Amid disruption, how do we "future proof" health care?

The pandemic’s profound impact on the industry has only heightened with staffing shortages and health care legislation complexities.

It has become apparent that a number of systemic challenges will continue to plague health care providers long after COVID cases subside. The pandemic’s profound impact on the industry has only heightened with staffing shortages and health care legislation complexities. Keeping the below items top of mind could help “future proof” the industry.

Labor

COVID compounded the enormous staffing challenges that existed prior to the pandemic. Health care teams have been on the frontline providing non-stop care to those directly impacted by COVID-19, resulting in severe burnout and subsequent turnover across the profession. For those opting to stay in the workforce, there is an abundance of opportunity to earn more income by becoming a “traveling” professional or switching employers and capitalizing on large sign-on bonuses. Bottom line: our national health care system is struggling to retain and hire enough workers to meet existing health care demand. Without viable strategies to address staffing, access to health care services will be hindered across the country.

Addressing labor challenges requires a multi-pronged approach. In the near term, providers can utilize bonus incentive payments to recognize extraordinary efforts. To the extent possible, avoid driving up base wage rates. Doing so locks in compensation for future periods and you’ll run the risk of having to take difficult actions to bring expenses back in line with revenue. Look closely at benefit packages and consider employee assistance programs.

Behavioral and mental health needs

COVID-19 has put a spotlight on mental and behavioral health. According to the Centers for Disease Control and Prevention (CDC) Health Statistics, as of February 2022 48% of Americans experience feelings of anxiety vs. 11% during the same time period in 2019. When it comes to experiencing symptoms of depression, 41% of Americans indicate they have symptoms vs. just 5% in the first quarter of 2019. The feelings of anxiety and depression are more pronounced among those age 18 – 24, reaching as high as 56%. One silver lining is the federal government has broadened payment of and availability for these services via telehealth; employers are offering wellness options that are specific to mental health, as well as rest days and other resources. For the first time, the framework for improving wellbeing is a focal point.

Growing mental and behavioral health needs represent an opportunity for providers to drive revenue growth by expanding services. Start by understanding new reimbursement regulations and how to capture revenue streams. Evaluate current policies and procedures and identify creative ways to modify and foster connections. CDC statistics suggest this will be a long-term health need.

Antitrust and compliance oversight

Antitrust has been a bubbling focal point. In July 2021, President Biden released an Executive Order aimed at improving competition in key sectors such as health care. The order encouraged regulatory agencies to focus on the key sectors to align on a plan of action with other governing bodies, recognizing that the law enables them to challenge mergers. Recently, the U.S. Justice Department acted and filed a $13 billion lawsuit against United Health Group in an effort to block one of its subsidiaries from acquiring a health care tech firm. The core concern being that United Health would gain access to information on competitor pricing and potentially position itself to undercut competitors.

Expect increased scrutiny on the role of private equity (PE) investment in health care, requirements for tax exempt hospitals, and increased enforcement around fraud and abuse, with a particular focus on Medicare Advantage. Now is a good time to verify you have robust and effective compliance and risk management programs in place.

Private equity influence

PE has had an increasing influence on health care for the better part of the last decade and the pandemic appears to have accelerated it. From digital health investments to PE-backed physician practices and senior living, we can expect increased PE activity in health care throughout 2022 and likely heading into 2023.

Proponents believe PE investment is necessary to drive innovation, iron out inefficiencies, and provide necessary capital to drive change — crediting PE for driving innovation more quickly than incumbent providers can. Opponents believe that the PE business model and the fundamentals of health care are not compatible with one another — that the PE business model is heavily focused on generating profits in the short term, inherently questioning long-term dedication to needs of a given population.

Given the rate of activity and growth it is clear PE firms are not only seeing opportunities but pushing forward to take advantage of them. Note the services in which PE is investing and consider if the opportunities could benefit you.

Medicare advantage growth, scrutiny

The Medicare eligible population continues to grow as baby boomers retire, and Medicare Advantage (MA) is growing as an attractive option. Currently, more than 40% of total Medicare enrollees have chosen a Medicare Advantage plan versus a traditional Medicare Fee-for-Service (FFS) plan. From a beneficiary standpoint, the attraction to Medicare Advantage is simple: there are potentially lower premiums and co-pays, coupled with increased access to supplement benefits, like dental coverage, fitness options, or hearing exams and aids.

These benefits bring a significant cost downside to the federal government. According to its June 2021 report to Congress, MedPAC indicates federal government spends 104% more per capita for beneficiaries enrolled in Medicare Advantage compared to beneficiaries enrolled in Medicare FFS. As is typically the case, when a program shows significant growth and costs more than alternative options, it attracts scrutiny. Throughout 2022, expect heightened regulation of Medicare Advantage, particularly within instances of “upcoding” beneficiary health conditions, along with failures to cover required services.

Monitor the changing demographics and MA penetration in your respective markets and understand the differences between MA and traditional Medicare FFS. Be proactive in communicating with MA plans to understand care protocols and the types of advance approvals necessary. For those who own or participate in an MA plan, now is a great time to understand process and procedures to determine beneficiaries’ health conditions and verifying your compliance process is tightened up.

Economy and inflation

The year is starting out with an economy that looks more like a bumpy roller coaster than it does a smooth sailing cruise ship. The Russia-Ukraine war creates increased uncertainty and instability in the markets, which will undoubtedly add to existing inflationary concerns. In an effort to tap down inflation, the Federal Reserve has recently approved its first interest rate increase. Chairman Jerome Powell said, “The committee is determined to take the measures necessary to restore price stability. The U.S. economy is very strong and well-positioned to handle tighter monetary policy.”

Success in 2022 requires a back to the basics approach, understanding service line profitability and utilizing financial modeling to develop scenarios to enhance planning and strategic direction. Now is not the time to pull back on growth strategies — be bold. However, don’t grow just for growth’s sake, make sure growth is efficient and adds to profitability.

Capitol Hill and regulatory agency agenda

Build Back Better 2.0, additional COVID relief packages, sequestration, and the risk of insolvency of the Medicare Part A Trust Fund are among the top challenges and points of contention for Congress. Don’t expect the Centers for Medicare and Medicare Services to let up on price transparency, other transparency initiatives on quality/staffing requirements, or value-based care. In fact, the Innovation Center (CMMI) has already released its strategic refresh to better align on overarching Administration goals, one of which is health equity.

This active legislative and regulatory environment should not be taken for granted. Continue to monitor the activity, including enforcement actions, and make sure compliance programs are functioning as intended. Labor is tight, yet compliance is not an area to short-cut; consider outsourcing or hiring trusted advisors who can help strengthen these programs.

The lingering effects of the past two years create increased complexities alongside strategic and operational challenges. Yet, with challenge comes opportunity. Plan ahead and act, and you could emerge stronger.

For more information, contact Rob Schile at rob.schile@CLAconnect.com or 612-376-4592.

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, investment, or tax advice or opinion provided by CliftonLarsonAllen LLP (CliftonLarsonAllen) to the reader. For more information, visit CLAconnect.com.