Hospital Industry Trends, Opportunities, and Challenges in 2022 and Beyond
By Brian Conner
Partner, Hospitals Practice
Moss Adams
Original Publish Date: February 15, 2022
Several recent trends in the hospital industry could impact operations in the coming years, most notably the continuing impacts of the COVID-19 pandemic. These trends create both opportunities and challenges for hospitals.
Read more to learn how these trends could impact your hospital in 2022 and beyond, as well as tips to stay ahead of change.
Major Trends Impacting Hospitals
Trends that could impact hospitals’ market outlook include:
- COVID-19
- Reimbursement
- Telehealth
- Pricing
- Health equity
Impacts of COVID-19
The pandemic brought major environmental challenges for hospitals and health systems since it emerged in early 2020. Human capital and workforce stabilization continued to be the prevailing struggle in 2021 and looking well into 2022.
An already frayed workforce faces growing challenges including:
- Severe burnout in health care as the pandemic surges
- Declining overall employee morale
- Vaccine mandates
Resource capacity shortages also continue to lead to soaring compensation trends.
In addition, an aging workforce, early retirement, and supply chain issues contribute to making the pandemic the top challenge facing hospitals.
In addition, health care spending rose 9.7% to $4.1 trillion in 2020, much of it tied to an increase of 36% in federal expenditures directly related to the COVID-19 pandemic, as reported by Health Affairs.
Reimbursement
The reimbursement environment continues to be plagued by ever-changing regulatory demands and a continued trend towards value-based care and risk-based models with increasing pressure from both commercial payors and the Centers for Medicare & Medicaid Services (CMS).
Crisis management over the past two years may have stalled hospitals’ efforts to create infrastructure to effectively transition to value-based care models. However, the pandemic also provided incentive to consider taking on more risk as a means of long-term stability.
Significant government stimulus during the pandemic in conjunction with the administration change as well as pending additional federal programming increased pressure on Medicare and Medicaid funding mechanisms.
This will likely drive intermediate-term downward pressure on reimbursement rates.
Telehealth
Site-of-care transformation accelerated in the pandemic environment as necessity forced significantly expanded telehealth use. Patients also became accustomed to the convenience of telehealth.
It remains to be seen how telehealth will be reimbursed by commercial and governmental payors prospectively; however some increase in demand will be permanent and continuing to expand telehealth services and infrastructure will be a worthwhile investment.
Home health is expected to see a similar uptick in demand as the convenience of telehealth services and technological and clinical advances drive greater demand for in-home site-of-care services.
Pricing
Price transparency and surprise billing initiatives continue to pressure the industry as regulators and legislators seek to remedy the disconnect between patient services and payments.
Enforcement of rules increased after a pause during the early stages of the pandemic. Failure to comply will likely create public relations and administrative issues for hospitals in the short term, as well as increased penalties. To prepare for the No Surprises Act, read about key updates.
Health Equity
Health equity became a significant battle cry to provide access and move the population health needle as the pandemic and racial tensions highlighted significant health inequity trends.
This is underscored by the American Medical Association’s recent launch of its strategic plan to “embed racial and social justice” and advance health equity in its organization and domains of influence.
Hospitals and health systems will need to consider health equity in all strategic and operational planning prospectively as communities demand equity and parity in health outcomes along racial, ethnic, and socioeconomic lines.
Opportunities and Challenges
From the above trends, there are five opportunities and challenges hospitals are likely to face through 2024:
- Rise in cost of care
- Leadership voids
- Waning resources
- Increased outsourcing
- Cybersecurity threats
1. Rise in Cost of Care
The cost of care will likely continue to rise as hospitals compete for talent.
Hospitals also continue to feel downward pressure on reimbursement services due to government funding constraints and transparency initiatives.
Combined with the unprecedented rise in national health care expenditures topping $4.1 trillion in 2020, hospitals and health systems will be under significant pressure to control health care costs.
2. Leadership Void
Significant retirement trends removing institutional knowledge from the industry will likely bring a leadership void.
This is especially impactful not only among the ranks of the C suite, physicians, and nurses but also across those in tenured, experienced positions responsible for keeping hospitals and health systems compliant with significant regulatory burdens, including reimbursement, physician compensation, and navigating health care fraud regulations for contracting and referral arrangements.
This has never been so visible as with the onset of the so-called Great Retirement as a generation of executives and professionals are expected to retire.
These are leaders who, as noted by Becker’s Hospital Review, “led their health systems through numerous milestones and headwinds, including input and compliance with the Affordable Care Act, the move from paper to digital records, and major mergers and labor strikes. Since 2020, they have been the top decision-makers as their organizations met the demands of the COVID-19 pandemic and its consequences. They set the tone and had final say in how forcefully their institutions condemned racism and what actions they took to fight health inequities.”
There simply aren’t enough succession candidates to adequately fill the void left from the volume of departures.
3. Waning Resources
Resource constraints test operations, clinical integrity, and safety mandates of hospitals. Conducting business in the same manner as pre-pandemic times simply isn’t an option.
Site of care transformation and technological and clinical advances may alleviate some of this pressure; however, hospitals will need to strategize how they’ll adapt to effectively do more with less.
4. Outsourcing
Resource restraints at all levels prevent hospitals from performing as much work in-house as they performed pre-pandemic; now hospitals and systems look for outsourcing or co-sourcing opportunities to supplement diminished internal resources.
As a result, collaborating and partnering with third-party organizations that have deep expertise in health care will become a necessity. From accounting, reimbursement, operational performance improvement to service line optimization, hospitals are turning to the market to help tackle some of these issues.
At the same time, they must remain diligent in their efforts to minimize third-party risk and right-sizing vendor management.
5. Cybersecurity
Protecting stakeholder data by implementing and enhancing cybersecurity efforts should always be a priority. In 2021, health care topped the industry list of average cost of data breaches worldwide, reaching an estimated $9.23 million per breach.
With new phishing, ransomware, third-party risks, and medical device security vulnerabilities, health care executives should identify cybersecurity as a top priority, requiring investment and expertise, as well as incident and emergency preparedness.
IT solutions in specific service lines, such as reimbursement and payer services, can potentially benefit hospitals regardless of specific trends in the hospital environment.
We’re Here to Help
For guidance on how to grow your hospital or overcome challenges, contact your Moss Adams professional.
You can also learn more about our Hospitals Practice and additional topics affecting the industry.
Additional Resources
For regulatory updates, strategies to help cope with subsequent risk, and possible steps to bolster your workforce and organization, please see the following resources: