What to Watch for in Health Care in 2022
By Rob Schile and Jennifer Boese
Two years of a pandemic and economic tumult with long-term systemic impacts that we continue to navigate. As we assessed 2021 and looked to 2022, CLA released our Top 10 list of insights. We encourage you to read the article because it spans many industries beyond health care, but today we decided to look at 2022 through a health care lens. Here are a few of the issues we’re watching.
Labor. Labor. Labor. It is an issue roiling many industries but is having particularly negative impact on health care. Why? Well, because you can’t just close hospitals or nursing homes when there’s a health care pandemic going on. People still need care…Every. Single. Day. Plus, after two years and counting, health care workers are stressed and burned out, which also means they are reassessing their options and work-life balance. Plus, health care workers may be able to make more money in other care settings or industries. While there are many inter-related issues at play, the bottom line is our health care system is struggling to retain and hire enough workers, particularly in key settings and roles.
- What To Do. Health care organizations will need short-term and long-term labor solutions. In the short-term, we know there are already pay adjustments, compensation studies and other wage/benefit considerations going on plus outsourcing where helpful/needed (back-office functions). Another short-term innovation to retain labor is the creation of internal “traveler” programs. Since temporary staffing agencies have become a big issue, some organizations are creating programs where their own clinicians/staff can volunteer as “travelers” for a time-limited rotation where needed (and clinically appropriate) within their own organizations. In return, they receive a bonus plus additional hourly or daily pay. Pipeline issues and whether reimbursements will keep pace are key in addressing long-term staffing needs.
Behavioral/Mental Health Needs. COVID has had a significant impact on the mental health of many individuals. We are increasingly seeing higher levels of burnout and retirement in health care professionals when we least can afford it. It’s also the impact of two years of remote work, isolation from family, teaching children at home, lock downs, fear of catching or transmitting COVID and all around COVID fatigue. We have seen the terrible impacts on the health care workforce, but also on our patients and nursing home residents.
- What To Do. Kudos to the federal government for broadening payment and availability for mental health to be delivered via telehealth and ongoing reimbursements for substance use disorders. Kudos to nursing homes and others who thought creatively about how to connect residents/patients with family and friends. We expect a continued focus in 2022 on improving behavioral/mental health care for employees through thoughtful employer-supported wellness and well-being options, such as Learn To Live, specific mental health/rest days or other resources. Well-being and working environments are as important as pay and employers should pay careful attention here.
Antitrust/Oversight. Watch for heightened focus on all types of oversight and compliance, but particularly in antitrust. From scrutiny on nursing homes, staffing levels, hospital mergers and the role of private equity in it all, health care is closely being watched. In fact, in July 2021 President Biden released an Executive Order with dozens of initiatives aimed at improving competition, including in key sectors like health care. Recently, the Department of Justice (DOJ) and Federal Trade Commission announced they would review merger guidance, seeking feedback and considering changes. Real-life examples of scrutiny? Think about the deal by Optum to buy Change Healthcare which is running into DOJ questions, or, how a group of 200 Members of Congress asked regulators to investigate temporary staffing agencies for “price gouging” during the pandemic.
- What To Do. With so much scrutiny on all things health care, there are many avenues to get ahead of issues, including a robust compliance and risk management program, internal audit function, cybersecurity and IT strategy, consulting, transaction services support and so much more.
Private Equity Influence. Speaking of private equity (PE), we expect to see increased activity in 2022 from digital health investments to private equity backed physician practices and senior living. This has been a trend for the better part of a decade now, and the pandemic does not seem to have curtailed it – and in some cases, has accelerated it. This growth in health care investment comes with mixed viewpoints. On one hand, many believe PE influence is necessary to drive innovation, ring out inefficiencies in the system while providing the necessary capital to drive change. Proponents see new PE entrants into the health care market as spurring the innovation that incumbent providers are not able to adapt to, or adapt to as quickly as the market would like. On the other hand, some view the PE business model and the fundamentals of health care as incompatible. Critics point out that the PE business model is really focused on generating profits in the short term, and may lack dedication to the longer term needs of a population.
- What To Do. Private equity ties into the broader picture of antitrust and market domination as well. With large payers taking even larger positions in the market through acquisition of provider practices, data analytics and health tech, we are very mindful of increased regulatory attention and lawsuits. That said, PE is on the forefront of health care and presents either an opportunity or a threat depending on where you sit. Preparation, analysis, strategic thinking and planning are necessary for all players.
Medicare Advantage Growth, Scrutiny: As the Medicare eligible population continues to balloon with baby boomers retiring, so has Medicare Advantage also grown. As of 2021 more than 40% of total Medicare enrollees have enrolled in a Medicare Advantage plan vs. traditional Medicare Fee-for-Service (FFS) plans. From a beneficiary standpoint, the attraction is simple: potentially lower premiums and co-pays coupled with increased access to supplemental benefits, like dental coverage, fitness options or hearing exams and aids. While these are great benefits, there are other trends to monitor in 2022 that are not so appealing. Medicare Advantage costs the federal government more than traditional Medicare FFS. According to its June 2021 report to Congress, MedPAC indicates federal government spends 104% per capita for beneficiaries enrolled in Medicare Advantage than it spends for same services for beneficiaries enrolled in Medicare FFS. As is typically the case, whenever a program shows significant growth along with higher costs, it attracts scrutiny. Regulators have stepped up enforcement actions in Medicare Advantage, including pursuing several cases alleging “upcoding” of beneficiary health conditions and failure to cover required mental health services.
- What To Do. Demographic shifts along with significant growth, higher costs and enforcement actions make the Medicare Advantage program ready for some revisions. Making sure you understand what ongoing demographic changes mean to local, regional and national markets is also foundational for the future since Medicare Advantage will be a growing part of that.
Economy/Inflation: The year is starting out with an economy that looks more like a bumpy roller coaster than it does a smooth sailing cruise ship. We have already seen significant swings on Wall Street, record inflation, low employment with job openings that still can’t be filled, and departures of clinical professionals in the health care field. Federal Reserve Chairman Jerome Powell recently signaled the potential for interest rate increases to offset rising inflation. In a press release from January 26, 2022, the Fed stated, “With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate.”
- What To Do. Market fluctuations are of concern to health care providers. Many rely on investment returns to help with funding of capital and other ongoing activities. Market declines will put downward pressures on these investment earnings and coupled with rising inflation will result in further erosion of much needed cash flows. Modeling out different financial scenarios and other strategic considerations will help providers prepare for what could be more troubling economic waters ahead.
Capitol Hill/Regulatory Agenda. Congress may still be working on Build Back Better 2.0. If it passes it will be a much, much smaller package. Health care providers are urging Congress to replenish the Provider Relief Fund, but Congress and Administration will likely view that in the context of other funding priorities (like funding the government), inflation and economic indicators. However, we could see Congress focused on targeted health care issues like telehealth changes. On the regulatory front, we do not expect the Centers for Medicare & Medicare Services to let up on price transparency (ex: No Surprises Act in effect now, increased penalties for not posting machine-readable files), other transparency initiatives on quality/staffing requirements (nursing home staffing levels) or value-based care. On the latter, the Innovation Center (CMMI) already released its strategic refresh to better hone and align its models with overarching Administration goals, one of which is health equity.
- What To Do. Watch for all the regular payment rules to come out per usual, as these are where the Administration will advance various goals. Assess where your organization is now in light of where health care is going. Think demographic changes and health care costs (Medicare Trust Fund insolvency as early as 2025). Those are exactly why price transparency, No Surprises and consumer protection will continue to pressure providers. Don’t forget about the role of disrupters, value-based care models and shifting sites of service, as those will continue in 2022 and beyond. The pandemic also highlighted the ongoing issue of health equity and social determinants. As mentioned, CMMI is refreshing models to better align with the Administration’s goals of health equity, and ensuring health care for all is also an Administration priority. What is clear is health care providers of all types should continue to keep a focus on all of these inter-related Congressional/regulatory issues when assessing strategic decisions and care delivery.
How we can help
Our health care practice sees these issues every day. From senior living, physicians and hospitals to private equity and emerging life sciences and biotech companies, we are working with them all. Talk to us today about how we can help you.
Jennifer Boese is the Director of Health Care Policy at CLA. She is a highly successful public policy, legislative, advocacy and political affairs leader, including working in both the state and federal government as well as the private sector. She brings over 20 years of government relations and public policy knowledge with her to CLA. Well over half of her career has been spent dedicated to health care policy and the health care industry, affording her a deep understanding of the health care market and environment, health care organizations and health care stakeholders. Her role at CLA is to provide thought leadership, policy analysis and strategic insights to health care providers across the continuum related to the industry's ongoing transformation towards value. A key focus of that work is on market innovations and emerging payment models. Her goal is to help CLA clients navigate and thrive in an increasingly dynamic health care environment.
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