Featured Guest: Scott Nelson (Host)
Outlook of potential risk topics and issues that could impact and shape health care during 2024
Scott Nelson 0:01
Welcome to The Risky Health Care Business Podcast, where we help you prepare for the future by sharing stories, insights, and skills from expert voices in and around the United States health care world with a mission to inform, educate, and help health care organizations and individuals, ranging from one doctor practices to large integrated systems and organizations throughout the dental, medical, and veterinary health care industry with risk, while hopefully having some fun along the way. I'm your host, Scott Nelson, a guy that grew up in Ohio and has been working all over the United States during my 20 plus year and counting career in the health care industry, with a commitment to accelerating health care performance through creativity, not just productivity. Let's dive in.
Hello and welcome to our first episode of 2024!
In this 2024 outlook episode, we’re going to highlight topics that have been reported and are predicted to impact US health care providers, organizations, and collaborators during the coming year.
The Merriam-Webster dictionary defines “Precognition” as “clairvoyance relating to an event or state not yet experienced.” If you had precognitive dreams and were able to see into the future you might know the news and events of the coming year. You might know what’s going to happen and the results. And maybe most importantly you might be able to make decisions accordingly, such as making the right investments to strengthen vulnerabilities. Being clairvoyant and able to see into the future would provide confidence, strength, and security.
Unfortunately, it’s highly unlikely any of us has the ability to see the future. We might have premonitions or feelings like our gut is telling us something. We can make guesses based on information, trends, and history to have educated guesses, foresight, or terms like forecasts, projections, and predictions with varying degrees of confidence.
So with that in mind the first topic to consider for 2024 is Medicare Advantage.
Regulators continue to crack down on fraud in the Medicare Advantage program, but Medicare Advantage plans still routinely deny coverage for necessary care. Without major changes, this fraud will continue to threaten the financial sustainability of rural hospitals and their patients.
This problem is forefront in an NBC News article written by Gretchen Morgenson. Morgenson is the Senior Financial Reporter for the NBC News Investigative Unit. As she explains, “Even worse, because the plans routinely deny coverage for necessary care, they are threatening the existence of struggling rural hospitals nationwide, CEOs of facilities in six states told NBC News. While the number of older Americans who rely on Medicare Advantage in rural areas continues to rise, these denials force the hospitals to eat the increasing costs of care, causing some to close operations and leave residents without access to treatment.”
Why, you might ask, isn’t there enough governmental oversight to mitigate these issues? In the same article, Morgenson explains that “by law, Medicare Advantage plans are supposed to base their reimbursements on Medicare rules. But, according to the United States’ Department of Health and Human Services, there’s room for interpretation.” She notes that “insurers can use their own clinical criteria to determine whether to authorize or pay for care and that even when the plans pay, they reimburse providers far less than traditional Medicare.”
Gretchen Morgenson is not, of course, the only person writing about these issues. In an article published in Healthcare Dive, the publication’s Senior Reporter, Rebecca Pifer, points out that the “fraud, waste and abuse in the Medicare Advantage program continues,” even after the Biden administration earlier this year finalized a rule requiring Medicare Advantage plans to comply with coverage rules in traditional Medicare. In that same rule, the administration issued guidelines cracking down on deceptive marketing practices for the privately-run Medicare plans. CMS planned to enforce the stipulations through oversight and audits, with punishment for Medicare Advantage plans dependent on the scope of the violation and beneficiary harm.
Even with these issues, it is highly likely that the Medicare Advantage program will continue to flourish. CMS projects a record 33.8 million people will enroll in Medicare Advantage in 2024.
Topic 2 is Clinician Burnout
Predicting clinician burnout for 2024 is not surprising at all. Health care professionals have been burned out during and since the COVID-19 pandemic, which took a toll on them physically and mentally and in-turn can cause negative results for patients and organizations.
Dr. Sachin Jain, President and CEO of SCAN Health Plan, in his Forbes article outlining his “Top 10 Healthcare Industry Predictions For 2024,” shares that he believes that as a response to clinician burnout, “too many healthcare organizations have embraced feel-good summits, yoga classes, mindfulness and meditation to address morale issues. Healthcare workers feel invisible and under-valued. Documentation requirements have been substituted for patient care. Tone-deaf administrators are unresponsive to frontline realities.”
Jain proposes that a revolution in the management and leadership of most healthcare organizations is needed to reduce clinician burnout. But, he does not see 2024 as the year that happens. He writes, “Too many organizations are getting by just fine with business as usual, so they’ll delay making fundamental and necessary changes to their strategies and operations.”
Topic 3 is regulatory risk
An article by Susan Morse, Executive Editor of Healthcare Finance News, sums up the regulatory risks most likely to be prominent in 2024. Morse points to two key ways regulatory risk may impact the healthcare industry this year.
First is low Medicare reimbursement levels. In her article, Morse forecasts that “government policies such as Medicare reimbursement levels that are not keeping up with inflation and the end of a pandemic-era provision preventing states from Medicaid disenrollment could lead to higher uncompensated coverage."
Then there’s risk around the 340B program, which allows some hospitals to purchase drugs at a discount. With data from Moody’s, Morse predicts that this program “will continue to face scrutiny, with limits on usage of contract pharmacies possibly hurting eligible hospitals through operating income losses.” However, she also notes that “some health systems may benefit from a one-time payout from prior-year 340B reimbursement true-ups in 2024.”
Still focusing on regulatory risks that could very well affect the health care industry this year, we move to CMS and its Minimum Staffing Standards for Long-Term Care Facilities and the Medicaid Institutional Payment Transparency Reporting proposed rule. According to CMS, this rule “seeks to establish comprehensive nurse staffing requirements to hold nursing homes accountable for providing safe and high-quality care for the over 1.2 million residents receiving care in Medicare and Medicaid-certified Long-Term Care facilities each day.” As Morse explains, these “potential requirements for nurse-to-patient staff ratios could increase labor costs and exacerbate staffing shortages, especially at post-acute-care facilities.”
For my final point in regulatory risks posed to affect the health care industry in 2024, we go back to Healthcare Dive’s Rebecca Pifer. In her article about recently finalized guidelines from the FTC and DOJ that might impede healthcare mergers and acquisitions, Pifer uses UnitedHealth Group as an example. "In June, UnitedHealth Group announced plans to buy home health and hospice firm Amedisys for $3.3 billion, outbidding a competitor, Option Care Health. But, the DOJ is taking a closer look at the deal, which is not surprising given that federal regulators are stepping up scrutiny of M&A transactions." The reach and scale – meaning transaction type and size – of these guidelines are unknown and unclear at this time.
Topic 4 is financial risk
If you missed our 2023 review episode, I mentioned this tidbit about the precarious financial situation of many health care organizations: "Thirteen healthcare companies have defaulted since January 2020. For these and other healthcare organizations, operating weakness has come from a variety of sources, including technological obsolescence, shortages in skilled labor or increases in labor costs, changes in the operating environment or simple mismanagement. And, of course, disruption caused by the COVID-19 pandemic."
According to Susan Morse, who we mentioned a few minutes ago, “Moody's Investors Service expects an increase in healthcare borrowing defaults in 2024 versus 2023, as more ratings migrate toward the lower-end of the credit spectrum.” She notes that a recent report from Moody’s predicts that many healthcare companies will have no other options but to default in 2024.
Fitch Ratings 2024 outlook report on U.S. not-for-profit hospitals and health systems paints a similar financial picture this year for the healthcare industry. Here are four notes from the report: The first is Fitch Ratings continues to expect core credit drivers for the sector to remain challenged for the sector writ large again in 2024, coming off a generationally challenged period in 2022 and 2023. The second note is the industry continues to struggle with labor shortages and salary/wage/benefit pressure that is still compressing margins for a sizable portion of the sector, even as other core credit drivers, specifically volumes and overall liquidity, begin to improve. The third note is as the largest single expense for healthcare providers, managing salary, wages, and benefits has emerged as the single most meaningful differentiator between operational success and failure. The fourth and final note is Fitch expects a number of health providers to lag significantly behind any recovery.
Topic 5 is technology risk
Technology has played an important role in improving clinician workflows and streamlining numerous administrative tasks for health care organizations, but it also has its risks as noted in previous episodes: "Cyberattacks are becoming increasingly sophisticated. The focus now for many hackers is targeting network vulnerabilities, especially as more healthcare moves online amid the industry’s digital transformation. The first half of 2023 had 77% of breaches targeting network servers as the point of entry; email-related breaches made up just 19% of reported incidents."
Probably the most comprehensive article I have read on 2024 cybersecurity trends for the health care industry comes from Dave Muoio of Fierce Healthcare. He includes some interesting points from multiple data security experts that stated “the healthcare sector must brace for increased AI-powered cyberattacks, which are more advanced and adaptable than traditional threats.” and emphasize that “These attacks include highly personalized phishing emails, automated exploitation of IT system vulnerabilities, and adaptive malware that evades detection.”
In the article Muoio goes on to share that “there's a notable rise in attacks on smaller, regional healthcare providers, which may need robust cybersecurity measures. Why the increase in targeting of these small providers, including down-market providers such as specialty clinics or medical imaging facilities? According to the article, “these entities often hold highly sensitive data, making them attractive targets for hackers.”
Muoio in his article elaborates on other healthcare industry targets of cybercriminals as he notes that “attacks against healthcare providers’ third-party business associates and the broader supply chain have also spiked during the last several months.”
What must these other healthcare entities do to combat rising instances of cybercrime? For the answer to this, Muoio’s article advises that “ensuring that third-party vendors adhere to robust cybersecurity standards is no longer a nice-to-have or checked-box exercise; it is a fundamental obligation to safeguard sensitive patient data, maintain operational continuity and protect against the rising tide of cyberthreats.”
2024 is certainly not the first year Artificial Intelligence has been predicted to be a major player in the health care industry. The focus on AI in more recent days is on the lack of regulations or standards for the increasingly popular technology. Healthcare IT News’ Managing Editor, Bill Siwicki, wrote about generative AI and expectations of more government intervention around AI in 2024 to help protect against patient safety risks and provider liability and provided thoughts on the topic: “A speed bump in front of healthcare’s adoption of generative AI is a lack of regulatory guidance or standardization designed to protect both patient safety and provider liability risk. President Biden’s Executive Order in October to regulate AI is an obvious portend that 2024 will include some sort of federal guidelines and/or legislation. Regulation of AI, however, was inevitable given its power and the speed of development. To put it another way, it’s currently the Wild West for healthcare AI with thousands of point solutions available, most of which have very limited to no real-world testing and few guardrails around them. This exciting but risky stage is coming to an end.”
I’ll conclude this 2024 outlook episode by saying these risk predictions are only that: predictions. However, they are based not only on health care industry trends but also the insight of industry experts. Even if only a portion of these risk predictions come to fruition in 2024, health care professionals and organizations must be prepared to act and deploy strategies and processes that mitigate impact and damaging results. Again, no one has a crystal ball to see what is going to occur this year. Being caught unprepared – whether you or your organization is a 1 or 2 doctor practice or a large, integrated system – can have devastating effects on health care professionals and organizations who either ignore risk or think they are not likely to encounter any adverse risk event.
I wish you a happy and healthy 2024!
Thank you for listening to The Risky Health Care Business Podcast. You can listen to all episodes from the resource center page of the SpringParker website, springparker.com, or click the Listen link in the show notes to listen and subscribe for free on your platform of choice. And remember, accelerating health care performance is achieved through creativity, not just productivity.