The COVID-19 pandemic caused the first contraction of the healthcare industry in the modern era, causing lucrative elective procedures to be sidelined as health systems wrangled with filled beds and spreading disease. Layoffs followed as 2020 dragged on and coronavirus surges relented.
But relief came in the form of the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, which earmarked $180 billion in healthcare-related spending, buoying struggling providers, allowing many to finish the year on solid ground.
The industry is now in recovery mode but still adjusting to a new way of doing business.
Telehealth, once a novel concept with mild interest among providers, erupted to the forefront of preventative medicine. Less than 1 percent of Medicare primary doctor visits were telehealth in February 2020 but spiked to 43 percent of visits in April of last year, driven by the pandemic, according to the American Hospital Association. Between August 2019 and August 2020, insurance claims for telehealth services in the U.S. rose 3,552 percent, according to FAIR Health's Telehealth Regional Tracker.
Remote doctor visits are increasingly common in 2021 and experts believe they will become a staple moving forward. Telehealth is now the most attractive health investment segment over the next two years, according to KPMG's 2021 Healthcare and Life Sciences Investment Outlook.
Hospital mergers have been ramping up for years, and experts are predicting that the financial strains of the pandemic will push consolidation. Merger trends in the past were largely consolidation of smaller, rural hospitals but the trend appears to have moved to larger systems pairing up.
This is evident in the recent merger talks between Grand Rapids' Spectrum Health and Southfield-based Beaumont Health, who plan to create a $12 billion, 22-hospital system in West and Southeast Michigan by this fall. The new system would create the state's largest provider and employer.
The two health systems are promising improved care and lower costs. Whether they can deliver those is an open question.
Antitrust scrutiny is expected to ramp up as regulators call into question the cost savings claims of merging health systems. It's not yet clear how the Federal Trade Commission or state regulators will weigh in on the Spectrum, Beaumont merger.
But eight large hospital mergers have been called off since May 2020, including two for Beaumont — a deal with Akron, Ohio-based Summa Health and the merger with Downers Grove, Ill.-based Advocate Aurora, which would have created a $17 billion, 36 hospital system. Beaumont had already cleared regulatory approvals for the Summa Health deal which fell apart as the two systems battled a COVID-19 surge last year.
To avoid regulatory scrutiny, KPMG predicts joint operating agreements will rise alongside mergers.
"These arrangements are attractive because of lower capital requirements, less regulatory scrutiny, and faster implementation," the KPMG report said.
In April, Michigan Medicine announced a joint operating agreement with Mercy Health St. Mary's in Grand Rapids and Mercy Health Muskegon to create the Cardiovascular Network of West Michigan, an open-heart surgery program that will share resources between the three entities.
The new program now competes directly with Spectrum, which operates the only open-heart surgery center in West Michigan.