The Friday release of the July jobs report gave a clearer view into a labor market clouded by mixed signals from real-time data and concerns about rising coronavirus cases across the country. The U.S. recovered another 1.8 million jobs last month—a bit above economists’ expectations, but well below the gains of May and June — and pushed the unemployment rate down to 10.2 percent.
While the U.S. economy is continuing to recover from the shock of pandemic, the report is a bit more complicated than the headline numbers indicate. Here are five key points to make sense of the July jobs report.
The recovery is still going, but slowing: The story of the coronavirus recession is a story of declines of record-breaking size and speed. Between March and April, the U.S. lost roughly 10 years of job gains and followed it up with a 32-percent annualized decline in economic growth in the second quarter.
The U.S. made solid progress recovering part of the more than 20 million jobs lost to the pandemic with gains of 2.7 million in May and 4.8 million in June. But the 1.8 million jobs gained in July marks a notable slowdown in the pace of recovery.
Economists have warned since coronavirus cases began spiking in mid-June that the resurgence would hinder the pace of growth, even if states don’t reimpose business closures. Those warnings bore out in the July jobs report, reinforcing the need to control the virus before the economy can fully recover.
The report gives both sides ammo in stimulus talks: The state of the economy rarely fits into a neat political narrative and the July jobs report is no exception.
Democrats can point to the slowing pace of job growth and the long road to recovery to support their calls for another $3 trillion in stimulus.
“The latest jobs report shows that the economic recovery spurred by the investments Congress has passed is losing steam and more investments are still urgently needed to protect the lives and livelihoods of the American people,” said House Speaker Nancy Pelosi (D-Calif.) and Senate Minority Leader Charles Schumer (D-N.Y.) in a Friday statement.
But the White House and Republican lawmakers are seizing on the expectations-beating job gain and lack of increase in permanent layoffs to make the case behind a pared down bill focused on reopening the economy.
“The most responsible thing we can do is to take proactive measures to allow people to return to work safely, instead of continuing to lock down the economy,” said Rep. Kevin Brady (R-Texas), ranking member of the House Ways and Means Committee.
The job market is still a long way from recovery: Despite three months of seven-figure job gains, the U.S. economy is still in a deeply damaged state. The July unemployment rate of 10.2 percent is roughly even with the peak of joblessness during the Great Recession of 10 percent in October 2009. And the true level of U.S. unemployment may be higher given how the pandemic has made it harder to define and track who is truly in the labor force.
It took a decade of steady economic recovery— the longest in modern U.S. history — for unemployment to drop to a 50-year low of 3.5 percent in February, so the nation remains a long way from where it was before the pandemic.
“At the current pace, it would take well into 2021 to recoup the 12.9 million jobs lost since February,” wrote Diane Swonk, chief economist at Grant Thornton, in a Friday analysis of the jobs report.
The increase in government jobs is likely misleading: Employment in government — which includes public schools — rose by 301,000 in July.
At first glance, that’s a welcome sign of resilience as state and local governments face severe budget crunches driven by falling tax revenues and staggering unemployment claims. But economists warn that the rise is likely the result of a seasonal adjustment designed to account for the large numbers of teachers and school employees that roll off of payrolls during the summer before coming back to work in the fall.
Elise Gould, senior economist at the left-leaning Economic Policy Institute, noted that public sector employment is still 1 million jobs below its February level after loads of layoffs during the beginning of the pandemic.
“We’ve seen large reductions in state and local public sector employment — a sector which disproportionately employs women and Black workers — over the last few months,” Gould wrote.
“I’d warn data watchers to consider those gains with a grain of salt, and to look at the overall changes from February (pre-COVID-19) to July.”
Aid to state and local governments is one of the biggest obstacles to gathering GOP support behind another stimulus bill, so this rise could factor into the rhetoric around the negotiations.
The report poses hard questions for negotiators: Every monthly jobs report has about two weeks of lag between the time the data was compiled — around the 12th of that month — and the report’s release.
While economic conditions don’t typically change drastically in that time, July was an exception. The $600 weekly boost to jobless benefits and the federal eviction and foreclosure ban enacted in March both lapsed in between the jobs report survey period and release, and much of the money lent through the Paycheck Protection Program had been spent by the end of the month. That means lawmakers are looking at a glimpse of the economy with much more fiscal support than it currently has, posing tough choices about how much more is needed to keep the economy afloat.
Even so, economists are urging lawmakers not to rest on their laurels as the U.S. faces a difficult road ahead.
“Any notion that the improvement in the top line provides a convenient excuse for policymakers to avoid hard decisions around a fifth round of fiscal aid aimed at the unemployed should be summarily dismissed,” wrote Joe Brusuelas, chief economist at tax and audit firm RSM, in a Friday analysis.
Talks on a new coronavirus relief package were going poorly before the report and collapsed hours after it was released.
LEADING THE DAY
Trump embraces jobs report signaling slowdown: The White House is trying to capitalize on the latest jobs numbers, arguing they point to a strong economic recovery under President Trump even as millions remain out of work and states grapple with increases in coronavirus infections.
But the data nevertheless point to an economic slowdown, challenging the White House’s bullish predictions for a speedy V-shaped recovery. The figures also come amid collapsed talks between the Trump administration and Democratic leaders on a coronavirus relief package, which economists say is desperately needed to prevent a deeper recession.
“This is not a rocket ship,” said Martha Gimbel, senior manager of economic research at Schmidt Futures. “It’s really unclear if the economy is going to achieve escape velocity before the lack of government spending crashes down or before … we have to shut down again, which is a total possibility.”
The Hill’s Morgan Chalfant and I explain why here.
The White House view: White House economic adviser Larry Kudlow, who did the rounds on cable news Friday morning, declared that the numbers evidenced a “self-sustaining recovery” and predicted that the United States would see unemployment head into the single digits in the fall months.
“The worries that some partial shutdowns or some pausing shutdowns would wreck the jobs numbers did not pan out. I think that shows signs of strength,” Kudlow said on Fox Business.
The economists’ take: Economic analysts say that despite the jobs report, there remains a need for additional fiscal stimulus. Many point to an extension of the expanded unemployment benefits and additional aid to states as necessary steps to shepherd the economy through recovery until there is a vaccine for the coronavirus.
“This jobs number doesn’t change the undeniable need for additional federal support,” said Isaac Boltansky, director of policy research at investment bank Compass Point Research & Trading.
If you make less than $600 week, you’re underpaid. Period.
The US economy added another 1.8 million jobs in July, a sharp slowdown from June and a small step for an economy that’s still down 12.9 million jobs during the pandemic.
Kelyn Yanez used to clean homes during the day and wait tables at night in the Houston area before the coronavirus. But the mother of three lost both jobs in March because of the pandemic and now is facing eviction.
The Honduran immigrant got help from a local church to pay part of July’s rent but was still hundreds of dollars short and is now awaiting a three-day notice to vacate the apartment where she lives with her children. She has no idea how she will meet her August rent.
“Right now, I have nothing,” said Yanez, who briefly got her bar job back when the establishment reopened, but lost it again when she and her 4-year-old daughter contracted the virus in June and had to quarantine. The apartment owners “don’t care if you’re sick, if you’re not well. Nobody cares here. They told me that I had to have the money.”
Yanez, who lives in the U.S. illegally, is among some 23 million people nationwide at risk of being evicted, according to The Aspen Institute, as moratoriums enacted because of the coronavirus expire and courts reopen. Around 30 state moratoriums have expired since May, according to The Eviction Lab at Princeton University. On top of that, some tenants were already encountering illegal evictions even with the moratoriums.
Now, tenants are crowding courtrooms — or appearing virtually — to detail how the pandemic has upended their lives. Some are low-income families who have endured evictions before, but there are also plenty of wealthier families facing homelessness for the first time — and now being forced to navigate overcrowded and sometimes dangerous shelter systems amid the pandemic.
Experts predict the problem will only get worse in the coming weeks, with 30 million unemployed and uncertainty whether Congress will extend the extra $600 in weekly unemployment benefits that expired Friday. The federal eviction moratorium that protects more than 12 million renters living in federally subsidized apartments or units with federally backed mortgages expired July 25. If it’s not extended, landlords can initiate eviction proceedings in 30 days.
“It’s going to be a mess,” said Bill Faith, executive director of Coalition on Homelessness and Housing in Ohio, referring to the Census Bureau Household Pulse Survey, which found last week that more than 23% of Ohioans questioned said they weren’t able to make last month’s rent or mortgage payment or had little or no confidence they could pay next month’s.
Nationally, the figure was 26.5% among adults 18 years or older, with numbers in Louisiana, Oklahoma, Nevada, Alabama, Florida, Mississippi, New York, Tennessee and Texas reaching 30% or higher. The margins of error in the survey vary by state.
“I’ve never seen this many people poised to lose their housing in a such a short period of time,” Faith said. “This is a huge disaster that is beginning to unfold.”
Housing advocates fear parts of the country could soon look like Milwaukee, which saw a 21% spike in eviction filings in June, to nearly 1,500 after the moratorium was lifted in May. It’s more than 24% across the state.
“We are sort of a harbinger of what is to come in other places,” said Colleen Foley, the executive director of the Legal Aid Society of Milwaukee.
“We are getting calls to us from zip codes that we don’t typically serve, the part of the community that aren’t used to coming to us,” she added. “It’s a reflection of the massive job loss and a lot of people facing eviction who aren’t used to not paying their rent.”
In New Orleans, a legal aid organization saw its eviction-related caseload almost triple in the month since Louisiana’s moratorium ended in mid-June. Among those seeking help is Natasha Blunt, who could be evicted from her two-bedroom apartment where she lives with her two grandchildren.
Blunt, a 50-year-old African American, owes thousands of dollars in back rent after she lost her banquet porter job. She has yet to receive her stimulus check and has not been approved for unemployment benefits. Her family is getting by with food stamps and the charity of neighbors.
“I can’t believe this happened to me because I work hard,” said Blunt, whose eviction is at the mercy of the federal moratorium. “I don’t have any money coming in. I don’t have nothing. I don’t know what to do. … My heart is so heavy.”
Along with exacerbating a housing crisis in many cities that have long been plagued by a shortage of affordable options, widespread discrimination and a lack of resources for families in need, the spike in filings is raising concerns that housing courts could spread the coronavirus.
Many cities are still running hearings virtually. But others, like New Orleans, have opened their housing courts. Masks and temperature checks are required, but maintaining social distance has been a challenge.
“The first couple of weeks, we were in at least two courts where we felt really quite unsafe,” said Hannah Adams, a staff attorney with Southeast Louisiana Legal Services.
In Columbus, Ohio, Amanda Wood was among some 60 people on the docket Friday for eviction hearings at a convention center converted into a courtroom.
Wood, 23, lost her job at a claims management company in early April. The following day, the mother of a 6-month-old found out she was pregnant again. Now, she is two months behind rent and can’t figure out a way to make ends meet.
Wood managed to find a part-time job at FedEx, loading vans at night. But her pregnancy and inability to find stable childcare has left her with inconsistent paychecks.
“The whole process has been really difficult and scary,” said Wood, who is hoping to set up a payment scheduled after meeting with a lawyer Friday. “Not knowing if you’re going to have somewhere to live, when you’re pregnant and have a baby, is hard.”
Though the numbers of eviction filings in Ohio and elsewhere are rising and, in some places reaching several hundred a week, they are still below those in past years for July. Higher numbers are expected in August and September.
Experts credit the slower pace to the federal eviction moratorium as well as states and municipalities that used tens of millions of dollars in federal stimulus funding for rental assistance. It also helped that several states, including Massachusetts and Arizona, have extended their eviction moratorium into the fall.
Still, experts argue more needs to be done at the state and federal level for tenants and landlords.
Negotiations between Congress and the White House over further assistance are ongoing. A $3 trillion coronavirus relief bill passed in May by Democrats in the House would provide about $175 billion to pay rents and mortgages, but the $1 trillion counter from Senate Republicans only has several billion in rental assistance. Advocacy groups are looking for over $100 billion.
“An eviction moratorium without rental assistance is still a recipe for disaster,” said Graham Bowman, staff attorney with the Ohio Poverty Law Center. “We need the basic economics of the housing market to continue to work. The way you do that is you need broad-based rental assistance available to families who have lost employment during this crisis.”
“The scale of this problem is enormous so it needs a federal response.”
Another 656,000 new claims were filed for Pandemic Unemployment Assistance, the benefits offered to gig and self-employed workers.
The number of people continuing traditional unemployment claims, from the week ending July 25, was 16.1 million, down about 844,000 from the week prior. (The statistic lags by a week.) When including the PUA, more than 32.1 million Americans are currently receiving some form of unemployment benefits.
“It is promising that the initial unemployment numbers have ticked down,” said AnnElizabeth Konkel, an economist at Indeed Hiring Lab. “But we aren’t out of the woods yet. The claims are still much higher than the pre-covid era, so it’s still pointing to a lot of economic pain.”
The numbers come during what many economists say is an inflection point for the country’s economy.
Congress continues to wrangle over an extension to the extra $600 a week in unemployment benefits that many laid off workers say have helped stabilize their finances — and stave off a deeper crisis from an economy hollowed by evictions, mortgage and credit card defaults, and plunging consumer demand. Those benefits expired last week.
Funds from the Paycheck Protection Program, the $660 billion federal aid program that was meant to help small businesses keep workers on the payroll, are in the process of running out, as well. And the coronavirus’ frightening march since mid-June has added to uncertainty about when — or even if — the country can expect a return in the near future to what was considered a normal way of life and doing business not that long ago.
There are many indications that workers are getting laid off for a second time in just a few short months. In California, for example, which has one of the highest rates of workers on unemployment insurance, an analysis by the University of California, Los Angeles, and the California Employment Development Department found that more than half — 57 percent — of initial unemployment claims filed during the week ending July 25th were from workers re-opening older claims, a large majority of which had been filed early in the crisis.
The unemployment rate for July, as well as the number of jobs added or lost, will be released Friday by the Bureau of Labor Statistics, from a survey taken early in the month. Many economists expect the country’s unemployment rate to drop from the 11.1 percent it was at in June; but due to the survey’s lag, many caution that the release will not register more recent economic developments that have emerged in recent weeks as the the pandemic has caught up with the country’s economic rebound.
[Readers’ Note: This is the first of two articles on the Future of Hospitals in Post-COVID America. This article
examines how market forces are consolidating, rationalizing and redistributing acute care assets within the
broader industry movement to value-based care delivery. The second article, which will publish next month,
examines gaps in care delivery and the related public policy challenges of providing appropriate, accessible
and affordable healthcare services in medically-underserved communities.]
In her insightful 2016 book, The Gray Rhino: How to Recognize and Act on the Obvious Dangers We Ignore,
Michelle Wucker coins the term “Gray Rhinos” and contrasts them with “Black Swans.” That distinction is
highly relevant to the future of American hospitals.
Black Swans are high impact events that are highly improbable and difficult to predict. By contrast, Gray
Rhinos are foreseeable, high-impact events that we choose to ignore because they’re complex, inconvenient
and/or fortified by perverse incentives that encourage the status quo. Climate change is a powerful example
of a charging Gray Rhino.
In U.S. healthcare, we are now seeing what happens when a Gray Rhino and a Black Swan collide.
Arguably, the nation’s public health defenses should anticipate global pandemics and apply resources
systematically to limit disease spread. This did not happen with the coronavirus pandemic.
Instead, COVID-19 hit the public healthcare infrastructure suddenly and hard. This forced hospitals and health systems to dramatically reduce elective surgeries, lay off thousands and significantly change care delivery with the adoption of new practices and services like telemedicine.
In comparison, many see the current American hospital business model as a Gray Rhino that has been charging toward
unsustainability for years with ever-building momentum.
Even with massive and increasing revenue flows, hospitals have long struggled with razor-thin margins, stagnant payment rates and costly technology adoptions. Changing utilization patterns, new and disruptive competitors, pro-market regulatory rules and consumerism make their traditional business models increasingly vulnerable and, perhaps, unsustainable.
Despite this intensifying pressure, many hospitals and health systems maintain business-as-usual practices because transformation is so difficult and costly. COVID-19 has made the imperative of change harder to ignore or delay addressing.
For a decade, the transition to value-based care has dominated debate within U.S. healthcare and absorbed massive strategic,
operational and financial resources with little progress toward improved care outcomes, lower costs and better customer service. The hospital-based delivery system remains largely oriented around Fee-for-Service reimbursement.
Hospitals’ collective response to COVID-19, driven by practical necessity and financial survival, may accelerate the shift to value-based care delivery. Time will tell.
This series explores the repositioning of hospitals during the next five years as the industry rationalizes an excess supply of acute care capacity and adapts to greater societal demands for more appropriate, accessible and affordable healthcare services.
It starts by exploring the role of the marketplace in driving hospital consolidation and the compelling need to transition to value-based care delivery and payment models.
COVID’s DUAL SHOCKS TO PATIENT VOLUME
Many American hospitals faced severe financial and operational challenges before COVID-19. The sector has struggled to manage ballooning costs, declining margins and waves of policy changes. A record 18 rural hospitals closed in 2019. Overall, hospitals saw a 21% decline in operating margins in 2018-2019.
COVID intensified those challenges by administering two shocks to the system that decreased the volume of hospital-based activities and decimated operating margins.
The first shock was immediate. To prepare for potential surges in COVID care, hospitals emptied beds and cancelled most clinic visits, outpatient treatments and elective surgeries. Simultaneously, they incurred heavy costs for COVID-related equipment (e.g. ventilators,PPE) and staffing. Overall, the sector experienced over $200 billion in financial losses between March and June 20204.
The second, extended shock has been a decrease in needed but not necessary care. Initially, many patients delayed seeking necessary care because of perceived infection risk. For example, Emergency Department visits declined 42% during the early phase of the pandemic.
Increasingly, patients are also delaying care because of affordability concerns and/or the loss of health insurance. Already, 5.4 million people have lost their employer-sponsored health insurance. This will reduce incremental revenues associated with higher-paying commercial insurance claims across the industry. Additionally, avoided care reduces patient volumes and hospital revenues today even as it increases the risk and cost of future acute illness.
The infusion of emergency funding through the CARES Act helped offset some operating losses but it’s unclear when and even whether utilization patterns and revenues will return to normal pre-COVID levels. Shifts in consumer behavior, reductions in insurance coverage, and the emergence of new competitors ranging from Walmart to enhanced primary care providers will likely challenge the sector for years to come.
The disruption of COVID-19 will serve as a forcing function, driving meaningful changes to traditional hospital business models and the competitive landscape. Frankly, this is long past due. Since 1965, Fee-for-Service (FFS) payment has dominated U.S. healthcare and created pervasive economic incentives that can serve to discourage provider responsiveness in transitioning to value-based care delivery, even when aligned to market demand.
Telemedicine typifies this phenomenon. Before COVID, CMS and most health insurers paid very low rates for virtual care visits or did not cover them at all. This discouraged adoption of an efficient, high-value care modality until COVID.
Unable to conduct in-person clinical visits, providers embraced virtual care visits and accelerated its mass adoption. CMS and
commercial health insurers did their part by paying for virtual care visits at rates equivalent to in-person clinic visits. Accelerated innovation in care delivery resulted.
THE COMPLICATED TRANSITION TO VALUE
Broadly speaking, health systems and physician groups that rely almost exclusively on activity-based payment revenues have struggled the most during this pandemic. Vertically integrated providers that offer health insurance and those receiving capitated payments in risk-based contracts have better withstood volume losses.
Modern Healthcare notes that while provider data is not yet available, organizations such as Virginia Care Partners, an integrated network and commercial ACO; Optum Health (with two-thirds of its revenue risk-based); and MediSys Health Network, a New Yorkbased NFP system with 148,000 capitated and 15,000 shared risk patients, are among those navigating the turbulence successfully. As the article observes,
…providers paid for value have had an easier time weathering the storm…. helped by a steady source of
income amid the chaos. Investments they made previously in care management, technology and social
determinants programs equipped them to pivot to new ways of providing care.
They were able to flip the switch on telehealth, use data and analytics to pinpoint patients at risk for
COVID-19 infection, and deploy care managers to meet the medical and nonclinical needs of patients even
when access to an office visit was limited.
Supporting this post-COVID push for value-based care delivery, six former leaders from CMS wrote to Congress in
June 2020 calling for providers, commercial insurers and states to expand their use of value-based payment models to
encourage stability and flexibility in care delivery.
If value-based payment models are the answer, however, adoption to date has been slow, limited and difficult. Ten
years after the Affordable Care Act, Fee-for-Service payment still dominates the payer landscape. The percentage of
overall provider revenue in risk-based capitated contracts has not exceeded 20%
Despite improvements in care quality and reductions in utilization rates, cost savings have been modest or negligible.
Accountable Care Organizations have only managed at best to save a “few percent of Medicare spending, [but] the
amount varies by program design.”
While most health systems accept some forms of risk-based payments, only 5% of providers expect to have a majority
(over 80%) of their patients in risk-based arrangements within 5 years.
The shift to value is challenging for numerous reasons. Commercial payers often have limited appetite or capacity for
risk-based contracting with providers. Concurrently, providers often have difficulty accessing the claims data they need
from payers to manage the care for targeted populations.
The current allocation of cost-savings between buyers (including government, employers and consumers), payers
(health insurance companies) and providers discourages the shift to value-based care delivery. Providers would
advance value-based models if they could capture a larger percentage of the savings generated from more effective
care management and delivery. Those financial benefits today flow disproportionately to buyers and payers.
This disconnection of payment from value creation slows industry transformation. Ultimately, U.S. healthcare will not
change the way it delivers care until it changes the way it pays for care. Fortunately, payment models are evolving to
incentivize value-based care delivery.
As payment reform unfolds, however, operational challenges pose significant challenges to hospitals and health
systems. They must adopt value-oriented new business models even as they continue to receive FFS payments. New
and old models of care delivery clash.
COVID makes this transition even more formidable as many health systems now lack the operating stamina and
balance sheet strength to make the financial, operational and cultural investments necessary to deliver better
outcomes, lower costs and enhanced customer service.
MARKET-DRIVEN CONSOLIDATION AND TRANSFORMATION
Full-risk payment models, such as bundled payments for episodic care and capitation for population health, are the
catalyst to value-based care delivery. Transition to value-based care occurs more easily in competitive markets with
many attributable lives, numerous provider options and the right mix of willing payers.
As increasing numbers of hospitals struggle financially, the larger and more profitable health systems are expanding
their networks, capabilities and service lines through acquisitions. This will increase their leverage with commercial
payers and give them more time to adapt to risk-based contracting and value-based care delivery.
COVID also will accelerate acquisition of physician practices. According to an April 2020 MGMA report, 97% of
physician practices have experienced a 55% decrease in revenue, forcing furloughs and layoffs15. It’s estimated the
sector could collectively lose as much as $15.1 billion in income by the end of September 2020.
Struggling health systems and physician groups that read the writing on the wall will pro-actively seek capital or
strategic partners that offer greater scale and operating stability. Aggregators can be selective in their acquisitions,
seeking providers that fuel growth, expand contiguous market positions and don’t dilute balance sheets.
Adding to the sector’s operating pressure, private equity, venture investors and payers are pouring record levels of
funding into asset-light and virtual delivery companies that are eager to take on risk, lower prices by routing procedures
and capture volume from traditional providers. With the right incentives, market-driven reforms will reallocate resources
to efficient companies that generate compelling value.
As this disruption continues to unfold, rural and marginal urban communities that lack robust market forces will
experience more facility and practice closures. Without government support to mitigate this trend, access and care gaps
that already riddle American healthcare will unfortunately increase.
WINNING AT VALUE
The average hospital generates around $11,000 per patient discharge. With ancillary services that can often add up to
more than $15,000 per average discharge. Success in a value-based system is predicated on reducing those
discharges and associated costs by managing acute care utilization more effectively for distinct populations (i.e.
This changes the orientation of healthcare delivery toward appropriate and lower cost settings. It also places greater
emphasis on preventive, chronic and outpatient care as well as better patient engagement and care coordination.
Such a realignment of care delivery requires the following:
A tight primary care network (either owned or affiliated) to feed referrals and reduce overall costs through
better preventive care.
A gatekeeper or navigator function (increasingly technology-based) to manage / direct patients to the most
appropriate care settings and improve coordination, adherence and engagement.
A carefully designed post-acute care network (including nursing homes, rehab centers, home care
services and behavioral health services, either owned or sufficiently controlled) to manage the 70% of
total episode-of-care costs that can occur outside the hospital setting.
An IT infrastructure that can facilitate care coordination across all providers and settings.
Quality data and digital tools that enhance care, performance, payment and engagement.
Experience with managing risk-based contracts.
A flexible approach to care delivery that includes digital and telemedicine platforms as well as nontraditional sites of care.
Aligned or incentivized physicians.
Payer partners willing to share data and offload risk through upside and downside risk contracts.
Engaged consumers who act on their preferences and best interests.
While none of these strategies is new or controversial, assembling them into cohesive and scalable business models is
something few health systems have accomplished. It requires appropriate market conditions, deep financial resources,
sophisticated business acumen, operational agility, broad stakeholder alignment, compelling vision, and robust
Providers that fail to embrace value-based care for their “attributed lives” risk losing market relevance. In their relentless pursuit of increasing treatment volumes and associated revenues, they will lose market share to organizations that
deliver consistent and high-value care outcomes.
CONCLUSION: THE CHARGING GRAY RHINO
America needs its hospitals to operate optimally in normal times, flex to manage surge capacity, sustain themselves
when demand falls, create adequate access and enhance overall quality while lowering total costs. That is a tall order
requiring realignment, evolution, and a balance between market and policy reform measures.
The status quo likely wasn’t sustainable before COVID. The nation has invested heavily for many decades in acute and
specialty care services while underinvesting, on a relative basis, in primary and chronic care services. It has excess
capacity in some markets, and insufficient access in others.
COVID has exposed deep flaws in the activity-based payment as well as the nation’s underinvestment in public health.
Disadvantaged communities have suffered disproportionately. Meanwhile, the costs for delivering healthcare services
consume an ever-larger share of national GDP.
Transformational change is hard for incumbent organizations. Every industry, from computer and auto manufacturing to
retailing and airline transportation, confronts gray rhino challenges. Many companies fail to adapt despite clear signals
that long-term viability is under threat. Often, new, nimble competitors emerge and thrive because they avoid the
inherent contradictions and service gaps embedded within legacy business models.
The healthcare industry has been actively engaged in value-driven care transformation for over ten years with little to
show for the reform effort. It is becoming clear that many hospitals and health systems lack the capacity to operate
profitably in competitive, risk-based market environments.
This dismal reality is driving hospital market valuations and closures. In contrast, customers and capital are flowing to
new, alternative care providers, such as OneMedical, Oak Street Health and Village MD. Each of these upstart
companies now have valuations in the $ billions. The market rewards innovation that delivers value.
Unfortunately, pure market-driven reforms often neglect a significant and growing portion of America’s people. This gap has been more apparent as COVID exacts a disproportionate toll on communities challenged by higher population
density, higher unemployment, and fewer medical care options (including inferior primary and preventive care infrastructure).
Absent fundamental change in our hospitals and health systems, and investment in more efficient care delivery and
payment models, the nation’s post-COVID healthcare infrastructure is likely to deteriorate in many American
communities, making them more vulnerable to chronic disease, pandemics and the vicissitudes of life.
Article 2 in our “Future of Hospitals” series will explore the public policy challenges of providing appropriate, affordable and accessible healthcare to all American communities.
Nearly a third of the laid off workers who were able to go back to their previous jobs have been laid off again, according to a Cornell survey released Tuesday.
The survey was conducted by RIWI from July 23 to Aug. 1, as a slew of states experiencing major COVID-19 outbreaks slammed the breaks on their economic reopenings and reimposed social distancing restrictions.
Danielle Goldfarb, head of global research at RIWI, said it was a sign that a second wave of layoffs was well underway.
“Official and private sectors jobs data have not yet picked up the significant share of American workers that have already been re-laid off,” said Goldfarb.
“Since the impact is actually worse in states that have not seen COVID surges, these data indicate a systemic problem and a much deeper recession than the mainstream data suggest,” she said.
The survey found that about 37 percent of people who were not self-employed were laid off after the pandemic struck in March, but over half (57 percent) had been called back to work since then.
But of those, 31 percent had been laid off again and another 26 percent had been told there was a possibility they would lose their jobs.
A deeper dive into the data, however, suggested that the second round of layoffs may be less about the resurgence of the virus than the loss of aid. It found only small differences in “healthier” states, those not experiencing a surge, than in places with new outbreaks.
One possible reason for the additional layoffs are problems with businesses that had remained afloat with the help of forgivable loans from the federal Paycheck Protection Program (PPP).
The funds, which started rolling out the door in April, were supposed to be enough to cover eight weeks of salary and expenses.
“The RIWI dataset output clearly shows that a substantial portion of the job growth experienced in May and June resulted from anomalies associated with PPP requirements, as opposed to underlying economic strength,” said Daniel Alpert, a senior fellow and adjunct professor of macroeconomics at Cornell Law School.
Congress has made scant progress in negotiating a new COVID-19 response bill which is expected to include an extension of the PPP and may allow businesses to apply for a second loan.
The survey was completed by 6,383 respondents, though some questions had smaller samples because they were only applicable to some people.
The margins of error for the survey questions ran from plus or minus 1.5 percent to plus or minus 3.9 percent.
The lapse of enhanced jobless benefits amid a record-breaking crush of applications is exposing the flaws and shortcomings of how the U.S. provides unemployment insurance.
The economic toll of the coronavirus pandemic has torn holes in a federal safety net woven by individual systems for every state plus the District of Columbia, Puerto Rico and the Virgin Islands. More than 30.2 million Americans were on some form of unemployment insurance as of mid-July, with the Labor Department reporting a growing number of new applications in subsequent weeks.
Friday’s expiration of a $600 weekly add-on to state benefits plunged those vulnerable Americans into financial peril.
Congressional Democrats and Trump administration officials are now deadlocked over negotiations for a broader coronavirus relief package that’s expected to include some form of federal unemployment benefits.
But short-staffed unemployment offices across the U.S. grappling with outdated technology and unprecedented demand would face challenges from implementing a scaled-down or more complicated approach to the weekly payments.
Economists and labor market experts also warn that any solution that emerges from the negotiations would take weeks, if not months, to get up and running, risking a potentially catastrophic fiscal cliff for tens of millions of U.S. households.
“You ought to be able to deliver the program that’s on the books,” said Douglas Holtz-Eakin, former director of the Congressional Budget Office and a White House economist under former President George W. Bush.
“The states, collectively, seem to have not kept up the systems and we now have a big problem because of that,” he added.
The unprecedented size and speed of the pandemic-driven economic collapse has posed a brutal challenge for state unemployment agencies. After 10 years of steady economic expansion, the labor market quickly went from the lowest unemployment rate in 50 years to the highest level of joblessness since the Great Depression.
New claims for unemployment benefits were averaging roughly 200,000 nationwide a week before the pandemic — a manageable level for state agencies that had largely been neglected during the longest stretch of growth in modern U.S. history. But the coronavirus lockdowns spurred 3.3 million new claims between March 15 and March 22, a then-record that would be doubled the following week. Before the COVID-19 outbreak, the previous record was 695,000 from the first week of October 1982.
A little more than four months after the pandemic hit, state agencies are now processing roughly 2 million new claims a week for both unemployment insurance and Pandemic Unemployment Assistance (PUA), a program designed to cover those who don’t qualify for typical benefits.
“On some level, you can’t really blame states for not being prepared for that level of onslaught,” said Michele Evermore, senior policy analyst at the National Employment Law Project.
“Usually, you see the recession starting up and state agencies say ‘You know, this looks like a recession here, so let’s start to staff up.’ This came on all at once, so we’ve had these neglected, antiquated systems and then there’s all these other stressors.”
The U.S. economy has been in recession since February, according to the National Bureau of Economic Research.
Processing the massive surge of unemployment claims on shoddy technology would have been hard enough for states. Adding enhanced benefits and PUA claims to the mix strained state agencies even more.
“It took time to upgrade those systems. It took time to hire and train new staff who could deal with the volumes of the calls, and all in a pandemic, when face-to-face contact and training and being together in office were not possible,” said Julia Pollak, labor economist at job recruitment and posting company ZipRecuriter.
“So it’s easy to see in hindsight why it all fell apart.”
Enhanced unemployment benefits are among the biggest obstacles to reaching a deal on what’s likely to be the last coronavirus relief package before the election. While President Trump and Republicans are divided over how and whether to extend the federal boost, Democrats are largely united behind extending the benefits and reducing them gradually along a curve tied to the unemployment rate.
Speaker Nancy Pelosi (D-Calif.) has called for including such a mechanism, known as an automatic stabilizers, in the coronavirus package being negotiated.
Rep. Don Beyer (D-Va.), vice chair of the Joint Economic Committee, introduced a separate bill designed to tackle economic downturns beyond the coronavirus recession. His measure would establish a six-tier system for reducing the federal benefit in line with a state’s unemployment rate.
The approach was endorsed by former Federal Reserve Chairman Ben Bernanke, who oversaw the central bank’s response to the Great Recession, and his successor, Janet Yellen.
“Every time you get close to a cliff and there’s a political battle and political price to be paid, probably by both sides, rather than just saying ‘This is what’s needed,’ let’s kick it in,” Beyer said in an interview.
“We talked to economists all across the country and virtually everyone we talked to said this makes the most sense.”
But Republican lawmakers and right-leaning economists have pushed back on efforts to codify mandatory spending and make decisions now about what will be needed to mitigate future crises.
“It’s hard for me to understand why it’s appropriate now to anticipate the economic conditions in the future and tie the hands of future elected representatives of Congress,” Holtz-Eakin said.
“It forked out $2.3 trillion in [the CARES Act] across the board in ways that got to small businesses, to households, to the employed, the unemployed. If you’re going to have one in 100-year events, that’s how you deal with them,” he added.
Republicans have instead proposed replacing the flat $600 weekly boost with a percentage of the worker’s pre-pandemic earnings in addition to what is prescribed by each state. While the wage-replacement is more tailored, Evermore warned that making the necessary calculations for each claimant could overwhelm an already teetering system.
“If you told states that they had to do a percentage replacement — oh, my gosh, that’s a recipe for crashing everything,” she said.
“It’s just not how the system is set up to work.”