Rae Woods: From Advisory Board, we're bringing you a Radio Advisory. My name is Rachel Woods. You can call me Rae. It's a new year, but that doesn't mean that 2021 is going to be any more predictable than 2020 was. In fact, things are changing so quickly in healthcare that we've added a new segment to the end of this episode where we'll talk about some of the other updates happening in healthcare. But for today, I want to talk about volumes. We built a model to forecast some of the different scenarios that healthcare leaders will be facing this year. Everything from inpatient admissions to outpatient surgeries. To talk about those predictions, I brought back planning and growth expert Colin Gelbaugh. Hey Colin. Colin Gelbaugh: Hey. Rae Woods: Welcome back to Radio Advisory. Second time. Colin Gelbaugh: That's right. I'm a seasoned veteran by now. Rae Woods: We're going to be talking about predictions and I'm curious, do you have any predictions for the Super Bowl? Have you been watching sports? Are you a football fan? Colin Gelbaugh: I am. I am hoping the GOAT, Tom Brady, [crosstalk 00:01:20] is able to take it home. Rae Woods: Oh god. [crosstalk 00:01:21] My husband is from Boston and he's a big Tom Brady fan so I think our household has to agree. Side note, that's my birthday and that's the last thing I want to be doing on my birthday is watching the Super Bowl, [crosstalk 00:01:37] but it happens like every couple of years. Colin Gelbaugh: Oh. [crosstalk 00:01:41] Well, maybe you can just have some good snacks then as a consolation. Rae Woods: All right. Well, it's been a while since we've talked about the volume outlook in general. Maybe get me up to speed. Where did we actually land at the end of 2020? Colin Gelbaugh: Right. Just fast forwarding back to when all this started almost a year ago, volumes, if you recall, were as low as 60% below what they were supposed to be for a while and providers were doing a really good job at recovering volumes for most of the year up until about November when, of course, the holiday surge started to really pick up steam and that really set people back in a big way. Where we are now is, cases have started to go down, the daily new case counts. Hospitalizations are still very high though. It just shows you the volatility of the situation and we're likely to see these peaks and troughs for awhile yet. Rae Woods: Which is exactly why CSOs and planners are so curious to know what is actually going to come in 2021. You were just talking a lot about COVID volumes specifically, but I do want to caveat that we're not just talking about COVID volumes, as important as those are. We're talking about the overall impact that Coronavirus is having on volumes as a whole, right? Colin Gelbaugh: Right. Rae Woods: Remind our audience, why is it actually so important to look at what's happening inside hospitals, inside ambulatory surgery centers and physician offices when it comes to volumes? Colin Gelbaugh: Well, projecting your volume is really important if you want to create any sort of financial projection and you need financial projections, of course, to make budgets, set cost reduction targets, allocate capital and make staffing decisions in a smarter way. And without any sort of indication of where volumes are headed, you're kind of flying blind. Rae Woods: You spend a lot of time talking with these planners and these chief strategy officers about the volume outlook. I'm just kind of curious, what are you hearing from them? Colin Gelbaugh: I think there's some eagerness to return to some level of normalcy. I'm also in appreciation for the hard work that their staff is putting in, the efforts they've made to recover loss volumes. There also is some level of denialism, I guess, or confusion over why we haven't been able to recover volumes yet. Rae Woods: And this was something that we talked about with our colleague, Anna, the last time we talked about volumes over the summer, and I think the feeling then was that a lot of executives thought that maybe by the winter things would be back to normal, which is obviously not the case. Colin Gelbaugh: Right and at that point too, we had no idea what the future of the virus would be. It's clear now that we're going to be, even with the vaccine, we're going to have to live with this for a while yet and in many respects, the volume outlook is going to follow the trajectory of the virus. Rae Woods: You just mentioned the kind of eagerness of executives to get back to normal and that's a question that I get a lot too, but I'm not sure that trying to figure out what the new normal is and when we are living in it is actually the right question. What do you think? Colin Gelbaugh: I think you also have to look at how consumer habits are changing. There are certain habits that consumers have learned over the past 10 months, a good example is telehealth, that are going to be here to stay. Then the shift away from ED visits to telehealth is something that I think will be here for the foreseeable future. Rae Woods: And that's why we want executives to be thinking about the range of scenarios that could be impacting their system and what's happening with COVID is just one way to actually look at what the ultimate outcome is going to be. I'm hearing a lot of folks struggle with this. In fact, just this week, I had a physician group come to me and say they feel like they are the only ones who haven't been able to rebound their volumes. And this executive was feeling a ton of pressure to get back to the levels that they saw in 2019 because they feel like they're behind the rest of the market and their peers across the industry. What would you actually say to that person? Colin Gelbaugh: I'd say they are definitely not the only ones that haven't recovered or aren't back to 100% normal. In fact, I'd say it's the exception rather than the rule of being back to normal, so to speak. Rae Woods: Okay, well, let's actually talk about some of the scenarios and help people understand not just where they are, but where they might be. I know you've been tracking this for a while now. What are some of the big paths forward that healthcare leaders could expect? Colin Gelbaugh: When we modeled volumes out, we looked at from now until June and developed three scenarios: one optimistic, one pessimistic, and one middle ground scenario. This gives us a range for different services and what we can expect month by month. We looked at different trajectories of the virus and the speed of vaccine rollout and how that would impact the number of infections under each of those scenarios to come up with the volume outlook. Rae Woods: So even across this kind of pessimistic to optimistic range, I'm guessing the actual impact on volumes is going to be different depending on where in the healthcare industry you are looking. I'm thinking inpatient versus outpatient versus surgeries. They're all going to have different outcomes. Is that right? Colin Gelbaugh: Exactly. Rae Woods: Okay, so let's break this down. Let's start by looking at the inpatient admissions space. How big of a deal is this? What are we actually predicting for 2021? Colin Gelbaugh: Inpatient admissions are actually pretty close to baseline and when I say baseline, I mean what you would expect when you compare your volumes now to 2019. They're pretty close to a 100% of what they're supposed to be, but that's mainly because of the high number of COVID-19 admissions. Though total days might actually be above baseline because of the longer length of stay of COVID patients and the higher acuity patients that you're seeing from people delaying care. Rae Woods: Help me understand what that means though. On the one hand I think it's a good thing. If volumes are close to that 2019 level, but you're talking about some other variables that might impact what those volumes actually mean for finances. Colin Gelbaugh: Yeah. It's important to look at the type of admissions or volumes generally that you're getting. Taking COVID patients, they're more expensive to treat, they're longer likely to stay, so your contribution margin per case is going to be beneath what it would be for another patient that could take the COVID patients place. Rae Woods: So revenue is pretty stable, but because it's so much more expensive to care for those patients, your margin is slimmer. Colin Gelbaugh: Right. Rae Woods: How about on the inpatient surgery side? My sense is that that is a little bit less predictable. Colin Gelbaugh: Yeah. In our models, inpatient surgeries are the most variable, or have the highest range, in terms of what providers can expect because the level of that you can perform them at really is going to depend on what staffing needs and what space needs you have, which is in turn, going to depend on what the status of the virus is. Under the pessimistic scenario, you might have to cancel up to 20% of cases, but under the optimistic, you might not have to cancel any at all. Rae Woods: And this is reflective of some health systems who are deciding, we need to postpone elective procedures to preserve staff, right? Keep space for COVID patients. It might also be something that the state is mandating for those hospitals and health systems. Colin Gelbaugh: Yeah. It's highly variable from state to state. If they have set thresholds for you or if they haven't and then of course, some health systems are making that decision on it by themselves. Rae Woods: So when it comes to inpatient volumes, whether we're looking at admissions or surgeries, what's the big takeaway? How big of a deal is the impact of volumes going to be in the first half of 2021? Colin Gelbaugh: There's going to be a pretty big hit, especially in the first quarter for inpatient surgeries. Like we were talking about, inpatient revenue could actually be up because your hospitals are full, but your expenses are also higher. And the long-term impact I think, is especially evident when you look at the patient admission front, where because of these habit changes that we've been talking about, the shift away from EDs to telehealth, you could see less volume in your inpatient setting because of that feeder is now gone, a portion of it. Rae Woods: And I'm guessing those types of shifts, those types of changes in behavior, are going to have, potentially, even more of an impact on the outpatient space. What are we seeing there? Colin Gelbaugh: Yeah. The outpatient space is a little different story. You might also have to cancel some outpatient surgeries, elective surgeries. Not to the extent necessarily as inpatient surgeries because patients don't always need to occupy a bed. In the outpatient visits space, you're also going to see an impact, but mostly from deferrals of care for safety reasons, for financial reasons, and again, the shift to telehealth. And the big problem there is when patients don't come in to the office in person, not only you might be reimbursed less for the visit, but you might not capture all the ancillary revenue either. The lab, the imaging and that sort of thing, Rae Woods: Which again, speaks to the very important point that the volume numbers at the high level don't necessarily tell the whole picture. You have to look at some of the other kind of more granular details to really understand how this is going to impact your finances. Colin Gelbaugh: Right. Rae Woods: One of the challenges that I'm hearing on the outpatient space that's a little bit different from the inpatient space is that even if patients want to come in, even if they want to see you in person instead of switching to telehealth, you just might not be able to kind of crank through as many patients as you used to because there's just new protocols that you have to follow, new safety procedures and the like. Is that having an impact on volumes? Colin Gelbaugh: Yes, absolutely. I think people have gotten a lot better at it, at kind of streamlining their operating procedures and adjusting for the cleaning and safety protocols that they have put into place but those procedures can add up to 15% or more of time per patient. So definitely, and also remember that if you have a patient that decides last minute that suddenly they don't want to have the procedure because they're getting skittish or they realize that they can't afford it right now, and you can't backfill that case, then that's lost volume as well. Rae Woods: So Colin, same question for the outpatient space as the inpatient space. When it comes to the first half of 2021, what is the overall impact that we are predicting? Colin Gelbaugh: The outpatient space is a little rosier a picture than the inpatient space. Assuming providers can reschedule the backlog procedures and streamline these operating procedures. We're expecting that they can end the year at, or within 2-3% of baseline. Rae Woods: So help me make sense of what's happening in the inpatient and the outpatient space together. I'm having a hard time weighing on the one hand, the outpatient space looking relatively, dare I say stable, versus a much more confusing picture on the inpatient side. All in all, what is the kind of net impact going to be for hospitals and health systems in the first half of the year? Colin Gelbaugh: This might not be the answer you're looking for, but I think it really will depend and of which one of these scenarios takes place and how active organizations are at recovering volumes. Rae Woods: I always hate the it depends answer, but I suppose that you are right here. You mentioned how active leaders are in getting volumes back, which is interesting to me because I sort of think of volumes maybe as this foregone conclusion, right? Something that is going to happen to you based on what is happening with COVID or how patients are interpreting their needs and their desires to return to the health system, but you're saying that it's not something that's just a foregone conclusion. Colin Gelbaugh: Right. There are obviously some things where you won't be able to have an impact, but there are definitely some where you will. How good are you at communicating and enforcing the safety measures that are important to consumers to feel comfortable coming back to receive care? Are you looking at your operating room block times and maximizing the efficiency there when you can restart elective surgeries? These are just some of the things that you'll probably see a lot of variability in how well hospitals are at doing these things to get volumes back. Rae Woods: And that makes sense to me as an area of focus for clinical leaders in particular, but are there some of the challenges that you've brought up that really are outside of leader's control? Like maybe elective surgeries getting posted? Colin Gelbaugh: Of course. Yeah. There's of course the state regulations that you can't necessarily control. Also, another one we haven't talked about is vaccine uptake. There's a lot of variability based on the population that you serve about their willingness to receive the vaccine. Now you can inflect that to an extent. Get your physicians out there and recommend that they take it and reinforce the safety message, but that's another one. Rae Woods: And I guess, the state guidelines, they don't come out of nowhere, right? They are a direct result of what's happening with COVID in the community. It's another reminder to organizations to get out there and put your marketing dollars into programs about staying home and social distancing and wearing masks and the like. Colin Gelbaugh: Right. Rae Woods: We've been talking about the kind of near term impact to volumes, at least for the first six months of 2021, but do we have a sense for how long we can expect these sorts of disruptions in volumes to take place? Colin Gelbaugh: I think the story doesn't end anytime soon. There is room for optimism. We have two vaccines approved, two more on the way, but there are some longer-term impacts that are going to stay. The economic impacts, people deferring care, we'll probably see that well beyond the six months in our models and we don't yet know the full picture about the clinical impacts of survivors of COVID having long lasting symptoms. That higher disease prevalence that, that we're going to have to deal with for perhaps years into the future. Rae Woods: Well, Colin, I want to thank you so much for coming back on Radio Advisory. You know what's coming, what's the one thing you want leaders to focus on right now? Colin Gelbaugh: I think it is to focus on those factors that you can inflect. Communicating to consumers about the safety of your facilities, streamlining operating procedures, filling OR block times efficiently, these things that are within your power, recognize them and take action on them. Rae Woods: Thanks Colin. Colin Gelbaugh: Thank you. Rae Woods: Forecasting and predicting is still important. Even in a world where 2021 is still unpredictable, but even as you make those assumptions about the future, keep in mind that you have the opportunity to shape the market. Rae Woods: There is so much happening in healthcare, and I don't think the new cycle is going to be slowing down any time soon. So here's what else we're watching. Hospitals are beginning to publish their prices after a new transparency rule came into effect on January 1st. This includes the previously private rates negotiated between hospitals and health plans and marks the start of a new era for market based competition. It will ultimately show how prices vary across and within hospitals. But for now, the information is still far from perfect. With no standard reporting format and very weak penalties for non-compliance, it may be some time before the full pricing picture is clear. Rae Woods: The rate of new COVID infections may be falling after surging through the holidays and into the new year, but new variants are emerging which may be more contagious or even more deadly. Scientists do expect that current vaccines will still protect against the virus, which puts even more pressure on health systems and government agencies to speed up the immunization process. As the pandemic drags on ACO participation has reached record lows, but this isn't the end of the road for Medicare risk. Now the Biden administration's healthcare team will have to choose whether they should keep betting on the current array of value based models or promote new ones. So far, no clear signals, but as we learn more, remember, we're here to help.