The No. 1 lesson from the 2021 JP Morgan Healthcare Conference: Healthcare is ‘too vital to fail’

Chronic Conditions | HENRY KOTULA

The annual J.P. Morgan Healthcare Conference is one of the best ways to diagnose the financial condition of the healthcare industry. Every January, every key stakeholder — providers, payers, pharmaceutical companies, tech companies, medical device and supply companies as well as bankers, venture capital and private equity firms — comes together in one exam room, even when it is virtual, for their annual check-up. But as we all know, this January is unlike any other as this past year has been unlike any other year.

You would have to go back to the banking crisis of 2008 to find a similar moment from an economic perspective. At the time, we were asking, “Are banks too big to fail?” The concern behind the question was that if they did fail, the economic chaos that would follow would lead to a collapse with the consumer ultimately picking up the tab. The rest is history.

Healthcare is “Too Vital to Fail” 

2020 was historic in too many ways to count. But in a year when healthcare providers faced the worst financial crisis in the history of healthcare, the headline is that they are still standing. And what they proved is that in contrast to banks in 2008 that were seen by many as “too big to fail,” healthcare providers in 2020 proved that they were “too vital to fail.” 

One of the many unique things about the COVID-19 pandemic is we are simultaneously experiencing a health crisis, where healthcare providers are the front line in the battle, and an economic crisis, felt in a big way in healthcare given the unique role hospitals play as the largest employer in most communities. Hospitals and health systems have done the vast majority of testing, treating, monitoring, counseling, educating and vaccinating all while searching for PPE and ventilators, and conducting clinical trials. And that’s just the beginning of the list.

Stop and think about that for a minute. What would we have done without them? Thinking through that question will give you some appreciation for the critical, challenging and central role that healthcare providers have had to play over the past year.

Simply stated, healthcare providers are the heart of healthcare, both clinically (essentially 100 percent of the care) and financially (over 50 percent of the $4 trillion annual spend on U.S. healthcare). Over the last year they stepped up and they stepped in at the moment where we needed them the most. This was despite the fact that, like most businesses, they were experiencing calamitous losses with no assurances of any assistance. 

Healthcare is “Pandemic-Proof”

This was absolutely the worst-case scenario and the biggest test possible for our nation’s healthcare delivery system. Patient volume and therefore revenue dropped by over 50 percent when the panic of the pandemic was at its peak, driving over $60 billion in losses per month across hospitals and healthcare providers. At the same time, they were dramatically increasing their expenses with PPE, ventilators and additional staff. This was not heading in a good direction. While failure may not have been seen as an option, it was clearly a possibility. 

The CARES Act clearly provided a temporary lifeline, providing funding for our nation’s hospitals to weather the storm. While there are more challenging times ahead, it is now clear that most are going to make it to the other side. The system of care in our country is often criticized, but when faced with perhaps the most challenging moment in the history of healthcare, our nation’s hospitals and health systems stepped up heroically and performed miraculously. The work of our healthcare providers on the front line and those who supported them was and is one thing that we all should be exceptionally proud of and thankful for. In 2020, they proved that not only is our nation’s healthcare system too vital to fail, but also that it is “pandemic proof.” 

Listening to Front Line at the 2021 J.P. Morgan Healthcare Conference 

There has never been a more important year to listen to the lessons from healthcare providers. They are and were the front line of our fight against COVID-19. If there was a class given about how to deal with a pandemic at an institutional level, this conference is where those lessons were being taught.  

This year at the J.P. Morgan Healthcare Conference, CEOs, and CFOs from many of the most prestigious and most well-respected health systems in the world presented including AdventHealth, Advocate Aurora Health, Ascension, Baylor Scott & White Health, CommonSpirit Health, Henry Ford Health System, Intermountain Healthcare, Jefferson Health, Mass General Brigham, Northwell Health, OhioHealth, Prisma Health, ProMedica Health System, Providence, Spectrum Health and SSM Health.

I’ve been in healthcare for 30 years and this is my fifth year of writing up the summary of the non-profit provider track of the conference for Becker’s Healthcare to help share the wisdom of the crowd of provider organizations that share their stories. Clearly, this year was different and not because the presentations were virtual, but because they were inspirational. 

What did we learn? The good news is that they have made many changes that have the potential to move healthcare in a much better direction and to get to a better place much faster. So, this year instead of providing you a nugget from each presentation, I am going to take a shot at summarizing what they collectively have in motion to stay vital after COVID.

10 Moves Healthcare Providers are Making to Stay Vital After-COVID

As a leader in healthcare, you will never have a bigger opportunity to drive change than right now. Smart leaders are framing this as essentially “before-COVID (BC)” and “after-COVID (AC)” and using this moment as their burning platform to drive change. Credit to the team at Providence for the acronym, but every CEO talked about this concept. As the saying goes, “never let a good crisis go to waste.” Well, we’ve certainly had a crisis, so here is a list of what the top health systems are doing to ensure that they don’t waste it and that they stay vital after-COVID:

1. Take Care of Your Team and They’ll Take Care of You: In a crisis, you can either come together as a team or fall apart. Clearly there has been a significant and stunning amount of pressure on healthcare providers. Many are fearing that mental health might be our nation’s next pandemic in the near future because they are seeing it right now with their own team. Perhaps one of their biggest lessons from this crisis has been the need to address the mental, physical and spiritual health of both team members as well as providers. They have put programs in place to help and have also built a tremendous amount of trust with their team by, in many cases, not laying off and/or furloughing employees. While they have made cuts in other areas such as benefits, this collective approach proved incredibly beneficial. And the last point here that relates to thinking differently about their team is that similar to other businesses, many health systems are making remote arrangements permanent for certain administrative roles and moving to a flexible approach regarding their team and their space in the future. 

2. Focus on Health Equity, Not Just Health Care: This was perhaps the most notable and encouraging change from presentations in past years at J.P. Morgan. I have been going to the conference for over a decade, and I’ve never heard someone mention this term or outline their efforts on “health equity” — this year, nearly everyone did. In the past, they have outlined many wonderful programs on “social determinants of health,” but this year they have seen the disproportionate impact of COVID on low-income communities bringing the ongoing issue of racial disparities in access to care and outcomes to light. As the bedrock of employment in their community, this provides an opportunity to not just provide health care, but also health equity, taking an active role to help make progress on issues like hunger, homelessness, and housing. Many are making significant investments in a number of these and other areas. 

3. Take the Lead in Public Health — the Message is the Medicine: One of the greatest failings of COVID, perhaps the greatest lesson learned, is the need for clear and consistent messaging from a public health perspective. That is a role that healthcare providers can and should play. In the pandemic, it represented the greatest opportunity to save lives as the essence of public health is communication — the message is the medicine. A number of health systems stepped into this opportunity to build trust and to build their brand, which are essentially one in the same. Some organizations have created a new role — a Chief Community Health Officer — which is a good way to capture the work that is in motion relative to social determinants of health as well as health equity. Many understand the opportunity here and will take the lead relative to vaccine distribution as clear messaging to build confidence is clearly needed.

4. Make the Home and Everywhere a Venue of Care: A number of presenters stated that “COVID didn’t change our strategy, it accelerated it.” For the most part, they were referring to virtual visits, which increased dramatically now representing around 10 percent of their visits vs. 1 percent before-COVID. One presenter said, “Digital has been tested and perfected during COVID,” but that is only considering the role we see digital playing in this moment. It is clear some organizations have a very narrow tactical lens while others are looking at the opportunity much more strategically. For many, they are looking at a “care anywhere and everywhere” strategy. From a full “hospital in the home” approach to remote monitoring devices, it is clear that your home will be seen as a venue of care and an access point moving forward. The pandemic of 2020 may have sparked a new era of “post-hospital healthcare” — stay tuned.

5. Bury Your Budget and Pivot to Planning: The budget process has been a source of incredible distrust, dissatisfaction and distraction for every health system for decades. The chaos and uncertainty of the pandemic forced every organization to bury their budget last year. With that said, many of the organizations that presented are now making a permanent shift away from a “budget-based culture” where the focus is on hitting a now irrelevant target set that was set six to nine months ago to a “performance-based culture” where the focus is on making progress every day, week, month and quarter. Given that the traditional annual operating budget process has been the core of how health systems have operated, this shift to a rolling forecast and a more dynamic planning process is likely the single most substantial and permanent change in how hospitals and health systems operate due to COVID. In other words, it is arguably a much bigger headline than what’s happened with virtual visits.

6. Get Your M&A Machine in Motion: It was clear from the presentations that activity around acquisitions is going to return, perhaps significantly. These organizations have strong balance sheets and while the strong have gotten stronger during COVID, the weak have in many cases gotten weaker. Many are going to be opportunistic to acquire hospitals, but at the same time they have concluded that they can’t just be a system of care delivery. They are also focused on acquiring and investing in other types of entities as well as forming more robust partnerships to create new revenue streams. Organizations that already had diversified revenue streams in place came through this pandemic the best. Most hospitals are overly reliant on the ED and surgical volume. Trying to drive that volume in a value-based world, with the end of site of service differentials and the inpatient only list, will be an even bigger challenge in the future as new niche players enter the market. As I wrote in the headline of my summary two years ago,It’s the platform, stupid.” There are better ways to create a financial path forward that involve leveraging their assets — their platform — in new and creative ways. 

7. Hey, You, Get into the Cloud: With apologies for wrapping a Rolling Stones song into a conference summary, one of the main things touted during presentations was “the cloud” and their ability to pull clinical, operational and financial dashboards together to monitor the impact of COVID on their organization and organize their actions. Focus over the last decade has been on the clinical (implementing EHRs), but it is now shifting to “digitizing operations” with a focus on finance and operations (planning, cost accounting, ERPs, etc.) as well as advanced analytics and data science capabilities to automate, gather insight, manage and predict. It is clear that the cloud has moved from a curiosity to a necessity for health systems, making this one of the biggest areas of investment for every health system over the next decade.

8. Make Price Transparency a Key Differentiator: One of the great lessons from Amazon (and others) is that you can make a lot of money when you make something easy to buy. While many health systems are skeptical of the value of the price transparency requirements, those that have a deep understanding of both their true cost of care and margins are using this as an opportunity to prove their value and accelerate their strategy to become consumer-centric. While there is certainly a level of risk, no business has ever been unsuccessful because they made their product easier to understand and access. Because healthcare is so opaque, there is an opening for healthcare providers to build trust, which is their main asset, and volume, which is their main source of revenue, by becoming stunningly easy to do business with. This may be tough sledding for some as this isn’t something healthcare providers are known for. To understand this, spend a few minutes on Tesla’s website vs. Ford’s. The concept of making something easy, or hard, to buy will become crystal clear as fast as a battery-driven car can go from zero to 60.

9. Make Care More Affordable: This represents the biggest challenge for hospitals and health systems as they ultimately need to be on the right side of this issue or the trust that they have will disappear and they will remain very vulnerable to outside players. All are investing in advanced cost accounting systems (time-driven costing, physician costing, supply, and drug costing) to truly understand their cost and use that as a basis to price more strategically in the market. Some are dropping prices for shoppable services and using loss leader strategies to build their brand. The incoming Secretary of Health and Human Services has a strong belief regarding the accountability of health systems to be consumer centric. The health systems that understand this are working to get ahead of this issue as it is likely one of their most significant threats (or opportunities) over the next decade. This means getting all care to the right site of care, evaluating every opportunity to improve, and getting serious about eliminating the need for expensive care through building healthy communities. If you’re worried about Wal-Mart or Amazon, this is your secret weapon to keep them on the sideline.

10. Scale = Survival: One of the big lessons here is that the strong got stronger, the weak got weaker. For the strong, many have been able to “snapback” in financial performance because they were resilient. They were able to designate COVID-only facilities, while keeping others running at a higher capacity. To be clear, while most health systems are going to get to the other side and are positioned better than ever, there are many others that will continue to struggle for years to come. According to our data at Strata, we see 25 percent operating at negative margins right now and another 50 percent just above breakeven. They key to survival moving forward, for those that don’t have a captive market, will be scale. If this pandemic proved one thing relative to the future of health systems it is this — scale equals survival. 

When Will We Return to Normal?

Based on what the projections that these health systems shared, the “new normal” for health systems for the first half of 2021 will be roughly 95 percent of prior year inpatient volume with a 20 percent year-over-year drop in ED volume and a drop of 10-15 percent in observation visits. So, the pain will continue, but given the adjustments that were already made in 2020, it looks like they will be able to manage through COVID effectively. While there will be a pickup in the second half of 2021, the safe bet is that a “return to normal” pre-COVID volumes likely won’t occur until 2022. And there are some who believe that some of the volume should have never been there to begin with and we might see a permanent shift downward in ED volume as well as in some other areas.

With that said, I’ll steal a quote from Bert Zimmerli, the CFO of Intermountain Healthcare, who said, “Normal wasn’t ever nearly good enough in healthcare.” In that spirit, the goal should be to not return to normal, but rather to use this moment as an opportunity to take the positive changes driven by COVID — from technology to processes to areas of focus to a sense of responsibility — and make them permanent.

Thanking Our “Healthcare Heroes”

We’ll never see another 2020 again, hopefully. With that said, one of the silver linings of the year is everything we learned in healthcare. The most important lesson was this — in healthcare there are literally heroes everywhere. To each of them, I just want to say “thank you” for being there for us when we needed you the most. We should all be writing love letters to those on the front line who risked their lives to save others. Our nation’s healthcare system has taken a lot of criticism through the years from those on the outside, often with a blind eye to how things work in practice vs. in concept. But this year we all got to see first-hand what’s happening inside of healthcare — the heroic work of our healthcare providers and those who support them. 

They faced the worst crisis in the history of healthcare. They responded heroically and were there for our families and friends.

They proved that healthcare is too vital to fail. They proved that healthcare is pandemic-proof.

Thank you to our healthcare heroes.

No more snow days in the clinic

https://mailchi.mp/e38b070b8787/the-weekly-gist-december-18-2020?e=d1e747d2d8

Snow Days and Health Care…No Such Thing. | The CureTalks Blog

It turns out it’s not just the kids who aren’t getting snow days this year. This week, we spoke with an executive at a health system hit hard by Wednesday’s Nor’easter, and asked how the system was faring with the expected 18 inches of snowfall. He replied that the medical group was as busy as usual.

With all the work this spring to expand telemedicine capabilitiesclinic staff were able to reach out to patients the day before the storm, and proactively convert a majority of scheduled in-person clinic visits to telemedicine. “Normally we would’ve been closed, and most appointments rescheduled for weeks down the road,” he told us. Instead, they were able to keep most of those visits in their scheduled time slot.

Now that we have a systemwide process for telemedicine, I don’t think we’ll have a reason for the clinic to take a snow day again.” It’s a clear win-win for the system and patients: patient care seamlessly goes on. It’s easy to see the many use cases for the ability to toggle between in-person and virtual visits. A parent is stuck at home with a sick kid, and can’t make her endocrinologist appointment? Moved to virtual! A patient has an unexpected business trip taking him out of town? Don’t cancel, let’s do that follow-up visit via telemedicine.

We’ve been worried about the slowdown in progress made on telemedicine as patients switched back to in-person visits across the summer and fall. The ability to continue patient care during a record-breaking snowstorm is a perfect illustration of why it’s critical not to “backslide” with virtual care: meeting patients where they are, regardless of circumstances, is an essential part of building long-term loyalty and care continuity.

10 healthcare execs share predictions for nursing in the next 5 years

https://www.beckershospitalreview.com/nursing/10-healthcare-execs-share-predictions-for-nursing-in-the-next-5-years.html?utm_medium=email

The future of nursing infographic | Cipherhealth

The pandemic put nurses on the front lines of the battle against COVID-19 and caused shifts in the way they provide care.

During this year, nurses have adapted to increased adoption of telehealth and virtual patient monitoring, as well as constantly evolving staffing needs. 

These factors — and others, such as the physical and emotional conditions nurses have faced due to the public health crisis — are sure to affect nursing in the years to come. Here, 10 healthcare executives and leaders share their predictions for nursing in the next five years.

Editor’s note: Responses were edited lightly for length and clarity.

Beverly Bokovitz, DNP, RN. Vice President and Chief Nurse Executive of UC Health (Cincinnati): In the next five years, as we continue to encounter a national nursing shortage, I expect to see additional innovative strategies to complement the care provided at the bedside. 

One of these strategies will be some type of robot-assisted care. From delivery of medications to answering call lights — and completing simple tasks like needing a blanket or requesting that the heat be adjusted — we will see more electronic solutions. These solutions will allow for a better patient experience and help to exceed the expectations of our patients as customers.

Of course, nothing can take the place of skilled and compassionate bedside care, but many tasks could be automated — and will be — to supplement the professional nursing shortage.

Natalia Cineas, DNP, RN. Senior Vice President and Chief Nurse Executive of NYC Health + Hospitals (New York City): Nurses will continue to play a vital role in addressing the health inequities and social determinants of health among vulnerable populations as the nursing workforce itself becomes more diverse and inclusive. As the largest segment of the healthcare workforce — with some 4 million nurses active in the U.S. — nurses represent the faces of the communities in which they serve. As America becomes a more diverse and inclusive society, so too will the nursing profession become more diverse and inclusive. Currently, industry estimates indicate that between one quarter to one-third of all U.S. nurses identify as a member of a minority group, with between 19 percent and 24 percent of U.S. nurses identifying themselves as Black/African-American; 5 percent to 9 percent identifying themselves as Hispanic; and about 3 percent identifying themselves as Asian. The percentage of minority nurses has been rising steadily for the past two decades and is expected to continue to climb in the coming years.

Blacks and underserved minority populations face numerous genetic, environmental, cultural and socioeconomic factors that account for health disparities, and the impact is particularly visible in the areas of cardiovascular disease, diabetes, pregnancy and childbirth mortality, and cancer outcomes, as well as the enormous toll of the current novel coronavirus global pandemic, where communities of color have been among the hardest hit populations. 

In New York City alone, statistics compiled by the city’s health department show Blacks and Hispanics together account for 65 percent of all COVID-19 cases; represented 70 percent of all hospitalizations due to COVID-19; and, sadly, 68 percent of all deaths caused by COVID-19. As demonstrated during this pandemic, in the future, technology such as telehealth and virtual patient monitoring will play a major role in the care of patients. There will be a vast need to address social determinants of health by educating and providing resources to allow utilization of this technology such as using “wearable tech” to monitor ongoing health issues, such as high blood pressure, diabetes, heart conditions and other chronic illnesses.

Ryannon Frederick, MSN, RN. Chief Nursing Officer of Mayo Clinic (Rochester, Minn.): Nursing research will experience extraordinary demand and growth driven by a realization that both complex and unmet patient needs can often be best served by the role of a professional registered nurse. Nurses are uniquely positioned to implement symptom and self-management interventions for patients and their caregivers. Significant disruption in healthcare, including increasing use of technology, will lead to a dramatic shift to understand the role of the RN in improving patient outcomes and implementing interventions using novel approaches. Nursing researchers will provide a scientific body of evidence proving equivalent, if not better, patient care outcomes that can be obtained at a lower cost than traditional models, leading to an even greater demand for the role of the professional nurse in patient care. 

Karen Higdon, DNP, RN, Vice President and Chief Nursing Officer of Baptist Health Louisville (Ky.): The value of nursing has never been more apparent. Nurses have led the front line during this pandemic. In the next five years, we must be flexible and creative in establishing new models of care, specifically around roles that support nursing, such as assistant and tech roles. Creating roles with clear role definition, that are attractive and meaningful for nursing support will help build consistent, high-quality models for nursing to lead. This consistency, along with IT capabilities that enhance workflow, will better allow nurses to work at the top of their scope.

Karen Hill, DNP, RN. COO and Chief Nursing Officer of Baptist Health Lexington (Ky.): 2020 was declared the “Year of the Nurse” and this reality has never been more true than realizing the personal and professional sacrifices of nurses in dealing with issues surrounding the pandemic. The next five years will require nursing professionals to be flexible to address new, unknown emerging issues in all settings, to be open to new opportunities for leadership in hospitals, schools and communities and to use technology and telehealth to provide safer care to patients. Nurses need to evaluate our practices and traditions that are value-added and leave behind the task orientation of the past. We need to honor our legacy and create our path.

Therese Hudson-Jinks, MSN, RN. Chief Nursing Officer and Chief Patient Experience Officer at Tufts Medical Center and Tufts Children’s Hospital (Boston): Over the next five years, I expect that the support and retention of clinical nurses will become the top priority of every CNO and executive team, given nurses’ direct impact on supporting the business of healthcare. This will be particularly critical because there will be a concerning shortage of experienced clinical nurses as a result of advancing technologies increasing complexity in care, additional nurse roles created outside traditional areas, fierce competition for talent between large healthcare systems, aging baby boom workforce retiring at higher rates year over year, and a lack of sufficient numbers of PhD-prepared nurses working in academia and supporting higher enrollments.

I also believe that CNOs will be laser-focused on creating the practice environment that enhances retention of top, talented clinical nurses, and we will put a greater emphasis on the influence of effective nursing leadership in reaching that goal. In addition, I fully expect that nurses will be seen more as individuals with talents and experience than ever before — not just a number on a team, but rather a professional with specific, unique, talents that are highly sought after in competitive markets.

Finally, I anticipate that nursing innovation will blossom, given the exposure of the “innovation/solutionist superpower” within nurses during the pandemic. Philanthropy will grow exponentially in support of nursing innovation as a result.

Carol Koeppel-Olsen, MSN, RN. Vice President of Patient Care Services at Abbott Northwestern Hospital (Minneapolis): During the COVID-19 pandemic nurses have been working in difficult physical and emotional conditions, which may lead to significant turnover after the pandemic resolves. Nurses have a commitment to serving others and will persevere until the crisis is past; however, when conditions improve, many nurses may decide to pursue careers outside acute care settings. A possible turnover, coupled with a service economy that has been devastated, may result in large numbers of former service workers seeking stable jobs in nursing. Hospitals will have to be nimble and creative to onboard an influx of new nurses that are not only new to the profession but new to healthcare. Tactics to onboard these new nurses may include the use of retired RNs as mentors, instructor-model clinical groups in the work setting, job shadowing and aptitude testing to determine the best clinical fit.

Jacalyn Liebowitz, DNP, RN. Senior Vice President and System Chief Nurse Officer of Adventist Health (Roseville, Calif.): Over the next five years, I see nurses providing more hospital-based care in the home using remote technology. Based on that shift, we will see lower-acuity patients move into home-based care, and higher-acuity care in hospitals will increase. With that, hospital beds will be used at a different level. My bold prediction is that we will not need as many beds, but we will need higher acute care in the hospitals.

Nurses will learn differently. As we are seeing now, nurses have not been able to train in the traditional way. They are already using more remote technology to educate, onboard and orient to their roles. It looks and feels vastly different, and nurses need to be comfortable with that.

As for patient care, I think data that can be gleaned from wearable biometrics, and the use of artificial intelligence will help predict patient care on a patient-by-patient basis. Nurses will work with AI as part of their thought process, instead of completely focusing on their own judgment and assessment. 

I also believe we are going to face a nursing shortage post-COVID for a few reasons. Due to the emotional and physical toll of responding to a pandemic, some nurses will decide to retire, and another group will leave based on the risks that go hand-in-hand with the profession. 

As for patient care, we are going to collaborate differently. There will be more video conferencing regarding collaboration around the patient. And I think in the future we will see that the full continuum of care will include a wellness plan.

Debi Pasley, MSN, RN. Senior Vice President Chief Nursing Officer of Christus Health (Irving, Texas): I believe the demand for nurses will become increasingly visible and newsworthy throughout the pandemic. This could drive increases in salaries and numbers of qualified candidates seeking nursing as a profession in the medium and long term. The shortage will, however, continue to be a factor, leading to more remote work options to both supplement nursing at the bedside and substitute for in-person care.

Denise Ray, RN. Chief Nursing Executive of Piedmont Healthcare (Atlanta): Nursing schools will need to focus on emergency management and critical care training utilizing a team nursing model. While nursing has become very specialty-driven, the pandemic has demonstrated gaps in our ability to adapt as quickly utilizing a team model where nurses lead and direct care teams. By implementing a team model and enhancing education in the areas of emergency management and critical care, nursing can adapt quickly to the ever-changing environment.

Also, communication with patients and families will take on different dimensions with wider use of tele-therapeutic communication. Nurses will be leaders and liaisons in the process, connecting physicians, patients and patient families virtually. Nurses will play a key role in integrating patient family members as true patient care partners — making sure they have the information they need to serve an active caregiving role for their family members during and after hospitalization. We’ll also see more nurses becoming advanced nurse practitioners, playing an expanded role in all healthcare settings.

What can Whole Foods tell us about integrating telemedicine?

https://mailchi.mp/f2794551febb/the-weekly-gist-october-23-2020?e=d1e747d2d8

How Whole Foods' Suppliers Are Shifting From Shelves to Screens to Better  Sell on Amazon | Inc.com

A quick stop at the local Whole Foods Market recently yielded surprising insights into the dilemma faced by physician practices in the COVID-era telemedicine boom.

The store location opened just last year, part of a brand-new residential and shopping complex designed for busy professionals. It’s larger than the old-style, pre-Amazon era stores, and was designed to integrate Amazon’s online grocery operations into the bricks-and-mortar retail setting. There’s a portion of the store set aside for Amazon “shoppers” to receive and pack online orders for pickup and delivery, along with an expanded array of convenience-food offerings for the app-powered consumer to scan and purchase.

But when COVID hit, the volume of online orders went through the roof, and the store hired a small army of Amazon shoppers (including one of our own adult children who’s on a “gap year”) to keep up with demand. The result has been barely controlled chaos—easily 70 percent of the shoppers in the aisles last weekend were young Amazon employees “shopping” on behalf of online customers. They’re all held to an Amazon-level productivity standard, which makes the pace of their cart-pushing somewhat frantic and erratic. And the discreet area at the front of the store for managing the Amazon orders has become a noisy hub, making entering and exiting the store problematic. Even the “regular” store employees at Whole Foods have begun to complain about the disruption caused by the Amazon fulfillment operation.
 
It’s a cautionary tale for traditional physician practices and other care delivery organizations looking to “integrate” telemedicine into normal operations. Integration sounds great in theory, but in practice raises important questions:

1) What physical space should be set aside for delivering virtual care?

2) Should telemedicine work be done in a separate, centralized location, or in existing clinic space?

3) How does the staffing of clinics need to change to meet the demand for virtual care?

4) How can we flex staffing up and down based on demand for telemedicine?

5) If new staff are required, how will they be incorporated into the existing team—or should they be managed separately?

6) What operational metrics will they be held accountable for, and what impact will those metrics have on other operational goals? 

If Amazon, a worldwide leader online, renowned for running tight, precision, productivity-driven operations, is having trouble figuring out physical-virtual integration at the front end of their business, imagine how difficult these challenges will be for healthcare providers. The sooner we start to dig into these issues and find sustainable solutions, the better.

Will ED volumes ever bounce back?

https://mailchi.mp/f5713fcae702/the-weekly-gist-september-18-2020?e=d1e747d2d8

Hospitals' ED volumes rebounding slower than other areas

We’re hearing from health systems across the country that physician office, surgery and diagnostic volumes have mostly returned to pre-pandemic levels. Consumers appear to feel comfortable coming back to scheduled appointments as long as social distancing and capacity can be managed. But they’re more reticent to return to “unscheduled” care settings that may involve a long wait, like urgent care clinics and emergency departments, where visits have stabilized at 75 to 85 percent of pre-pandemic levels.

The latter in particular has proved concerning to hospitals leaders, who have begun to ask, what if ED volumes never fully come back? (Around 15 percent of ED visits convert to inpatient stays, on average, making the ED an important source of downstream revenue for hospitals.) We spoke recently with a health system COO who realistically thinks that 10 percent of the volume could be gone for good, and recognizes that “from a public health perspective, that’s probably a good thing”, given that lower-acuity, non-emergent patients account for a portion of the “lost” volume.

But concerns about patients delaying much-needed care persist—amplifying the need for alternate channels, both virtual and in-person, for patients to access care and quickly connect to more intensive services if needed. Hospital leaders would be wise to prepare for a “90 percent future”, and adjust revenue models and cost structures to be less dependent on admissions and procedures that come through the emergency department.

 

 

 

 

Patient-provider encounter trends have stabilized, but remain significantly lower than before COVID-19

https://www.healthcaredive.com/news/patient-provider-encounter-trends-stabilized-below-normal/583599/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202020-08-17%20Healthcare%20Dive%20%5Bissue:29123%5D&utm_term=Healthcare%20Dive

Measuring a patient's vital signs without any contact - ISRAEL21c

Dive Brief:

  • In-person doctor visits plummeted during the start of the COVID-19 crisis in the United States, but have rebounded to a rate somewhat below pre-pandemic levels, according to a new analysis issued by The Commonwealth Fund and conducted by researchers from Harvard Medical School, Harvard University and the life sciences firm Phreesia.
  • According to data compiled through Aug. 1, all physician visits were down 9% from pre-pandemic levels. That’s significantly improved compared to data from late March, when visits were down 58%. Although the rebound got major traction beginning in late April, it began plateauing in early June, when all visits were 13% lower than normal. As of early August, in-person visits were down 16% compared to pre-COVID levels. States that are currently coronavirus hot spots are seeing bigger declines than states where the case levels are lower.
  • Meanwhile, telemedicine encounters have settled in at rates much higher than pre-pandemic levels. However, they still make up just a fraction of patient-provider encounters for care. As of the start of this month, they comprised 7.8% of all such encounters. That’s compared to a peak of 13.8% in the latter part of April. Prior to COVID-19, they were only 0.1% of all visits.

Dive Insight:

COVID-19 has widely disrupted healthcare delivery in the United States. However, it is becoming clear that as the pandemic has become a part of everyday life for the time being, how patients visit their medical providers has also settled into a pattern.

According to Harvard researchers using data from Phreesia’s more than 50,000 provider clients, the plunge in patients seeing their physicians has rebounded from its nearly 60% dive in early spring. However, with all patient-physician encounters still consistently down from pre-COVID levels, the study’s authors warn that “the cumulative number of lost visits since mid-March remains substantial and continues to grow.”

Meanwhile, COVID-19 hotspots in the South and Southwest are depressing patient-provider encounters for the time being. Encounters were down as of late July by 15% in Arizona, Florida and Texas, compared to 12% in the Northeast and 8% in all other states.

Among medical specialties, only dermatology has seen a rebound beyond pre-COVID levels, with encounters up about 8% overall. But primary care visits are down 2%; surgery encounters, 9%; orthopedics, 18%; and pediatrics are in a 26% decline.

That the encounters between patients, doctors and other providers remains lower than normal has sparked some concerns about practices and other medical enterprises moving forward. HHS just earmarked $1.4 billion for nearly 80 children’s hospitals across the United States to try to shore them up financially.

The private sector has also undertaken an initiative to encourage patients to return to their providers. Insurer Humana, along with the Providence and Baylor Scott & White healthcare systems, launched an advertising campaign last month to encourage patients to seek out healthcare needs, even during the historic pandemic.

 

 

 

 

 

Home as the center of “care anywhere”

https://mailchi.mp/647832f9aa9e/the-weekly-gist-august-14-2020?e=d1e747d2d8

We’re increasingly convinced that virtual physician visits are just one part of a continuum of care that can be delivered in the convenience and safety of the patient’s home. Health systems that can deliver “care anywhere”—an integrated platform of virtual services consumers can access from home (or wherever they are) for both urgent needs and overall health management, coordinated with in-person resources—have an unprecedented opportunity to build loyalty at a time when consumers are seeking a trusted source of safe, available care solutions.

The graphic above outlines the key components of a comprehensive home-based care model,

which requires the integration of three main elements:

a technology backbone,

a supply chain to provide services like labs and diagnostics,

and a tiered, flexible workforce. 

Of course, these infrastructure needs will increase with care acuity level, ranging from a simple virtual visit to home-delivered vaccination, all the way to hospital-level care at home. Delivering safe, accessible care within the home can be the foundation for an access platform that creates ongoing consumer loyalty—especially for systems who can build a financial model less dependent on payers’ long-term support for telemedicine reimbursement “parity”.

 

 

Kaiser’s net income more than doubles to $4.5B in Q2

https://www.beckershospitalreview.com/finance/kaiser-s-net-income-more-than-doubles-to-4-5b-in-q2.html?utm_medium=email

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After reporting a $1.1 billion net loss in the first quarter, Kaiser Permanente’s revenue, operating income and net income for its nonprofit hospital and health plan units increased year over year in the second quarter of this year. 

The Oakland, Calif.-based healthcare giant reported operating revenues of $22.1 billion in the second quarter of 2020, up 3.3 percent from the same period a year earlier. Kaiser also saw expenses decline about 1.5 percent year over year to $20 billion.

“Deferred elective surgeries and procedures due to stay-at-home orders across the communities we serve contributed heavily to our second quarter results by temporarily reducing our operating expenses,” Executive Vice President and CFO Kathy Lancaster said in an earnings release.

Kaiser spent $907 million on capital projects in the second quarter, up from $710 million in the same period a year earlier. The system made investments in technology and infrastructure, including reconfiguring hospitals and building new clinical capacity to care for COVID-19 patients.

The 39-hospital system ended the second quarter of this year with operating income of $2.1 billion, up from $1.1 billion in the same quarter last year. 

Kaiser’s unique integrated model — it provides healthcare and health plans — makes it difficult to compare its financial results to those of other systems that do not receive member premiums. As of June 30, Kaiser had 12.4 million health plan members, 183,000 more than in December. Most of the growth occurred during open enrollment, which occurred pre-COVID-19, Kaiser Senior Vice President and Treasurer Tom Meier told Becker’s Hospital Review.

As a result of improved financial market conditions in the second quarter, the system reported strong growth in investment returns, Mr. Meier told Becker’s. That recovery pushed Kaiser’s net income to $4.5 billion in the second quarter of this year, up from $2 billion in the same period of 2019. In the first quarter of this year, Kaiser reported a nonoperating loss of $2.4 billion, generated largely by investment losses.

As the system continues to navigate the challenges of the COVID-19 pandemic, ensuring patients and health plan members have access to needed care and testing is a top priority, Chair and CEO Greg Adams said in an earnings release.

“We have now reintroduced care that was halted during the stay-at-home orders, expanded our services, especially virtual care, and are working with members to schedule care that may have been deferred,” Mr. Adams said. “Moreover, we are working to expand our testing capabilities by purchasing our own testing equipment and building Kaiser Permanente testing labs, partnering with state and local health departments to support robust contact tracing, helping to slow the spread of the virus through education and household prevention kits, and helping our customers maintain their health coverage through these difficult times.”

Looking at results for the first six months of this year, Kaiser reported net income of $3.4 billion on revenues of $44.7 billion. In the same period a year earlier, the system posted net income of $5.2 billion on revenues of $42.8 billion. 

 

 

Industry Voices—6 ways the pandemic will remake health systems

https://www.fiercehealthcare.com/hospitals/industry-voices-6-ways-pandemic-will-remake-health-systems?mkt_tok=eyJpIjoiTURoaU9HTTRZMkV3TlRReSIsInQiOiJwcCtIb3VSd1ppXC9XT21XZCtoVUd4ekVqSytvK1wvNXgyQk9tMVwvYXcyNkFHXC9BRko2c1NQRHdXK1Z5UXVGbVpsTG5TYml5Z1FlTVJuZERqSEtEcFhrd0hpV1Y2Y0sxZFNBMXJDRkVnU1hmbHpQT0pXckwzRVZ4SUVWMGZsQlpzVkcifQ%3D%3D&mrkid=959610

Industry Voices—6 ways the pandemic will remake health systems ...

Provider executives already know America’s hospitals and health systems are seeing rapidly deteriorating finances as a result of the coronavirus pandemic. They’re just not yet sure of the extent of the damage.

By the end of June, COVID-19 will have delivered an estimated $200 billion blow to these institutions with the bulk of losses stemming from cancelled elective and nonelective surgeries, according to the American Hospital Association

A recent Healthcare Financial Management Association (HFMA)/Guidehouse COVID-19 survey suggests these patient volumes will be slow to return, with half of provider executive respondents anticipating it will take through the end of the year or longer to return to pre-COVID levels. Moreover, one-in-three provider executives expect to close the year with revenues at 15 percent or more below pre-pandemic levels. One-in-five of them believe those decreases will soar to 30 percent or beyond. 

Available cash is also in short supply. A Guidehouse analysis of 350 hospitals nationwide found that cash on hand is projected to drop by 50 days on average by the end of the year — a 26% plunge — assuming that hospitals must repay accelerated and/or advanced Medicare payments.

While the government is providing much needed aid, just 11% of the COVID survey respondents expect emergency funding to cover their COVID-related costs.

The figures illustrate how the virus has hurled American medicine into unparalleled volatility. No one knows how long patients will continue to avoid getting elective care, or how state restrictions and climbing unemployment will affect their decision making once they have the option.

All of which leaves one thing for certain: Healthcare’s delivery, operations, and competitive dynamics are poised to undergo a fundamental and likely sustained transformation. 

Here are six changes coming sooner rather than later.

 

1. Payer-provider complexity on the rise; patients will struggle.

The pandemic has been a painful reminder that margins are driven by elective services. While insurers show strong earnings — with some offering rebates due to lower reimbursements — the same cannot be said for patients. As businesses struggle, insured patients will labor under higher deductibles, leaving them reluctant to embrace elective procedures. Such reluctance will be further exacerbated by the resurgence of case prevalence, government responses, reopening rollbacks, and inconsistencies in how the newly uninsured receive coverage.

Furthermore, the upholding of the hospital price transparency ruling will add additional scrutiny and significance for how services are priced and where providers are able to make positive margins. The end result: The payer-provider relationship is about to get even more complicated. 

 

2. Best-in-class technology will be a necessity, not a luxury. 

COVID has been a boon for telehealth and digital health usage and investments. Two-thirds of survey respondents anticipate using telehealth five times more than they did pre-pandemic. Yet, only one-third believe their organizations are fully equipped to handle the hike.

If healthcare is to meet the shift from in-person appointments to video, it will require rapid investment in things like speech recognition software, patient information pop-up screens, increased automation, and infrastructure to smooth workflows.

Historically, digital technology was viewed as a disruption that increased costs but didn’t always make life easier for providers. Now, caregiver technologies are focused on just that.

The new necessities of the digital world will require investments that are patient-centered and improve access and ease of use, all the while giving providers the platform to better engage, manage, and deliver quality care.

After all, the competition at the door already holds a distinct technological advantage.

 

3. The tech giants are coming.

Some of America’s biggest companies are indicating they believe they can offer more convenient, more affordable care than traditional payers and providers. 

Begin with Amazon, which has launched clinics for its Seattle employees, created the PillPack online pharmacy, and is entering the insurance market with Haven Healthcare, a partnership that includes Berkshire Hathaway and JPMorgan Chase. Walmart, which already operates pharmacies and retail clinics, is now opening Walmart Health Centers, and just recently announced it is getting into the Medicare Advantage business.

Meanwhile, Walgreens has announced it is partnering with VillageMD to provide primary care within its stores.

The intent of these organizations clear: Large employees see real business opportunities, which represents new competition to the traditional provider models.

It isn’t just the magnitude of these companies that poses a threat. They also have much more experience in providing integrated, digitally advanced services. 

 

4. Work locations changes mean construction cost reductions. 

If there’s one thing COVID has taught American industry – and healthcare in particular – it’s the importance of being nimble.

Many back-office corporate functions have moved to a virtual environment as a result of the pandemic, leaving executives wondering whether they need as much real estate. According to the survey, just one-in-five executives expect to return to the same onsite work arrangements they had before the pandemic. 

Not surprisingly, capital expenditures, including new and existing construction, leads the list of targets for cost reductions.

Such savings will be critical now that investment income can no longer be relied upon to sustain organizations — or even buy a little time. Though previous disruptions spawned only marginal change, the unprecedented nature of COVID will lead to some uncomfortable decisions, including the need for a quicker return on investments. 

 

5. Consolidation is coming.

Consolidation can be interpreted as a negative concept, particularly as healthcare is mostly delivered at a local level. But the pandemic has only magnified the differences between the “resilients” and the “non-resilients.” 

All will be focused on rebuilding patient volume, reducing expenses, and addressing new payment models within a tumultuous economy. Yet with near-term cash pressures and liquidity concerns varying by system, the winners and losers will quickly emerge. Those with at least a 6% to 8% operating margin to innovate with delivery and reimagine healthcare post-COVID will be the strongest. Those who face an eroding financial position and market share will struggle to stay independent..

 

6. Policy will get more thoughtful and data-driven.

The initial coronavirus outbreak and ensuing responses by both the private and public sectors created negative economic repercussions in an accelerated timeframe. A major component of that response was the mandated suspension of elective procedures.

While essential, the impact on states’ economies, people’s health, and the employment market have been severe. For example, many states are currently facing inverse financial pressures with the combination of reductions in tax revenue and the expansion of Medicaid due to increases in unemployment. What’s more, providers will be subject to the ongoing reckonings of outbreak volatility, underscoring the importance of agile policy that engages stakeholders at all levels.

As states have implemented reopening plans, public leaders agree that alternative responses must be developed. Policymakers are in search of more thoughtful, data-driven approaches, which will likely require coordination with health system leaders to develop flexible preparation plans that facilitate scalable responses. The coordination will be difficult, yet necessary to implement resource and operational responses that keeps healthcare open and functioning while managing various levels of COVID outbreaks, as well as future pandemics.

Healthcare has largely been insulated from previous economic disruptions, with capital spending more acutely affected than operations. But the COVID-19 pandemic will very likely be different. Through the pandemic, providers are facing a long-term decrease in commercial payment, coupled with a need to boost caregiver- and consumer-facing engagement, all during a significant economic downturn.

While situations may differ by market, it’s clear that the pre-pandemic status quo won’t work for most hospitals or health systems.

 

 

 

The Future of Hospitals in Post-COVID America (Part 1): The Market Response

Click to access CBC_72_08052020_Final.pdf

 

[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.
attributed lives).

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
branding.

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.