McKinsey and Company Says the COVID-19 Pandemic is Accelerating Six Critical Trends in Healthcare, at Least One Which Would Benefit Anatomic Pathologists
Clinical laboratory and pathology groups that support ambulatory and virtual care, and urgent care and retail clinics may experience growth
Global management consulting company McKinsey and Company’s report, “The Great Acceleration In Healthcare: Six Trends to Heed,” identifies six trends in healthcare that are accelerating due to the global COVID-19 pandemic.
Clinical laboratory managers and pathology practice administrators should consider how these trends may affect their business and patients when planning for the future.
1: Healthcare Reform
McKinsey identified three areas where the coronavirus pandemic may impact healthcare reform:
- “COVID-19-era waivers that could become permanent.
- “Actions that may be taken to strengthen the healthcare system to deal with pandemics.
- “Reforms to address the COVID-19-induced crisis.”
McKinsey reports that “the Centers for Medicare and Medicaid Services has introduced more than 190 waivers since the beginning of March 2020.” These waivers can affect all aspects of healthcare, from clinical practice to reimbursement. Some of them, according to McKinsey, are “only relevant during the crisis (for example, the waiver of intensive care unit death reporting). A retrospective assessment of others (for example, expansion of telehealth access) could reveal beneficial innovation worth preserving.”
Several areas that McKinsey says are clearly ripe for reform include improving the resiliency of the healthcare system and the way the system is funded.
Public sector budgets are generally kept strictly separate, each with its own rules and policies that dictate operations. But in his article, “After COVID-19—Thinking Differently About Running the Health Care System,” published in JAMA Health Network, Stuart M. Butler, PhD, Senior Fellow in Economic Studies at the Brookings Institution, wrote, “The intensity of the COVID-19 pandemic … is forcing jurisdictions all across the country to find ways to be nimble so that multiple agencies can work together.”
Thus, McKinsey recommends, “Given the substantial shifts in relative market positioning among industry players that prior reforms have created, leaders would do well to plan ahead now.”
2: Better Access to Healthcare Services
Some people who develop COVID-19 are at far greater risk of hospitalization and death than others, including those who have:
- Chronic health conditions, including obesity.
- Mental and behavioral health challenges, such as substance abuse.
- Unmet social needs, such as food or housing insecurity.
- Poor access to healthcare.
McKinsey wrote that these “intersecting health and social conditions,” combined with certain races that have higher risk for severe complications, including Black, Indian, and Hispanic/Latino Americans, “correlated with poorer health outcomes.”
Value-based healthcare, telehealth, and greater attention to the social determinants of health may help address some of these issues, McKinsey notes, but the pandemic has shined a spotlight on how lack of care increases risk for certain populations during a public health crisis.
3: Era of Exponential Improvement Unleashed
Some of the trends that appear to be accelerating as a result of the pandemic are good news. McKinsey cites several benefits, including:
- Improved understanding of patients.
- Delivery of more convenient and individualized care.
- $350-$410 billion in annual revenue by 2025.
Through telehealth and other types of virtual care enabled by digital technology, “intuitive healthcare ecosystems” may arise and offer a more integrated experience for patients and their caregivers, McKinsey notes.
“While the pace of change in healthcare has lagged other industries in the past, potential for rapid improvement may accelerate due to COVID-19. An example is the exponential uptake of digitally enabled, virtual care,” McKinsey wrote. “Our analysis … showed that health systems, primary care, and behavioral health practices are reporting increases of more than 50–175 times in telehealth visits, and the potential market size for virtual care could reach around $250 billion.”
4: The Big Squeeze
The pandemic has caused an enormous outflow of cash from the healthcare system, and some experts don’t expect an injection of funding until 2022. “This outflow is expected to be primarily driven by coverage shifts out of employer-sponsored insurance and possible coverage reductions by employers as well as Medicaid rate pressures from states,” McKinsey states.
“We estimate that COVID-19 could depress healthcare industry earnings by between $35 billion and $75 billion compared with baseline expectations,” McKinsey predicted, adding, “Select high-growth segments will remain attractive (for example, virtual care, home health, software and platforms, specialty pharmacy) and will disproportionally drive growth. These high-growth areas are expected to increase more than 10% over the next five years, while other segments may stagnate or decline altogether.”
5: Fragmented, Integrated, Consolidated Care Delivery
McKinsey says, “The shift of care out of hospitals is not new but has been accelerated by COVID-19.” Rather than the hospital being the center of care delivery, patients are increasingly choosing to receive care at a range of sites across many healthcare ecosystems that are connected digitally and through analytics.
Early in the course of the pandemic, visits to ambulatory care facilities dropped nearly 60% by early April. But by mid-May, those visits were beginning to rebound.
In, “The Impact of the COVID-19 Pandemic on Outpatient Visits: A Rebound Emerges,” the Commonwealth Fund reported that “the relative decline in visits remains largest among surgical and procedural specialties and pediatrics” but is “smaller in other specialties, such as adult primary care and behavioral health.”
6: Adoption of Next-Generation Managed Care Is Accelerating
How will COVID-19 affect the managed care industry? McKinsey says the “next generation” of managed care might use Medicare Advantage as a model.
“Payers pursuing the next generation of managed care model (through deep integration with care delivery) demonstrate better financial performance, capturing an additional 50 basis points of earnings before interest, taxes, depreciation, and amortization above expectation,” McKinsey noted, adding, “Employers and payers could consider fundamentally rethinking how employer-sponsored health coverage is structured. Learning from Medicare Advantage could provide inspiration for such a reimagination.”
What Should Clinical Laboratory Managers Do?
The McKinsey article concludes by stating, “While the challenges are numerous, leaders who seize the mindset that “disruptive change provides an opportunity to separate yourself from the pack” will build organizations meaningfully stronger than the ones they ran going into the crisis.”
The McKinsey article authors recommend that healthcare organizations take several proactive steps, including:
- Launch a plan-ahead team.
- Question your role and your future business model.
- Prepare to transform your business.
- Reimagine your organization to make faster decisions.
- Take action to drive health equity.
Though the McKinsey and Company article covered healthcare in general, many of the authors’ observations and recommendations can apply to clinical laboratories and pathology groups as well and may be valuable in future planning.
—Dava Stewart
Related Information:
The Great Acceleration in Healthcare: 6 Trends to Heed:
After COVID-19—Thinking Differently About Running the Health Care System:
The Next Wave of Healthcare Innovation: The Evolution of Ecosystems
The Impact of the COVID-19 Pandemic on Outpatient Visits: A Rebound Emerges
Three Federal Agencies Warn Healthcare Providers of Pending Ransomware Attacks; Clinical Laboratories Advised to Assess Their Cyberdefenses
Sophisticated cyberattacks have already hit hospitals and healthcare networks in Oregon, California, New York, Vermont, and other states
Attention medical laboratory managers and pathology group administrators: It’s time to ramp up your cyberdefenses. The FBI, the federal Department of Health and Human Services (HHS), and the federal Cybersecurity and Infrastructure Security Agency (CISA) issued a joint advisory (AA20-302A) warning US hospitals, clinical laboratories, and other healthcare providers to prepare for impending ransomware attacks, in which cybercriminals use malware, known as ransomware, to encrypt files on victims’ computers and demand payment to restore access.
The joint advisory, titled, “Ransomware Activity Targeting the Healthcare and Public Health Sector,” states, “CISA, FBI, and HHS have credible information of an increased and imminent cybercrime threat to US hospitals and healthcare providers.” It includes technical details about the threat—which uses a type of ransomware known as Ryuk—and suggests best practices for preventing and handling attacks.
In his KrebsOnSecurity blog post, titled, “FBI, DHS, HHS Warn of Imminent, Credible Ransomware Threat Against U.S. Hospitals,” former Washington Post reporter, Brian Krebs, wrote, “On Monday, Oct. 26, KrebsOnSecurity began following up on a tip from a reliable source that an aggressive Russian cybercriminal gang known for deploying ransomware was preparing to disrupt information technology systems at hundreds of hospitals, clinics, and medical care facilities across the United States. Today, officials from the FBI and the US Department of Homeland Security hastily assembled a conference call with healthcare industry executives warning about an ‘imminent cybercrime threat to US hospitals and healthcare providers.’”
Krebs went on to reported that the threat is linked to a notorious cybercriminal gang known as UNC1878, which planned to launch the attacks against 400 healthcare facilities.
Clinical Labs, Pathology Groups at Risk Because of the Patient Data They Keep
Hackers initially gain access to organizations’ computer systems through phishing campaigns, in which users receive emails “that contain either links to malicious websites that host the malware or attachments with the malware,” the advisory states. Krebs noted that the attacks are “often unique to each victim, including everything from the Microsoft Windows executable files that get dropped on the infected hosts to the so-called ‘command and control’ servers used to transmit data between and among compromised systems.”
Charles Carmakal, SVP and Chief Technology Officer of cybersecurity firm Mandiant told Reuters, “UNC1878 is one of the most brazen, heartless, and disruptive threat actors I’ve observed over my career,” adding, “Multiple hospitals have already been significantly impacted by Ryuk ransomware and their networks have been taken offline.”
Multiple Healthcare Provider Networks Under Attack
Hospitals in Oregon, California, and New York have already been hit by the attacks, Reuters reported. “We can still watch vitals and getting imaging done, but all results are being communicated via paper only,” a doctor at one facility told Reuters, which reported that “staff could see historic records but not update those files.”
Some of the hospitals that have reportedly experienced cyberattacks include:
- Sky Lakes Medical Center, Klamath Falls, Ore.;
- St. Lawrence Health System Canton-Potsdam, Massena, and Gouverneur hospitals, St. Lawrence County, N.Y.;
- Ridgeview Medical Center, which includes multiple hospitals, urgent care clinics, and other emergency and long-term care facilities in Minn.;
- George Washington University Hospital in Washington, D.C.;
- University of Vermont Medical Center in Burlington, Vt., and many others.
In October, the Associated Press (AP) reported that a recent cyberattack disrupted computer systems at six hospitals in the University of Vermont (UVM) Health Network. The FBI would not comment on whether that attack involved ransomware, however, it forced the UVM Medical Center to shut down its computer system and reschedule elective procedures.
Threat intelligence analyst Allan Liska of US cybersecurity firm Recorded Future told Reuters, “This appears to have been a coordinated attack designed to disrupt hospitals specifically all around the country.”
He added, “While multiple ransomware attacks against healthcare providers each week have been commonplace, this is the first time we have seen six hospitals targeted in the same day by the same ransomware actor.”
An earlier ransomware attack in September targeted 250 healthcare facilities operated by Universal Health Services Inc. (UHS). A clinician at one facility reported “a high-anxiety scramble” where “medical staff could not easily see clinical laboratory results, imaging scans, medication lists, and other critical pieces of information doctors rely on to make decisions,” AP reported.
Outside of the US, a similar ransomware attack in October at a hospital in Düsseldorf, Germany, prompted a homicide investigation by German authorities after the death of a patient being transferred to another facility was linked to the attack, the BBC reported.
CISA, FBI, HHS, Advise Against Paying Ransoms
To deal with the ransomware attacks, CISA, FBI, and HHS advise against paying ransoms. “Payment does not guarantee files will be recovered,” the advisory states. “It may also embolden adversaries to target additional organizations, encourage other criminal actors to engage in the distribution of ransomware, and/or fund illicit activities.” The federal agencies advise organizations to take preventive measures and adopt plans for coping with attacks.
The advisory suggests:
- Training programs for employees, including raising awareness about ransomware and phishing scams. Organizations should “ensure that employees know who to contact when they see suspicious activity or when they believe they have been a victim of a cyberattack.”
- Regular backups of data and software. These should be “maintained offline or in separated networks as many ransomware variants attempt to find and delete any accessible backups.” Personnel should also test the backups.
- Continuity plans in case information systems are not accessible. For example, organizations should maintain “hard copies of digital information that would be required for critical patient healthcare.”
Evaluating Continuity and Capability
The federal agencies also advise healthcare facilities to join cybersecurity organizations, such as the Health Information Sharing and Analysis Center (H-ISAC).
“Without planning, provision, and implementation of continuity principles, organizations may be unable to continue operations,” the advisory states. “Evaluating continuity and capability will help identify continuity gaps. Through identifying and addressing these gaps, organizations can establish a viable continuity program that will help keep them functioning during cyberattacks or other emergencies.”
Dark Daily Publisher and Editor-in-Chief, Robert Michel, suggests that clinical laboratories and anatomic pathology groups should have their cyberdefenses assessed by security experts. “This is particularly true because the technologies and methods used by hackers change rapidly,” he said, “and if their laboratory information systems have not been assessed in the past year, then this proactive assessment could be the best insurance against an expensive ransomware attack a lab can purchase.”
—Stephen Beale
Related Information:
Ransomware Activity Targeting the Healthcare and Public Health Sector
FBI, DHS, HHS Warn of Imminent, Credible Ransomware Threat Against U.S. Hospitals
Hackers Hit Hospitals in Disruptive Ransomware Attack
Several Hospitals Targeted in New Wave of Ransomware Attacks
Hospitals Hit with Ransomware Attacks as FBI Warns of Escalating Threat to Healthcare
Ransomware Attacks on Hospitals Could Soon Surge, FBI Warns
Building Wave of Ransomware Attacks Strike U.S. Hospitals
Oregon Hospital Shuts Down Computer System After Ransomware Attack
Three St. Lawrence County Hospitals Hit by Ransomware
‘Unusual Network Activity’ at Ridgeview Medical Center
Brooklyn and Vermont Hospitals Are Latest Ryuk Ransomware Victims
Medicare Proposes Payment Changes to Increase At-Home Dialysis Services for End-Stage Renal Disease Patients in a Trend That Shifts Where These Patients Access Clinical Laboratory Tests
New rule for 2021 would accelerate CMS’ effort to direct patient care to lower-cost settings and improving access to care
Medicare is using data to assess where it spends the most money on clinical services. Then, guided by that data, it wants to take steps to encourage better, proactive care for patients, including directing clinical care into lower-cost settings. This has implications for clinical laboratories because such efforts can move patients into alternative care settings and make it more difficult for labs to collect lab test specimens.
In pursuing the goal of better, more proactive care, the federal Centers for Medicare and Medicaid Services (CMS) proposed changing Medicare payments for dialysis to encourage more at-home dialysis services. The initiative confirms that CMS will be steadfast in its efforts to identify high-cost diseases and sites of care, and to direct that care into lower-cost settings that reduce Medicare expenditures without sacrificing care quality.
And, though the initiative has the potential to decrease Medicare spending while improving patient compliance and quality of care, it may lead to logistical challenges for clinical laboratories that will have to collect specimens for testing from patients’ homes rather than dialysis centers.
Changing Government Barriers to Home Dialysis
A press release from the federal Department of Health and Human Services (HHS) states that Medicare spends roughly $114 billion annually on kidney disease, accounting for 20% of all fee-for-service spending. In the United States, 37-million patients suffer from chronic kidney disease and more than 726,000 have end-stage renal disease (ESRD).
“In-center dialysis can be more expensive and produce worse outcomes for patients than at-home dialysis or even a kidney transplant,” Healthcare Dive reported CMS Administrator Seema Verma telling reporters last year when President Trump announced he would sign an executive order overhauling kidney disease payment models.
In a news release, CMS pointed out that currently more than 85% of ESRD patients on Medicare travel to a facility to receive dialysis at least three times a week. On average, they spend 12 hours per week on dialysis machine away from home. The proposed rule (CMS-1732-P) for calendar year 2021 would expand the transitional add-on payment adjustment to include certain new home dialysis machines, CMS said.
COVID-19 and Threatening Traditional Dialysis Providers
Additionally, the ESRD population has the highest hospitalization rates due to COVID-19 among Medicare beneficiaries, Healthcare Finance reported.
In a statement, Kidney Care Partners (KCP) praised the changes that foster development of home dialysis machines and add new dollars for dialysis calcimimetic drugs. The coalition’s one “disappointment” was that CMS did not change the adjusters currently used in the ESRD Prospective Payment System (PPS) bundle. KCP contends the “underlying methodology used to create the current adjusters gets them wrong and leads to money being taken away from patient care.”
In its analysis of the rule change, Laffer Healthcare Intelligence warned that the federal government’s effort to “modern and optimize ESRD protocols” and its advocacy for home dialysis, artificial 3D-printed kidney development, and high rates of kidney transplants is putting “traditional facility-based dialysis providers at higher risk.”
In its healthcare investment newsletter, Laffer cited HHS Secretary Alex Azar’s “blunt language” in a March 19, 2019, speech to the National Kidney Foundation, in which Azar said his department’s plan was to “pay for Americans with kidney disease to actually get good outcomes, rather than the endless, life-consuming procedures,” as evidence of the federal mandate to overhaul the current system of kidney care.
Lower Cost versus Superior Care
But, according to Modern Healthcare, dialysis centers and patient advocacy groups are not all onboard with CMS’ plan to realign financial incentives to increase home dialysis and kidney transplants and shift providers to risk-based payments. Modern Healthcare’s review of comments on the proposed new payment models (one mandatory and four voluntary) found “some providers and patient groups think the [CMS] Innovation Center exaggerated the clinical evidence, and choosing whether to receive treatment at home or in a dialysis center should be based on patient choice, not financial rewards.”
But Strive Health co-founder and Chief Revenue Officer Robert Badal believes the new rule has the potential to “drive meaningful savings in dialysis costs and improvements in member care” for Medicare Advantage (MA) organizations.
“Skeptics of the new rule claim it may negatively impact access for members who dialyze in the outpatient setting, but this argument appears unfounded,” Badal wrote in an article posted on the Strive Health website. “Existing MA members with ESRD will maintain access to their dialysis provider, whether their provider is contracted or not, and continuity-of-care requirements ensure that dialysis providers will continue treatments and not displace the member. Even as such, we have talked to dozens of payors about the new rule, and the consensus has been a member-centric view of the changes. In fact, many payors are planning to keep their [participating] networks completely unchanged.”
The rule change builds on President Trump’s 2019 executive order launching his “Advancing American Kidney Health” initiative. Its goals are to:
- Reduce the number of Americans developing ESRD by 25% by 2030;
- Have 80% of new ESRD patients in 2025 either receiving dialysis at home or receiving a transplant; and
- Double the number of kidneys available for transplant by 2030.
This proposed CMS rule change is further evidence that the shift from “volume to value” in healthcare may impact clinical laboratories and pathology groups in unexpected ways.
—Andrea Downing Peck
Related Information:
Dialysis/ESRD Investments: CMS Proposes Increased Reimbursement for Home Dialysis
CMS Proposes Medicare Changes to Increase the Use of Dialysis in the Home
Kidney Care Partners Reacts to Recently Released Prospective Payment System (PPS) Rule
HHS Launches President Trump’s ‘Advancing American Kidney Health’ Initiative
Walmart Opens Second Health Center Offering Clinical Laboratory Tests and Primary Care Services
In another example of giving consumers more direct access to medical laboratory tests, Walmart believes that convenience and lower prices can help it capture market share
Retail giants continue to add healthcare services—including medical laboratory testing—to their wares. It’s a trend that pressures hospital systems, clinical laboratories, pathology groups, and primary care providers to compete for customers. And, while in most instances competition is good, many local and rural healthcare providers cannot reduce their costs enough to be competitive and stay in business.
This is true at Walmart (NYSE:WMT), which recently opened its second “Health Center” in Georgia and announced prices for general healthcare services 30% to 50% below what medical providers typically charge, reported Modern Healthcare.
The services offered at the new Walmart Health Center in Calhoun, a suburb of Atlanta, include:
- Primary care
- Dental
- Counseling
- Clinical laboratory testing
- X-rays
- Health screening
- Optometry
- Hearing
- Fitness and nutrition
- Health insurance education and enrollment
A Walmart news release states, “This state-of-the-art facility provides quality, affordable and accessible healthcare for members of the Calhoun community so they can get the right care at the right time … in one facility at affordable, transparent pricing regardless of a patient’s insurance status.”
The fact that Walmart posts “Labs” on the Health Center’s outdoor sign may indicate the retail giant considers easy access to clinical laboratory testing a selling point that will draw customers.
“By offering clinical laboratory testing in support of primary care and urgent care, Walmart may be able to lower prices for lab tests in any market that it enters,” said Robert Michel, Editor-in-Chief of Dark Daily and its sister publication The Dark Report, and President of The Dark Intelligence Group.
Healthcare Transparency and Lower Prices
The 1,500 square-foot free-standing Walmart Health Centers offer more services than the in-store Care Clinics installed in other Walmarts throughout Georgia, South Carolina, and Texas. For its healthcare services, Walmart established partnerships with “on-the-ground” health providers to offer affordable services.
“We have taken advantage of every lever that we can to bring the price of doing all of this down more than any hospital or group practice could humanly do. Our goal, just like in the stores, is to get the prices as low as we can,” Sean Slovenski, Senior Vice President and President of Walmart Health and Wellness, told Bloomberg Businessweek.
Some of the clinical laboratory prices prominently posted in the building and noted on the Health Center online price list include:
- Primary care physician office visit $40
- Lipid $10
- Hemoglobin A1c $10
- Pregnancy Test $10
- Flu Test $20
- Strep Test $20
- Mono Test $20
Meanwhile, the average cost to visit a primary care doctor is $106, according to Health Care Cost Institute data cited by Business Insider, which noted that Walmart’s rates “could be a steep mountain for traditional providers to climb.”
However, Rob Schreiner, Executive Vice President of WellStar Health System in Northern Georgia told Modern Healthcare that “Walmart will offer a cheaper alternative for working-class families who may not have health insurance and may not have an established relationship with a primary care provider.”
Convenient Access to Quality Healthcare Services a Major Draw
At a freestanding Walmart Health Center, people can park near the entrance and walk a few steps to the entrance, rather than traversing aisles to a Care Clinic inside a Walmart Supercenter. And for many customers, finding a Walmart Health Center may not be as complicated or stressful as visiting doctors’ offices.
That seems to be Walmart’s goal—not simply using the Health Centers to increase traffic in its stores, Slovenski said. “We are trying to solve problems for our customers. We already have the volume,” he told Forbes. “We have the locations and the right people. We are creating a supercenter for basic healthcare services.”
Walmart’s arrangement with local healthcare providers differs from traditional primary care clinics staffed by doctors who are practice owners, or who are employed by nearby hospitals and health systems.
“The whole design of the clinic is curious to most of the doctors here [in Dallas, Ga.],” Jeffrey Tharp, MD, Chief Medicine Division Officer, WellStar Medical Group, told Modern Healthcare. “We are advocating integration into our network, for instance with patients who need a cardiologist coming from Walmart to WellStar.”
Other Retailers Offering Primary Care Services
Walmart is not the only retailer moving into the outpatient healthcare market. Dark Daily recently reported on CVS Health’s and Walgreens’ strategies in delivering primary care, as well as on the Amazon Care pilot program, which may lead to Amazon becoming a primary care provider as well. (See, “Amazon Care Pilot Program Offers Virtual Primary Care to Seattle Employees; Features Both Telehealth and In-home Care Services That Include Clinical Laboratory Testing,” January 31, 2020.)
Clinical laboratory leaders may want to explore partnerships with Walmart and other retailers that are developing healthcare centers to deliver primary care services in places where masses of people shop for everyday items. Especially given that these big-box retailers remain open during healthcare crises like the COVID-19 pandemic.
—Donna Marie Pocius
Related Information:
Walmart Tests Leap into Healthcare Business by Opening Second Clinic
Calhoun Walmart Remodel Features Opening of New Walmart Health Center
Walmart Takes on CVS, Amazon with Low Price Healthcare Clinics
Walmart Health Center Price List
Walmart Opens Second Primary Care Center
