The term “fog of war” is getting a lot of play in the worldwide battle against the COVID-19 pandemic. But forward-looking senior executives are taking smart steps now to get through that fog to healthcare’s “whatever comes next.”

In recent days, I have spoken with some of the most thoughtful and strategic executives from health systems around the country to learn their thoughts about the foreseeable future. The clear message was that the “old normal” of U.S. healthcare is gone, and that the current crisis offers an opportunity to create a more efficient and sustainable healthcare delivery system.

The present financial damage caused by the crisis is hard to hear. Some systems are losing millions of dollars a day and expecting steep declines in margin. But COVID-19’s scorched earth does allow—or perhaps force—some changes that will be good for patients and healthcare organizations.

Even knowing the skills of these executives, I was incredibly impressed by the speed, insightfulness, and tenacity with which they are identifying new strategies toward a future that is still foggy.

Informed by the observations of these executives, we offer the following ways in which health system leaders can move aggressively from battling the current crisis to making meaningful and necessary changes to their organizations and to healthcare delivery in America.

 

“Even during a crisis, CEOs must focus on larger strategic issues”

Strategic issues can’t wait for the current crisis to pass. One CEO told me, “An attitude of ‘let's get through this first’ is not the way to go.” Executives must ensure that their organizations think hard now about the post-COVID future and what broad changes in strategy might be necessary for that future state.

While health systems need to deal with current pressures from the crisis, such as possible liquidity problems, more strategic issues also require immediate attention. The CEOs I spoke with are already standing up working groups on critical future issues such as:

Clinical operations. What new care models will emerge from COVID? What portion of services will continue to be managed through telehealth and hospitals at home? What will the implications be for hospital and ambulatory facilities? What will the implications be for operations, workforce, and reimbursement?

Digital platform. How do digital capabilities need to improve in order to serve demand that may permanently shift to digital interaction? How can current platforms become easier for users, offer more sophisticated services, and handle greater volume? What changes to the platform will be needed for the possibility that many employees may work remotely?

Living with COVID-19. What structural, operational and staffing decisions are needed to allow elective and emergency procedures to resume while COVID-19 patients remain in hospital facilities—likely for an extended period?

Creating the new normal. How can organizations rebuild their balance sheets? What will be the new capital structure? What partnerships should be pursued? Is there an opportunity to expand market share? How will staffing needs change?

These work groups have charters to develop and report strategies within short timeframes. The recommendations then will be mapped to different scenarios for the path of COVID-19, return of non-urgent surgical cases, demand for services, economic conditions, and other factors. The resulting strategic scenarios will then be presented to the boards.

 

“Move hard during the recovery phase”

Now is not the time to pause. As one executive told me, “Most market share gains will happen within 12 months of recovery after recessionary shocks.”

The pace of recovery and the tactics needed will vary, depending on each organization’s COVID-19 experience, its local economy and other factors. Those hit hard by the pandemic will likely see elective procedures return much more slowly than those that did not experience a major surge.

Regardless, the economic crisis will roil the healthcare industry in the coming months, and decisions made during this time will have long-term consequences.

In the short-term, most systems are reconsidering their immediate capital expenditures. One executive said all capital spending is on hold; another slashed the organization’s capital expenditure budget by half.

In the longer-term, organizations must review and completely rework their strategic plans in light of the changes brought by the pandemic. Several executives told me that their organizations’ pre-COVID-19 strategic plans are no longer relevant. These leaders are thinking about several priorities going forward:

  • Ambulatory services will be prioritized more than ever
  • Cost control will be paramount
  • Workforces may be restructured
  • A new safety movement must occur
  • Market circumstances may change materially

 

“We’ll need COVID units for a long time to come”

COVID will not simply go away. One executive said, “We can’t just wait for this to be over because that’s not going to happen.”

Hospitals and health systems will be treating—or must be ready to treat—COVID-19 patients at least into 2021. The executives identified several implications of this reality:

Relentless preparation. The need for personal protective equipment (PPE) and testing capacity does not end when the surge subsides. Returning to elective procedures and clinic visits requires being able to test both patients and providers, and assure everyone—physicians, staff and patients—that PPE is available to keep them safe.

Reconfigured facilities. As elective procedures return, how to keep COVID-19 patients segregated from those who are virus-free? Some systems may designate specific facilities to be “COVID-19 hospitals.”

Staffing issues. Some of the clinician heroes on the COVID-19 front lines will need support in the future. Is this almost a post-traumatic stress syndrome situation? Meanwhile, recruiting may become more difficult; will young people sign up for what COVID-19 care teams are going through now?

Emergency department (ED) volume. The sharp decline in heart attack and stroke volumes in EDs during the pandemic has not yet been explained, so no one knows how long that will last. Patients with non-emergent conditions are avoiding the ED, and some executives believe ED volume may be permanently reduced.

Relationship-building. Safety-minded employers in all sectors will want COVID-19 testing as they reopen their businesses. One health system is contacting employers to offer its testing capacity, seizing the opportunity to strengthen relationships with businesses in its community.

 

“There’s no going back on telehealth”

COVID-19 has been telehealth’s proving ground, and it will be a cornerstone of healthcare delivery going forward. One system that was doing 25 televisits a day before COVID-19 is now doing 3,600. Another went from 200 a day to 5,000. Another jumped from 500 visits a day to 12,000. “Telemedicine is here to stay, and that is a good thing,” one executive said.

Because telehealth’s tipping point has come during this crisis, hospitals and health systems must move quickly to develop their virtual-care strategies. Allowing telehealth to lose momentum after the immediate crisis ends will be a missed opportunity; one executive plans to accelerate her system’s virtual strategy by two to three years.

This includes not just video visits, but in-home monitoring, mobile apps, and other tech-enabled care, all of which needs to be coordinated for maximum effect. But it also includes processes and protocols for triaging patients so that they receive care—virtual or in-person—in the most appropriate way.

The surge in telehealth also presents financial and strategic challenges. What level of investment is required for top-flight telehealth? Where should hospitals and health systems get the intellectual capital and capabilities? What new partnerships might be necessary? How will a significantly higher percentage of telehealth business affect revenue and margin? How could a greater emphasis on telehealth affect the competitive landscape, including the historically regional nature of healthcare delivery and possible competition from non-provider companies with tech expertise or healthcare providers with national reputations?

 

“Do we need these buildings?”

Cost control will be key to recovery, and reducing real estate expenses may be a prime opportunity as healthcare embraces the work-from-home movement.

When the pandemic hit, health systems had significant portions of administrative staff move to working from home. “Everything has worked just perfectly,” one executive said.

Another admitted he had given telework short shrift in the past, thinking the personal nature of healthcare required staff to be in the corporate office. “But we have lots of people at home now, and they are doing fine,” he said. “And at least some portion of those people aren’t going to want to come back into the facility.”

The executives I spoke with are looking hard at the implications of what COVID has shown them about their workforce. An obvious question is whether all the buildings that housed administrative staff are still needed. Another question is how to structure the workforce for the post-COVID era. The executives I spoke with urged caution. “The last thing you want to do is damage your labor pool,” one executive said.

 

“There will be another wave of consolidation”

The COVID-19 pandemic will hasten the reorganization of America’s healthcare landscape. The financial toll—sharp revenue decline from reduced elective and non-emergent volume just when COVID-19 preparation and care costs increased—will be too much for some hospitals, and even some systems. “There will be another wave of consolidation due to financial damage,” one executive said.

Almost universally, executives reported being contacted by physician groups ready to exchange their independence for the financial support of being part of a health system. “The doctors are getting smashed,” one said.

Several have been approached—or expect to be—by stand-alone hospitals and multi-hospital systems looking for partnership arrangements. One leader expects such deal-making will get serious in about six months after new strategic plans have been developed. He and others are using this time to determine:

  • How much they can afford to invest in new partnerships
  • What type of opportunities they want to pursue—hospitals, ambulatory sites, and with what criteria
  • How arrangements should be structured; “any M&A deals going forward need to be capital-light,” one executive said

 

“We will be living in a different world”

COVID-19’s toll on healthcare providers and the hit to the U.S. economy mean business-as-usual is not coming back. One executive believes healthcare will be changed by COVID-19 in the way air travel was changed by 9/11. “We don’t even remember what air travel was like before 9/11 at this point,” he said. “We’ve just accepted it.”

Executives see several aspects of this change.

Changing payer mix. Increased unemployment may very well mean fewer patients with private insurance, more Medicaid and self-pay patients. But for how long?

Socioeconomic disparities. The economic crisis will hit the most vulnerable the hardest. One executive expects disparities will become even more visible. “We’re going to have to get smarter on social determinants of health,” she said.

Purchasers seeking value. The coming recession will force corporations to tighten control on their own costs. One executive said employers that were previously cool to narrow networks are rethinking their position.

Fresh eyes on operations. As the pandemic put a pause on daily hospital life, some executives could see opportunities they had missed before. One said running operating rooms on a 24/7 schedule is an idea worth exploring. Another plans to address perennial operating-room bottlenecks by creating a centralized OR schedule.

Organizational structure. In time of crisis, a command-and-control management approach proves its merits. An executive leading a system comprising several hundred sites of care sprawled across a vast metropolitan area said years of work to create a true system, rather than a federation of affiliated sites, paid off when COVID-19 demanded a quick response. Less centralized health systems may follow that example as a hedge against future crises.

Crisis preparation. Many healthcare executives thought the 2008-2009 economic crisis was the biggest leadership challenge of their careers—until COVID-19 hit. “We have not spent enough time thinking about Black Swan events,” one leader said. “We now have had two in the last ten years. We have to create an operating model that’s much more protective in these situations."

 

Leadership intensified

Leadership has always been about bridging the future and the present: identifying and clarifying organizational objectives, and mobilizing action to achieve those objectives. In the COVID-19 crisis, successful leaders are taking these qualities to an altogether new level.

The executives I spoke with are seeing long-term opportunities in a time of unprecedented chaos. They are articulating those opportunities with great clarity. And they are guiding their organizations through highly structured actions to move into a hard-to-predict future. They are doing all that at exactly the same time the organizations are fighting daily COVID-19 fires.

A crisis intensifies the need for leadership vision, clarity, and action across multiple dimensions of time. The executives I spoke with are showing just what this type of intensified leadership looks like.

 

For more information, contact Ken Kaufman.

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Kenneth Kaufman

Managing Director, Chair
Kenneth Kaufman offers deep insights on the economic, technological, and competitive forces undermining healthcare’s traditional business model.
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