Blog, The Hospital Finance Podcast®

The issues driving healthcare in 2021 [PODCAST]

besler insights blog corner graphic

The Hospital Finance Podcast

In this episode, we are joined by Paul Keckley, Managing Editor of The Keckley Report and widely-known healthcare researcher and industry expert, to discuss issues driving healthcare in 2021.   

Learn how to listen to The Hospital Finance Podcast® on your mobile device.


Highlights of this episode include:

  • What patients and providers can expect to see from COVID financial relief in 2021.
  • What obstacles and implications are involved with ongoing vaccine distribution in 2021.
  • How the incoming Biden administration is planning to manage the pandemic. 
  • What top challenges face hospital boards in early 2021?
  • How the hospital C-suite will be changed by the pandemic.
  • And more…  

Mike Passanante: Hi, this is Mike Passanante and welcome back to the award-winning Hospital Finance Podcast®. Today, I’m joined by Paul Keckley, managing editor of The Keckley Report and a healthcare researcher and widely-known industry expert. Paul recently wrote about what he sees coming for healthcare in 2021. And we’re happy to have him back on this show to discuss his analysis. Paul, welcome back.

Paul: Thank you, Mike.

Mike: So lots to unpack with healthcare from this past year of 2020 and heading into 2021. And I think it just makes start– it makes sense to start talking about COVID in our discussion. So what do you see for COVID financial relief going forward for both patients and providers in 2021?

Paul: Well, in addition to the three trillion of relief funds that have come through the system in 2020, there’ll be another trillion that comes through with– targeted to unemployment benefits to small business and some individual relief for certain populations. But I mean, the way to think through this is the first six months of 2021 are we’re managing the last hopeful stage of the pandemic in the US. But its lingering impact will continue long after the first two quarters. The economy will close 2020 when we get those final numbers at about 3.7 to 4 percent below on a GDP basis. And our federal deficit will be sitting somewhere around 27 trillion and change. So, our net worth -as an enterprise if you will- will reflect an 18 trillion-dollar asset and a 27 trillion-dollar long-term deficit. So, we’ve got a– we’re upside down on the deficit side and that’ll become more important as we kind of come out of the pandemic in the last two quarters of next year and beyond. So, Mike, I think pandemic is still the story. But it’s pandemic and what’s next. And a lot of that will be defined by the policies of the Biden administration and much of that defined by the Constitution of Congress, especially the Senate because this was not the change election that the Democrats had expected. And it was more of a repudiation to some extent of kind of a far-left view of government. Voters like the idea of a divided government, especially the top half of the income ladder. And the market says we’re not so sure that Congress ever figures things out as easily as the private sector. So, there was a pretty significant rejection of some of the bigger government-run solutions. That’s not going away. But it’s been buffered by the election. So, the way to think through the next two years at least is incremental changes that will satisfy more kind of a center-left and a left side of the voting spectrum but not the major changes that were promised in the campaign.

Mike: Great analysis, Paul. Let’s talk tactically about the next stages of COVID on the ground. How do you see vaccine distribution playing out? What are some of the obstacles and implications we’re going to face?

Paul: Well, we have eight vaccine manufacturers that have gone through or going through the finalization of emergency use authorization. We have three that will be in play in January. And that shifts the focus to the supply chain and logistics. So we’re discovering, for instance, that the private sector has to play a key role in distribution. But the distribution in rural areas is not as easy as distribution in urban markets. We’ve discovered that getting 70% of the population to be vaccinated, which is kind of the ideal number, might be difficult. The polls say that 4 out of 10 are suspicious and that was before– toward the end of 2020, we were finding out that certain populations with allergies or pre-existing conditions or certain chronic conditions might experience some complications and that could push further some hesitance on the part of the population. So I think the logistics of getting the vaccine in all of the places with the right storage capability, distribution capability, quality controls, the follow up required depending on which vaccine in 14 to 21 days of each, and then this kind of cloud of hesitance in certain populations is going to be a logistical challenge. That’s the reason I think the government will spend a lot of really creative energy to figure out how to reduce that anxiety. I don’t think that’s been addressed to date and there are discussions about do we need, for instance, to have celebrities be vaccinated on camera and run those as real time ads or do we want the presidents, the former living presidents, to be vaccinated as part of an ad campaign or so on. All of that speaks to this notion of 6 out of 10 seem willing to be vaccinated but 4 out of 10, for a variety of reasons, don’t. And every day, you hear more that there might be some complication. Then you’re having more and more people say maybe I’ll wait or maybe this isn’t what it’s cracked up to be.

Mike: Yeah, a lot to unpack there. Paul, you touched on the presidential transition a little bit earlier and I want to unpack that a little bit more now. So, let’s pivot to that. We’re here in December. This podcast will air in early January, so we’ll be coming close to the transition at that point. But at this point in time, what is the Trump administration busy with regarding health care?

Paul: Well, the Trump administration has two agenda items. that have peripheral interaction with healthcare. One is you’re obviously challenging in the courts the election results and have 18 Republican attorneys general joining them in a suit they hope goes to the Supreme Court and says, “We need to go back and fix some of these states where they believe there are ballots that shouldn’t have been counted.” That’s item 1, 2, and 3 on the executive branch agenda right now. If you drop down then to the COVID task force and the pandemic, there’s I think a level of collaboration going on between outgoing and incoming that’s very positive. It doesn’t get a lot of attention in the press. But you had a lot of folks in key positions like Tony Fauci and Steve Hahn and others that have been voluntarily very involved in the transition. And with the new team coming in from President-elect Biden, these are known entities coming into those roles. So, Bob Redfield at CDC knows well Rochelle Walensky. So, these are people that have relationships and I think that makes the transition good. So that’s kind of the second agenda item was make a transition where the Trump administration gets credit for Warp Speed and gets to do a victory lap around that. But when the new administration is seated January 20th, we double down on really vaccinations and testing and really getting the right numbers of people vaccinated at least once if not both doses. And then, the third is at a kind of health system level. What are the regs that are sitting out there with CMS and some of the other agencies, CMMI and others. As you know, there are 54 different alternative payment models, and each of those has been tweaked through the past four years, and some are new, like the direct contracting, what’s called the geo model of direct contracting. So, there is a desire on the part of the Trump administration to hardwire the rules and regs around things they initiated, like price transparency for hospitals, price transparency starting in 2022 for insurance companies. They want to make it hard to undo those. And that’s kind of the third layer of activity going on. How do we transition out without admitting that that’s likely by making it difficult to undo some of these executive orders and administrative actions that have been taken? So that’s it.

Mike: So, let’s talk about the incoming administration for a minute. Obviously, their initial focus is going to be COVID, but they have some other things they want to get done too. But realistically, beyond managing COVID, what can they do in the short-term?

Paul: Not much. Candidly, what they can do is through administrative action order a review all the executive orders that were passed, like press transparency and others that have not been implemented or where you had a recent interim final rule. As you know, what happens in any of these executive orders, there is a directive in the order to HHS or FDA or CMS or somebody, an agency, to develop the detailed plan and bring that back within 60 days, 90 days, six months, whatever. So, there’s always a period of time from the start of something like the price transparency executive order to its implementation, and there’s also a series of court challenges that you anticipate. So, all of that will work its way through the system for all of the executive orders and administrative actions that have been initiated under the Trump administration.

I think the way to think about the Biden administration’s health policy is, one, it starts with expanding access to insurance any way possible for those even above 400% of the federal poverty level. As you know, in the Affordable Care Act, the exchanges and the Medicaid expansion basically gave underinsured and uninsured people mechanisms to be insured up to 400% of the federal poverty level. The Biden administration will expand that. They’ll find ways to expand access. But to do that with the deficit overhang, they have to actually increase revenues and reduce spending in some other areas. So I suspect they’ll look at other parts of government like defense spending and some others and say we need clawback. They’re likely in tandem with subsidized coverage knowing they can’t get a public option passed, knowing it’s virtually impossible to get the age of Medicare eligibility decreased to 60 from 65. They now have to do operate in the middle. They have to make trades.

So are you willing to make trades with Republicans around more addressed aggressive drug price control policy in order to get some relief, some subsidy for Medicaid, and for the health exchanges? Are you willing to trade a solution to surprise medical bills which hospitals and a lot of organizations don’t want to see fixed and private equity supports keeping surprise medical bills, but the public hates it? But are you willing to take some bullets in the court of public opinion in order to use that as a bargaining chip to really reengineer how key provisions of the Affordable Care Act can be reinvigorated? As you know, the ACA had a public health fund which essentially has not been implemented or funded where we did a better job around endemic preparation and surveillance. It had features like the patient-centered outcome research institute to standardize care around and make it publicly accessible. There were so many parts of the Affordable Care Act, the one I always found interesting is Title 5, which is creating a whole new health care workforce. In other words, training the workforce for the way health is in the future. More holistic, more technology-enabled, delivered out of facilities through various mechanisms of self-care, technology biometrics, smart devices. That was never funded. So, I think they’ll find ways to make trades to get some of these things under way. Remember, Mike, that all of this is being calculated against the midterm election. 2022, if history serves any purpose, it says the party in power in the White House will lose some seats in the House of Representatives. Clinton lost 54. Obama lost 63. Nancy Pelosi only has a slim margin of about 15 seats in the house now. So, they can’t afford to lose the house, and they are quietly assuming that the January 5th result may not give them control of the Senate. In other words, the Republicans will hold one or two of those seats in Georgia. So that means a Biden administration, at least in the first two years, is working in a divided Congress, can’t hit home runs, has to think about singles, has to think about trades that may be what brings the economy to the front faster as the issue.

Because in politics, the appropriations process is your political capital. You spend your influence to get certain things funded and leave certain other things out. And that’s where the trades will be made. If what we’ve learned over the past month– we’re talking in December, the government is supposed to shut down December 18th. We’ll take that right up to the last minute with an omnibus bill, but we’ll pass it and keep the government floating. A stimulus bill somewhere around 916 billion dollars will end up getting passed. That’ll be a relief bill for the pandemic. But that will have been death by a thousand cuts. So I don’t see a wild swing left in a Biden health policy, nor do I see the Republicans being able to swing for the fences on things that they consider sacrosanct. I think we’re kind of a center left policy agenda for health care for at least the next two to four years.

Mike: Paul, you mentioned the Georgia Senate races just a minute ago, and we may have to take out our crystal ball for the next question I’m going to ask you, but at this point those races have not yet been decided. So can you tell us how things play out if Republicans maintain control and conversely if the Senate splits.

Paul: Yeah. So those two seats, one is the special election because Charlie Isaacson resigned and Governor Kemp appointed Kelly Loeffler to that seat. And then David Perdue was for his regular-cycle reelection. History tells us that the Republicans will win one or two of those races. In eight prior contests like this, Republicans have kept the incumbency in seven of the eight. So, I think the betting odds are the Republicans will come away from January 5 with one or two of those seats, meaning Mitch McConnell is the Senate majority leader and the Republicans control the Senate. Why is that important? All the confirmations for the Biden administration that are key will require Senate confirmation. So, the battles will be fought initially, and the committees of the Senate where nominees for things like HHS or the Office of Management and Budget – where they really floated Neera Tanden’s name as their nominee – that’s going to be where battles are fought initially. But I think what the Biden team will do is pick the battles they’re ready to fight and get some credit for the battles they walk away from. And that’s kind of the politic of that administration. It’s a very pragmatically wired administration.

Mike: Great insights there as well, Paul. So let’s pivot away from politics for a little while and talk about our hospital providers, because they’ve got a very unique set of challenges over the next several months. So when you think about hospital boards, what are some of the top challenges they’re going to face as we move through this winter?

Paul: Mike, that probably is my biggest concern relative to hospitals, is the degree to which our boards are adequately prepared to make tough decisions. In ACD, the National Association of Corporate Directors that does some interesting studies says that not-for-profit boards are about a 200-hour-a-year commitment, and the number-one concern of those boards is understanding the strategy of the organization and being adequately capable of participating in those plans. I think most of our boards are very confident in the skill set of their CEOs and default to the CEOs’ premonitions about the market, and do not fulfill to the level necessary a fiduciary role of developing an independent view, an informed view on key decisions. So, where’s that going to factor in? It’ll factor in how capital is spent, what clinical programs need to be a focus of investment and which ones do we need to re-engineer? Partnerships, mergers. This is an administration– the Biden administration has said, “We’re going to revisit hospital consolidation. We’re not sure that that’s functioned in the public good.” I’m not sure that the boards are equipped with essentially about a once a month meeting cycle and maybe a once a year retreat and some interaction through committee cycles that we’re adequately preparing boards to navigate as a partner with the CEO. I think one of the most insightful and in surprising comments I ever heard was from a CEO who said, “My board trusts my judgment too much. I need them to challenge me. That’s good for my organization.” For me, that’s the biggest challenge.

Mike: Yeah. Clearly, there’s a way to go there when you’re dealing with a volunteer organization and having them plugged in as closely as you need them to be during a time of crisis particularly, which we’re going through now. And that’s always going to be a challenge.

Paul: Yeah. Most of our boards, as you know, in the acute sector are not for profit boards four out of five. So they’re volunteers and most are unpaid. Oh, this is going to be time-consuming and the boards in hospitals do it for the right reasons. These are good people. We just have to squeeze more time out of them, right? And we got to squeeze more of their tough decision-making independently. And that’s going to be a challenge.

Mike: So then let’s talk about the C-suite, Paul, because I think the pandemic has certainly challenged leadership within our hospitals. Do you think the hospital C-suite will change post-pandemic? Do you think there’s going to be new or different skill sets required given what we’ve seen in 2020?

Paul: Well, I don’t think the C-suite of the future is a mirror of the past. I think there will be two other roles that become pretty significant. One will be this notion of well-being management. We’ve found, both among our workforce and in our communities, that well-being is a complicated topic. It’s not just about a person feeling healthy. It’s their finances. It’s their social well-being. It’s where they live and things. So, I think that’ll elevate in the C-suite. How are we addressing well-being? How do we address that for an employer that’s seen an incredible disintegration of their workforce, productivity, presenteeism, and so on. So I think that’s one role that’s now going to elevate. And I think a second is going to be non-operating income. We have to look beyond the core businesses of patient care and related services and the solvency and liquidity of the organization. That’s the non-operating income and it has to be beyond the way many have done it in the past which is either through philanthropy or through– we use our fund balance and we’re investing in a couple of index funds with a local broker. I think we’re going to find that our dependence on non-operating income, income from new sources and new structures for accessing that is going to be a huge imperative because the core business with all the financial pressure it’s going to face is not sustainable from a financial standpoint. And some would say that the inpatient business is probably a public utility in waiting. So we’ve got to find a different enterprise financing structure and I think that’ll be a new face in the C-suite.

Mike: Well, Paul, I always enjoy our conversations and I learn a lot every time. And we’ve only just scratched the surface here. There’s so much more but we’re lucky that you publish a report regularly called the Keckley Report. Where can people find that report if they want to go and read more from you?

Paul: Thanks, Mike. It’s just www.paulkeckley.com and I welcome comments. We’re all on a journey. This is an industry where every day it changes. And if you’re more than 24 hours away from today’s news, you’re behind.

Mike: You’re so right about that. Paul, thanks so much for coming by the podcast again today.

Paul: Thanks, Mike.


The Hospital Finance Podcast

SUBSCRIBE for Weekly Insider Updates

  • Podcast Alerts
  • Healthcare Finance News
  • Upcoming Webinars

By submitting your email address, you are agreeing to receive email communications from BESLER.

BESLER respects your privacy and will never sell or distribute your contact information as detailed in our Privacy Policy.

New Webinar

Wednesday, December 14, 2022
1 PM ET

live streaming
Podcasts
Insights

Partner with BESLER for Proven Solutions.

whiteboard