Keith Loria is a contributing writer to Medical Economics.

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Remote patient monitoring, once the province of early adopters and healthcare’s gadget geeks, has become mainstream during the COVID-19 pandemic. Hospitals are using remote monitoring to reduce spending on personal protective equipment and free up beds for patients with COVID-19. Many clinicians appreciate that this technology allows them to keep tabs on patients in continuous real time instead of periodically at checkups. There are also pluses for patients.

“There are many aspects of patient care delivery and monitoring that can now be successfully accomplished outside of the traditional healthcare setting,” says Donna Morrow, vice president of clinical operations at Noteworth, a digital health company headquartered in Hoboken, New Jersey. “This is providing peace of mind to the patient and reducing exposure.”

Eric Rock, founder and CEO of Vivify Health, says the immediate future of remote patient monitoring will rest on its scalability and the level of information it provides.

“Instead of asking the exact same biometric measurement questions of someone every day, [remote patient monitoring] will engage the patient with more meaningful content that is tailored and adaptive to patients’ responses,” he says. “The tool will have its own rules and logic built in and will ask a sequence of questions much [as] a nurse would. Intelligent content has been shown to facilitate patient engagement, which positively [affects] outcomes.”

That may all be true, but there’s also the grittier reality that the future of remote patient monitoring, as with so much else in healthcare, depends on federal government regulation and reimbursement, especially Medicare reimbursement. Part of the reason for the crescendo of remote patient monitoring is an FDA decision in March 2020 to relax its regulation and a subsequent guidance in October that expanded upon the policy.

“In the context of the COVID-19 public health emergency,” the FDA guidance states, “the leveraging of current noninvasive patient monitoring technology will help eliminate unnecessary patient contact and ease the burden on hospitals, other healthcare facilities and healthcare professionals [who] are experiencing increased demand due to the COVID-19 pandemic as it relates to diagnosis and treatment of patients with COVID-19 and ensuring other patients who require monitoring for conditions unrelated to COVID-19 can be monitored outside of healthcare facilities.”

Philip Golz, vice president, commercial, at Spire Health, which sells remote patient monitoring technology for chronic respiratory disease, says changes in the 2021 Medicare physician fee schedule finalized by CMS at the beginning of December 2020 also will bolster remote monitoring.

“In particular, [it is helped by the requirement] that the technology used for [remote patient monitoring] is capable of transmitting data automatically and at least 16 days per month,” he says. “The new changes aim to ensure the technologies provide meaningful data and are patient-friendly.”

Remote patient monitoring is part and parcel of the COVID-19-inspired shift to telehealth. Anish Sebastian, CEO and co-founder of Babyscripts, a virtual maternity care company in Washington, D.C., says that before the pandemic, telehealth was an option that set a practice apart from the competition. Now it’s standard-issue healthcare. “Because of COVID-19, providers really had no choice but to let go of their concerns about telehealth and implement virtual solutions for their patients,” he says. “Before, (remote patient monitoring) was being tested out and piloted primarily with low-risk patients, but COVID-19 drove providers to offer it for all risk profiles, sometimes supplemented with in-person visits.”

Now that clinicians have seen the benefits of remote patient monitoring, they are much more comfortable weaving it into their practices, he says.

“It’s especially important for health systems that are feeling the financial strain of the pandemic to offer these enhancements to patients, and we’re seeing new reimbursement codes and payer reimbursement mechanisms that are making it easier for practices to use (the technology),” Sebastian says.

Prior to the public health emergency, Medicare coverage of remote patient monitoring services was limited to patients with one or more chronic conditions. However, as patients were being encouraged to stay at home, the need for remote monitoring to treat patients with acute, time-limited conditions (such as COVID-19) became all the more critical. Confirmed in the 2021 Final Rule, CMS clarifies that providers may furnish RPM to collect/analyze physiological data from patients with acute and chronic conditions.

It’s also attractive to patients who worry about possible exposure to the virus during an in-person visit. “With the availability of remote patient monitoring, [Noteworth] is allowing providers to keep patients out of the hospital and physician office settings,” Morrow says. “This is especially important for the at-risk population. And with the changes enacted by CMS to open the patient population that could utilize remote patient monitoring, this expanded to the acute conditions as well. This opened up greater engagement and accountability for the patient and the care team.”

Robin Hill, chief clinical officer of Vivify Health, notes that leveraging remote patient monitoring quickly has enabled clinicians to keep an eye on their patients without going into the home. “Because of the social isolation, using our solution to provide that human touch virtually helped support our patients holistically,” she says. “Our solution has also helped decompress some pressure on health systems that were at capacity with the influx of [patients with] COVID-19 by being able to remotely screen and/or monitor patients and/or employees [for the virus].”

Tomas C. Walker, vice president of clinical affairs at Dexcom, a San Diego-based maker of continuous glucose monitoring systems, says changing standards of care in the current COVID-19 environment led to rapid development in monitoring technologies.

“One of the clinicians we work with told us that the hospital staff and administrators grasped the value and the potential of remote monitoring and care and that they will never go back,” Walker says. “I think we can safely state that the genie is out of the bottle on this one. Remote care and telehealth have been given a huge opportunity with COVID-19, and we are seeing the benefits of a lot of previously unnoticed work.”

Although remote patient monitoring isn’t confined to any particular demographic, it may be especially valuable when it comes to caring for elderly people. About 1 in 4 seniors lives alone. Even before the pandemic, access to in-person care was far from a sure bet. Social distancing requirements because of COVID-19 make in-person care even more difficult, so remote patient monitoring is extremely important in this group.

Walker says that remote patient monitoring is a hot topic right now, with data from continuous glucose monitoring playing a central role. His company has integrated data from Bluetooth-connected insulin pens into its reports. “Clinicians who may be used to looking at insulin pump printouts where you can see insulin dosing and meal boluses now get that same feature (virtually) with continuous glucose monitoring.

Remote monitoring is bringing together data produced by insulin pumps, glucose meters, smart pens and other devices that people who have diabetes depend on, says Diana Isaacs, Pharm.D., continuous glucose monitoring program coordinator for the Cleveland Clinic Diabetes Center. 

“There are now more sophisticated mobile apps that can connect with these devices and automatically upload data to a portal so data can be viewed in nearly real time,” she says. “Also, many of the systems can be set up to flag for things (such as) hyperglycemia and hypoglycemia. There are also smart scales and blood pressure cuffs. Many apps can integrate with Apple’s Health app to view other things, too, (such as) heart rate, (daily number of) steps and sleep quality.”

Maternal health has seen a big jump in remote patient monitoring, with companies such as Babyscripts taking the lead. “Pregnant moms are more anxious than the typical population (about risking) exposure to COVID-19 by coming into the office,” Sebastian observes. “They’re also the perfect age for using technology in their healthcare, making them an ideal demographic for remote monitoring.”

Still, partly because remote patient monitoring is relatively new to the healthcare field, there are problems that need to be sorted out, not the least of which is payment. “The reimbursement through insurance companies is inconsistent,” Isaacs says. “Fortunately, the coverage is improving, but not all plans reimburse yet, and copays can vary.”

Isaacs also noted that the number of remote monitor systems has proliferated. “We don’t yet have the perfect system that can work with all devices and directly send data to the electronic medical record,” she says.

Sebastian says incorporating remote monitoring — and the data it produces — into the workflow of clinicians is a concern: “If workflow is not simple, intuitive and well-integrated, [remote patient monitoring] is going to fail.”

Some of the biggest worries about remote monitoring have been privacy and security. They haven’t gone away, even if the pandemic has shifted attention away from them.

“As with everything health-related, data privacy and security are also going to be concerns,” Sebastian says. “Even with the COVID-19 surge, providers are still wary of handling sensitive information through technology because of the potential for security breaches.”

Golz notes that remote patient monitoring is still considered new by many. He sees more innovation in the offing. “We believe that, as it evolves, [remote patient monitoring] will become more robust as the monitoring technology improves, the evidence supporting its use develops and the ability to share data across systems increases,” he says. “Changes [such as] those described in the 2021 physician fee schedule continue to drive the industry toward offering technology that is easy for patients to use and provides clinical value.”

Sebastian thinks there will be remote patient monitoring in every person’s home in the next 10 to 15 years, maybe sooner.

“Insurers are starting to see the benefits and are finding mechanisms for reimbursement outside the normal CPT and billing codes,” he says. “With financial barriers removed by the payer, providers are going to make [remote patient monitoring] a standard enhancement to the delivery of care.”

Physician shortages have made asynchronous methods of care delivery an imperative. For patients who are facing barriers of access — social or geographic — a remote connection to the provider is even more important for continuity of care. That’s why Walker sees remote patient monitoring as a robust part of future healthcare for both inpatient and outpatient care.

“Now that (clinicians) have had the opportunity to engage in this, we are seeing the full potential of remote monitoring and distant care,” says Walker. Just as remote learning became an option in education, remote care has become an option in healthcare, says Walker. “Patients and clinicians have been thinking about this for a long time, and now that they are engaged in this practice, it is not going away.”

 a frequent contributor to Managed Healthcare Executive®

, is a freelance writer in the Washington, D.C., area.

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Devices take some of the pressure off a healthcare system coping with COVID-19.

Pandemic Opens Minds, Loosens Providers’ Purse Strings for Remote Patient Monitoring

Now that we’re about a year into the COVID-19 pandemic, many healthcare experts are looking at how the industry responded and categorizing what areas were positive and which parts need improvement.

In the plus column, for example, is the unprecedented speed of decision-making and execution of those decisions. Practices transitioned to virtual platforms in a matter of weeks, sometimes days. COVID-19 vaccines were developed in a matter of months.

But healthcare’s ledger is hardly all positive. It is clear that the long-neglected and underfunded public health infrastructure was ill-prepared at best. Public health is always joined to politics, but in 2020 they were hopelessly tangled, with dire consequences, as reflected in the disproportionate number of Americans who died from COVID-19 relative to the number of deaths from the virus in other countries. Moreover, the accolades for vaccine testing and development in 2020 have been followed by criticism of — and confusion about — distribution of the vaccines this year.

Still, many healthcare leaders speak with pride about how their organizations —and the sector, in general — responded to the pandemic. Alexa B. Kimball, M.D., M.P.H., CEO and president of the Harvard Medical Faculty Physicians at Beth Israel Deaconess Medical Center in Boston, notes that a year into the COVID-19 pandemic, the industry has seen incredible innovation, true collaboration for the good of all patients, improved communication, and sharing of resources among hospitals and caregivers.

“For healthcare, the silver linings of the pandemic have included the expansion and rapid deployment of telehealth, the discovery that even large academic institutions could pivot in a nimble fashion and the incredible innovation necessitated by the pandemic,” she says. “In an age when healthcare is sometimes criticized as a business with a cold bottom line, collaboration took the place of competition.”

Hospitals within systems anchored to academic medical centers were able to share expertise, expedite patient transfers, and redistribute personal protective equipment and ventilators to other facilities where they were in short supply, Kimball says. Physicians and staff members across a healthcare network collaborated and communicated in ways that will benefit them for years to come, she says. 

“Community hospitals that are part of larger networks benefited from the availability of specialists and supportive infrastructure, and those of us who are part of those large networks learned of the incredible talent of care providers within our networks,” Kimball says.

Ben Kornitzer, M.D., chief medical and quality officer for Agilon Health, a Long Beach, California, company that advises physician practices, says that the pandemic accelerated the transition to value-based care and created incentives for physicians to care for vulnerable individuals who weren’t able to be seen in person.

“We saw an increased ability to meet the patient where they are — telehealth, remote monitoring, home visits, medical care in parking lots and so on,” he says. “One of our PCPs even did a televisit with a patient on a construction crane hundreds of feet in the air.”

No one wants to be so insensitive as to talk about winners amid a pandemic, yet there’s no question that some groups and organizations have prospered in the year since the first cases were discovered in the U.S. Michael Abrams, M.A., co-founder and managing partner of Numerof & Associates, a healthcare consulting firm headquartered in St. Louis, notes that the pandemic has left many insurers in a strong financial position. 

“So many elective procedures and routine visits have been deferred during the pandemic that medical claims for most insurers during the second and third quarters of 2020 were dramatically lower than originally anticipated, creating a windfall profit for most payers,” he says. Flush with cash, companies such as Anthem, many of the Blues plans and others have announced rebates to plan members now as opposed to waiting until August 2021, when the medical-loss ratio requirements of the ACA would require them to do so anyway, Abrams says.

Abrams also sees telehealth providers coming out of the pandemic as winners. Before the pandemic, healthcare systems had generally little interest in telehealth, partly because of low reimbursement and regulatory obstacles. “But with the onset of COVID-19, hospitals facing the choice of telehealth visits or nothing quickly ramped up,” he says. “Telemedicine giants have seized the moment, responding to exploding demand for their services. CMS and other big payers have helped in a big way by increasing the number of telehealth services eligible for enhanced government payments and, at least during the pandemic, paying for telehealth visits at the same rate as in-office visits.”

Adnan Iqbal, M.S., MBA, CEO of Luma Health, says Americans can view COVID-19 as an impetus for improved healthcare in the future. The pandemic has caused illness and death and economic hardship, Iqbal says, but it also has been transformative. “The pandemic has very quickly forced healthcare to deliver better patient care — including increased digital options and virtual care, which offer added convenience. The status quo has absolutely been kicked to the curb,” he says.

According to data compiled by Bloomberg News, more than three dozen hospitals have entered bankruptcy this year. Meanwhile, the American Hospital Association is projecting hospital and health system losses of more than $323 billion through 2020. Kaufman Hall has projected that more than half of all hospitals will report negative margins from the fourth quarter of 2020.

“Those medical centers and systems that rely on patients from outside of their network’s geographic area clearly experienced large declines in patient volume during the pandemic,” Kimball says. “Patients weren’t getting on planes to go to cancer centers or specialty hospitals providing elective, nonemergent surgery.”

During the initial spike in infections between March and April 2020, the healthcare industry lost 1.5 million jobs. More than half a million jobs remained lost six months later, with losses spread across the major healthcare sectors of hospitals (22.7%), ambulatory care settings (39.6%) and long-term care facilities (37.7%). The pandemic has been especially hard on small medical practices, Kimball says. “The necessary investments in PPE (personal protective equipment), the need for physically distanced compatible waiting rooms and the overall decrease in routine care all have played a role in the economic burden to these practices,” she says.

The fact that hospitals that treated many patients with COVID-19 often struggled financially is an indictment of how hospitals are funded, Kornitzer says. Many healthcare experts believe the industry needs to re-envision what hospitals do, how they do it, and how their services are reimbursed.

“Hospital economics do not serve their true public function, and that was laid bare during the pandemic,” Kornitzer says. “Hospitals have increasingly relied on high-margin specialty service lines and elective procedures to cross-subsidize critical services that often lose money, such as general medical admissions.”

Kornitzer also says the pandemic has shined a negative but needed light on the care that older Americans receive. “The warehousing and unacceptably high mortality of our older patients in long-term and nursing facilities must be reevaluated at every level,” Kornitzer says. He sees a shortage of personalized and primary care in addition to the need to focus on holistic medicine and palliative care.

Abrams believes the pandemic put a spotlight on the failure of the industry — and political leaders — to pivot from a transactional model of treatment that only reacts when individuals are sick, to a population health model that addresses the management of chronic conditions across time and through multiple service delivery modalities. He says more emphasis needs to be placed on the importance of social determinants of health and population health.

“The disproportionate impact of COVID-19 on disadvantaged populations and those with chronic conditions highlighted the costs that come with the choices made to date,” he says. “Disadvantaged populations and many essential workers have had a disproportionate share of infections and deaths. And these subpopulations make it that much harder to bring COVID-19 under control. Had a population health approach been the organizing principle across the industry, we would all have been better prepared to weather this onslaught.”

The pandemic also made clear how reliant the U.S. is on other countries, especially China, for critical active pharmaceutical ingredients, drugs such as penicillin and statins, and products such as personal protective equipment, Abrams notes. “While no industry could have accommodated the explosion in demand for things such as PPE driven by COVID-19 without shortages, the fact that our supply chains extended across continents and were hostage to the political agendas of other countries was a miscalculation that imposed a price on all of us,” Abrams says.

Finally, Abrams sees a big lesson to be learned in the hidden vulnerability of the fee-for-service payment model. “For years, the industry has resisted payment models that made prudent use of resources and actual delivery of desired outcomes a factor in reimbursement, labeling them as ‘too risky,’” he says. “But as hospitals across the country canceled the elective procedures that provide the bulk of operating margin in a fee-for-service payment structure, it became clear that this legacy approach carries its own hidden form of risk. Healthcare organizations reliant on fee-for-service reimbursement will be repairing their balance sheets for years.”

Healthcare has successfully pivoted and collaborated. But COVID-19 also has spotlighted flaws in how hospitals are financed and the weakness of the public health infrastructure.

The Pandemic One Year in: The Silver Linings and Big Reveals

Eric Whitaker, M.D., is a nationally recognized authority on public health and an expert in the health issues of African American communities, and he is using his influence and knowledge to lead Zing Health, a physician-led Medicare Advantage HMO plan that helps underserved seniors.

An internal medicine physician by training, Whitaker has had a carer that includes running the Illinois Department of Public Health and founding the investment firm TWG Partners. He also is a friend of former President Barack Obama. Whitaker was a student at the Harvard T.H. Chan School of Public Health when he met Obama, who was a student at the university’s law school. “I actually didn’t know his name until I saw his name in a Boston newspaper as the first Black president of the 

 and realized that though we were in Boston, we both had a connection to Chicago,” says Whitaker.

Over time, his relationship with both Barack and Michelle Obama opened his eyes to the immense possibilities in the future. Whitaker knew he wanted to do all he could to make a difference.

That was a catalyst for forming Zing Health, which he started in 2019 along with Kenneth Alleyne, M.D., FAAOS, a board-certified orthopedic surgeon. The company, which got its start in the innovation lab at the American Medical Association, markets Medicare Advantage plans to underserved communities, with a focus on Black and Latino communities. The company has branched out from its home base in Chicago and Cook County and is now marketing plans in Indiana and Michigan.

“Whereas a lot of insurance companies run away from diverse populations, we’re running toward them because we’re giving our experience to vulnerable populations,” Whitaker says. “Even with Medicare Part D, we focus on the low-income segment of that population. We feel we have a unique experience to deliver stellar health outcomes for these underserved populations.”

Whitaker, 55, was the middle of three boys raised by his mother, Charlotte, a nurse administrator and head nurse at Chicago’s Michael Reese Hospital, now closed and demolished. She graduated from the hospital’s nursing school, which at the time was one of only two nursing schools in the city that accepted Blacks. “In another age, she would have been a physician, but that path wasn’t open to her,” Whitaker says.

Whitaker grew up in Morgan Park, a neighborhood on Chicago’s South Side, and attended St. Rita of Cascia High School, taking four buses to get there each day. “I got a basketball scholarship to go there, but I tested into the top honors class, though they didn’t care,” he says. “They just wanted me to play basketball.”

Whitaker’s mother used to joke that she would whisper in her boys’ ears that they should become doctors. “I was the only one who listened to her,” he laughs. Whitaker says the experience that led to him becoming a physician occurred during his junior year in high school.

“I was enrolled in this program at the Illinois Institute of Technology called CHAMPS (Chicago Area Health and Medical Careers Program), which aimed to identify minorities who were good in sciences and expose them to the health professions,” he says. “In CHAMPS, I saw my first African American doctor — and that was an inspiration — and I learned the importance of role models. It changed my life.”

During that time, Whitaker also learned about what everyone in healthcare is now calling the social determinants of health. “There was a little clinic, and there were pregnant women lined up outside the door,” he says. “There’s this thought that poor people don’t want healthcare, and here I saw with my own eyes that folks were out in the sun waiting to be seen in what I consider inhumane conditions. That image has rested in my mind to this day and really has been a driver for how I’ve approached my career. I knew I wanted to be a physician, but I wanted to be a physician for communities and populations.”

Whitaker went on to major in chemistry at Grinnell College in Iowa and then earned his medical degree from the University of Chicago Pritzker School of Medicine and master’s in public health from the Harvard T.H. Chan School of Public Health.

While in medical school, Whitaker took a break from his studies to devote time to being president of the American Medical Student Association, a group that represents approximately 30,000 medical students around the country. That experience introduced him to the busy intersection of healthcare and politics — and to a cadre of future healthcare leaders. “I ended up testifying in front of Congress twice,” he says. “The people that I met are now running institutions, hospitals, foundations, government — they’re all over the place. It’s been a powerful network of folks that I’ve been able to collaborate and work with to improve healthcare for vulnerable populations.”

A mentor recommended that he do his residency at San Francisco General Hospital (now Zuckerberg San Francisco General Hospital and Trauma Center) because he could make a difference there during the HIV/AIDs epidemic. In the early ’90s, the epidemic’s disproportionate effect on African Americans was becoming apparent. “One of the things that I saw was that in the Black community, HIV was growing and spreading, yet a lot of the community was really ignoring it and not being proactive about preventing HIV spread,” he says.

Whitaker has spent most of his career in Chicago — and he makes a point of mentioning that he lives on the South Side today by choice. He worked first with Cook County Health’s Woodlawn Health Center, which was just a few blocks from the University of Chicago. Whitaker then started Project Brotherhood, which encouraged Black men to use community healthcare services. The project included a fatherhood and rites of passage program. “It was really about men accepting their responsibilities to go along with the rights they think they have as men,” says Whitaker. To erase the stigma associated with going to the doctor, Whitaker and his colleagues added a barbershop in the clinic.

Whitaker credits the work he did setting up Project Brotherhood with leading to his appointment as Illinois state health commissioner in 2003, a post he held for four years. “I’d say it was some of the most fun I’ve had in my life,” Whitaker says, “because it’s one thing to have a lot of ideas, (but) it’s another to be able to change a policy that impacts millions of people.” As state health commissioner, he worked on HIV prevention as well as reducing the burden of breast cancer among the state’s Black women and increasing preparedness for bioterrorism and a flu pandemic.

During the next chapter of his career, Whitaker returned to the South Side where he served as executive vice president for strategic affiliations and associate dean for community-based research at the University of Chicago Medical Center.

In 2018, he helped establish the Creating Pathways and Access for Student Success (CPASS) Foundation. Like CHAMPS before it, CPASS offers students, through its SMASH Academy, a five-week experience on the Illinois Institute of Technology campus, exposing them to a STEM (science, technology, engineering and mathematics) program of study and fostering interest in both health professions and technology.

Whitaker’s wife, Cheryl, is also a physician. When they aren’t working (and before the COVID-19 pandemic), the Whitakers enjoyed eating out and traveling, often accompanying the Obamas on vacations to Martha’s Vineyard and Hawaii. They have two teenage children, Caleb and Caitlin. “Cheryl has been on a lot of the journey with me — training at the same hospitals — and did a lot of the same things,” Whitaker says.

Whitaker had been involved in several businesses prior to Zing. “I consulted with a healthcare company, and when that owner sold that business, he said he enjoyed working with me and wanted to find something we could work on together,” Whitaker says. “We looked at a lot of options and decided to get into the Medicare Part D business. It was based on our skill sets.”

The first insurance company he founded was Symphonix Health Holdings, which was sold to United Healthcare; his second was
NextLevel Health, which he co-founded with his wife, who was CEO and chair of the board. NextLevel Health sold its assets to Centene Corporation last year.

With Zing Health, Whitaker says he’s working against a health insurance system that is often complicated to navigate and access, especially for minorities in low socioeconomic communities. Zing Health uses a community-based approach oriented toward the social determinants of health to keep individuals and communities healthy. In May, Newlight Partners, a private investment firm in New York, announced that it had taken a $150 million equity position in Zing. Newlight Partners has also invested in Oak Street Health, the primary care business headquartered in Chicago that that went public in May.

Zing Health started selling coverage two years ago in Cook County and subsequently expanded to six additional counties in Illinois, three in Indiana and three in Wisconsin, and has plans for more expansion in Michigan.

“What is unique about our approach is that our company is really designed to be mindful of social determinants of health,” says Whitaker.

One of Whitaker’s hopes for Zing Health is that it becomes a training ground for African American and Latino executives in the health insurance industry so that they can move on and rise to positions of influence in the industry.

Another one of Whitaker’s goals: Have Zing reach unicorn status by crossing the $1-billion-in-value threshold that the unicorn label denotes.

“Few African Americans founders get access to venture capital, and few certainly get access to the significant capital that Zing Health has,” he says. “I want Zing to be an exemplar of what’s possible, because if someone sees us do it, then they can think they can do it themselves. So that’s a pretty lofty goal, but it’s one that I would love to reach in the next four or five years.”

®, is a freelance writer in the Washington, D.C., area.

Eric Whitaker, M.D., credits influences in high school and medical school with his success. Now he wants to turn his new Medicare Advantage plan, Zing Health, into a training ground for Black and Latino health insurance executives — and has his sights set on unicorn status. 

Eric Whitaker, M.D.- From Influences to Influencer

Despite — or maybe because of — the COVID-19 pandemic, the pace of mergers and acquisitions (M&A) in the provider healthcare sector was brisk last year, and some of the same forces may be at play this year.

While M&A activity paused briefly in the spring, it returned to historic averages by summer. According to a recent report by Kaufman Hall, M&A activity crescendoed in 2020, with a high level of activity by not-for-profit hospitals and health systems. The report shows that 19 transactions with a value of about $8 billion occurred in the third quarter, a level on par with historical averages and significantly higher than the 14 transactions in the second quarter.

Those with healthcare M&A expertise see the same pattern: a COVID-19-related pause early last year followed by an increase in dealmaking as the year went on. John Fanburg, a managing member and chair of healthcare law at Brach Eichler, a law firm in Roseland, New Jersey, says M&A activity was high in 2020 till mid-March, when COVID-19 hit and transactions either slowed dramatically or came to a complete halt. “Activity recommenced in June, and deals picked up from where they stopped,” he says.

Gay Casey, a managing director at Berkeley Research Group, a consulting firm in Philadelphia, notes that transaction activity reported through the third quarter is a leading indicator that healthcare providers are moving beyond the immediate impacts of the COVID-19 pandemic. “We are seeing a lot of M&A activity in the post-acute healthcare setting, including physician group partnerships and joint venture agreements between hospitals and home healthcare/hospice providers,” she says.

Anu Singh, a Kaufman Hall managing director, says the pandemic has, in fact, strengthened the rationale for strategic partnerships, leading to a potential uptick in M&A .

“The reality is, COVID was a clinical impact item to a lot of organizations, but what was happening inside and outside the industry pre-COVID was a bigger story,” he says. “We’re seeing whole new ways of delivering care, whole new ways to collaborate, find value and deal with new reimbursement models. COVID has certainly accelerated these pursuits, but the most forward-thinking systems were already charting this path before the pandemic.”

Singh says providers are facing the fact that pre-pandemic revenue streams may not return. “In order to compete moving forward — whether it’s investing in telehealth or an urgent care presence in their communities — many organizations are realizing they need more capabilities and resources and are working with other organizations on a path to viability,” he says.

Four major mergers were announced in the third quarter of last year:

Cone Health, a healthcare delivery system headquartered in Greensboro, North Carolina, and Sentara Health system, headquartered in Norfolk, Virginia.

Lifespan and Care New England, both in Providence, Rhode Island, after years of on-again, off-again talks.

CHI Franciscan in Tacoma, Washington, and Virginia Mason Health System in Seattle.

Novant Health, headquartered in Winston-Salem, North Carolina, and New Hanover Regional Medical Center in Wilmington, North Carolina.

The major M&A trend, Singh notes, is large organizations thinking more strategically around partnership opportunities. “I think we’re going to see some systems who appreciate where they need to be from a geographical standpoint with facilities and now want to build out more services,” he says.

The pandemic has created an environment ripe for an increase in M&A, especially among smaller systems, rural hospitals and independent practices, says Brandon Edwards, CEO of ReviveHealth, a health communications company in Nashville, Tennessee. “While the CARES Act helped some, and elective care and routine care are picking up, many are still likely to need a partner to survive,” he says. The Coronavirus Aid, Relief and Economic Security Act, or CARES Act, is the $2.2 trillion economic stimulus bill passed in March 2020.

Edwards says M&A in the healthcare sector definitely slowed because providers have been consumed with managing through the pandemic, but as operations have trended upward, that will likely change. “We’re seeing some of the normal activity with larger systems looking to expand their geographic footprints,” he says. “But we also saw some newer dynamics like Novant and UNC (University of North Carolina) creating a partnership so they could go after New Hanover Regional Medical Center in eastern North Carolina. As the industry evolves, so will the definition of a partner.”

Edwards points to CHI Franciscan and Virginia Mason as a possible template for future pairings — an innovative system and a community hospital, respectively, joining forces.

Edwards says it’s worth noting that some deals fell apart last year. Beaumont Health in Michigan and Summa Health in Northeast Ohio called off their plans to combine in 2020. Advocate Trinity Hospital, Mercy Hospital & Medical Center, South Shore Hospital and St. Bernard Hospital, four money-losing hospitals serving a largely poor patient population on Chicago’s South Side, abandoned their plans for merging after funding from the Illinois Legislature fell through.

There are some centrigual forces at play, notes Nathan Kaufman, a healthcare consultant in San Diego. He points to Hoag Memorial Hospital Presbyterian, a two-hospital system in Newport, California, that is seeking to separate from the Providence Health system headquartered in Renton, Washington.

Kaufman says it’s difficult to make predictions for 2021 other than that it is shaping up to be a tough year for healthcare systems. “What is certain is we will have more uninsured, more Medicaid, and very tough negotiations with complicated and very greedy commercial insurance companies,” he says. According to the Kaiser Family Foundation, preliminary Medicaid data show that total enrollment had grown to 75.5 million by July 2020, an increase of 4.3 million beneficiaries from in February.

Edwards at ReviveHealth also sees tough times as the number of uninsured climbs. “Though not certain, it’s highly likely we’ll see a surge in M&A, as large systems can capitalize on this current dynamic to increase market share and geography as well as efforts to place tighter restrictions on M&A activity like we’ve seen in California,” he says, adding that payers may also see acquisition opportunities as some practices struggle.

Edwards notes that Optum, under its parent company UnitedHealth Group, is the second-largest employer of physicians behind Kaiser Permanente and one of the largest managers of surgery centers. “They are using their physician and insurance presence to cherry-pick the most profitable parts of the market, which are Medicare Advantage and ambulatory surgery, leaving everything else for the hospitals,” he says.

Casey at Berkeley Research Group notes that consolidation has been the trend among providers for the past five years; she expects that to continue this year: “We could see an increase in the number of healthcare providers exploring partnerships as a means to recover from the impacts of the pandemic .”

Fanburg at Brach Eichler sees tension between healthcare systems and their physicians. “They are seeing their doctors move in a direction that they cannot control or legally influence in the years to come,” he says. “As hospitals move more toward an outpatient strategy, controlling their medical staff members will be critical to their future strategic goals.”

Last year a lull in provider mergers and acquisitions was followed by an uptick. Experts say the disruptive effect of COVID-19 may mean plenty of deals this year.

Keith Loria

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