A Lookback at the 2021 Top Five Trends in Healthcare

From Unprecedented to New Normal

As we look back at 2021 and review the year, it is hard to imagine that we thought we would be past COVID-19 by this point. More and more, we realize that this is indeed our new normal; it will simply change our lives as we embrace this virus moving forward. Regardless, COVID-19 still has unexpected consequences, even almost two years into the pandemic.

As we started 2021, we took stock of all the changes and tried to project what could be ahead. While we certainly got some things right, there were new lessons to be learned and continued unknowns. In this article, we reflect on our projected trends and consider what we got right, and more importantly, what we potentially missed.

Consider this in conjunction with the article we recently published on 2022 trends, creating a strong understanding of the various factors at play in the industry.

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Post-COVID Transactions

Based on the trends we saw in late 2020, we expected transactions – including private equity, hospital and health system acquisitions of private practices, and mergers (both horizontally and vertically) – to increase in 2021 compared to 2020. We saw these transactions increase, and the details are interesting.

Specifically, in 2021, while the total number of transactions remained low, the size of transactions increased, in part because many small or struggling organizations were already acquired before 2021, leaving larger mergers to occur. As projected, private equity continues to be a driver for these types of transactions, adding another competitor to the market for hospitals considering transactions.

In July, President Biden released an executive order encouraging competition and reviewing consolidation in the industry. Specifically, the order stated,

“Hospital consolidation has left many areas, especially rural communities, without good options for convenient and affordable healthcare service. Thanks to unchecked mergers, the ten largest healthcare systems now control a quarter of the market. Since 2010, 138 rural hospitals have shuttered, including a high of 19 last year, in the middle of a healthcare crisis. Research shows that hospitals in consolidated markets charge far higher prices than hospitals in markets with several competitors.”

Thus, the order pushed HHS to review and revise its merger guidelines to ensure patients are not harmed. Regardless, we have not seen this inhibit this trend much, and we do not expect it to change soon, but it is essential to be mindful of such government responses.

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Political Transition

In keeping with the above, President Biden has certainly been active in the healthcare industry; however, there has not been a significant change due to the nature of politics. There continues to be political unrest across the country, with the November 2021 election again creating challenges for any party to make significant changes. We continue to see the mitigation of significant changes based on the ongoing COVID-19 challenges (i.e., delays in expected Medicare Physician Fee Schedule changes).

One of the major policies affecting our healthcare organizations in 2021 is the vaccine mandates. We continue to see this play out with the relevance of boosters, creating significant difficulty to maintain staffing and keep up with the policies. President Biden has been a strong supporter of vaccine mandates thus far; however, much of this has been left to state decision-making. Regardless, this is a major political debate that has significant implications for the day-to-day running of our organizations.

Finally, in 2021, President Biden’s administration introduced the federal hospital price transparency rules for Obamacare. With that said, this has been extremely slow to come to fruition, and legal guidelines are still murky. Thus, we are still not completely aware of how this will play out long-term.

There were significant political changes in 2021, but there have been less widespread overhauls than expected, especially given the Democratic senate.

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Value-Based Arrangements

In keeping with the above, while President Biden clearly outlined some goals and visions for value-based care under his administration, there have not been massive overhauls yet. Again, this is partly due to the delay related to ongoing COVID challenges. Implementing long-term, strategic visions is tough when the day-to-day minutia of a global pandemic challenges organizations.

In October 2021, the Centers for Medicare & Medicaid Services (CMS) introduced their strategic vision for the next decade in a white paper on the CMS Innovation Center Strategy Refresh: Driving Health System Transformation – A Strategy for the CMS Innovation Center’s Second Decade.

A few key takeaways include:

• Establish all Medicare beneficiaries (and a high percentage of Medicaid beneficiaries) in some type of accountable care model by 2030
• Develop models that judge organizations on their ability to reduce costs and on their ability to improve health equity
• Encourage patients to become more involved in their care and include more person-centered measures across all models
• Drive models to ensure price transparency using cost-sharing and drug pricing initiatives
• Pursue multi-payer alignment in models by 2030 to allow for stronger partnerships in achieving CMS goals

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Operations and Efficiencies

In 2021, we expected responses from organizations due to financial struggles related to COVID-19, specifically regarding operations and efficiencies. While many organizations sought to tighten their purse strings, we also saw many organizations seek more aggressive growth. As noted above, we saw mergers and acquisitions rebound, with many historically private organizations seeking potential partners to weather the storm.

Further, since COVID-19 is still ravaging some populations and healthcare organizations, there has not been the ability to decrease significant overhead levels. In fact, due to the labor shortage experienced across the nation, there have been some compensation increases to retain existing staff. Labor shortages continue to present challenges, particularly for rural organizations, struggling to compete already and now facing even more significant constraints.

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Telehealth

Telehealth continued to make progress in 2021, with organizations jumping lightyears beyond where they started their operations in 2020. With that said, 2021 also raised concerns over specific operational functions – in part related to how quickly organizations pushed these initiatives forward. Additionally, some payers began pushing back on the leniency allowed during the height of the pandemic, seeking to place more oversight and structure into the relative free-for-all that existed in 2020. Thus, as expected, while telehealth is way ahead of pace based on 2019 expectations, 2021 saw the emergence of many questions regarding successful integration and long-term sustainability.

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Summary

Overarchingly, much of what we expected to come to fruition in 2021 occurred, though potentially at a slower pace than initially thought. Since COVID-19 continues to be a massive factor across the country, organizations are just as challenged as they were in 2020. Thus, 2021 was still a year of defense versus establishing a proper offensive strategic plan for many. As we move forward, hopefully, we can begin returning to a process of genuinely looking ahead and planning for the future.

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Next Steps

• Read Top 5 Trends in Healthcare for 2022 and work to create a pathway for success for your organization based on market dynamics
• Submit your information and request to speak with one of our consultants