Susan Ladika

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Although TV footage has shown hospitals overflowing with patients since the COVID-19 pandemic hit the U.S. last March, the coffers of many hospitals and other healthcare providers are far from overflowing. In fact, they are running dry because millions of Americans didn’t get medical care last year and are continuing to put it off this year. “Folks actively avoided going to the emergency department,” says Aaron Wesolowski, vice president of policy research, analytics and strategy for the American Hospital Association (AHA).

Utilization of in-patient and out-patient care also decreased. As a result, hospitals and healthcare systems lost at least $323 billion in 2020, according to a recent AHA report. At the start of 2021, the number of people going to the hospital remained low, leading to reduced hospital revenue. The decrease in patient volume “that drove revenue losses in a lot of cases [in 2020] is still present,” Wesolowski says.

It’s not just hospitals that have been affected. Providers of all kinds — primary care physicians, specialists, dentists, clinics — have experienced sharp declines in patient volume. Because they have many days of cash on hand and access to capital, healthcare systems anchored by large hospitals should be able to weather the months of low revenue. But for many medical practices, particularly primary care practices, the circumstances are dire, as the pandemic is now casting a long shadow over 2021. Independent physicians “are small businesses without big financial reserves,” says Sean Cavanaugh, M.P.H., chief commercial officer and policy officer for Aledade, a Bethesda, Maryland, consulting company that advises and partners with primary care physicians.

From March 2020, when cases started to spike in the U.S., through June, hospitals and health systems lost an estimated $202.6 billion, according to the AHA. Utilization bounced back some during the second half of the year. Still, the association estimated that hospitals would lose at least $120.5 billion more from July to December. In addition to dealing with revenue losses from declines in utilization, hospitals had to purchase more personal protective equipment and other supplies.

A survey of 275 hospitals by Strata Decision Technologies found that emergency department visits dropped by 50% initially in March and were still down by 25% in September as compared with data from 2019.

Inpatient volumes in September were approaching 2019 levels, but inpatient surgeries and procedures were down 18.6% overall, Strata’s survey showed. Outpatient volumes initially dropped by 56%, but by September they had were down just 1.5% compared with the previous year, according to the survey results. “Recovery is not evenly distributed, as some areas have come back strongly, while other care areas still lag,” the survey’s authors wrote. In COVID-19 inpatient volumes did not surge as expected, they noted, and did not replace the dramatic decline in total admissions. Although the cost of treating patients with COVID-19 is covered by Medicaid, Medicare and private insurers, “it has not completely offset revenue losses” from the lack of delivery of other hospital-based medical services,” Wesolowski points out.

The plight of hospitals hasn’t gone unnoticed. The Coronavirus Aid, Relief and Economic Security (CARES) Act, which Congress passed in March, sent $100 billion to hospitals and other providers. According to AHA estimates, another $75 billion in relief funds was earmarked for providers under the Paycheck Protection Program. But as of October, only $70 billion had reached hospitals, according to the AHA. Moreover, reports by ProPublica, an investigative journalism organization, and others have cast doubt on whether the relief money went to those that needed it most. “How the CARES Act Forgot America’s Most Vulnerable Hospitals” was the headline on a ProPublica story in January about rural hospitals not receiving money from the coronavirus relief bill.

A report by healthcare consultancy Kaufman Hall, done for the AHA in July, found that even before COVID-19 hit, some hospitals were coping with negative margins, and the median hospital margin was 3.5%. A January 2021 report from Kaufman Hall found that without CARES Act funding, the median hospital operating margin was down 4.9 percentage points. With the funding, it was down 1.2 percentage points. Meanwhile, more than 36 hospitals have gone into bankruptcy, according to an AHA fact sheet from November.

Roger B. Weems, vice president of advisory services at Premier, a group purchasing organization in Charlotte, North Carolina, that has branched out into healthcare analytics, says he has seen major differences in healthcare usage among providers. Although providers in certain geographic areas have placed elective surgeries on hold for months, others are almost back to pre-COVID-19 levels, he says. The lack of elective procedures “is the core financial challenge they are trying to recover from,” Weems says.

Going forward, there may be a shift in where care is delivered, Weems says. Some care that is currently provided on an inpatient basis might be done in an ambulatory care setting. “Many hospital systems have been contemplating it for a long time,” Weems says.

Physicians also are dealing with the financial fallout from the pandemic. Of the 3,500 physicians surveyed by the American Medical Association (AMA) last summer, 81% reported that revenue was lower than pre-pandemic levels, with an average decline in revenue of 32%. Cavanaugh says that the independent primary care physicians that Aledade works with saw patient visits immediately fall 30% to 40% when the pandemic began. As a result, some practices laid off staff and a few closed. The number of patients has fluctuated depending on the whether the pandemic is easing or flaring up, Cavanaugh says.

Although telehealth usage soared during the pandemic, 70% of physicians surveyed by the AMA reported they were providing fewer total visits — both in-person and virtual — than before the pandemic began.

The surge in telehealth occurred partly because Medicare and  HIPAA rules were relaxed. Also, many insurers moved to reimburse telehealth visits at the same rate as in-person care. Now the question is whether the rules and the reimbursement rates will be changed permanently.

Lesley Reeder, RN, vice president at COPE Health Solutions, a healthcare consulting firm in Los Angeles, says many primary care physicians will continue to see fewer patients than they did before the pandemic. They are spacing out visits to ensure that there is ample time for cleaning between appointments. “Medical facilities are so tuned in to ensuring they are not a vector for infection for the patients they serve,” she says.

Despite telehealth having been “a real boon,” Reeder says, limitations remain because certain types of care, such as doing blood work, require in-person visits.

The majority of respondents to the AMA survey rated financial assistance from the CARES Act, the Paycheck Protection Program, and the CMS Accelerated and Advance Payment Program as extremely or very helpful. Cavanaugh notes, however, that applying for assistance from those programs was difficult for independent physicians who didn’t have an attorney or accountant on staff to shepherd the application and gather all the necessary documentation. “It’s really intimidating to small businesses,” he said.

Experts believe the pandemic will lead to permanent changes in American healthcare even as cases and deaths decline. “My instinct is that many primary care physicians and small specialists will look to larger organizations to partner with going forward,” Reeder says, leading to more mergers and acquisitions.

The pandemic also is likely to accelerate the move to value-based care, which can reorient financial incentives so providers are paid according to patient outcomes and not simply by the number of procedures done or tests ordered. The pandemic “highlighted the need to focus on value-based payment arrangements. Those [providers who] were in that arrangement clearly fared better,” said Matt Eyles, president and CEO of America’s Health Insurance Plans, headquartered in Washington, D.C., during a payers meeting last summer organized by Becker’s Healthcare.

“The addiction to fee-for-service has struck health systems in a real way,” Craig E. Samitt, president and CEO of Blue Cross and Blue Shield of Minnesota, said during the same meeting. As a result, there may be “a stronger appetite to take risks and pursue value,” he noted.

“Accelerating the path to value will ultimately enable better healthcare to be delivered,” Weems says.

an independent journalist in Tampa, Florida, who covers healthcare and business.

Articles

Federal assistance programs and telehealth have helped, but they haven’t made up for the shortfall from lack of services.

The Pandemic One Year in: Providers Struggle with Loss of Revenue 

Although virtual visits as a whole have dropped off since their peak last spring, visits for behavioral health issues are still going strong, a reflection, in part, of the toll the COVID-19 pandemic has taken on the mental health of Americans. 

A survey by the CDC found that by late June 2020, 40% of Americans were struggling with mental health or substance abuse issues. More than 10% of those surveyed said they had seriously considered committing suicide during the previous 30 days. With COVID-19 cases and deaths increasing this winter, the mental health consequences of the pandemic are likely to continue.

Providing mental health services virtually can increase access to providers who, even before the pandemic, were in great demand, as well as reduce the stigma that can surround mental health care. Rather than going to a therapist’s office, patients can access care from their mobile phone or home computer.

MDLive reported its behavioral health business grew by nearly 50% during the first months of the pandemic, and the company expanded its network of board-certified psychiatrists and licensed therapists by 50% to meet the surging demand.

Teladoc Health reported in its third-quarter earnings call that virtual visits for anxiety and depression, along with hypertension and back pain, represented more than half of its volume, compared to a third of visits in 2019. “Demand for dermatology and behavioral health services continues to significantly outpace overall volume growth,” the company reported.

At Optum, which is part of UnitedHealth Group, patients made more than 1 million virtual visits from the start of the pandemic until late October 2020, said Optum CEO Wyatt Decker, M.D., MBA, during a recent press briefing. In spring 2020, the majority of all visits were virtual. While that number has dropped off, demand for virtual behavioral healthcare has remained high. Deckersaid half of all visits are still done virtually.

For behavioral health, virtual becomes a reality through telehealth

As the COVID-19 pandemic has pushed much of life — including healthcare — in a digital, virtual direction, companies that provide telehealth services have prospered, raking in major investments in initial public offerings (IPOs). Telehealth provider Amwell raised $742 million in September 2020, after bumping up both the number of shares it planned to sell and its price because of strong demand, while GoodRx, which helps consumers find deals on prescription drug prices and has a telehealth operation, raised $1.1 billion with a stock price well above what was initially anticipated. The following month, telehealth giant Teladoc Health completed its $18.5 billion merger with Livongo, a digital health company that helps patients monitor chronic conditions.

Already this year, the healthcare sector has seen almost $30 billion in merger activity, with more than half coming from Teladoc and Livongo. The activity already exceeds the previous five years, according to Brian O’Rourke, senior analyst at S&P Global Market Intelligence.

The financial moves in the healthcare sector mark “a realization that consumers are going to start to really drive healthcare in a way they haven’t been able to before,” says Bill Fera, M.D., a principal at Deloitte.

The pandemic has meant a sea change for telehealth, which “had been the technology of the future for decades,” O’Rourke says. But with COVID-19, many consumers have been reluctant to get in-person healthcare and, instead, flocked to virtual care. A study of telehealth visits by Epic Health Research Network, using electronic medical records from 22 health systems covering 7 million patients, found telehealth visits increased 300-fold from spring 2019 to spring 2020. An updated study by Epic released in August 2020 — ahead of the fall spike in COVID-19 cases — found that in mid-April, telehealth made up 69% of total visits but by late summer accounted for 21% of all visits. Still, that is a sharp contrast from pre-pandemic usage, when less than 0.01% of visits were virtual.

Much was driven by changes at CMS, which expanded telehealth access for Medicare beneficiaries under an emergency declaration because of the pandemic. State-level rules have also had an effect, with some states mandating private insurers reimburse for virtual visits at the same rate as in-person care. Several major insurers — Florida Blue and Humana, to name just two — began offering virtual visits with no copayments, and a number are continuing to offer telehealth with no copayments for 2021. Clarifying that providers can be reimbursed for offering telehealth services “added lighter fluid to the smoldering fire that was telehealth,” says Kristen Hallam, healthcare news desk manager for S&P Global Market Intelligence.

As a result of the pandemic, telehealth is “very quickly maturing from a sideshow to the mainstream,” says Ido Schoenberg, chairman and CEO of Boston-based Amwell. “Telehealth was not born because of COVID-19, and it will not die after COVID-19.” Amwell offers telehealth technology solutions for providers and has its own virtual doctor’s visits for $79, covering a wide range of medical and behavioral health conditions. With its IPO, Amwell originally had planned to sell 35 million shares at $14 to $16 each, according to its filings with the Securities and Exchange Commission. 

Instead, it offered 41.2 million class A shares at $18 each, and the stock price opened at $25.51 per share. Shortly before its IPO, Amwell announced that Google Cloud was investing $100 million in the company and that the two would partner on technology and innovation. In a press release, the companies said they see room to improve telehealth experiences by doing everything from automating waiting rooms and checkout to assisting payers and providers with routine tasks to triaging cases.

Amwell’s dealings will be more transparent as a public company, Schoenberg says, and that creates “an increased level of confidence to very large customers. They know who you are, what you do.” During Amwell’s conference call for third quarter 2020, Schoenberg said that the company had more than 1.4 million virtual visits for the quarter, compared with 255,000 the year before, and that revenue soared 80%, to $62.6 million. The number of providers offering telehealth on its platform also soared — to 62,000, from just 6,000 the previous year. 

He also talked about a hybrid healthcare model with patients consulting with their own physicians either in person or virtually: “They won’t focus on your sore throat; they focus on your full continuum of care.” Telehealth will also open up the possibility that anyone, including those in rural areas, will have access to high-quality care. “Care is divorced from location,” he says.

GoodRx, the online prescription-drug bargain finder, also went public in late 2020. The company planned to sell 34.6 million shares at $24 to $28 per share; instead, they sold for $33. GoodRx, which is headquartered in Santa Monica, California, had third-quarter 2020 revenue of $140.5 million, an increase of 38% compared with the previous year. Almost 90% of revenue came from prescription transactions.

In September 2019, GoodRx acquired telemedicine company HeyDoctor. Terms of the deal were not disclosed. Visits start at just $20, and consumers don’t need health insurance to get care. HeyDoctor providers saw more than 1,000 patients per day last summer for conditions ranging from primary care services to behavioral health care, and prescriptions can be mailed to a patient’s home.

The company says more than 15 million consumers each month use GoodRx to find discounts and prices for their healthcare needs. “The huge growth in usage creates more investor enthusiasm. It has a bit of a snowball effect,” Hallam says.

At least one more telehealth company is expected to go public soon. Charles Jones, chairman and CEO of MDLive, told 

 that he expected his company would go public in January or February. That news came after the company announced in September 2020 a $50 million crossover equity investment from Sixth Street Growth, which will primarily be used to expand MDLive’s virtual primary care platform. 

Headquartered in Miramar, Florida, MDLive also secured $25 million in debt expansion from other investors. Because of the pandemic, MDLive’s virtual visits almost doubled during the first half of 2020. Through July 2020, it handled almost 1 million patient visits — a 500% increase for behavioral health and a 350% increase for dermatology.

In a conference call with analysts before the Livongo merger was completed, Teladoc CEO Jason Gorevic said the companies would join forces “to deliver a level of patient insight that has been previously unavailable. Combining meaningful, data-driven insights with clinical expertise will enable better care delivery, better outcomes and lower costs.”

Teladoc providers conducted more than 2.8 million virtual visits in the third quarter of 2020, more than triple the number of visits provided in 2019, Gorevic said.

The company, which is based in Purchase, New York, said revenue for the third quarter of 2020 was $289 million, up almost 110% from the previous year. For the year, Gorevic said he expected revenue to top $1 billion. Just five years ago, when Teladoc went public, it raised a fraction of that amount: $156.8 million.

Healthcare’s pivot to telehealth is remarkable; collectively, American healthcare is saying, “Why didn’t we think of this before?” But the future of telehealth depends on whether public payers — especially Medicare, as the largest buyer of healthcare — are willing to pay for it. If the government continues to reimburse for virtual care, O’Rourke at S&P Global Market Intelligence says he expects telehealth to continue to grow, but if the government doesn’t continue its reimbursement, “that could have a really adverse impact.”

Reimbursement remains an open issue. When CMS released its annual physician fee schedule in December 2020, it permanently expanded only the telehealth services that covered Medicare patients in rural areas, although CMS officials said they were commissioning a study to look at creating more telehealth flexibilities.

Fera at Deloitte says value-based care may accelerate the adoption of telehealth because of its cost effectiveness, noting that people with chronic conditions such as diabetes can be monitored more or less constantly with telehealth: “You’re getting care every day, potentially.” Schoenberg says he sees these new care models as a way to monitor conditions and “use artificial intelligence to raise very sophisticated (red) flags.”

The days of scrappy startups may be dwindling in telehealth. As the telehealth market matures, Fera expects to see more consolidation: “Larger companies are really going to start taking hold of the market and acquiring other companies.” Schoenberg, now leading one of those larger companies, says, “Telehealth is not a playground for small, niche startups. You need serious investments.”

Susan Ladika is a health and business writer in Tampa, Florida. 

Riding high because of the COVID-19 surge, telemedicine companies are going public and making expensive deals.

Telehealth is dialing up the dollars

At certain times and in certain parts of the country, the COVID-19 pandemic stretched hospitals and other sorts of providers to the limit this year. But the pandemic has also had the opposite effect. Concern about receiving in-person healthcare, along with worry about the country’s economic future despite the bull stock market, means that millions of Americans have put off healthcare. The follow-up visit, the screening test, the annual checkup — the pandemic has had a chilling effect on all of them. “We’re going to have a population health issue on our hands” as a result of deferred care, undetected diseases such as cancer and an increase in chronic conditions, predicts Arielle Trzcinski, a senior analyst with Forrester Research and co-author of the research firm’s “Predictions 2021: Healthcare” report.

One of the questions facing American healthcare going into 2021 is how much telehealth and other forms of remote care delivery can replace what now seems almost old-fashioned: going to see the doctor in person instead of seeing them on your phone, tablet or laptop. There’s still plenty of apprehension about remote care, but it is ebbing — and some small studies have been producing evidence that it could have certain decided advantages over the pre-pandemic ways of delivering healthcare.

, by the end of June, about 40% of American adults had delayed or avoided medical care, and a sizable proportion — 12% — had put off urgent or emergency care. Those most likely to avoid urgent care had underlying health conditions, were Black or Hispanic, were young, had disabilities, or served as unpaid caregivers.

As the number of COVID-19 cases and deaths decreased in many parts of the country during the summer months, the provision of medical services bounced back to a certain extent. It is too soon to tell what impact the escalating number of cases and deaths in November will have.

Although the economic indicators this year are a mixed bag, the economic disruptions caused by the pandemic have factored into many people’s decision to skip medical care, observes Trzcinski: “Many can’t afford an unexpected medical bill.” And millions of people have lost their jobs, along with their health insurance, as a result of the pandemic. “People are making hard decisions — paying for health insurance or paying for rent,” she says.

Of course, the decline in in-person care has been accompanied by the much-talked-about surge in telehealth, especially for behavioral health problems. The Forrester researchers estimate that American consumers will make roughly
480 million telehealth visits this year, with almost 40% of those visits for behavioral health care. The research firm predicts a slight drop next year to about 440 million visits.

But the evidence of the shift to telehealth is overwhelming. Research results reported in 

 in October showed that in 2018 and 2019, between
122 million and 130 million primary care visits occurred each quarter and that only 1% of those visits were conducted virtually. During the second quarter of this year, the number of primary care visits dipped to fewer than 100 million, but 35% of those visits were conducted virtually.

“It’s anybody’s guess how long the pandemic will significantly pressure patients and clinicians to use telemedicine in settings where they might otherwise engage face- to-face,” says lead author G. Caleb Alexander, M.D., M.S., a professor of epidemiology and medicine at the Johns Hopkins Bloomberg School of Public Health. Alexander believes that telehealth can be used successfully when patients have an ongoing relationship with a primary care provider. He has qualms, though, about depending on a telehealth visit when a clinician is seeing a patient for the first time or dealing with a new complaint. It can be “very hard to evaluate them properly using telemedicine,” says Alexander.

During a recent webinar on 2021 healthcare predictions, Sam Glick, an Oliver Wyman partner and leader of the consulting firm’s innovation center, said telehealth usage represented 70% to 80% of care during the height of the pandemic and is expected to account for 30% to 50% of care going forward. Primary care physicians are using telehealth to improve the continuity of care, Glick observed, but he said the change was in its infancy. Glick’s prediction: Virtual visits that are not integrated into someone’s healthcare record, such as care provided through Teladoc or a similar service, “will be commoditized and compete with urgent care.”

Andrew J. P. Carroll, M.D., FAAFP, a family physician in Chandler, Arizona, and member of the board of directors of the American Academy of Family Physicians, says his office pivoted to virtual care “really out of necessity” and as a way to maintain continuity care for patients with chronic conditions and for those with COVID-19. Carroll says that in some cases, patients who have skipped routine care during the pandemic ended up having to receive costly emergency care.

Even before the pandemic began, consumers were forgoing visits to primary care physicians, according to Forrester’s research. A study published in the 

 in February found that from 2008 to 2016, visits to primary care physicians dropped by about 25% for adults under the age of 65, and the proportion of adults making no visits to their primary care provider in a year jumped from 38% to 46%. “I don’t think telemedicine is going to solve our historic problem of underutilization of primary care,” says Alexander. And as primary care visits fell, visits to urgent care clinics, retail clinics and emergency departments climbed 47%. Trzcinski at Forrester says that healthcare clinics at retail locations such as Walmart and CVS have benefited because of their price transparency and convenience.

The primary care visit isn’t the only type of care that has declined since the pandemic began. A drop in hospital usage is projected to cost health systems $350 billion this year, according to Forrester. According the research firm’s predictions report, emergency department visits have fallen by 42%, outpatient visits by 35%, and in-patient care by 22%.

Hospitals have responded, in part, by providing hospital-level care to patients in their homes. Results of what appears to be the first randomized controlled trial looking at the effectiveness of hospital-at-home care were reported last year in the 

. Lead author David M. Levine, M.D., M.P.H., M.A., of Brigham and Women’s Hospital in Boston, and his colleagues found that the average cost of an acute care episode was almost 40% lower for patients receiving hospital-at-home care compared with those who were traditional inpatients. The hospital-at-home patients had fewer lab tests, imaging studies and consultations. They were less sedentary, and their 30-day readmission rate was 7% compared with 23% for those receiving care in the hospital.

Levine says that hospital-at-home care is common in many industrialized countries: “We are pretty far behind.” Levine is doing his part to change that and expects to have two more studies published in the next month or so. One challenge has been the number of patients who declined to receive care at home. “We’ve spent 100 years telling people the best care is at the hospital,” Levine says. “We need to prove they can get high-quality, safe care at home.” Another one has been reimbursement, says Levine. “There is no easy payment mechanism,” he notes. “That’s one of the reasons why it hasn’t taken off in the U.S.” 