I was recently on a flight when seemingly out of nowhere, the plane encountered unplanned turbulence causing the aircraft to drop without warning. Few things can be more unsettling than flying 30,000 feet above the ground and, without warning, the aircraft loses altitude, causing people and objects to be scattered throughout the cabin. As a passenger on a plane, I always appreciate it when the pilot makes an overhead announcement letting us know that turbulence is expected ahead. This opportunity to mentally and physically prepare for what may lie ahead makes the turbulence easier to endure rather than being caught off guard.

For those paying attention to what is happening in the healthcare industry today, we are receiving clear warnings that the industry is facing significant turbulence - now and in the future. From Becker's Healthcare headlines, such as "for hospitals, difficult decisions loom after 9 months of negative margins", to Kaufman Hall's October flash report stating that "this is shaping up to be one of the worst financial years for hospitals," it is clear that the provider-side healthcare industry is in for some challenging times ahead.

We are entering a very difficult time as an industry for many reasons. While this is not an exhaustive list, several items contribute to financial challenges. Lingering supply chain issues, wage inflation, staffing shortages, and the increasing cost of goods and services are all leading factors. The federal stimulus known as Provider Relief Funds that helped sustain health systems during COVID is no longer available to hospitals. In addition, patients have put off preventative care due to COVID, and health systems across the country are seeing sicker patients in their emergency departments and hospitals as a result. Sicker patients can lead to longer hospital stays and drive up the cost of care.

Out of these factors, the biggest impact on the health system's financials is the cost to properly staff nurses at the bedside. When reading quarterly earnings reports for health systems across the country, the cost of hiring agency nurses to supplement existing nursing staff continues to create the biggest pressure on their financials. The nurse staffing shortage is expected to worsen between now and 2025. According to a McKinsey report, the United States may have a gap of between 200,000 and 450,000 nurses in the next three years.

Healthcare, unlike other industries, cannot charge more for their services to offset cost increases. Health systems are bound by payer contracts and rates set by the federal government for Medicaid and Medicare reimbursement. When expenses go up, this significantly impacts the bottom line.

The impact of these financial challenges is far-reaching and has an impact on the services and overall health of the communities these health systems serve. These financial challenges are leading to longer wait times in emergency departments and accelerating the closure of many rural and urban safety net hospitals. In the past decade, more than 130 rural hospitals have closed, and an estimated 600 rural hospitals are at risk of closing in the near future. This accounts for nearly 30% of all rural hospitals in the United States. The closure of these rural and urban safety net hospitals will profoundly impact the country's health and wellness. This will lead to an even greater disparity of care for the underserved and most at-risk individuals in this country.

While there is no doubt that the industry is facing unprecedented challenges, this has created opportunities to look at ways to leverage innovative ideas and technologies to transform care delivery and the overall patient experience. Here are five trends I see emerging to help address these challenges.

Automation

Automation can have a significant impact in areas such as registration and check-in. Today's consumers are accustomed to using their mobile devices to schedule services, receive alerts and reminders, and check in from their devices for many non-healthcare-related services. Implementing these technologies can improve the patient experience by reducing wait times and duplicate information. It can also reduce the staff needed to perform check-in and registration functions or allow existing staff to focus on individuals who need the greatest assistance.

With staffing challenges happening in nearly every area of the health system, automating redundant tasks can be a great way to free up an individual's time to focus on more important tasks. There are several areas of opportunity for back-office and clinical automation. We are just starting to see automation in these areas, which will be a growth area for years.

Partnerships with Non-traditional Healthcare Companies

2021 marked a record year for digital healthcare startups, with investments totaling more than $29B. The pace of investing has slowed in 2022 but still continues at a near-record pace. Healthcare is very complex, and many new entrants into the healthcare space have failed due to a lack of understanding of the complexities involved in providing care. 

Health systems can benefit from outside partners bringing much-needed capital funds to help them innovate and transform the care delivery model. These non-traditional healthcare companies can include startups, Fortune 100 tech companies, schools, and universities. Non-traditional healthcare companies can benefit from these partnerships by gaining an understanding of the healthcare industry and leveraging the brand recognition of already established health systems in local and national markets. I believe we will hear about more of these types of partnerships as a way for health systems to address their current challenges

Innovation Centers and Corporate Ventures

Many health systems understand that the challenges we face today are unique and require innovative approaches to dealing with these issues. As a result, several health systems have started innovation programs and centers to encourage team members and thought leaders to bring innovative ideas forward for evaluation. These health systems can leverage new ideas, concepts, and technologies to develop new solutions by creating a culture of innovation. Some health systems are even using their internally developed innovative products and solutions as a way to generate additional revenue by marketing them to other health systems. 

We are also seeing a growing trend of health systems creating their own venture capital funding or startup funding to provide financial investments for start-ups. By investing in these solutions, health systems can help fund these startups while leveraging the solutions and becoming a proving ground for some of these technologies. This helps health systems implement these solutions quicker while continuing to focus on their core business of providing care to patients.

New Care Delivery Models

The challenges the healthcare industry faces today creates opportunities to evaluate new care delivery models. Technology has reached a point of maturity where it can now be leveraged to provide different care models that were unavailable just a few years ago. 

Telehealth is a great example of a widely available technology that can be leveraged to expand access to care. While nearly every health system in the country implemented telehealth due to the COVID-19 pandemic, we are just starting to see the benefit of this technology. There is a lot of opportunity for telehealth to expand in areas such as mental health, rural access, school and community outreach, and specialty consults. Health systems that have implemented a robust strategy for telehealth are seeing increased demand for their services.

Other care delivery models such as hospital-at-home, are seeing success in clinical outcomes, including reduced readmission rates and reduced infections. It has also been shown to lower the cost of care and improve patient satisfaction. The opportunities for new care delivery models, such as hospital-at-home, will continue to grow as digital health technologies become more widely available and embedded in the care process. 

Concierge Medicine 

A care model that continues to gain traction across the country is the concierge care model. This model promotes greater access to timely care in exchange for monthly or annual fees. In addition to greater access, they can also include more individualized services and wellness offerings. Care can be delivered by telehealth, in-home visits, or medical spas. Health systems can generate new revenue opportunities by charging a fee for this type of access.

Concierge medicine is expected to grow by 10% to over $13B by 2030. This growth area creates an opportunity for health systems to tap into a growing market where fees and higher reimbursements can create a profitable service line. One item of note, this additional revenue model can come at the expense of creating greater health inequities if health systems solely cater to those who can afford the concierge model.  

Closing

When evaluating these solutions, it is essential to note which will drive down costs, generate additional revenue, and lead to better patient outcomes and overall experiences. Health systems that figure out how to leverage these, and other innovative solutions, will be the ones who emerge from this challenging time stronger and best positioned for future success. 

Despite the healthcare industry's challenges, this is an exciting time to be in healthcare. The innovations developed and implemented in response to this current challenge will transform healthcare and shape how we deliver care for many years to come.