Ketul J. Patel, Division President, Pacific Northwest; Chief Executive Officer, CommonSpirit Health; Virginia Mason Franciscan Health

There is no shortage of challenges to confront in healthcare today, from workforce shortages and burnout to innovation and health equity (and so much more). We’re committed to giving industry leaders a platform for sharing best practices and exchanging ideas that can improve care, operations and patient outcomes.


Check out this podcast interview with Ketul J. Patel, CEO at Virginia Mason Franciscan Health and division president, Pacific Northwest at CommonSpirit Health, for his insights on where healthcare is headed in the future.

In this episode, we are joined by Ketul J. Patel, Division President, Pacific Northwest; Chief Executive Officer, CommonSpirit Health; Virginia Mason Franciscan Health, to discuss his background & what led him to executive healthcare leadership, challenges surrounding workforce shortages, the importance of having a strong workplace culture, and more.

‘Hospital purgatory’: Confidence in healthcare plunges as criticism grows louder and larger

Payers, pharmacy benefit managers and drug manufacturers are no strangers to heavy criticism from the public and providers alike. Now another sector of the healthcare system has found itself increasingly caught in the crosshairs of constituents looking to point a finger for the rising cost of care: hospitals.

As sharp words against the industry bubble up more often and encompass a wider variety of issues, it marks an important turn in the ethos of American healthcare. Most policymakers have historically wanted hospitals on their side, and health systems are often the largest employer within their communities and in many states.

“In my career, I’ve never seen things more aligned to the detriment of hospitals than it is now,” Paul Keckley, PhD, said. Dr. Keckley is a widely known industry analyst and editor of The Keckley Report, a weekly newsletter discussing healthcare policy and current trends. 

Confidence in the medical system as a whole fell from 51 percent in 2020 to a record low of 38 percent in 2022. Though the healthcare system is among all major U.S. institutions facing record-low public confidence, are hospitals ready for an era of widespread distrust? 

We’re going into hospital purgatory. It’s a period in which old rules may not work in the future,” Dr. Keckley said. “The only thing we know for sure is that it’s not going to get easier.”

State-versus-hospital fights have popped up throughout the U.S. over the past year. Most recently, in Colorado, a back and forth unfolded between Gov. Jared Polis and the state’s hospital association over who is ultimately responsible for high care costs. In a speech Jan. 17, the Democratic governor accused Colorado’s hospitals of overcharging patients and sitting on significant cash reserves.

“It’s time that we hold them accountable,” he said.

The Colorado Hospital Association says the data supporting those claims does not reflect the several ongoing industry challenges, among them labor shortages, regulatory burdens and inflationary pressures.

“Unfortunately, we continue to hear rhetoric against the hospitals and health systems that have worked diligently on healthcare quality, access and affordability,” CHA said in a statement to Becker’s. “Colorado’s hospitals and health systems have been working with the administration on many of these programs, including reinsurance, hospital discounted care, price transparency, out-of-network patient protections, and more.”

Some 1,500 miles eastward, another incident of hospital-community conflict grew. In January, Pennsylvania lawmakers promoted a nonpartisan report that accuses UPMC of building a monopoly in the state through consolidation over the last decade — the Pittsburgh-based system refuted the claims, saying they were based on “flawed data.”

To the south, North Carolina officials accused the state’s seven largest health systems in June of using pandemic aid to enrich themselves. Hospitals said the accusations were based on “cherry-picked data” spun in a way that does not reflect their ongoing challenges.

As state- and market-level fights against hospitals intensify and grab national attention, hospitals and health systems may find themselves less familiar in steadying public perception than their payer and pharmaceutical counterparts, who are no strangers to vocal opponents.  

“With public opinion shifting a bit amid COVID, and with some anecdotal evidence that hospitals are doing some bad things, state policymakers feel that they are enjoying the political will to make these gestures,” Ge Bai, PhD, said. “It’s also a key issue for voters. Even if they don’t do anything in reality, the gesture will probably get political capital.”

Dr. Bai is a professor of accounting and health policy at Baltimore-based Johns Hopkins University. She believes a key underlying factor driving hospital critiques as of late is the reduced public confidence in medicine by way of the pandemic. 

“The hospital industry has moved away from its traditional charitable mission and toward a business orientation that is undeniable,” she said. “With the [pandemic] dust settling, I think a lot of people realize the clinicians are the heroes, but hospitals are maybe not as altruistic as they once thought.”

In 2021, over 70 percent of Americans said they trusted physicians and nurses, but only 22 percent said the same about hospital executives, according to a study from the University of Chicago and The Associated Press-NORC Center for Public Affairs Research. 

“It’s a tough job and a complicated business to run, and everybody in the community has an opinion about it based on anecdotal evidence,” Dr. Keckley said. “I think much of the blame too for hospitals taking a lot of hits has been boards that are not prepared to govern.”

For both Drs. Keckley and Bai, there are other major issues they each point to as contributing factors to the growing wariness around hospital operations: 

  • A lack of compliance with CMS price transparency rules. Some of the most recent studies estimate hospital compliance rates could range from 16 percent to 55 percent, while hospitals say the issue has been mischaracterized. CMS has penalized very few hospitals for noncompliance since the rule took effect in 2021.
  • The decades-long trend of consolidation hitting a tipping point. With consolidation, hospitals have long argued the trend would lead to more efficiency, care access, quality of care and lower costs. One of the most comprehensive consolidation studies to date was released Jan. 24 in JAMA and concluded that merged health systems have led to “marginally better care at significantly higher costs.”

    “Hospitals are doing exactly what they’re supposed to do — make money to survive and expand,” Dr. Bai said. “Instead of blaming individual players, we have to raise the bar and think about who created the system in the first place that makes competition so difficult — the government.”
  • State retirement benefits plans struggling financially. Though not a new trend, unfunded healthcare benefits promised to retired public employees and their dependents continues to grow around the country, incentivizing state lawmakers to look in new directions to save on costs. Unfunded retiree healthcare liabilities across all states surpassed $1 trillion in 2019, according to the American Legislative Exchange Council.
  • Competition from other healthcare sectors. Competition for patients has arrived from other healthcare sectors, especially from payers. In 2023, UnitedHealth Group’s Optum owns or is affiliated with the most physicians in the country at 60,000, though it’s likely higher after several large acquisitions last year.

“The center of gravity in healthcare has shifted from hospitals that muscled their way into scaling,” Dr. Keckley said. “The reality is that providing hospital services in non-hospital settings that are safe, effective and less costly is where the market, and insurers, are going.”

Despite the uptick in states and Americans that have gone into fault-finding mode against hospitals and those running them, operating a financially successful hospital or health system in 2023 is a monumental task, perhaps even close to impossible for many. Last year, approximately half of U.S. hospitals finished the year with a negative margin, making it “the worst financial year” for the industry since the start of the pandemic, according to Kaufman Hall’s latest “National Flash Hospital Report.”

“Hospitals aren’t going into this with a huge amount of goodwill at their backs, and I think that’s what they need to be prepared for,” Dr. Keckley said. “You can’t just go in and tell the story of ‘look at what we do for the community’ or ‘look at all the people we employ’ — that is not going to work anymore.”

Be Ready for the Reorganized Healthcare Landscape

Running a health system recently has proven to be a very hard job. Mounting losses in the face of higher operating expenses, softer than expected volumes, deferred capex, and strained C-suite succession planning are just a few of the immediate issues with which CEOs and boards must deal.


But frankly, none of those are the biggest strategic issue facing health systems. The biggest
strategic issue
is the reorganization of the American healthcare landscape into an ambulatory care
business that emphasizes competing for covered lives at scale in lower cost and convenient settings
of care. This shift in business model has significant ramifications, if you own and operate acute care
hospitals.


Village MD and Optum are two of the organizations driving the business model shift. They are
owned by large publicly traded companies (Walgreens and UnitedHealth Group, respectively). Both
Optum and Village MD have had a string of announced major patient care acquisitions over the past
few years, none of which is in the acute care space.


The future of American healthcare will likely be dominated by large well-organized and well-run
multi-specialty physician groups with a very strong primary care component. These physician
service companies will be payer agnostic and focused on value-based care, though will still be
prepared to operate in markets where fee-for-service dominates. They will deliver highly
coordinated care in lower cost settings than hospital outpatient departments. And these companies
will be armed with tools and analytics that permit them to manage the care for populations of
patients, in order to deliver both better health outcomes and lower costs.


At the same time this is happening, we are experiencing steady growth in Medicare Advantage.
And along with it, a stream of primary care groups who operate purpose-built clinics to take full risk
on Medicare Advantage populations. These companies include ChenMed, Cano Health and Oak
Street, among others. These organizations use strong culture, training, and analytics to better
manage care, significantly reduce utilization, and produce better health outcomes and lower costs.


Public and private equity capital are pouring into the non-acute care sectors, fueling this growth. As
of the start of 2022, nearly three quarters of all physicians in the US were employed by either
corporate entities
(such as private equity, insurance companies, and pharmacy companies), or
employed by health systems. And this employment trend has accelerated since the start of the
pandemic. The corporate entities, rather than health systems, are driving this increasing trend.
Corporate purchases of physician practices increased by 86% from 2019 to 2021.


What can health systems do? To succeed in the future, you must be the nexus of care for the
covered lives in your community. But that does not mean the health system must own all the
healthcare assets or employ all of the physicians. The health system can be the platform to convene these assets and services in the community. In some respects, it is similar to an Apple iPhone. They are the platform that convenes the apps. Some of those apps are developed and owned by Apple. But many more apps are developed by people outside of Apple, and the iPhone is simply the platform to provide access.


Creating this platform requires a change in mindset. And it requires capital. There are many opportunities for health systems to partner with outside capital providers, such as private equity, to position for the future – from both a capital and a mindset point of view.


The change in mindset, and the access to flexible capital, is necessary as the future becomes more and more about reorganizing into an ambulatory care business that emphasizes competing for covered lives at scale in lower cost and convenient settings of care.

Four Insights from Healthcare Reimagined: BDO’s J.P. Morgan Conference Event

https://www.linkedin.com/pulse/four-insights-from-healthcare-reimagined-bdos-jp-morgan-steven-shill/

This January, BDO hosted healthcare and life sciences leaders on the sidelines of JP Morgan’s Healthcare Conference to glean insights from those at the forefront of these rapidly evolving industries. 

In a series of intimate breakout discussions, these leaders discussed the challenges they’re seeing and what they anticipate the near future will hold. Here are four of their biggest takeaways that industry stakeholders need to know:  

·        Healthcare labor needs a makeover

One of the biggest issues we’re seeing in healthcare today is the overburdening of clinicians and other healthcare staff. This year, healthcare leaders need to prioritize enabling clinicians to practice at the top of their licenses. That means reducing their administrative burden so they can spend more time doing what they do best: working with patients and dispensing care. 

·        Healthcare valuations are moderating

In the past year, healthcare company valuations have been very high. We’re now seeing valuations moderate, which could mean a major shift in the deal landscape, with deal opportunities opening up as the price is right. 

·        Health equity is about choice

The reality is that each individual patient has unique needs that require tailored solutions. One important tool for improving health equity is technology that enables patients to choose what is right for them and their situation. That’s why capabilities like self-scheduling are so important, despite the fact that they are currently a missed opportunity for many providers

·        Life sciences leaders are looking at drug timelines differently

COVID-19 showed how quickly a drug can be safely developed when the right resources are in place. Moving forward, life sciences leaders are likely to pressure test drug timelines, which could lead to a shift in how the industry looks at drug development as a whole. 

·        While it’s impossible to know exactly what the future holds, we’re thankful that we were able to hear from industry leaders with on-the-ground knowledge of what’s happening now and what’s likely ahead. In the months and years ahead, we’ll continue to look to these leaders for their insights. 

U.S. healthcare: A conglomerate of monopolies

The Taylor Swift ticketing debacle of 2022 left thousands of frustrated ‘Swifties’ without a chance to see their favorite artist in concert. And it also highlighted the trouble that arises when companies like Ticketmaster gain monopolistic control.

In any industry, market consolidation limits competition, choice and access to goods and services, all of which drive up prices.

But there’s another—often overlooked—consequence.

Market leaders that grow too powerful become complacent. And, when that happens, innovation dies. Healthcare offers a prime example.

And industry of monopolies

De facto monopolies abound in almost every healthcare sector: Hospitals and health systems, drug and device manufacturers, and doctors backed by private equity. The result is that U.S. healthcare has become a conglomerate of monopolies.  

For two decades, this intense concentration of power has inflicted harm on patients, communities and the health of the nation. For most of the 21st century, medical costs have risen faster than overall inflation, America’s life expectancy (and overall health) has stagnated, and the pace of innovation has slowed to a crawl.

 This article, the first in a series about the ominous and omnipresent monopolies of healthcare, focuses on how merged hospitals and powerful health systems have raised the price, lowered the quality and decreased the convenience of American medicine.

Future articles will look at drug companies who wield unfettered pricing power, coalitions of specialist physicians who gain monopolistic leverage, and the payers (businesses, insurers and the government) who tolerate market consolidation. The series will conclude with a look at who stands the best chance of shattering this conglomerate of monopolies and bringing innovation back to healthcare.

How hospitals consolidate power

The hospital industry is now home to a pair of seemingly contradictory trends. On one hand, economic losses in recent years have resulted in record rates of hospital (and hospital service) closures. On the other hand, the overall market size, value and revenue of U.S. hospitals are growing.

This is no incongruity. It’s what happens when hospitals and health systems merge and eliminate competition in communities.  

Today, the 40 largest health systems own 2,073 hospitals, roughly one-third of all emergency and acute-care facilities in the United States. The top 10 health systems own a sixth of all hospitals and combine for $226.7 billion in net patient revenues.

Though the Federal Trade Commission and the Antitrust Division of the DOJ are charged with enforcing antitrust laws in healthcare markets and preventing anticompetitive conduct, legal loopholes and intense lobbying continue to spur hospital consolidation. Rarely are hospital M&A requests denied or even challenged.

The ills of hospital consolidation

The rapid and recent increase in hospital consolidation has left hundreds of communities with only one option for inpatient care.

But the lack of choice is only one of the downsides.

Hospital administrators know that state and federal statutes require insurers and self-funded businesses to provide hospital care within 15 miles of (or 30 minutes from) a member’s home or work. And they understand that insurers must accept their pricing demands if they want to sell policies in these consolidated markets. As a result, studies confirm that hospital prices and profits are higher in uncompetitive geographies.

These elevated prices negatively impact the pocketbooks of patients and force local governments (which must balance their budgets) to redirect funds toward hospitals and away from local police, schools and infrastructure projects.

Perhaps most concerning of all is the lack of quality improvement following hospital consolidation. Contrary to what administrators claim, clinical outcomes for patients are no better in consolidated locations than in competitive ones—despite significantly higher costs.

How hospitals could innovate (and why they don’t)

Hospital care in the United States accounts for more than 30% of total medical expenses (about $1.5 trillion). Even though fewer patients are being admitted each year, these costs continue to rise at a feverish pace.

If our nation wants to improve medical outcomes and make healthcare more affordable, a great place to start would be to innovate care-delivery in our country’s hospitals.

To illuminate what’s possible, below are three practical innovations that would simultaneously improve clinical outcomes and lower costs. And yet, despite the massive benefits for patients, few hospital-system administrators appear willing to embrace these changes.

Innovation 1: Leveraging economies of scale

In most industries, bigger is better because size equals cost savings. This advantage is known as economies of scale.

Ostensibly, when bigger hospitals acquire smaller ones, they gain negotiating power—along with plenty of opportunities to eliminate redundancies. These factors could and should result in lower prices for medical care.

Instead, when hospitals merge, the inefficiencies of both the acquirer and the acquired usually persist. Rather than closing small, ineffective clinical services, the newly expanded hospital system keeps them open. That’s because hospital administrators prefer to raise prices and keep people happy rather than undergo the painstaking process of becoming more efficient.

The result isn’t just higher healthcare costs, but also missed opportunities to improve quality.

Following M&A, health systems continue to schedule orthopedic, cardiac and neurosurgical procedures across multiple low-volume hospitals. They’d be better off creating centers of excellence and doing all total joint replacements, heart surgeries and neurosurgical procedures in a single hospital or placing each of the three specialties in a different one. Doing so would increase the case volumes for surgeons and operative teams in that specialty, augmenting their experience and expertise—leading to better outcomes for patients.

But hospital administrators bristle at the idea, fearing pushback from communities where these services close.   

Innovation 2: Switching to a seven-day hospital

When patients are admitted on a Friday night, rather than a Monday or Tuesday night, they spend on average an extra day in the hospital.

This delay occurs because hospitals cut back services on weekends and, therefore, frequently postpone non-emergent procedures until Monday. For patients, this extra day in the hospital is costly, inconvenient and risky. The longer the patient stays admitted, the greater the odds of experiencing a hospital acquired infection, medical error or complications from underlying disease.

It would be possible for physicians and staff to spread the work over seven days, thus eliminating delays in care. By having the necessary, qualified staff present seven days a week, inpatients could get essential, but non-emergent treatments on weekends without delay. They could also receive sophisticated diagnostic tests and undergo procedures soon after admission, every day of the week. As a result, patients would get better sooner with fewer total inpatient days and far lower costs.  

Hospital administrators don’t make the change because they worry it would upset the doctors and nurses who prefer to work weekdays, not weekends.

Innovation 3: Bringing hospitals into homes

During Covid-19, hospitals quickly ran out of staffed beds. Patients were sent home on intravenous medications with monitoring devices and brief nurse visits when needed.

Clinical outcomes were equivalent to (and often better than) the current inpatient care and costs were markedly less.

Building on this success, hospitals could expand this approach with readily available technologies.

Whereas doctors and nurses today check on hospitalized patients intermittently, a team of clinicians set up in centralized location could monitor hundreds of patients (in their homes) around the clock.

By sending patients home with devices that continuously measure blood pressure, pulse and blood oxygenation—along with digital scales that can calibrate fluctuations in a patient’s weight, indicating either dehydration or excess fluid retention—patients can recuperate from the comforts of home. And when family members have questions or concerns, they can obtain assistance and advice through video.

Despite dozens of advantages, use of the “hospital at home” model is receding now that Covid-19 has waned.

That’s because hospital CEOs and CFOs are paid to fill beds in their brick-and-mortar facilities. And so, unless their facilities are full, they prefer that doctors and nurses treat patients in a hospital bed rather than in people’s own homes.

Opportunities for hospital innovations abound. These three are just a few of many changes that could transform medical care. Instead of taking advantage of them, hospital administrators continue to construct expensive new buildings, add beds and raise prices.