December 10, 2021

The Weekly Gist: The One Rage or Another Edition

by Chas Roades and Lisa Bielamowicz MD

No sooner had our plane landed from our most recent visit with a health system member than a timely news item flashed across our screens. According to the latest polling from Morning Consult, 39 percent of business travelers say they will never take another trip for work. Having just watched a fellow traveler escorted from the row ahead of us for berating a flight attendant, we weren’t surprised to read that 41 percent of travelers said they’ve cut back on flights because of fears of air rage, and two-thirds said they were at least somewhat concerned about unruly passengers. It’s ugly out there right now: people are on edge, and everyone seems to be on their worst behavior. Count us among the 62 percent of respondents who said they’d be driving, rather than flying, whenever they can. We’ll take road rage over air rage any day.

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GRAPHIC OF THE WEEK

A key insight or teaching point from our work with clients, illustrated in infographic form.

Affiliation improves rural hospital sustainability

In 2020, a record-breaking 19 rural hospitals closed their doors due to a combination of worsening economic conditions, changing payer mix, and declining patient volumes. But many more are looking to affiliate with larger health systems to remain open and maintain access to care in their communities. The graphic below illustrates how rural hospital affiliations (including acquisitions and other contractual partnerships) have increased over time, and the resulting effects of partnerships. Affiliation rose nearly 20 percent from 2007 to 2016; today nearly half of rural hospitals are affiliated with a larger health system. Economic stability is a primary benefit: the average rural hospital becomes profitable post-affiliation, boosting its operating margin roughly three percent in five years. But despite improved margins, many affiliated rural hospitals cut some services, often low-volume obstetrics programs, in the years following affiliation. Overall, the relationship likely improves quality: a recent JAMA study found that rural hospital mergers are linked to better patient mortality outcomes for certain conditions, like acute myocardial infarction. Still, the ongoing tide of rural hospital closures is concerning, leaving many rural consumers without adequate access to care. Late last month, the Department of Health and Human Services announced it would distribute another $7.5B in American Rescue Plan Act funds to rural providers. While this cash infusion may forestall some closures, longer-term economic pressures, combined with changing consumer demands, will likely push a growing number of rural hospitals to seek closer ties with larger health systems.


THIS WEEK AT GIST—ON THE ROAD

What we learned this week from our work in the real world.

Facing a “new normal” of higher labor costs

Attending a recent executive retreat with one of our member health systems, we heard the CEO make a statement that really resonated with us. Referring to the current workforce crisis—pervasive shortages, pressure to increase compensation, outsized reliance on contract labor to fill critical gaps—the CEO made the assertion that this situation isn’t temporary. Rather, it’s the “new normal”, at least for the next several years. The Great Resignation that’s swept across the American economy in the wake of COVID has not spared healthcare; every system we talk to is facing alarmingly high vacancy rates as nurses, technicians, and other staff head for the exits. The CEO made a compelling case that the labor cost structure of the system has reset at a level between 20 and 30 percent more expensive than before the pandemic, and executives should begin to turn attention away from stop-gap measures (retention bonuses and the like) to more permanent solutions (rethinking care models, adjusting staffing ratios upward, implementing process automation). That seemed like an important insight to us. It’s increasingly clear as we approach a third year of the pandemic: there is no “post-COVID world” in which things will go back to normal. Rather, we’ll have to learn to live in the “new normal,” revisiting basic assumptions about how, where, and by whom care is delivered. If hospital labor costs have indeed permanently reset at a higher level, that implies the need for a radical restructuring of the fundamental economic model of the health system—razor-thin margins won’t allow for business to continue as usual. Long overdue, perhaps, and a painful evolution for sure—but one that could bring the industry closer to the vision of “right care, right place, right time” promised by population health advocates for over a decade.


THIS WEEK AT GIST—ON THE PODCAST

All the headlines in healthcare policy, business, and more, in ten minutes or less every weekday morning.

As they look for ways to lower the cost of care for their growing Medicare Advantage populations, health plans are increasingly investing in companies that help address social needs like hunger and loneliness. Coming up on this Monday’s episode, we’ll hear from Dr. David Nash, Dean Emeritus of the Jefferson College of Population Health, about the importance of evaluating the actual efficacy of these solutions amid an unprecedented flood of investor capital.

[Subscribe on Apple, Spotify, Google, or wherever fine podcasts are available.]


Another edition in the books, as we hurtle toward the end of 2021. Thanks for taking time out of your busy schedules to read the Weekly Gist. We really appreciate it! Don’t forget to fill out our reader survey, and then let a friend or colleague know about us, and encourage them to subscribe, and to listen to our daily podcast.

Most of all, we hope you’ll let us know how we can be of assistance in your work. You’re making healthcare better—we want to help!

Best regards,

Chas Roades
Co-Founder and CEO
chas@gisthealthcare.com

Lisa Bielamowicz, MD
Co-Founder and President
lisa@gisthealthcare.com