The healthcare industry as a whole faced fundamental and unpredictable challenges throughout 2021. With staffing shortages, stifled earnings growth, and the ongoing uncertainty of the pandemic, no business was immune to painful pressure on margins.
That said, the opportunity to change for the better remained abundant. Providers embraced more virtual care options. Health IT companies made inroads to support the delivery of care in the home. Investors found unique ways of deploying capital.
Was 2021 an improvement over 2020? Yes, but it was hardly the make-good that many health execs had hoped for. Following is a summary of key learnings from 2021 and some guidance from Canton & Company senior leaders for addressing the challenges of 2022.
1. ‘Health@’ presents new opportunities
The business of acute care has forever changed. What 2021 taught many providers is that the swerve toward delivering care in the community — especially at home — has accelerated in momentum to the point where it’s unwise for leaders to pump the breaks now.
In other words, it’s time to go big on “health@,” says Canton & Company CEO Don McDaniel. He says the trend represents a several hundred-billion-dollar arbitrage opportunity in the next few years, which makes it open season for private equity investors, health IT business, and payers.
“This year catapulted forward the ‘health@’ trend — the already burgeoning continuum of person-centered, technology-enabled care provided in alternative settings,” says Brent Feorene, Executive Vice President and General Manager, Health@. “Payers, providers, technology firms, policymakers, capital sources, and even health systems have acknowledged and embraced the power this disruptive force has unleashed to change lives, eliminate waste, and create value.”
2. Risk is the inevitable reality
The Centers for Medicare & Medicaid Services (CMS) direct-contracting program is designed to test financial risk-sharing arrangements. In December 2020, CMS expanded the model to include managed-care Medicaid as a new direct contracting entity (DCE), specifically for dual eligibles. It’s a foreshadowing of what’s to come.
“CMS is all-in on driving risk transference from the government to private payers and providers,” McDaniel says. “The advent of the DCE program is the latest example of a forced march to risk. However, many physicians are still resisting the move to value. This reality will continue to create enormous opportunities for smart entrepreneurs and insurgents that operate at scale.”
3. Consumer engagement cannot be underestimated
Think about the disrupters in healthcare: the Amazons, Walmarts, and Best Buys of the world. They’re leveraging their expertise in consumer engagement and seamless experiences to capture revenue that otherwise might have been captured by industry incumbents. Healthcare has a long way to go, but 2021 proved the industry can enhance consumer experiences with service delivery integration when it has the financial motivation to do so.
“Primary engagement with consumers will continue to be a key success metric, but the question is whether the primary care physician will be the tip of the engagement spear,” McDaniel says. “Today very few physicians practice in ecosystems that allow truly integrated care.”
4. Strategic flexibility is essential
Scenario planning became especially important for hospitals and health systems in 2021. Leaders had to challenge their assumptions like never before and craft additional contingency plans to manage through the starts and stops of COVID-19.
“Hospitals learned the difference between pandemic planning and pandemic readiness,” says Michael Consuelos, MD, MBA, Executive Vice President and General Manager, Strategy. “All had plans, but few were ready.”
In 2021, COVID surges caused an unpredictable ebb and flow in patient volume for elective and emergency care services. Those who were prepared to refine their operational activities in response to changing conditions weathered the surges better than those who didn’t. Flexible strategies that outline detailed execution plans — including workflows, communication channels, and accountability, for example — should be in place with criteria for when and how they would be deployed.
5. Disrupters are quietly reshaping care delivery
While hospitals and health systems dealt with the continued demands of the pandemic, supply disruptions, workforce shortages, reduced service volumes, and increased expenses throughout 2021, a quiet but significant trend advanced, fundamentally altering healthcare’s landscape, according to William Streck, MD, Chief Clinical Officer and General Manager, Hospitals & Health Systems. He says providers will need to reassess their positions in the market relative to disrupters in 2022.
“Through massive investments and strategic acquisitions, major technology companies, large insurer groups, and other innovative provider models moved to reshape much of the delivery system,” Dr. Streck says. “The equilibration process between the COVID-weary traditional providers and the increased presence of well-resourced disruptors in the delivery landscape will begin to play out as the pandemic abates.”
For example, investor-backed tech companies are opening up the field of digital-first care platforms that include virtual care, patient-to-provider text messaging, chatbots, remote patient monitoring, and more. Providers that can’t pivot quickly might find themselves losing patients to any one of the many new competitors in the market.
6. Predictive analytics must further evolve
Technology is a ubiquitous enabler that helped many stakeholders maintain — or in some cases improve — their bottom lines during another financially demanding year. Those who leveraged technology’s benefits fared better than those who did not, according to Joe Reilly, Chief Information Officer and General Manager, Performance Solutions.
“The industry’s response to COVID and the planning that followed highlighted the value of and continual need to evolve predictive analytics in managing disease burden, resource planning, supply chain logistics, and a host of other factors,” Reilly says.
For example, from a resource planning perspective, COVID had a significant impact on both the volume and delivery of healthcare services, Reilly says. The resources, people, and technologies required in a highly virtual approach are significantly different than those in a more traditional in-person delivery model.
“Using predictive analytics to better understand how care and service delivery may be impacted under a given set of circumstances can allow healthcare organizations to proactively prepare and more nimbly respond to changes and demand,” he says.
He also cautions that cybersecurity will continue to be a pervasive issue in 2022, and the industry will have to evolve rapidly to predict and shield against emerging threats. In 2021, more than 40 million patient records and numerous digital networks were compromised by healthcare cyber attacks.
7. Workforce shortages are longer-term issues
While the delivery system is splintering under the weight of workforce shortages right now, the labor issue has been going on since long before the pandemic. It’s not exclusively a symptom of the “great resignation.” Signing bonuses and temporary bumps in pay to cover overnight shifts — levers that some of the nation’s largest hospitals are currently using to attract and retain clinical staff — are temporary fixes producing mixed results.
“Are the short-term impacts of COVID on labor markets just obfuscating longer-term structural labor force shifts?” asks McDaniel.
Recent data from the Association of American Medical Colleges estimates the nation will endure a shortage of 37,800 to 124,000 physicians by 2034. Primary care represents one of the most critical shortfalls with a 13 percent rise in demand for services coupled with only a six percent rise in supply from 2018-2030, according to the latest Health Resources and Services Administration data.
Beyond the sheer numbers, the workforce must also retool to meet the rising demand for “health@” services, tech-enabled care, and greater integration of behavioral health services across the medical continuum. Clinical workers will continue to be in high demand, but so will the technicians and data experts who support them.
It’s not too late to refine your strategy for 2022. Let the Canton & Company team of healthcare experts help you build and execute a growth-oriented strategy with hands-on execution. Contact our team today!