Strata Decision Technology has been tracking patient volumes, ED visits, length of stay, margins and telehealth utilization monthly for the past six months — and one reality that Strata’s latest data highlights is that fee-for-service payment models are problematic.
Strata began analyzing the data as COVID-19 hit the United States and in September the company published its 6-month update, which pointed to considerable spikes in the initial reaction and leveling off in the time since.
Health Evolution interviewed Strata CEO Dan Michelson about what the data reveals, misperceptions that continue, and what CEOs should consider for the rest of 2020 and moving into 2021.
Health Evolution: What surprised you about the findings? And what should CEOs understand about that?
Michelson: The elasticity of demand for essential care during the pandemic has been extraordinarily variable. Visits dropped 50%, admissions 25% and office visits 50% almost overnight. The need for screening and care didn’t go away but people made a trade-off between care and the risk of contracting COVID-19. For instance, breast health volumes are still down 37% since March even though overall daily volumes are back to 2019 levels. This makes fee-for-service a systemic risk to the health care sector.
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We have to drive patient confidence to avoid future serious illness due to care delays. CEOs need to continue rethinking their volume– and procedure–driven economic models, channels of care, and access points. The way the industry creates margin has to be fundamentally evaluated. The pandemic has made it clear that the industry is not equipped to handle a severe supply shock and survive. Hospitals were rescued by the CARES Act this but the government may not come to our rescue again.
Health Evolution: Let’s take a reality check. What does your data illustrate about what’s really happening versus what’s being misconceived?
Michelson: Our health systems are not too big to fail. The belief that providers are “rolling in cash” due to high prices and market power just isn’t so. Margins across the StrataSphere network, even for the upper 25% of health systems, went to near zero and the median and bottom 25% saw negative margins. Well-financed, high market–share health systems fared better than others but the vast majority, particularly in smaller cities and rural communities, struggle to sustain services. The CARES ACT put many on stable footing for a few months but if the rise in COVID-19 cases drives hospitalizations and reduces people’s willingness to seek care again, we will see many on the brink again. We can’t allow that to happen. Our health systems in many parts of the country are also the largest employers, social hubs, and the safety net. They are far more important in most peoples’ lives than the banks were during the financial crisis of 2007-8. So while we can and should continue to focus on things like cost structures, waste, where investments should be made, salaries, and prices, we need to take steps to ensure the viability of our health systems. It is clear now that it doesn’t take much of a shock to drive an industry-wide collapse.
