The latest episode of Policy Outsider dives deep into the ever-evolving landscape of healthcare. Rockefeller Institute’s Senior Fellow for Health Policy, Courtney Burke, follows up on her latest blog, “The Healthcare Industry Mega Trend to Watch in 2024: “Today” and “Tomorrow” Players and the Emergence of the “Striving Survivors”” that expands on her earlier work that identified 10 key trends in 2023 that are shaping the health care industry and discusses what we can expect in the coming year. The episode unravels the interaction between these trends and examines the existing challenges of today’s health care marketplace, including labor shortages, price inflation, and declining margins; how tomorrow’s healthcare entities are dynamically changing the playing field through private equity, consolidation, and technology; and the striving survivors–the existing health care businesses that are trying to navigate the evolution of healthcare in real time.
Guest:
Courtney Burke, senior fellow for health policy, Rockefeller Institute of Government
Learn More:
The Healthcare Industry Mega Trend to Watch in 2024
Top Health Trends for State Health Policymakers to Watch in 2023
A Mid-Year Update on 2023 Healthcare Trends
Transcript was generated using AI software and may contain errors.
Alexander Morse 00:02
Welcome to Policy Outsider presented by the Rockefeller Institute of Government. I’m Alex Morse. On today’s episode, we’re going to dive deep into the ever evolving landscape of healthcare with the Institute’s Senior Fellow for Health Policy, Courtney Burke. Courtney’s latest blog for the Rockefeller Institute, “The Healthcare Industry Mega Trend to Watch in 2024: “Today” and “Tomorrow” Players, and the Emergence of Striving Survivors”” expands on her work that identified 10 key trends in 2023 that are shaping the healthcare industry and discusses what we can expect in the coming year. For our conversation, we’ll unravel the interaction between these trends and examine the existing challenges of today’s healthcare marketplace, including labor shortages, price inflation, and declining margins; how tomorrow’s healthcare entities are dynamically changing the playing field through private equity, consolidation and technology; and the striving survivors-the existing healthcare businesses that are trying to navigate the evolution of healthcare in real time. Hope you enjoy. Coming up next.
Alexander Morse 01:27
Courtney, thanks so much for joining today.
Courtney Burke 01:28
Thank you for having me.
Alexander Morse 01:30
So in 2023, you highlighted 10 trends worth watching. Let’s quickly identify what these trends are and find out if they are still important. I’ve grouped them here into three main categories. And we’ll go with one at a time. So the first category, let’s start with public health emergency wind down, health workforce shortages, price inflation and declining margins at hospitals.
Courtney Burke 01:52
Okay, well, I’ll start with the first one that you mentioned, which was the public health emergency. And that has continued to be something that’s been important to watch. What was interesting this year is that the public health emergency actually ended. And there was a de-linking prior to that of continuous enrollment for Medicaid from the public health emergency. So we knew that there was going to be a requirement that people who are enrolled in Medicaid actually recertify their eligibility. So we’ve definitely been keeping an eye on that trend. You’ve seen different numbers put out there by CMS, the Centers for Medicare and Medicaid Services, that have shown a decline in the number of people who are enrolled. And this process for recertifying is gonna go on for a number of months into 2024. So I think it is a trend that is definitely worth continuing to watch in the new year. The second trend you mentioned was workforce shortages. And there’s long term projections from groups like the American Hospital Association, that there is going to be a continued shortage of physicians, well to say 2030, 2033, and a need to hire nurses to meet rising demand as the population ages. So this is a trend that I think is worth watching, not just into 2024, but probably well beyond that. But I think the most interesting thing from 2023 might be that the cost overall for labor, which was very high during the pandemic, because there was such demand, began to normalize a bit in 2023. So we’ll see how that trend continues. The third one you mentioned was price inflation. And there has predicted to be by Fitch Ratings, a 7 percent growth in healthcare prices overall. But I think what’s interesting about it most specifically, is that there’s going to be persistently high labor costs. And that’s a big expense in health care. And then the fourth trend you mentioned was the decline in hospital margins. And there’s a bit of good news here in that revenue return to normal for a lot of providers, it had been down during the pandemic, but on the on the downside, expenses are still high in the health care sector. So it’s going to continue to be challenging for hospitals.
Alexander Morse 04:09
It sure sounds like the financial picture for the health care industry is at a tenuous point. You mentioned the labor shortage, the declining margins for hospitals. But you did mention that there’s some price stabilization that we’re seeing. So should we expect healthcare costs to stay flat or go up, down?
Courtney Burke 04:28
Well, I think the predictions are that healthcare costs will continue to grow. But the degree to which they will do that there seems to be some evening out. It’s just that labor costs continue to be fairly high. And that will continue to be a challenge in 2024.
Alexander Morse 04:42
Sure. All right. Now, the next category that we have here is looking kind of at the health care market, you identified private equity, consolidations and alternative payment models. Can you expand a little bit on what those are and what you’re seeing into 2024?
Alexander Morse 04:57
sure,
Courtney Burke 04:57
Sure, well, private equity is a great resource in any industry for investment to take place, and you saw a lot more private equity, and you’ve seen a growing trend of private equity entering the healthcare space, particularly this past year in behavioral health, health information technology and other specialty areas like orthopedics. So there was a slowdown in the number of what they call private equity deals this year. But there were some some very big significant deals that happen on a much larger scale. So you can’t always just look at the number, sometimes you have to look at the amount overall. And there was an interesting study this year that showed that there were 13 metro areas where there’s a single private equity firm that owns more than half of the physician market in those areas. So that’s significant watching the private equity trend over the last decade. And I think another important trend that you mentioned was consolidations in healthcare, probably the most significant one that happened this year, that got a lot of headlines, because it wasn’t a regional consolidation of, let’s say, two hospital systems, but rather, it was a consolidation of hospital systems on the West Coast, and eastern part of the US, Kaiser and Geisinger, they created a new entity called Rising Healthcare that is looking to acquire additional health systems. So that was probably the biggest consolidation that was worth noting. But you’re also continuing to see consolidation in the insurance market. Towards the end of 2023, you saw Cigna and Humana, both really big insurance companies looking to merge, although it looks like that merger may not actually go through. But those are the types of consolidations that have been happening. And then the last one that you mentioned, alternative payment models, the Centers for Medicaid and Medicare Services has a goal of creating 100 percent of payments in alternative payment models by 2030. So that’s 100 percent of Medicare being the in these forms of payment within the next decade. So you saw more of movement from CMS to try to get providers and insurers to move into these types of arrangements. Two big models that came out this year were the making care primary model, and the advancing health equity model, otherwise known as the ahead model. So again, a trend to continue to watch into 2024.
Alexander Morse 07:18
Now, I’m curious, when you look at these private equity partnerships or consolidations, amongst hospital systems, I would guess, theoretically, that would help reach scale for consumers, drive down costs and maybe provide more options. Is that the case? Or are we seeing something else?
Courtney Burke 07:34
Well, I think it’s a mixed bag. And you’re seeing different studies now trying to attempt to look at the impact of private equity on health care costs. The Commonwealth Fund did a recent study towards the end of 2023, looking at the pros and cons of private equity in health care. One of the larger trends, which I’ll tell you about in a minute, and once we get through these 10 trends, looks at the impact of private equity, along with a couple of other factors in healthcare and what that is doing to the industry overall?
Alexander Morse 08:03
Sure, we’ll get to that. Thank you for keeping me on track with your 10 trends. So the final basket of trends that you identified last year was attention to health equity, digital health, and the expansion of non traditional health care entities. I presume that’s about health care delivery systems and trying to make things more accessible for consumers.
Courtney Burke 08:22
Yes, and I would say I was delighted to see the trend of health equity really take off this past year, the pandemic had highlighted the disparities that exist in the current system. And so now that we know that those disparities exist, and it’s commonly accepted, this year, you saw the federal government, particularly CMS, and some state governments, pushing health equity focused agendas. And now you’re seeing as of this year, new screening for what’s called social determinants of health, and other social drivers. And those are going to be things that become mandatory for health systems to monitor and 2024. And also, you mentioned digital health. Another interesting area, I don’t think I need to go into some of the statistics on the number of people who are now wanting to use digital health because it’s almost become a regular part of our life. So the healthcare sector is also expanding digital health, and most healthcare providers or other entities in healthcare have some type of digital healthcare strategy for the future. But the last trend that you mentioned, the non traditional actors in healthcare, is actually a good segue into what I wanted to talk about for 2024. And that trend was all of these non traditional providers. I think what you’re seeing is an emergence and an interaction between several of these trends. That’s creating what I see as a trifurcation in the healthcare sector, and I’m not sure what to call this trifurcation but I think I can describe and label the three different areas. So why don’t we talk about that?
Alexander Morse 09:58
Let’s do that.
Courtney Burke 09:59
Okay. So the way I see it is that there are healthcare providers of today. Today entities, these are ones that most of us are familiar with. It’s the hospital down the street. It’s the local or regional health insurance company. It’s the physician practice that you’ve known for many, many years. And all of these providers of today are being forced to change their business models, because they’re competing with what I call the healthcare entities of tomorrow, to healthcare entities of tomorrow, differ from the healthcare entities of today, because they bring, number one, a lot of capital resources to the table, which is often in the form of private equity. There also tend to be very large, already consolidated companies that may or may not have been in the healthcare space previously. So these are those non traditional actors that I talked about in these last year trends. And it includes companies like Amazon and CVS that are household names. And another thing that’s also interesting about them is that with this consolidation, they’ve almost created these mega huge entities. And we can delve into those a little bit more with some examples going forward. So then you wonder to yourself, well, what is the third category? The third category, in my mind is the healthcare providers of today that are striving to be tomorrow providers. So these are entities that you could identify that might be a health care provider, it might be the hospital down the street, but they’ve recently either consolidated with another health care provider, or they’re working to partner with, let’s say, a tech enabled company. So why don’t we pause and dive into those in a little bit more detail? All right, so talking a little bit more about the healthcare players of today, one of the challenges that I mentioned that they’re experiencing is the cost of labor, and the increase in prices, they also are looking to consolidate if they can, because they know that bond rating agencies typically favor larger providers because they’re less risky. But they’re also looking to do things in the digital space, looking at how people can maybe book their appointments using artificial intelligence, or chatbots. Or they’re looking to provide care in different ways, like hospital at home or home base cares. And tomorrow, players are already doing these types of things. So let’s take Amazon, for example. We all know they started as an online bookstore, but now they have annual revenues of over 500 billion, a lot of which they’re investing in healthcare. Or CVS, which started as a retail pharmacy chain, and now has revenues close to 300 billion. Or Uber. Everybody knows Uber now, which started as a tech enabled taxi-like transport company, and they now have revenues of over 30 billion. All of these companies have gotten into the healthcare space in some form in the last couple of years.
Alexander Morse 12:50
Yeah, I find that to be really interesting. I think of an organization like CVS, okay, I can kind of see the parallels and the connection to health. But then Amazon or Uber, I wouldn’t necessarily think on the surface that may be connected to healthcare. But then as you mentioned, these connections are trends focusing on tech, and then you peer a little bit deeper, and it makes total sense of the world that they are tech industries that are now trying to venture into the healthcare industry, which is what, how many billions of dollars is the healthcare industry in the United States,
Courtney Burke 13:17
I want to say three or 4 trillion, yeah, $3 or $4 trillion.
Alexander Morse 13:20
I was way off. So it kind of makes sense that Amazon, Walmart, maybe or CVS, they have all this access to capital, they have this tech infrastructure that they can import and try to become major players, as you mentioned, the tomorrow players in the healthcare setting.
Courtney Burke 13:37
Exactly. In thinking about the striving survivors, you know, I mentioned some of the things that they’re doing, but they are creating those non traditional partnerships. So they’re not necessarily always partnering with another healthcare entity. But a lot of the times they’re partnering with a technology company.
Alexander Morse 13:55
Right, they’re gonna have to evolve to meet the demands of people seeking health care. And as you alluded to earlier, a lot of us have health care at home with telehealth, right. That’s, that’s kind of what the demand is pointing to that we want more of.
Courtney Burke 14:08
Exactly. Yeah, the technologies that’s really interesting, or significant in what consumers want. You think about some of the ones that you just mentioned, like having home care or having hospital at home. Hospital at home is actually different than what’s considered home care, because hospital at home is acute care delivery, for qualifying conditions for certain populations. And you have to go through a different process in order to be able to provide that service and have it be reimbursed. That’s completely different than something like remote patient monitoring, where you would do the monitoring for something that would traditionally be done in a clinical setting like glucose monitoring or heart monitoring or something that’s using physiological data. And more and more of the population I’ve seen estimates as high as 70 million people by 2025 may be using some form of remote patient monitoring to get their health care. And that’s very different than telehealth where you call somebody, or you use the internet to call somebody and get some advice on what you need to do for your medical condition. So technology is entering healthcare in all different ways, including artificial intelligence, which we’ve talked about and blogged about previously.
Alexander Morse 15:27
So we’ve mentioned some of these trends and the new models of trying to deliver health care and the striving survivors, you know, how are they actually surviving? What is it that they need to do in order to achieve the share of the market and be able to to effectively deliver health care to survive and become a tomorrow entity?
Courtney Burke 15:46
Great question. I think there’s probably three main strategies for the health care entities of today, to be able to be the healthcare entities of tomorrow. And there’s probably more strategies than three. But let me put them into those three broad categories. The first is similar to some of them, ones that I’ve mentioned, which is partnering with other entities. And that can be a merger of some sort to increase the size, scale and revenue that’s coming in. And it does create economies of scale that allows them to bargain better for payments from insurance companies, and allows them better access to capital markets. The second strategy that I would highlight would be maximizing technology. So today’s healthcare entities are seeking that different ways to use that technology, which I mentioned, was telehealth remote monitoring, artificial intelligence hospital at home, you name it, these are all ways that are preferable for consumers to have their health care. And if you’re gonna survive in the future, you have to be engaging in technology. The third area that I think is probably being used by healthcare providers of today to make sure that they can survive and strive into tomorrow, is revenue diversification. And that’s a growth strategy that’s used in many different industries, not just healthcare. And I think it very much relates to the first two that I mentioned, the partnering and use of technology. Because if you’re going to diversify your revenue, you probably need to partner or unless you’re coming up with homegrown solutions and revenue solutions, or you need to employ technology in some form to help you. So wherever there is demand for services that are growing is a likely area where you’re going to be able to receive new revenue in the future.
Alexander Morse 17:39
These three main strategies that you outlined, making partnerships, maximizing the use of tech and diversifying revenue, that all sounds something in the wheelhouse of a larger system, right? Maybe a hospital system, or some of these companies like Amazon or whoever. That doesn’t sound like a really easy alternative for a small family owned practice.
Courtney Burke 18:01
It’s not and that’s why you’ve seen so much consolidation, you’re correct that it’s not easy for the health care providers of today, to figure out how to get to be a healthcare provider of tomorrow. There’s so few independent physician practices anymore. There’s fewer and fewer independent hospitals. It’s just a natural part of what’s been happening in the healthcare marketplace over the last several years, but it’s just become more obvious now. Because you have such big players that have entered the market, diversify their revenue or diversify the services they’re offering.
Alexander Morse 18:35
You mentioned earlier that there was a study that looked at outcomes, health outcomes. Is there any trend that you’re seeing that says that these consolidations or partnerships or the healthcare sector in general is having better health outcomes?
Courtney Burke 18:47
I think it’s a very big question to draw conclusions about probably easier to study. One area of the different trends that we’re talking about, for example, focusing specifically on some of the different types of technology. Are there better health outcomes for people who are using telehealth for behavioral health data, for example, overall, seeing whether some of these trends is positive or negative is pretty difficult to do because they are so big in nature?
Alexander Morse 19:17
Well, that’s why we have you here to keep monitoring these trends, Courtney. So let’s wrap up here by looking at how to watch and monitor these trends in 2024 and beyond?
Courtney Burke 19:26
Well, it’s a great question, I think it’s important to monitor the individual trends that we looked at and just talked about the 10 trends from 2023. But I do think that looking for how those trends interact, as we did in talking about what I consider the mega trend of the today, provider entities that tomorrow, and the striving survivors, because those mega trends, you don’t always notice them as you look at the daily headlines, but over time you see the bigger impact and the interaction that those trends have with each other. So that would be my recommendation for 2024 is to not just watch the individual trends, but watch the interaction of those individual trends and what that means for the healthcare marketplace.
Alexander Morse 20:07
Well, we appreciate you stopping by to talk about this. And we look forward to 2024 and seeing how these trends play out. Thank you, Courtney.
Courtney Burke 20:14
Thank you.
Alexander Morse 20:18
Thanks again to Courtney Burke, Senior Fellow for Health Policy at the Rockefeller Institute for joining us to discuss her latest blog, “The Healthcare Industry Mega Trend to Watch in 2024: “Today” and “Tomorrow” Players and the Emergence of Striving Survivors,”” which you can check out by visiting our website. A link to the blog is available in the episode description. You can also read Courtney’s 2023 trends for health policymakers and her mid year update in the episode description too. Did you like this episode, please share it with a friend. It’s the best way to spread the word and get the latest in public policy research. All of our episodes are available for free wherever you stream, your podcasts and transcripts are available on our website. Special thanks to Rockefeller Institute staff Heather Trela for their contribution to this episode. Thanks for listening. I’m Alex Morse. Until next time.
Alexander Morse 21:28
Policy Outsider is presented by the Rockefeller Institute of Government, the public policy research arm of the State University of New York. The Institute conducts cutting edge nonpartisan public policy research and analysis to inform lasting solutions to the challenges facing New York State and the nation. Learn more at Rock institute.org or by following at Rockefeller Institute. That’s Rockefeller i n s t on social media. Have a question comment or idea? Email us at [email protected]
“Policy Outsider” from the Rockefeller Institute of Government takes you outside the halls of power to understand how decisions of law and policy shape our everyday lives.
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