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3 challenges for CEOs and boards during the COVID-19 Dark Winter ahead

Guest contributor Paul Keckley advises hospital chief executives about preparing for problems related to vaccines, workforce and capital as the second surge continues into the winter season.

Paul Keckley | November 17, 2020

There are 6146 hospitals in the United States of which 5198 are classified as community hospitals. They employ 7.8 million including 35% of the nation’s physicians. A fourth are owned by private investors; the rest are private not for profit or public hospitals. All face a dark winter.

The second surge of the pandemic has begun: daily infection rates spiked to 184,515, 68,516 are hospitalized and deaths hit 1431 over the weekend. Public health officials estimate deaths could reach 375,000 by the end of the year, up from 246,224 as of November 15, 2020. And despite promising news about emergency use authorization for vaccines from Pfizer and Moderna, widespread access is unlikely before Spring 2021. That’s where we are.

According to the American Hospital Association, hospitals saw their revenues shrink $50 billion/month in the pandemic’s first surge last spring. The suspension of “non-essential services” cut 20% from procedures and tests and essentially shut down primary care, orthopedics, dentistry, and other clinical services for almost 3 months.


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Some hospitals were hurt more than others: by the end of the third quarter, 2020, about half had recovered more than 70% of the services they suspended and restored day to day operations albeit with added precaution for infection control and worker safety.

For 70 years, hospitals have affirmed that…

    • ‘We are necessary to community health and economic vitality’

    • ‘We serve the public’s interest by providing high quality, cost effective evidence-based care’

    • ‘We are efficient and cost effective. We are not wasteful’

    • ‘We are underfunded and over-regulated’

Though credible studies have challenged these assertions to varying degrees, the efforts of hospitals to garner the public’s trust and confidence have worked. Polls show Americans trust hospitals and physicians (67%) for their medical needs over other options over urgent care (29%) and retail solutions (10%). And Gallup’s Institutional Confidence Monitoring Surveys show confidence in the medical system (aka hospitals and physicians) up at 51%–the highest since 1977.

 

The dark winter adds to a list of imperatives — reducing costs, transitioning from volume to value, embracing transparency, building a digital front-door, optimizing capital, competing against novel entrants and negotiating with insurers and large employers.

Paul Keckley, The Keckley Report

Despite mounting confidence and trust and a growing reservoir of good will earned in the pandemic, hospitals enter the dark winter with three unprecedented hurdles that keep their CEOs, and their Boards awake:

Logistical Access to Vaccines Poses Huge Issues for Hospitals
Frontline caregivers and seniors at highest risk are slated to be the first to receive vaccines as soon as next month, but widespread access before the spring is unlikely. The production, mass distribution and storage requirements for the vaccine are logistical challenges: each vaccine will have its own properties, and all will require patients to take multiple shots and follow monitoring protocols. In most communities, hospital and local public health clinics will handle access to vaccines: Walgreens, CVS and other retail operators will play a secondary role until widespread public access to vaccines is achieved.

Workforce Anxiety
As of Sunday, 216,049 healthcare workers have been infected by the virus; 799 have died. Those at highest risk are middle-age workers who have pre-existing conditions and direct exposure to hospitalized patients. The hospital workforce is anxious about the future: furloughs, outsourcing, and benefits cuts are taking their toll. The dark winter exacerbates their fears and imperils their ability to work, especially if shortages of PPE, masks, ventilators, and ICU beds re-occur.

Access to Capital
Hospitals are labor intense, highly regulated and capital intense: it’s a daunting combination especially when more than 60% of hospital revenues are paid by the government plans (Medicaid, Medicare) who don’t negotiate the rates they pay. Despite $175 billion through the Coronavirus Aid, Relief, and Economic Security Act (CARES) along with temporary payment increases, for most hospitals, long-term solvency is an issue. And it’s a decided disadvantage when competing with well-funded insurers, tech companies and private equity funds that target profitable slivers of the hospital market.

MY TAKE
The dark winter adds to a growing list of imperatives facing hospitals—reducing operating costs, transitioning finances from volume to value-based payments, embracing price transparency, building a digital front-door, optimizing capital to achieve optimal scale and diversification, competing against novel entrants in health delivery and negotiating with insurers and large employers are table stakes.

Fights against reimbursement cuts and opposition to policies like lowering the age of Medicare eligibility to 60 and price transparency are understandable, but the immediate opportunity is to demonstrate the central role hospitals can capably play in managing the second surge in communities. How it’s managed, how hospitals collaborate with local primary care, public health agencies, retail pharmacies and lab testing companies is the platform on which hospitals can advocate for a new social pact with policymakers and community leaders that protects the future and avoids collapse.

It’s time for meaningful discussion about the future for hospitals. The dark winter will pass, but not before taking its toll on hospitals.

This article originally appeared on The Keckley Report website

About the Author

Paul Keckley, C-Level contributor

Paul Keckley is Managing Editor of The Keckley Report and Managing Partner of The Keckley Group, which provides advisory services to health systems, health insurers, technology companies and investors. He is an expert on healthcare industry trends and regulation and served as facilitator between the White House Office of Health Reform and major industry trade groups in developing the Affordable Care Act. He serves as an Independent Director of Q Source (Memphis) and Sullivan Cotter (Chicago) and Advisor to Erdman Inc. (Madison WI), Lumeris (St. Louis) and Health Catalyst (Salt Lake City). He previously served on the Boards of InterDent (El Segundo, CA), Healthways (Nashville) and PhyCor (Nashville).