Financial losses for hospitals and health systems due to cancelled procedures and coronavirus expenses will lead to changes in healthcare delivery, operations, and clinical laboratory test ordering
COVID-19 is reshaping how people work, shop, and go to school. Is healthcare the next target of the coronavirus-induced transformation? According to two experts, the COVID-19 pandemic is pushing hospitals and health systems toward a “fundamental and likely sustained transformation,” which means clinical laboratories must be prepared to adapt to new provider needs and customer demands.
Burik and Fisher called attention to the staggering $50 billion-per-month loss for hospitals and health systems that was first revealed in an American Hospital Association (AHA) report published in May. The AHA report estimated a $200 billion loss from March 1, 2020, to June 30, 2020, due to increased COVID-19 expenses and cancelled elective and non-elective surgeries.
Adding to the financial carnage is the expectation that patient volumes will be slow to return. In “Hospitals Forecast Declining Revenues and Elective Procedure Volumes, Telehealth Adoption Struggles Due to COVID-19,” Burik said, “Healthcare has largely been insulated from previous economic disruptions, with capital spending more acutely affected than operations. But this time may be different since the COVID-19 crisis started with a one-time significant impact on operations that is not fully covered by federal funding.
“Providers face a long-term decrease in commercial payment, coupled with a need to boost caregiver and consumer-facing digital engagement, all during the highest unemployment rate the US has seen since the Great Depression,” he continued. “For organizations in certain locations, it may seem like business as usual. For many others, these issues and greater competition will demand more significant, material change.”
A Guidehouse analysis of a Healthcare Financial Management Association (HFMA) survey, suggests one-in-three provider executives expect to end 2020 with revenues at 15% below pre-pandemic levels, while one-in-five of them anticipate a 30% or greater drop in revenues. Government aid, Guidehouse noted, is likely to cover COVID-19-related costs for only 11% of survey respondents.
“The figures illustrate how the virus has hurled American medicine into unparalleled volatility. No one knows how long patients will continue to avoid getting elective care or how state restrictions and climbing unemployment will affect their decision making once they have the option,” Burik and Fisher wrote. “All of which leaves one thing for certain: Healthcare’s delivery, operations, and competitive dynamics are poised to undergo a fundamental and likely sustained transformation.”
As a result, the two experts predict these pandemic-related changes to emerge:
Payer-Provider Complexity on the Rise; Patients Will Struggle. As the pandemic has shown, elective services are key revenues for hospitals and health systems. But the pandemic also will leave insured patients struggling with high deductibles, while the number of newly uninsured will grow. Furthermore, upholding of the hospital price transparency ruling will add an unwelcomed spotlight on healthcare pricing and provider margins.
Best-in-Class Technology Will Be a Necessity, Not a Luxury. COVID-19 has been a boon for telehealth and digital health usage, creating what is likely to be a permanent expansion of virtual healthcare delivery. But only one-third of executives surveyed say their organizations currently have the infrastructure to support such a shift, which means investments in speech recognition software, patient information pop-up screens, and other infrastructure to smooth workflows will be needed.
“Through all the uncertainty COVID-19 has presented, one thing hospitals and health systems can be certain of is their business models will not return to what they were pre-pandemic,” Guidehouse Partner Chuck Peck, MD (above), a former health system CEO, said in a statement. “A comprehensive consumer-facing digital strategy built around telehealth will be a requirement for providers. Moreover, shifting hardware and physical assets to the cloud, and use of robotic process automation, has proven to be successful in improving back-office operations in other industries. Providers will need to follow suit.” Clinical laboratories and anatomic pathology groups should track these developments and respond appropriately to meet the changing needs of the hospitals and physicians they serve with diagnostic testing services. (Photo copyright: Athens Banner-Herald.)
The Tech Giants Are Coming. Both major retailers and technology stalwarts, such as Amazon, Walmart, and Walgreens, are entering the healthcare space. In January, Dark Daily reported on Amazon’s roll out of Amazon Care, a 24/7 virtual clinic, for its Seattle-based employees. Amazon (NASDAQ:AMZN) is adding to a healthcare portfolio that includes online pharmacy PillPack and joint-venture Haven Healthcare. Meanwhile, Walmart is offering $25 teeth cleaning and $30 checkups at its new Health Centers. Dark Daily covered this in an e-briefing in May, which also covered a new partnership between Walgreens and VillageMD to open up to 700 primary care clinics in 30 US cities in the next five years.
Work Location Changes Mean Construction Cost Reductions. According to Guidehouse’s analysis of the HFMA COVID-19 survey, one-in-five executives expect some jobs to remain virtual post-pandemic, leading to permanent changes in the amount of real estate needed for healthcare delivery. The need for a smaller real estate footprint could reduce capital expenditures and costs for hospitals and healthcare systems in the long term.
Consolidation is Coming. COVID-19-induced financial pressures will quickly reveal winners and losers and force further consolidation in the healthcare industry. “Resilient” healthcare systems are likely to be those with a 6% to 8% operating margins, providing the financial cushion necessary to innovate and reimagine healthcare post-pandemic.
Policy Will Get More Thoughtful and Data-Driven. COVID-19 reopening plans will force policymakers to craft thoughtful, data-driven approaches that will necessitate engagement with health system leaders. Such collaborations will be important not only during this current crisis, but also will provide a blueprint for policy coordination during any future pandemic.
As Burik and Fisher point out, hospitals and healthcare systems emerged from previous economic downturns mostly unscathed. However, the COVID-19 pandemic has proven the exception, leaving providers and health systems facing long-term decreases in commercial payments, while facing increased spending to bolster caregiver- and consumer-facing engagement.
“While situations may differ by market, it’s clear that the pre-pandemic status quo won’t work for most hospitals or health systems,” they wrote.
The message for clinical laboratory managers and surgical pathologists is clear. Patients may be permanently changing their decision-making process when considering elective surgery and selecting a provider, which will alter provider test ordering and lab revenues. Independent clinical laboratories, as well as medical labs operated by hospitals and health systems, must be prepared for the financial stresses that are likely coming.
Experts say Amazon could be planning a roll-out of healthcare services to its Prime members and others
Clinical laboratory leaders will want to note that the Telehealth and home healthcare industries have expanded with the launch of Amazon Care, a virtual medical clinic and home care services program from global retailer Amazon.com, Inc. (NASDAQ:AMZN).
Amazon is piloting Amazon Care as a benefit for its 53,000
Seattle-area employees and their families, according to published reports. Could
this indicate the world’s largest online retailer is moving into the primary
care space? If so, clinical laboratory leaders will want to follow this
development closely, because the program will need clinical laboratory support.
Amazon has successfully disrupted multiple industries in its
corporate life and some experts speculate Amazon may be using its own employees
to design a new medical delivery model for national roll-out.
The S&P report goes on to state, “In as little as five years, the Seattle-based e-commerce company could interlink its system of capabilities and assets to launch various healthcare products, insurance plans, virtual care services, and digital health monitoring to a broader population. The rollout would be part of a larger plan by Amazon to deliver convenient, cost-effective access to care and medications across the U.S., likely tied to Amazon’s Prime membership program, according to experts.”
Modern Healthcare reported that Amazon Care services include telemedicine and home visits to employees enrolled in an Amazon health insurance plan.
Experts contacted by S&P Global Market Intelligence
suggest Amazon:
Plans a “suite of customized health plans and
services for businesses and consumers;”
May offer health services to its five million
seller business and more than 100 million Amazon Prime members; and
Sees healthcare as a growing market and wants
greater involvement in it.
How Amazon Care Works
Amazon Care offers online, virtual care through a
downloadable mobile device application (app) as well as in-person home care for
certain medical needs, such as:
Colds, allergies, infections, and minor injury;
Preventative consults, vaccines, and lab tests;
Sexual health services; and
General health inquiries.
Becker’s Hospital Review reported that once a participant downloads the Amazon Care app to a smartphone or tablet and signs up for the program, he or she can:
Communicate with healthcare providers via text
or video;
Plan personal visits if needed;
Set payment methods in their user profile; and
Receive a “potential diagnosis” and treatment
plan.
The graphic above is taken from the S&P Global Market Intelligence report, which states, “Amazon is one of several tech firms vying for a share of the healthcare market where national spending is expected to reach $6.0 trillion by 2027, up from $3.6 trillion in 2018, according to the Centers for Medicare and Medicaid Services.” (Graphic copyright: S&P Global Market Intelligence.)
“The service eliminates travel and wait time, connecting employees and their family members to a physician or nurse practitioner through live chat or voice,” an Amazon spokesperson told CNBC, “with the option for in-person follow-up services from a registered nurse ranging from immunizations to instant strep throat detection.”
The “mobile health nurse” may also collect clinical laboratory
specimens, the Verge
reported.
Amazon has partnered with Oasis Medical Group, a family primary care practice in Seattle, to provide healthcare services for Amazon Care patients.
Paving the Way to Amazon Care
The Healthcare Financial Management Association (HFMA) compares Amazon’s piloting of Amazon Care to similar healthcare projects that studied population health by first involving employee health plans.
HFMA’s analysis noted that Amazon Care is similar to Haven, a patient advocate organization based in Boston and New York that was created in 2018 by Amazon, JPMorgan Chase, and Berkshire Hathaway to lower healthcare costs and improve outcomes for participating companies.
Tech Crunch reported that in 2018 Amazon also purchased PillPack for nearly $1 billion and integrated its prescription delivery services into Amazon Care.
More recently, Amazon acquired Health Navigator and plans to bring those offerings to Amazon Care as well, CNBC reported. Founded in 2014, Health Navigator provides caregivers with symptom-checking tools that enable remote diagnoses.
Should Telemedicine Firms Be Nervous?
Dark Daily recently reported on Doctor on Demand’s launch of its own virtual healthcare telehealth platform called Synapse. The e-briefing also covered Doctor on Demand’s partnership with Humana (NYSE:HUM) to provide virtual primary care services to the insurer’s health plan members, including online doctor visits at no charge and standard medical laboratory tests for a $5 copayment.
So, should telemedicine firms be concerned about Amazon competing in their marketplace? Business Insider predicts Amazon will need time to beef up its medical resources to serve people online and in-person through Amazon Care.
But that’s the point of Amazon’s pilot, isn’t it? What comes
from it will be interesting to watch.
“Meanwhile, telemedicine firms can ink strategic
partnerships and strengthen their existing payer relationships to safeguard
against Amazon’s surge into the space,” Business Insider advised.
It remains to be seen how medical laboratory testing and reports
would fit into an expanded Amazon Care health network. Or, how clinical laboratories
will get “in-network” with Amazon Care, as it grows to serve customers beyond
Amazon’s employees.
As Dark Daily recently advised, medical laboratory leaders will want to ensure their lab’s inclusion in virtual care networks, which someday may include Amazon Care.
