The hospital industry faced a massive financial crisis in 2020 caused by the COVID-19 pandemic, as systems struggled with low patient volumes and massive hits to financial resources and liquidity. The pandemic will likely continue to have a substantial impact on the hospital industry throughout 2021, from increased hospital consolidation to a volatile payer mix and a surge in telehealth.
Mergers Likely to Increase for the Greater Good
Healthcare experienced a significant movement toward hospital consolidation prior to the pandemic, and this trend is likely to continue as some smaller, independent hospitals face revenue deficits caused by dwindling patient volumes. According to an outlook report from the credit rating agency Fitch Ratings, smaller providers may be forced to align with larger providers as the pandemic begins to fade.
Mergers have the potential to increase in 2021 as health systems pivot toward more virtual care. Reports from consulting firms Kaufmann Hall and Deloitte suggested health systems should transform their business model from a revenue-focused hospital care toward a “broader portfolio of nonpatient care delivery.” The year-end analysis within the reports uncovered 79 healthcare merger and acquisitions announcements in 2020, including a deal between Intermountain Healthcare and Sanford Health. The Utah-based organizations revealed in an October press release that their partnership will focus on bringing more affordable and accessible healthcare to communities through coordinated care and increased use of telehealth and digital health services. The proposed merger has been placed on hold due to a change in Sanford Health’s leadership, but the health systems may revisit discussions in 2021 as Sanford Health continues to evaluate its organizational needs.
Last October, Atrium Health and Wake Forest Baptist Health finalized an $11 billion merger to create a next-generation academic health system. Wake Forest Baptist Health and Wake Forest School of Medicine will be the academic core of the merger, with a focus on expanding its school of medicine to create one of the largest educators of physicians and other medical professionals in North Carolina. The new health system also intends to advance its behavioral health capabilities via telemedicine, improve large, patient-centered research aimed at Alzheimer’s disease, and expand its provider care as the largest provider for Medicaid recipients across North Carolina.
The need for hospital and health systems to focus on core business strengths and bolster intellectual capacity will only grow in 2021 as vaccinations are still in the process of distribution throughout the US. From improving relationships between payers and providers to research partnerships between academic medical institutions and pharmaceutical companies, look for an increase in collaborations between non-traditional partners that are forged to address gaps in the infrastructure exposed by the COVID-19 virus.
A Fickle Payer Mix Could Wreak Financial Havoc on Hospitals
A significant derivative of the pandemic has been job losses across the economy, which could lead to major changes to the payer mix for some hospitals in 2021. Elevated unemployment in 2020 and a slow recovery may lead to a rise in Medicaid and uninsured patients as individuals lose employer-sponsored commercial insurance, which is typically more profitable for hospitals than government health plans due to their larger reimbursement rates.
The credit ratings agency Moody’s released a report that discovered commercial insurance participation declined by 1% in the third quarter of 2020 compared to 2019. The report also revealed Medicaid enrollment skyrocketed throughout the 2020 pandemic, with Medicaid enrollment increasing by nearly 8.5% between February and September of last year. As furloughs potentially turn into layoffs, the rise in Medicaid and self-pay insurance could increase the rate of changes in payer mix for hospitals in 2021 and jeopardize the revenue stability of the healthcare industry.
The upsurge in government health plan enrollment in the past year can also be attributed to the telehealth boom within the healthcare industry. The Centers for Medicare and Medicaid Services (CMS) expanded its Medicare and Medicaid coverage guidelines in 2020 to make health care more accessible and allow for more patient flexibility through telehealth services. According to the Department of Health and Human Services, nearly half of Medicare primary care visits were via telehealth in April of last year.
As Telehealth Soars, So Does the Potential for Cyber Threats
Buoyed by the COVID-19 pandemic, telehealth was at the forefront of health care in 2020, from providing clinical support for physical and mental health issues to supplying medical care to rural communities with limited medical facility access. As many hospitals and physician offices continue to pivot toward telehealth for clinical visits, insurers are also modifying their reimbursement policies in favor of telehealth. As of January 2021, insurance juggernauts United Healthcare and Cigna revised their telehealth reimbursement policies to broaden their commercial plan virtual services, create a more interactive patient experience, and align with CMS telehealth services and guidelines. Despite the overwhelmingly positive impact of telehealth in the past year, the increased utilization and reliance on shared technology provides new entry points for hackers to access and exploit valuable information.
Universal Health Services, one of the largest health systems in the US, was subject to a ransomware attack last October that affected all of its domestic care sites and hospitals. The Wall Street Journal reported that the attack resulted in rerouting of ambulances, delays in patient treatments, and temporary as well as, in some cases, permanent loss of medical records. In the same month, University of Vermont Health Network also fell victim to a ransomware strike. According to the Burlington Free Press, the organization’s patient portal was inaccessible for weeks and cost the health system approximately $1.5 million each day in increased expenses and lost revenue.
It is important to recognize that these cyber threats do not only pertain to organizations within the healthcare industry. Companies in all market segments need to look internally and assess the nature of their security infrastructure, including how data is encrypted and who can access sensitive data. Communicating the importance of cyber hygiene to telecommuting staff should remain a top priority, and it is imperative for companies across all industries to act as risk managers and adopt a proactive approach to cybersecurity. Proper levels of investment in people, processes, and information technology will result in resiliency from an array of potential threats, and more importantly, a future pandemic.