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Clinical Laboratories and Pathology Groups

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News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

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IT Experts Demonstrate How AI and Computer Microphones Can Be Used to Figure Out Passwords and Break into Customer Accounts

Clinical laboratories and pathology groups should be on the alert to this new digital threat; telehealth sessions and video conferencing calls particularly vulnerable to acoustic AI attacks

Banks may be the first to get hit by a new form of hacking because of all the money they hold in deposit accounts, but experts say healthcare providers—including medical laboratories—are comparably lucrative targets because of the value of patient data. The point of this hacking spear is artificial intelligence (AI) with increased capabilities to penetrate digital defenses.

AI is developing rapidly. Are healthcare organizations keeping up? The hackers sure are. An article from GoBankingRates titled, “How Hackers Are Using AI to Steal Your Bank Account Password,” reveals startling new AI capabilities that could enable bad actors to compromise information technology (IT) security and steal from customers’ accounts.

Though the article covers how the AI could conduct cyberattacks on bank information, similar techniques can be employed to gain access to patients’ protected health information (PHI) and clinical laboratory databases as well, putting all healthcare consumers at risk.

The new AI cyberattack employs an acoustic Side Channel Attack (SCA). An SCA is an attack enabled by leakage of information from a physical computer system. The “acoustic” SCA listens to keystrokes through a computer’s microphone to guess a password with 95% accuracy.

That’s according to a UK study published in IEEE Xplore, a journal of the IEEE European Symposium on Security and Privacy Workshops, titled, “A Practical Deep Learning-Based Acoustic Side Channel Attack on Keyboards.”

“With recent developments in deep learning, the ubiquity of microphones and the rise in online services via personal devices, acoustic side channel attacks present a greater threat to keyboards than ever,” wrote UK study authors Joshua Harrison, MEng, Durham University; Ehsan Toreini, University of Surrey; and Maryam Mehrnezhad, PhD, University of London.

Hackers could be recording keystrokes during video conferencing calls as well, where an accuracy of 93% is achievable, the authors added.

This nefarious technological advance could spell trouble for healthcare security. Using acoustic SCA attacks, busy healthcare facilities, clinical laboratories, and telehealth appointments could all be potentially compromised.

“The ubiquity of keyboard acoustic emanations makes them not only a readily available attack vector, but also prompts victims to underestimate (and therefore not try to hide) their output,” wrote Joshua Harrison, MEng (above), and his team in their IEEE Xplore paper. “For example, when typing a password, people will regularly hide their screen but will do little to obfuscate their keyboard’s sound.” Since computer keyboards and microphones in healthcare settings like hospitals and clinical laboratories are completely ubiquitous, the risk that this AI technology will be used to invade and steal patients’ protected health information is high. (Photo copyright: CNBC.)

Why Do Hackers Target Healthcare?

Ransomware attacks in healthcare are costly and dangerous. According to InstaMed, a healthcare payments and billing company owned by J.P. Morgan, healthcare data breaches increased to 29.5% in 2021 costing over $9 million. And beyond the financial implications, these attacks put sensitive patient data at risk.

Healthcare can be seen as one of the most desirable markets for hackers seeking sensitive information. As InstaMed points out, credit card hacks are usually quickly figured out and stopped. However, “medical records can contain multiple pieces of personally identifiable information. Additionally, breaches that expose this type of data typically take longer to uncover and are harder for an organization to determine in magnitude.”

With AI advancing at such a high rate, healthcare organizations may be unable to adapt older network systems quickly—leaving them vulnerable.

“Legacy devices have been an issue for a while now,” Alexandra Murdoch, medical data analyst at GlobalData PLC, told Medical Device Network, “Usually big medical devices, such as imaging equipment or MRI machines are really expensive and so hospitals do not replace them often. So as a result, we have in the network these old devices that can’t really be updated, and because they can’t be updated, they can’t be protected.”

Vulnerabilities of Telehealth

In “Penn Medicine Study Shows Telemedicine Can Cut Employer Healthcare Costs by 25%,” Dark Daily reported a study conducted by the Perelman School of Medicine at the University of Pennsylvania (Penn Medicine) which suggested there could be significant financial advantages for hospitals that conduct telehealth visits. This, we projected, would be a boon to clinical laboratories that perform medical testing for telemedicine providers.

But telehealth, according to the UK researchers, may also be one way hackers get past safeguards and into critical hospital systems.

“When trained on keystrokes recorded using the video-conferencing software Zoom, an accuracy of 93% was achieved, a new best for the medium. Our results prove the practicality of these side channel attacks via off-the-shelf equipment and algorithms,” the UK researchers wrote in IEEE Xplore.

“[AI] has worrying implications for the medical industry, as more and more appointments go virtual, the implications of deepfakes is a bit concerning if you only interact with a doctor over a Teams or a Zoom call,” David Higgins, Senior Director at information security company CyberArk, told Medical Device Network.

Higgins elaborated on why healthcare is a highly targeted industry for hackers.

“For a credit card record, you are looking at a cost of one to two dollars, but for a medical record, you are talking much more information because the gain for the purposes of social engineering becomes very lucrative. It’s so much easier to launch a ransomware attack, you don’t even need to be a coder, you can just buy ransomware off of the dark web and use it.”

Steps Healthcare Organizations Should Take to Prevent Cyberattacks

Hackers will do whatever they can to get their hands on medical records because stealing them is so lucrative. And this may only be the beginning, Higgins noted.

“I don’t think we are going to see a slowdown in attacks. What we are starting to see is that techniques to make that initial intrusion are becoming more sophisticated and more targeted,” he told Medical Device Network. “Now with things like AI coming into the mix, it’s going to become much harder for the day-to-day individual to spot a malicious email. Generative AI is going to fuel more of that ransomware and sadly it’s going to make it easier for more people to get past that first intrusion stage.”

To combat these attacks patient data needs to be encrypted, devices updated, and medical staff well-trained to spot cyberattacks before they get out of hand. These SCA attacks on bank accounts could be easily transferable to attacks on healthcare organizations’ patient records.

Clinical laboratories, anatomic pathology groups, and other healthcare facilities would be wise to invest in cybersecurity, training for workers, and updated technology. The hackers are going to stay on top of the technology, healthcare leaders need to be one step ahead of them.

—Ashley Croce

Related Information:

How Hackers Are Using AI to Steal Your Bank Account Password

A Practical Deep Learning-Based Acoustic Side Channel Attack on Keyboards

AI Can Steal Passwords with 95% Accuracy by ‘Listening’ to Keystrokes, Alarming Study Finds

New ‘Deep Learning Attack’ Deciphers Laptop Keystrokes with 95% Accuracy

Can A.I. Steal Your Password? Study Finds 95% Accuracy by Listening to Keyboard Typing

Ransomware in Healthcare: What You Need to Know

Hospital 2040: How Healthcare Cybercrime is Predicted to Escalate

30 Crucial Cybersecurity Statistics (2023): Data, Trends and More

Penn Medicine Study Shows Telemedicine Can Cut Employer Healthcare Costs by 25%

Gen Z Set to Outnumber Baby Boomers and Will Be 75% of the Workforce within the Next Year, Report States

Zoomers’ unique approach to work and personal health could affect clinical laboratory workplaces, how staff is managed, and how they personally use lab tests

Would it surprise you to learn that Generation Z is poised to make up 75% of the workforce in the United States by 2025? This fact has many implications for clinical laboratories, genetic testing companies, and pathology practices. That’s because Zoomers, as they are called, will be dominant in two ways. First, they will make up the majority of the lab workforce. Second, they will be the majority of consumers and patients accessing medical laboratory testing services.

Zoomers (born 1997-2012) approach work and their own healthcare differently than previous generations. This is partly due to Zoomers being “digital natives who have little or no memory of the world as it existed before smartphones,” according to Pew Research.

Now, a recently released report by economic research firm Glassdoor on 2024 workplace trends states that Zoomers are about to overtake Baby Boomers (born 1946-1964) in the full-time workforce, and that the shift will “represent a pivotal moment of cultural change that US companies cannot ignore.” This includes clinical laboratories and pathology groups that employ them.

According to Glassdoor, Gen Z workers “care deeply about community connections, about having their voices heard in the workplace, about transparent and responsive leadership, and about diversity and inclusion.”

Zoomers bring unique requirements and attitudes to the workplace, but they may also be the fresh infusion of talent a shrinking healthcare workforce needs. It’s no secret that clinical laboratories and pathology groups are facing a labor shortage. An aging workforce combined with burnout from the COVID-19 pandemic have left the entire healthcare industry scrambling for workers.

“A recent survey by Elsevier Health predicts that up to 75% of healthcare workers will leave the profession by 2025. And a 2020 study conducted by the Association of American Medical Colleges (AAMC) projected a shortfall of up to 139,000 physicians by 2033,” Medscape reported.

In “Clinical Laboratories Suffer During the Great Resignation,” Dark Daily noted other causes that are behind the abundance of open positions, such as early retirements, graduating individuals experiencing more specialized training programs, and a shift in the way the current working generation views employment.

Thus, the current healthcare workplace should not only expect unique challenges as Zoomers take over, but also changes that come with adapting to a smaller, younger workforce.

Mark Beal

“[Gen Z] will pressure employers to establish a company’s purpose in a way that contributes to a better society and prioritize a company’s purpose along with profits,” Mark Beal (above), Assistant Professor of Professional Practice and Communication at Rutgers University, told Forbes. “Having succeeded at remote learning, they will influence an increased transition to hybrid and remote work as well as the four-day work week.” Clinical laboratories that understand Zoomers’ motivations will likely have more success integrating them into their workforce. (Photo copyright: Rutgers University.)

Generational Shift in Healthcare

Zoomers are the most technically-minded generation yet, especially considering they had to master remote learning during the COVID-19 pandemic. And, as we reported in “Despite Technical Challenges During COVID-19 Pandemic, Healthcare Networks Plan to Increase Investment in Telehealth Technologies,” healthcare systems that have increased their investment in telehealth technologies may benefit greatly from having these tech-savvy workers on board.

However, there could be unique challenges with a Zoomer workforce as well. According to Forbes, more than half of these new workers are willing to leave their jobs over “dissatisfaction with fulfillment (59%), professional development (57%), and providing value (53%).”

Although this may make some older workers scoff, each generation has entered the workforce with its own unique perspective based on personal values, and the workplace has shifted and changed to reflect the new workers. The same can be said of the clinical laboratory and pathology workforces.

The chart above shows the different generations as a proportion of the total population of the United States as of 2025. It dramatically illustrates why the largest number of working age individuals will be from Generation Z (aka, Zoomers). With their unique interests and traits, Zoomers will want their workplaces to be responsive in ways that are much different than the generations that preceded them. This will be equally true of how Gen Z accesses clinical laboratory testing services. (Graphic copyright: The Wall Street Journal.)

Gen Z Likes Automation

Another aspect to the increasing Zoomer workforce is Gen Z’s comfort with automated technology. Automation has always shifted how clinical laboratories work, and it can have great benefits for clinical pathology as well.

According to Today’s Clinical Lab, automation reduces error rates by more than 70% and reduces the time needed for each staff member per specimen by 10%.

However, the benefit does not come from automation replacing workers, rather that automated processes reduce repetitive work that takes time and attention away from workers. And, as noted, Gen Z workers tend to be extremely tech-savvy given the prevalence of technology in their lives.

Automation could fill gaps when it comes to labor shortages, not by replacing workers, but by helping adjust the workflow and avoiding worker burnout by automating tedious tasks. And Gen Z workers may be uniquely suited to engage with automated testing technologies.

Evolving Healthcare Workplaces

“The coming year will … represent a pivotal moment of cultural change that US companies cannot ignore as Gen Z workers—who care deeply about community connections, about having their voices heard in the workplace, about transparent and responsive leadership, and about diversity and inclusion—make up a rapidly growing share of the workforce,” the Glassdoor report stated, adding that 2024 “will test the robustness of workplace institutions,” The Hill reported.

Clinical laboratory managers and pathologists will be managing a multi-generational workforce, each with its own attributes and requirements. Thus, lab managers will need to reflect these difference in the management decisions they make and how they organize the laboratory workplace.

—Ashley Croce

Related Information:

Gen Z Set to Pass Baby Boomers in Workforce: Report

Glassdoor’s 2024 Workplace Trends

Physicians May Retire En Masse Soon. What Does That Mean for Medicine?

Clinical Laboratories Suffer During the Great Resignation

How Gen Z’s Impact on the Workplace Continues to Grow

Despite Technical Challenges During COVID-19 Pandemic, Healthcare Networks Plan to Increase Investment in Telehealth Technologies

Should Lab Staff Be Concerned about Automation?

Pennsylvania Legislature Advances Bill Lifting Restrictions on Advertising by Clinical Laboratories

Sponsors cited the rise of healthcare consumerism in proposing the bill, which passed unanimously in the State Senate

In what appears to be a step forward in fostering more consumerism in healthcare, the Pennsylvania State Senate has unanimously passed Senate Bill 712 which removes the state’s prohibition on consumer advertising by clinical laboratories. The bill passed on a 45-0 vote and amends the state’s Clinical Laboratory Act, originally enacted in 1951. It now heads to the Pennsylvania House of Representatives.

The newly approved legislation will “eliminate regulations preventing patients from learning about diagnostic testing and services provided by local clinical laboratories,” according to a press release issued by the Pennsylvania Senate Republicans.

Republican state Senator Rosemary Brown was the bill’s primary sponsor. She was joined as co-sponsors by a bipartisan group of colleagues.

“The regulations prevent patients from learning about clinical laboratories and the services they provide,” Brown said in the press release. “Patients deserve to know about their options when they are selecting a clinical laboratory to perform these important tests and procedures.”

The press release noted that Pennsylvania is the only state that prohibits clinical laboratories from advertising to residents.

“It’s time for Pennsylvania to catch up with the rest of the nation and enable patients to have access to this information,” said co-sponsor of the bill Republican Senator Tracy Pennycuick (above) in a press release. “Our bill would enable advertising while maintaining the important consumer protection provisions that ensure tests and procedures can only be performed based on a doctor’s order.” Once enacted into law, clinical laboratories in Pennsylvania will be able to advertise their services just like labs in other US states. (Photo copyright: Montgomery County Republican Committee.)

Details of Senate Bill 712

The bill applies to clinical laboratory tests ordered by licensed healthcare practitioners and performed by the medical laboratories themselves. Labs are prohibited from making claims “about the reliability and validity of the testing that is inconsistent with the testing proficiency standards” in federal law, the bill states, and labs must disclose that the test “may or may not be covered by health insurance.”

Brown, Pennycuick, and co-sponsor Republican Senator Lynda Schlegel Culver, discussed the need for the new legislation in a March 2023 memo, observing that 70% of healthcare decisions are influenced by clinical laboratory tests.

“As our state and the nation’s healthcare system continues to grow and evolve, consumers are demanding greater transparency and to be more engaged in how healthcare is delivered to them,” they wrote, adding that the state’s current restrictions are “outdated.”

“We believe permitting outreach to Pennsylvania consumers with accurate, scientifically based diagnostic information can be a source of personalized, highly relevant insight to help foster better, more informed dialogue with licensed healthcare providers, which enables Pennsylvania consumers to take action to improve their health,” they wrote.

“Patients should have access to information about the services and procedures available at their local clinical laboratories,” said Senator Culver in the press release. “I want to make sure patients can make informed decisions about where and how to obtain these important health services. Our bill would remove the gag order on this specific set of healthcare services.”

Similar legislation, HB1558, sponsored by Republican Representative Paul Schemel, is currently pending in Pennsylvania’s House of Representatives.

Larger Push for Healthcare Consumerism

Dark Daily and our sister publication The Dark Report have reported extensively about the rise of consumerism in healthcare—including factors such as price transparency—as it applies to medical laboratories.

In “Pathology Groups and Clinical Laboratories Have Unique Opportunity to Take Leadership Role in Healthcare Consumerism,” we reported how employers and healthcare policymakers are seeking ways for consumers to take more active roles in their healthcare. That includes requiring more out-of-pocket payments from patients to control prices, and quality metrics, so patients can select hospitals, doctors, and clinical laboratories based on price and performance.

And in “Millennials Set to Reorder Healthcare and Lab Testing,” The Dark Report advised clinical laboratories on the need to reconfigure key aspects of their services to accommodate the rising numbers of Millennials in the workforce. For example, these consumers are accustomed to using mobile devices to interact with retailers and want the same convenience when obtaining healthcare services from doctors and labs.

Global management consulting firm McKinsey and Company addressed many of these issues in report titled, “Driving Growth through Consumer Centricity in Healthcare.” The authors suggested that healthcare providers need to “redefine the consumer experience” by emulating “consumer-focused companies in other sectors” with “personalized offerings and services, value-based pricing, and an elevated experience—all from distinctive, high-quality brands.”

The report also noted that providers still have a lot of work to do. “Many consumers believe that the health system does not support their care needs, and they perceive that the quality of their healthcare is negatively affected by their personal attributes, including income, insurance coverage, weight, and age, among other factors,” the authors wrote.

Huron, a healthcare consulting company, identified five current trends in healthcare consumerism based on a survey of US consumers, Healthcare Dive reported. They are:

  • Greater digital functionality, including telehealth, wearable devices to report health data, and mobile apps for scheduling, communication, and payment.
  • Affordability, shorter wait times, and online ratings as factors driving consumers to choose providers.
  • Accurate diagnoses and effective treatment plans as drivers of consumer satisfaction.
  • Increasing demand for technology-enabled conveniences such as virtual care.
  • More price transparency in response to concerns about affordability.

Pennsylvania’s decision to join the rest of the nation and allow clinical laboratories to advertise their services may be evidence that the growing number of consumers who want direct access to medical care and the ability to choose their provider—be it hospital, physician, or clinical laboratory—are encouraging the pathology and medical laboratory professions to lobby their state lawmakers to make it easier to advertise their services to the public.

—Stephen Beale

Related Information:

Senate Approves Bill Eliminating Regulation That Denies Patients Access to Information about Laboratory Services

Consumerism in Healthcare

Driving Growth Through Consumer Centricity in Healthcare

Five Healthcare Consumer Trends to Prepare for

Pathology Groups and Clinical Laboratories Have Unique Opportunity to Take Leadership Role in Healthcare Consumerism

Millennials Set to Reorder Healthcare and Lab Testing

Penn Medicine Study Shows Telemedicine Can Cut Employer Healthcare Costs by 25%

This is good news for clinical laboratories that already perform medical testing for telehealth providers and an opportunity for medical labs that do not, it is an opportunity to do so

Telemedicine visits have become commonplace since the arrival of COVID-19. Before the pandemic, telehealth was primarily used to give remote patients access to quality healthcare providers. But three years later both patients and physicians are becoming increasingly comfortable with virtual office visits, especially among Millennial and Gen Z patients and doctors.

Now, a recent study by the Perelman School of Medicine at the University of Pennsylvania (Penn Medicine) suggests that there could be a significant financial advantage for hospitals that conduct telemedicine. This would be a boon to clinical laboratories that perform medical testing for telemedicine providers.

According to Digital Health News, in July 2017 Penn Medicine launched a 24/7/365 copayment-free telemedicine program for its employees called Penn Medicine OnDemand. To engage with a telemedicine provider, patients must have a smartphone or tablet with a front-facing camera and updated operating system.

Telemedicine Visits Cost Less than In-Office Doctor Appointments

An analysis of the OnDemand program’s data collected from its inception through the end of 2019 found that the telemedicine appointment per-visit cost averaged around $380, whereas the cost of an in-person visit at an emergency department, primary care office, or urgent care clinic averaged around $493.

Typically, Penn Medicine’s employees used the telemedicine program for common, low risk health complaints. Healthcare conditions that many patients might otherwise not seek treatment for if an in-office visit was inconvenient.

“The data we analyzed pre-date the pandemic. It was a time when people were just putting a toe in the water and wondering, ‘Let me see if telemedicine could treat my needs,’” Krisda Chaiyachati MD, an internal medicine physician and Adjunct Assistant Professor at Penn Medicine, told Digital Health News. Chaiyachati lead the research team that conducted the telemedicine study.

“These days, people seem willing to jump in for an appropriate set of conditions,” he added. “The good news is that we made care easier while saving money, and we think the savings could be higher in the future.”

Chaiyachati and his colleagues found that telemedicine can save employers healthcare costs without sacrificing quality of care.

The Penn Medicine researchers published their findings in The American Journal of Managed Care, titled, “Economics of a Health System’s Direct-to-Consumer Telemedicine for Its Employees.”

Krisda Chaiyachati MD

“The conditions most often handled by OnDemand are low acuity—non-urgent or semi-urgent issues like respiratory infections, sinus infections, and allergies—but incredibly common, so any kind of cost reduction can make a huge difference for controlling employee benefit costs,” Krisda Chaiyachati MD (above), a Penn Medicine physician and the study’s lead researcher, told Digital Health News. Clinical laboratories that already perform testing for telemedicine providers may see an increase in test orders once hospitals learn of the costs savings highlighted in the Penn Medicine study. (Photo copyright: Penn Medicine.)

Telemedicine on the Rise

The idea is not new. In late 2018, Planned Parenthood launched the Planned Parenthood Direct mobile app in New York State. The app provides New York patients with access to birth control, emergency contraception, and UTI treatment with no in-person visit required.

The program has since expanded across the country. Users of the app can connect with a physician to go over symptoms/needs, and the be sent a prescription within a business day to the pharmacy of their choice.

The concept is similar to Penn Medicine OnDemand, which gives patients 24/7 year around access to treatment for common and low-acuity medical issues in a convenient, virtual process.  

Telemedicine was on the rise in other parts of the healthcare industry before the pandemic. According to “The State of Telehealth Before and After the COVID-19 Pandemic” published by Julia Shaver, MD, Kaiser Permanente, in the journal Primary Care: Clinics in Office Practice, 76% of US hospital systems had utilized some form of telemedicine by 2018. This rate grew exponentially while the healthcare system had to navigate a world with COVID-19 on the rise.

And, apparently, quality of care does not suffer when moved from in-person to virtual settings. Two studies conducted by The University of Rochester Medical Center (URMC) found telemedicine to be effective and that “common concerns about telemedicine don’t hold up to scrutiny,” according a news release.

In her New England Journal of Medicine (NEJM) paper on the studies, Kathleen Fear, PhD, URMC’s Director of Data Analytics, Health Lab, and her co-authors, wrote: “Three beliefs—that telemedicine will reduce access for the most vulnerable patients; that reimbursement parity will encourage overuse of telemedicine; and that telemedicine is an ineffective way to care for patients—have for years formed the backbone of opposition to the widespread adoption of telemedicine.”

However, URMC’s study found the opposite to be true. The NEJM authors wrote, “there is no support for these three common notions about telemedicine. At URMC, the most vulnerable patients had the highest uptake of telemedicine; not only did they complete a disproportionate share of telemedicine visits, but they also did so with lower no-show and cancellation rates. It is clear that … telemedicine makes medical care more accessible to patients who previously have experienced substantial barriers to care.

“Importantly, this access does not come at the expense of effectiveness. Providers do not order excessive amounts of additional testing to make up for the limitations of virtual visits. Patients do not end up in the ER or the hospital because their needs are not met during a telemedicine visit, and they also do not end up requiring additional in-person follow-up visits to supplement their telemedicine visit,” the NEJM authors concluded.

“Not only did our most vulnerable patients not get left behind—they were among those engaging the most with, and benefiting the most from, telemedicine services. We did not see worse outcomes or increased costs, or patients needing an increased amount of in-person follow up. Nor did we find evidence of overuse. This is good care, and it is equitable care for vulnerable populations,” Fear said in the news release.

“For patients, the message is clear and reassuring: Telemedicine is an effective and efficient way of receiving many kinds of healthcare,” she added.

Opportunities for Clinical Laboratories

Dark Daily has covered the fast growing world of telemedicine in many ebriefs over the years.

In “Two New Definitive Healthcare Surveys Show Use of Inpatient Telehealth is Outpacing Outpatient Telehealth Services,” we covered how medical laboratories could help hospital telehealth physicians in ordering clinical laboratory tests and reviewing test results to ensure selecting the best therapies.

And in “Despite Technical Challenges During COVID-19 Pandemic, Healthcare Networks Plan to Increase Investment in Telehealth Technologies,” we reported on a survey which showed that in 2021 more than 50% of hospitals and health systems planned to increase virtual care services within two years, a development that we predicted could change how patients access clinical laboratory testing services. And it has.

As telemedicine broadens its reach across the healthcare world, clinical laboratories and pathology groups would be wise to seek collaboration with health plans and providers of telemedicine to figure out where sample collection and testing fits into this new virtual healthcare space.

Ashley Croce

Related Information:

Telemedicine Visits Cut Health System Employee Care Costs by Nearly 25%

Planned Parenthood’s Mobile App Brings Birth Control Pills and UTI Treatment to New Yorkers’ Doorsteps

The State of Telehealth Before and After the COVID-19 Pandemic

Myths Busted: New Studies Show Telemedicine is Effective, Doesn’t Reduce Access to Care

Two New Definitive Healthcare Surveys Show Use of Inpatient Telehealth is Outpacing Outpatient Telehealth Services

Despite Technical Challenges During COVID-19 Pandemic, Healthcare Networks Plan to Increase Investment in Telehealth Technologies

California Doles Out $300 Million in No-Interest Loans to Save its Financially Struggling Hospitals

State’s new program helps ensure local communities have access to a community hospital and its physicians and clinical laboratories

Like phoenixes rising from ashes, a number of bankrupt and shuttered California hospitals have new life due in part to a state-run program offering the healthcare providers interest-free loans. The medical staff in these hospitals—including the clinical laboratories—will be happy to learn that their local communities refused to let their preferred healthcare providers shut down and disappear.

California’s Distressed Hospital Loan Program, operated by the state’s Department of Health Care Access and Information (HCAI) and the California Health Facilities Financing Authority, is making awards of nearly $300 million in no-interest loans to 17 healthcare providers, an HCAI news release announced.

“The program, established through Assembly Bill 112, offers interest-free, working capital loans to nonprofit and publicly operated financially-distressed hospitals, including facilities that belong to integrated healthcare systems with less than three separately licensed hospital facilities,” according to the news release.

This clearly demonstrates that even as both physicians and patient are increasingly comfortable with telehealth consultations—and having their healthcare conditions managed in ambulatory settings—the concept of the community hospital as an essential medical resource continues to motivate local governments and citizens to invest money in money-losing hospitals.

Elizabeth Landsberg

“Today we have provided much needed assistance to community hospitals across the state that desperately need financial help to provide the care their communities need,” said HCAI Director Elizabeth Landsberg (above). “I’m grateful to the legislature for spearheading this effort to help make sure these vital healthcare institutions are fiscally stable so they can continue to provide quality, affordable healthcare for all Californians.” Thanks to these loans, clinical laboratories in these hospitals will continue to perform critical testing for their communities. (Photo copyright: Gilbert Perez/HCAI.)

Providers Get Support with Conditions

Among the 17 healthcare providers receiving loans is Madera Community Hospital, a 106-bed hospital that served a rural area in California’s Central Valley. Madera, which closed in December and filed for Chapter 11 bankruptcy earlier this year, is one of 17 “troubled hospitals” in California getting a “lifeline,” KFF Health News reported.

Madera will receive a $2 million bridge loan earmarked toward operational costs. It is also eligible for a $50 million loan once Adventist Health, Madera’s intended new administrator, offers up a “comprehensive hospital turnaround plan,” HCAI noted.

“California hospitals face many financial challenges, and for independent rural hospitals, these challenges can sometimes be almost insurmountable,” said Kerry Heinrich, JD, President and CEO of Adventist Health, in a blog post leading up to the state’s announcement of loan awards. “If Madera succeeds in getting the financial resources it needs, Adventist Health will provide Madera Community Hospital with the expertise of a large healthcare system, helping to secure a sustainable future for healthcare in Madera County.”

It’s interesting to note that potential “operators” are watching to see if the hospital or State of California can arrange tens of millions of dollars in loans or other financing before they agree to come in and manage the hospital. 

The Distressed Hospital Loan Program aims to provide “loans (repayable over six years) to not-for-profit hospitals and public hospitals, as defined, in significant financial distress or to governmental entities representing a closed hospital to prevent the closure or facilitate the reopening of a closed hospital,” according to California Assembly Bill 112.

“The hospitals approved for this program have shown a detailed plan for financial recovery, and these funds will help them keep the doors open so they can keep serving their communities,” Fiona Ma, CPA, California State Treasurer, told Cal Matters.

Also receiving financial support is Beverly Hospital, a 202-bed Montebello, California, provider set to be purchased by Adventist Health White Memorial of Los Angeles, Cal Matters reported.

Beverly Hospital received a $5 million bridge loan to use toward operation costs while it is “purchased out of bankruptcy,” HCAI said in the news release.

Another hospital getting a “lifeline” is Hazel Hawkins Memorial in Hollister, California. The 25-bed level IV trauma center will receive a $10 million loan.

Other Ailing Hospitals Getting Interest-free Loans

According to HCAI, the other 14 hospitals receiving loans include:

What Led California’s Hospitals to Financial Hardship? 

According to Cal Matters, hospitals in California are “distressed” due to rising labor costs and inadequate reimbursement from Medicare, Medi-Cal, and commercial insurance.

In addition, the COVID-19 pandemic had a “staggering” impact on California hospitals’ financial health, Kaufman Hall reported in its April “California Hospital Financial Impact Report.”

The consulting firm’s report also found:

  • One in five California hospitals is at risk of closure due to “an unsustainable combination of negative margins, decreasing cash positions, and increasing debt.”
  • Hospital expenses in 2022 were $23.4 billion over pre-pandemic levels, outpacing revenue increases.
  • Operating income in 2022 was $8.5 billion less than in 2019.

Will Consumer Demand Affect California’s Success?

California’s commitment to its financially struggling hospitals comes amid national trends suggesting physicians and patients—especially younger healthcare consumers—are becoming increasingly comfortable with remote healthcare monitoring and receiving primary care in non-traditional environments, such as retail pharmacies and clinics.

In “Survey Indicates Zoomers and Millennials Are Ready for Pharmacies to Play a Bigger Role in Their Primary Care,” Dark Daily reported how demand for low cost, convenient access to doctors and drugs is driving transformation to decentralized medical care, and how retail pharmacy chains are seeing opportunity in offering primary care services.

Will younger Californian’s demand for low-cost, convenient healthcare render the state’s attempt to rehabilitee its failing hospitals moot? Time will tell. The ongoing financial woes of California hospitals will be watched by hospital-based clinical lab managers and pathologists in other states. That’s because California has a reputation for being first in the nation in attempts to address problems or regulate activity.

Regardless, it’s clear that—at this moment—the state is willing to invest in hospitals with a history of deteriorating financial performance as a way of ensuring access to healthcare for all of its citizens.   

Donna Marie Pocius

Related Information:

California Offers Lifeline to 17 Troubled Hospitals

California Announces $300 Million in Financial Support for Community Hospitals Across the State

Assembly Bill 112

Adventist Health to Manage Madera Community Hospital

California Bails Out Distressed Hospitals, Offers Interest-Free Loans to 17 Troubled Providers

San Benito Health Care District Receives Letter of Intent

California Hospital Financial Impact Report

Survey Indicates Zoomers and Millennials Are Ready for Pharmacies to Play a Bigger Role in Their Primary Care

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