Providers focus on adding nurses, expanding outpatient care

Several healthcare trends had been well underway before COVID-19: more outpatient services and a nurse shortage, to name a couple. Then the pandemic struck, and they took off like wildfire.

The results of Modern Healthcare’s latest CEO Power Panel survey from the first quarter of 2021 show that the crisis that defined 2020 exacerbated a number of existing stressors the industry has faced for years, such as having enough front-line caregivers. In other ways, it prompted leaders to shift their strategies going into the new year.

Overall, health system CEOs—respondents were mostly from secular not-for-profit health systems that spanned all sizes—are less optimistic about how their businesses will perform this year compared with the same period last year, and more systems are open to mergers and acquisitions. While most CEOs said they think their volumes will return to normal by the end of this year, a smaller contingent believes they will never fully recover.

The pandemic didn’t go away when 2021 rolled around, and neither did the crushing demand for nurses it brought with it.

More than 80% of survey respondents pointed to front-line caregivers as the area they’re most trying to fill—up from 69% in 2020—and nursing was the first position executives named specifically in interviews.

Last year, Carilion Clinic in Roanoke, Va., hired more registered nurses than ever before, CEO Nancy Howell Agee said.

“It was a banner year,” she said, “and we’re on track to do the same thing this year.”

Carilion has lots of strategies for getting new nurses on board. It hosts virtual job fairs and unit tours with a nursing school that’s located on its campus. It identifies candidates early and stays in touch. It has a nurse internship program for new graduates, and has hosted safe, on-site interviews with candidates.

Hand-in-hand with the desire to hire more front-line caregivers is the survey’s finding that 63% of provider CEOs expect staffing and labor to be their fastest-growing expense this year, up from just 38% in 2020. Competition for travel nurses is doubling or even tripling their pay rates, making it hard for some health systems to compete for temporary workers.

Nursing expenses are on every health system’s radar right now. It’s been an issue for years, but particularly during the pandemic, hospitals had to backfill nurses required to isolate with expensive contract labor, said Therese Fitzpatrick, senior vice president with consultancy Kaufman Hall. On top of that, many nurses are leaving the workforce because they’re retiring early.

“What we have seen in some markets is nurses and others have said in the middle of the pandemic, ‘I was thinking of retiring in a year or two and I’m going to speed those plans up. I’m worried about my health and this new clinical situation is taking a toll on me physically and mentally.’ ”

The heightened demand for nurses also stemmed from the fact that COVID patients require more nursing care than typical intensive-care unit patients, said Terry Shaw, CEO of Altamonte Springs, Fla.-based AdventHealth.

“Right now, we have an RN shortage in this country and everybody is chasing that shortage with opportunities, money, shift bonuses and sign-on bonuses,” he said.

Dallas-based Baylor Scott & White Health, by contrast, has not had trouble filling front-line nursing slots, CEO Jim Hinton said. He was one of a few survey respondents who said clinical leaders are the positions he’s most looking to fill, people with technical skills who can also lead ancillary departments like respiratory therapy or nursing. The pandemic has raised a “strong awareness” about the critical roles of people who can lead and have clinical backgrounds, Hinton said.

Finding patient-care technicians and medical assistants are also big areas of need, according to survey respondents. Those jobs require less training and typically pay less than other positions.

Froedtert Health in Wisconsin recently bumped its minimum wage to $15 per hour to attract more medical assistants and certified nursing assistants, CEO Cathy Jacobson said. The long-planned move was essential to compete with a high number of warehouse positions in its area offered by Amazon and others.

Healthcare providers are increasingly challenged in filling those positions because they’re competing with industries outside of healthcare like Walmart, Amazon and fast-food chains, Fitzpatrick said.

In case there weren’t enough mergers and acquisitions in healthcare already, the pandemic appears to have spurred even more interest in such transactions.

Almost 38% of respondents to this year’s survey said M&A best describes their organization’s growth strategy for 2021, up from 27% in 2020. With respect to the type of deals they’re looking at, three-quarters said traditional mergers or acquisitions in 2021, compared with just 46% in 2020. A significant number of respondents said they’re also interested in joint partnerships and vertical mergers this year.

“We don’t see that we need to do everything alone, and we think opportunities to partner and collaborate make sense,” said Carilion Clinic’s Agee. Carilion created a public-private partnership with Virginia Tech to start a new allopathic medical school and biomedical research institute.

Atlantic Health System is having lots of conversations with potential partners, and using Zoom during the pandemic has helped make them happen more efficiently, CEO Brian Gragnolati said. New Jersey-based Atlantic recently struck a deal to become the majority corporate member of CentraState Healthcare System.

“Healthcare is a team sport,” Gragnolati said.

The pandemic accelerated a transformation already underway in healthcare that included moving more care to outpatient settings, operating more efficiently and thriving under new reimbursement models, said Anu Singh, a managing director at Kaufman Hall and leader of its mergers, acquisitions, and partnerships practice. With that, long-term needs have become medium-term, medium-term needs have become short-term and short-term needs should have happened yesterday, he said.

“So how do we catch up?” Singh said. “It’s fair to say in certain situations M&A … tends to slow down that cycle time to bring that offering to the marketplace.”

For Carilion, by contrast, innovation is the top business growth strategy this year. The system has filed seven patents in the past year and has dozens of other promising inventions in the pipeline it hopes will either drive revenue from commercialization, improve patient care or both, Agee said. The system is commercializing a fogless face shield for its ambulance crews and launched several new companies, such as one that offers a digital patient assessment tool and another that simplifies medical credentialing using blockchain technology.

“We’ve really embraced innovation going forward,” Agee said.

The pandemic has certainly increased providers’ appetites for value-based contracting. Three-quarters of survey respondents said they plan to take on more value-based contracts as a result of the crisis.

Early on in the pandemic, it became clear that health plans offered a financial buffer for health systems because they generated steady income from premiums even as revenue from surgeries and other patient-care services plummeted. Moreover, value-based contracts, which take many forms but effectively pay providers to keep patients healthy rather than based on the number of services they provide, emerged as sensible solutions during times of uncertainty.

Atlantic Health’s value-based strategy was its “saving grace” during the pandemic, Gragnolati said. The health system’s contract with Horizon Blue Cross and Blue Shield of New Jersey features downside risk, which requires having the ability to marry claims and clinical data.

“That gives you a base of data analytics that’s spectacular,” he said.

Atlantic Health even used that data to study how flu normally migrates in its communities to predict how COVID would spread. Gragnolati said the predictions were “spot on.”

While very few payers in Baylor Scott & White’s market offer capitated contracts, Hinton said the pandemic has certainly accelerated the movement toward value-based care. That’s because the federal government is responsible for more patients’ care under public programs like Medicare and employers are looking to drive their healthcare costs down.

“All those roads lead to a continued reduction of open-ended, fee-for-service reimbursement and more experimentation in the realm of value-based care,” he said.

The crisis has also spurred more investment in outpatient facilities as some patients continue to shy away from hospitals. Half of respondents to the survey said the pandemic has prompted them to add more outpatient facilities such as ambulatory surgery centers, urgent-care clinics and free-standing emergency departments.

Health systems have invested heavily in ASCs in recent years as both insurers and patients push for less expensive options, a recent Modern Healthcare analysis found.

Froedtert, for example, has always been light on hospitals for its size and conscious of pushing care into outpatient settings.

“COVID has fundamentally shifted the way patients are going to access some modes of care and we think we’re well-positioned for that,” Jacobson said.

While Carilion’s Agee said her system also plans to invest in more outpatient facilities, she said that’s balanced with the fact that the system still needs to get paid. Outpatient facilities receive lower reimbursement from insurers, but it doesn’t necessarily cost less money to provide services at those sites compared with at a hospital, she said.

“What we’re trying to learn as we’re migrating to ambulatory services is how to perform those services less expensively,” Agee said.