting with open minds, facts and creativity. Society deserves no less.

The changing face of the nursing workforce

Posted on by • Posted in Health System, Hospital, Hospital Industry, Nurse Agency Staffing, Nurse Education, Nurse Retention, Nurse Staffing, Nurse Training, Nurse Vacancy Rates, Nurses Compensation, Nurses Leadership, Nurses Shortage, Recruiting, Retention, Retirement, Talent Imperative, Talent Management, Workforce Retention, Workforce Shortages, Workforce Strategy • Leave a comment

https://mailchi.mp/377fb3b9ea0c/the-weekly-gist-august-4-2023?e=d1e747d2d8

Last week we discussed how hospitals are still struggling to retain talent. This week’s graphic offers one explanation for this trend: 

a significant share of older nurses, who continued to work during the height of the pandemic, have now exited the workforce, and health systems are even more reliant on younger nurses. 

Between 2020 and 2022, the number of nurses ages 65 and older decreased by 200K, resulting in a reduction of that age cohort from 19 percent to 13 percent of the total nursing workforce. While the total number of nurses in the workforce still increased, the younger nurses filling these roles are both earlier in their nursing careers (thus less experienced), and more likely to change jobs. 

Case in point:

From 2019 to 2023, the average tenure of a hospital nurse dropped by 22 percent. The wave of Baby Boomer nurse retirements has also resulted in a 33 percent decrease from 2020 to 2022 in the number of registered nurses who have been licensed for over 40 years. 

Given these shifts, hospitals must adjust their current recruitment, retention, training, and mentorship initiatives to match the needs of younger, early-career nurses.

Cartoon – Resuscitation Available

Posted on by • Posted in Billing Related, Cartoon, Health Insurance Coverage Adequacy, Health System, High Prices, Hospital, Hospital Bill, Hospital Industry, Out of Pocket Expenses, Resuscitation, Rev Cycle Management, Revenue Cycle • Leave a comment

When private equity and doctors break up

Posted on by • Posted in Federal Trade Commission, Federal Trade Commission (FTC), Health System, Hospital, Hospital Industry, Non-Compete Agreements, Physician, Physician Arms Race, Physician Coverage, Private Equity, Specialty Care • Leave a comment

https://mailchi.mp/c02a553c7cf6/the-weekly-gist-july-28-2023?e=d1e747d2d8

We recently spoke with a health system COO who wanted help playing out scenarios regarding the relationship between specialist physicians and their private equity (PE) partners. The system is located in one of the markets referenced in a recent study that has some of the highest levels of private equity ownership in the country. One physician group, whose doctors provide almost all the system’s coverage for a key specialty, has worked with PE partners for five years, and the relationship is not going well. “We’re hearing that many of the younger doctors want to leave. And many of the others are close to retirement,” he shared. 

“We’re really concerned about what could happen if the group implodes.” The key issue: the doctors signed very restrictive noncompete agreements when they sold their practice, which could prohibit them from working in the market. 

The health system would consider bringing some of the doctors into their employed medical group, but executives are worried this might be impossible for the duration of the noncompete agreements. “If these doctors can’t stay locally, we might have to rebuild that specialty from scratch. And I can’t imagine how disruptive that would be,” he worried.
 
When the FTC announced a proposed rule earlier this year that would ban employers from imposing noncompete agreements, many health systems reacted with alarm, fearing the that the freedom to move would lead to frequent bidding wars, ultimately driving up the cost of physician talent in the market.

But the situation shows how perspectives would change depending on who holds the noncompete.

Mid-sized markets like this one, where coverage for several specialties may come from single groups, are particularly vulnerable. Regardless, this situation highlights the need to diversify physician relationships to guard against getting caught in a “coverage crisis”.

Hospitals still struggling to retain talent

Posted on by • Posted in Cost Management, Cost Reduction, Health System, Hospital, Hospital Industry, Labor Spend Management, Nurse Retention, Nurse Vacancy Rates, Nurses Compensation, Nurses Leadership, Nurses Shortage, Operating Expense Reduction, Operating Expenses, Operating Income, Operating Margin, Operating Performance, Recruiting, Retention, Retirement, Talent Management, Talent Pipelines, Turnover Rates • Leave a comment

https://mailchi.mp/c02a553c7cf6/the-weekly-gist-july-28-2023?e=d1e747d2d8

Of all the pandemic’s impacts still felt today, disruptions to the healthcare workforce and rising labor costs may be most impactful to current health system operations.

Over the next three editions of the Weekly Gist, we’ll be exploring the lingering effects of this workforce crisis, with a focus on nurse staffing and recruitment.


In this week’s graphic, we use data from the 2023 NSI National Health Care Retention Report to show how hospital turnover and vacancy rates have changed over the past several years. 

While wage increases helped reduce hospital registered nurse (RN) turnover rates from 27 percent in 2021 to 23 percent in 2022, nurses—along with hospital employees in general—are still changing jobs at higher rates than before the pandemic.

Over half of all hospitals still face nurse vacancy rates above 15 percent, a slight improvement from 2022 but still far more than before the pandemic.

While the worst of nursing turnover appears to have passed, the “rebasing” of wages (for nursing, 27 percent higher compared to 2019) will provide ongoing pressure to strained hospital margins.