Contributors: Lisa Soroka and Wren Keber
To learn more about Lisa and Wren, click here.
In the coming issues, we will discuss the broad and profound impacts the COVID-19 pandemic has had on the whole healthcare industry. We begin with hospitals and hospital systems. We will share our views on necessary and meaningful changes to support financial and operational recovery across the continuum of care, as we transition out of crisis and into a meaningful period of “rebuilding, rethinking and redesigning.”
We draw our insights based on experience during the pandemic and other periods of economic and operational chaos impacting all of healthcare. These include transition into and out of health maintenance organizations (HMOs) in the early 2000s, as well as the worldwide recession last decade. We can apply valuable lessons learned to aid in pandemic recovery and rebuilding. We intend our series to be insightful and thought-provoking and to prompt actions to help push recovery through innovation.
To understand where we are now, we need to remember the years preceding the pandemic. As a result of healthcare reform efforts codified in the Affordable Care Act (ACA), payers and constituents, such as the Centers for Medicare and Medicaid Services (CMS) pushed for a reduction in the dependence on hospitals as centers of care delivery. Repeated themes ranged from “right-sizing bed needs” to “reducing avoidable inpatient utilization,” and more. Many payers, including Medicare, were experimenting with alternative payment arrangements (APMs) to move the locus of care. These pressures were pushing leaders to think about financial and clinical operations in a different light – and respond through efforts including increasingly strict space planning/bed licensure, as well as value-based payment (VBP) arrangements through clinically integrated (CI) vehicles such as Accountable Care Organizations (ACOs).
As the pandemic began to surge, hospitals were pushed into the spotlight as a primary battleground in the COVID-19 response. Hospital leaders found themselves amid radically different demands from stakeholders, such as overwhelming ambulance transports, capacity and treatment options, and decisions around non-COVID-19 care (e.g., elective surgeries.) Limited operational tools were available to immediately respond (for example, there are only so many places an intensive care unit (ICU) can expand to when the hospital’s capacity has already been “right-sized.” To complicate matters, information about transmission, progression, and treatment of COVID-19 was ever-changing and complex at the time.
The glaring impact to hospitals in our country (as well as worldwide) has been financial. With a reduction in elective surgery and a dependence on hospitals for expensive COVID-19 related care, the financial picture for most facilities was quickly painted with red ink. Even with pandemic-related aid, most hospitals are still struggling with cash flow issues resulting from increased costs including but not limited to staffing, sourcing and paying increased prices for personal protective equipment (PPE), telehealth implementation, decreased elective patient visits, procedures, and inpatient stays, and other unexpected/unbudgeted costs. Leaders will be dealing with both short and long-term impacts to budgets and should be focused on how to overcome these shortfalls expeditiously in post-pandemic fiscal periods.
An effective, comprehensive recovery plan for hospitals must cut across all operational areas. Starting with the organization’s current vision, strategy needs to be evaluated against post-pandemic realities. Key assumptions and inputs to organizational strategy may have changed, and should be accounted for, in addition to realities about payer mix, patient demographics, competitor behavior, service areas, and more. We believe this thoughtful, effective recovery plan builds on a refreshed strategy.
A properly recast financial plan relies on strong financial planning and analysis (FP&A) professionals who can model multiple scenarios for volumes and services and account for remaining relief funding and/or repayments. Payer preferences and managed care contracting should also play a role in estimating the best/worst cases for revenues in post-pandemic periods – because payer mixes are shifting. Health plans also have changing priorities valuable to hospitals, (e.g., capturing members back into appropriate care coordination, such as post-acute discharge after surgery and obtaining delayed care for members with chronic conditions). These efforts will help hospitals regain lost ground in pay-for-performance programs.
Clinical teams should be developing strategies and tactics to meaningfully re-engage with patients who let preventive/chronic care lapse, especially through digital channels to “meet patients where they are.” According to Health Care Cost Institute (HCCI) claims data, screenings under preventive care dropped precipitously from 2019 to 2020, such as colonoscopies which fell by 27% and mammograms by 19%. For clinical operations, teams should be aligned on patient care, with an eye toward efficiency and standardization; reducing variability adds quality and financial strength to the hospital. Additionally, clinical leadership should be evaluating the ongoing balance between telehealth and in-person encounters, especially for hospital-based clinics, to enhance and promote patient-provider communication and interaction in the most high-quality, efficient, and cost-effective manner.
For organizational operations, increasing and ongoing issues with burnout, early retirement, and providers leaving healthcare altogether will hamper recruitment and retention of the workforce. These issues were exacerbated by the unexpected trauma of treating overwhelming waves of COVID patients, which have taken a toll on the mental health of the workforce. Even where there are willing and able staffers, hospitals will continue to struggle with completely vaccinating that workforce due to hesitancy and staff refusal. Regarding supply chain, we anticipate ongoing fluctuation in pricing and procurement sources. To work effectively within this reality, operational leaders will need to implement updated sourcing arrangements and increase storage requirements.
Business development and medical staff teams should spring back into action to rebuild any lost or stale referrer relationships. This is especially important when the market is dominated by Preferred Provider Organizations (PPOs) and when shifts from employer-sponsored commercial products to government payers/exchanges have occurred. Thinking broadly is important, as partnerships/affiliations might change to include new partners, such as Federally Qualified Health Centers (FQHCs) or other safety-net providers, to align with new access points.
It is important to remember that, while efforts may take many shapes and will take longer for some hospitals than others, recovery is possible. Through thoughtful strategic planning, coupled with forward-thinking finance leadership and comprehensive budgeting as well as innovative operational shifts, we can rebuild the healthcare system for the future.
In a post-pandemic world, hospitals, providers, and staff will be increasingly engaging with technology such as artificial intelligence (AI), in-room clinical surveillance, and advanced analytics, while continuing to innovate in onsite care through leading-edge programs (such as hospital-at-home and telehealth hospitalist programs). Comprehensive recovery from the impact of COVID-19 can enable these long-term visions to come to fruition.
Contact Lisa at: [email protected]
Contact Wren at: [email protected]