EDITOR’S NOTE: ICD10monitor Publisher and Talk Ten Tuesdays program host Chuck Buck recently asked longtime national ICD10monitor correspondent Mark Spivey to produce a feature article on the financial fallout from COVID-19. The pandemic turned much of what many thought about healthcare management on its head. But where do we go from here, now that the federal Public Health Emergency (PHE) has ended? For Part 2 of this series, Spivey asked three more of our most trusted contributors to weigh in, and their thoughts appear throughout this article.
EDITOR’S NOTE: RACmonitor Publisher and Monitor Mondays program host Chuck Buck recently asked longtime national RACmonitor correspondent Mark Spivey to produce a feature article on the financial fallout from COVID-19. The pandemic turned much of what many thought about healthcare management on its head. But where do we go from here, now that the federal Public Health Emergency (PHE) has ended?
For Part 2 of this series, Spivey asked three more of our most trusted contributors to weigh in, and their thoughts appear throughout this article.
In the wake of last month’s expiration of the federal COVID-19 public health emergency (PHE), if you ask a dozen experts whether the American healthcare system might be anywhere close to ready for the next pandemic (in whatever form that might take), you should expect a dozen answers in return.
And some will be more colorfully and forcefully worded than others.
“I suspect we will be as ready as we were last time. Supply chains remain constrained, or frankly, broken. Costs remain high, compared to 2019, even accounting for inflation. Labor markets remain broken, and most important, healthcare remains plagued by over-utilization and under-funding. There has been no fundamental change in healthcare delivery since the introduction of third-party reimbursement 70 years ago,” said Dr. John K. Hall, a prominent physician, attorney, CEO, and longtime member of the RACmonitor Editorial Board. “The use of more expensive testing and treatments with lower reimbursement is an ongoing trend unlikely to change. Implementation of unproven or even unnecessary therapy strains hospitals, which continue to operate on a volume basis, rather than value, outcome, or population basis.”
“Basically, healthcare, starting with medical education and its associated expense, seems to be irremediably f*cked up,” Hall concluded (the asterisk is our own). “But it’s a great opportunity for the parasitic industries claiming to offer ‘help.’”
Assessing the Damage
In Part I of this series, we noted that COVID-19 left in its wake both human and financial tolls: more than 1.1 million Americans died due to the disease, with tens of millions more seriously sickened (many of whom continue to suffer aftereffects to this day), and the overall price tag of the pandemic is now estimated to reach $14 trillion by the end of 2023, making it by far the costliest disaster of any kind to affect the country in the 21st century.
Some of our most trusted experts noted that many providers are currently more focused on survival than anything else.
“While federal aid during the pandemic stalled a decades-long string of rural hospital closures, in the last two years the closures have picked up again, with (approximately) 280 closing in 2022 and (approximately) 220 closing in 2023 so far,” one regular RACmonitor and Monitor Mondays contributor told us, citing a recent study by the University of North Carolina at Chapel Hill’s Cecil G. Sheps Center for Health Services Research. “And with (the end of the PHE), an estimated 15 million people will be knocked off of Medicaid. While many of those will find their way back into Medicaid, an ACA (Affordable Care Act) exchange plan, or their employers’ coverage, many more will likely be uninsured. This increase in uncompensated care will put incredible cost pressures on providers.”
The contributor, who requested anonymity, also pointed to a recent Trilliant Health study predicting that the number of commercially insured patients will drop in future years, while government and uninsured patients will increase in number, meaning that competition for shrinking numbers of privately insured patients is sure to intensify.
“Given these price pressures, market forces such as inflation and strained workforces, and recent legislation that providers must deal with, like the transparency rules and the No Surprises Act, I think providers may need to change completely the way the provide healthcare,” he said. “This would include utilizing virtual (care) and telehealth, moving outside the traditional four walls of the healthcare access, and using AI (artificial intelligence) and other technology to streamline administrative tasks. One National Bureau of Economic Research study suggested that up to $110 billion could be saved in healthcare over the next five years with the use of AI.”
But even if realized, those savings might just cancel out a fraction of the increased costs incurred by providers in recent years – which show no signs of abating in the near future.
“The pandemic caused a massive increase in labor cost ‘at the bedside,’” Hall added. “The use of ‘contract’ services, including nursing, respiratory therapy, and OT/PT imposed a huge financial burden. Pandemic-related government funds mitigated some of this cost; although the funds have stopped, labor shortages and excessive costs associated with adequate staffing have not.”
The short-term solutions aren’t always pretty.
“Many hospitals are in the uncomfortable position of removing beds from service in order to limit wage costs,” Hall said. “It’s a phenomenon unrelated to hospital or system size – Kaiser, Providence, and Cleveland Clinic all posted losses for 2022. Many will fare no better in 2023. For small, independent hospitals, it could mean closure or loss of autonomy. Rural communities are at significant risk, and a wide range of services such as OB (obstetrics) are in jeopardy.”
While some experts have suggested that the pandemic generally went easier on physician practices than larger providers, others note that the impact was still often devastating. The Chief Medical Informatics Officer for TiaTech USA Inc., a healthcare solutions and technology firm headquartered in the greater Detroit area, pointed to plummeting patient volumes and revenue, paired with increased costs.
“Elective care is still being delayed by patients, even today. Practices had to invest in personal protective equipment and telehealth technology. Productivity decreased due to office staff and physicians who were sick or quarantined. (But) the biggest impact of the pandemic was the cost of human capital,” he said. “Many senior nurses chose to retire or work in non-clinical roles. Due to the continuing challenges in recruitment and retention, the staff that continued to work has faced increased stress and burnout. These financial, emotional, and operational challenges will likely continue for some time.”
And as with many healthcare matters, the more rural you go, the tougher it becomes.
“Many rural hospitals must support physicians financially in order to assure availability of needed services,” Hall said. “The most difficult balancing act for rural hospitals now is offering competitive physician compensation without unduly compromising the compensation of or disenfranchising other members of the healthcare team: nurses, therapists, housekeeping, food services, etc. Carefully balancing physician expectations with the realities of hospital finances and fiscal responsibility is a daunting task. It’s worse when financial resources are constrained.”
And at the risk of redundancy – the short-term solutions aren’t always pretty.
“Doctors have had to reduce costs by reducing staff or hours, increase revenue by increasing prices or offering new services, and change their way of practicing (telehealth, COVID protocols) to ensure their practices stay viable under these difficult circumstances,” TiaTech’s Chief Medical Informatics Officer added. “On the positive side, some of the operational efficiency gained in terms of streamlined workflows, task automation, digital healthcare technology adoption, and increased use of telehealth will continue to augment practice productivity.”
“In the immediate future, increasing costs of labor and supplies with the inflation in the consumer markets will eat into the bottom lines of many practices,” he added. “The decreasing reimbursement, as payors tighten their belts and patients lose their coverage due to loss of employment and the end of the eligibility expansion during the (PHE), will further hamstring the nascent recovery. Stiff competition from private equity-owned or large integrated healthcare system-owned multi-specialty practices will make it increasingly difficult for the traditional private practice solo physician to maintain a healthy financial account.”
Dare we even ask what might be lurking on the horizon?
“Federal, state, and local authorities have offered little more than lip service. They’re ready to ‘be done’ with COVID and all the associated costs,” Hall said. “This will not become an issue for the government until many hospitals operating with negative margins or very low ‘cash on hand’ begin defaulting on bond covenants and mortgages. At that point there will be a widespread healthcare financing crisis that will serve as fodder for political careers. No solution will be had, but someone will get elected with a promise to ‘fix’ healthcare.”
Any viable solutions, our aforementioned longtime contributor told us, may have to come from internal rather than external sources.
“I do think that more and better use of technology can take a lot of the administrative costs out of healthcare, if not the clinical. Compared to every other industry, healthcare lags far behind in terms of streamlined billing and payment for its services. The industry has used the excuse that healthcare is too complicated to apply what other industries have learned, but that excuse is getting old,” he said. “To that end, I was a fan of the federal government’s Meaningful Use program in the early 2010s, in which the government gave a carrot – actual money – to providers that adopted electronic health records and a more digital healthcare environment. I think that kind of model can be used again, this time on the administrative side. I don’t know how it could be done, especially in this economy and in this political environment, but providing incentives, instead of enforcement, to help providers process claims and be more consumer-friendly with billing and payments would go a long way.”
He wasn’t the only one expressing a glimmer of optimism that Washington could wind up offering a lifeline, rather than merely continuing its contracted audit bombardment of providers.
“The federal government can play a significant role in preventing this slow downward spiral. The reimbursement for healthcare services needs to increase in sync with inflation. The eligibility criteria for Medicare and Medicaid should be liberalized to make them available for a greater part of the population. The administrative and regulatory burden on doctors should be decreased, especially by streamlining the revenue cycle operations,” TiaTech’s Informatics Officer said. “And the United States needs to invest in the public health infrastructure. The ability to monitor, track, and respond to outbreaks needs to be augmented. Significant effort is required for public awareness and education to prevent some of the anti-science behavior seen during this pandemic. Stockpiles of critical medications and personal protective equipment need to be bolstered. Companies that are working on processes for rapid vaccine and drug development need to be offered generous research and development funds. Stronger coordination of international response to a future global pandemic is a prerequisite to ensure the global economy and healthcare systems do not collapse.”
If there was a silver lining to COVID, our longtime RACmonitor contributor concluded, it’s that it shone a blindingly bright spotlight on some such areas of healthcare that desperately need fixing.
“For all the damage of COVID, and setting aside, for the moment, the tremendous loss of life and physical anguish, the pandemic went a long way to showing both individual, societal, and economic weaknesses, as well as showing its strengths. We are certainly more prepared as a health system, as a society, than we were last time, but the pandemic demonstrated why traditional brick-and-mortar healthcare is not a sustainable system,” he said. “Today, in mid-2023, in all aspects of life and society, we have pretty much settled into our pre-pandemic patterns, and that includes brick-and-mortar healthcare. Many of us would like to just forget the last three years. In contrast to that, we need to take the lessons of the pandemic and prioritize them.”
“I think the industry will make it through, but only those organizations that are agile enough to reinvent themselves and create new business models,” he concluded. “We’ve also got to find a way to simplify the administrative processes between all parties in the system: providers, payers, and patients. In this post-pandemic world, we can’t go back to doing things the way we’ve always done it – no matter how ‘complicated’ we think healthcare is.”