Financial Sustainability

National Academy of Medicine paper explores transformation opportunities for health systems

April 8, 2021 3:22 pm
  • As an early step toward achieving industrywide improvement coming out of the COVID-19 pandemic, policymakers should be considering ways to help health systems shore up their finances.
  • Regulatory and legislative support will be vital in efforts to maintain the momentum behind newer care delivery models such as telehealth and hospital-at-home programs.
  • Investments in the supply chain, the healthcare workforce and emergency capacity also are crucial to transformation efforts.

Coming out of the COVID-19 pandemic, health systems are “looking at new ways to address gaps in financing, infrastructure and coordination to improve the sector’s overall efficiency as well as enhance preparedness for future emergencies,” according to a new paper issued by the National Academy of Medicine.

Authored by leaders of four large health systems and two hospital associations, the paper examines priorities for healthcare transformation from the perspective of care delivery organizations.

The paper is part of a nine-part series to be released by the NAM to chart the post-pandemic future of healthcare. One other part, focusing on the public health sector, also has been published, with the remaining installments scheduled over upcoming months.

“Sustaining and scaling these best practices will require policy, regulatory and in some cases legislative changes,” wrote the authors of the paper on care delivery, adding that “the heterogeneity of the care delivery sector will require nuanced improvement initiatives that reflect the context of specific subsectors.”

Enhancing the financial resilience of health systems

A top policy priority for care transformation should be to fix “the precarious financial foundations of America’s health systems,” the authors wrote, adding that “the ongoing financial impact of COVID-19 should prompt exploration of opportunities to improve the sector’s financial resiliency.”

Health systems can take positive steps operationally, such as by diversifying revenue streams through vertical integration (e.g., with supply chain collaboratives, labs) and risk-based arrangements with payers. They can reduce costs and capital investments to sustain cash flow, “in some cases to avoid violating financial covenants,” the authors wrote.

But organizations need certainty from a policy standpoint, including whether pandemic-era reimbursement approaches will be sustained. The paper specifically mentions telehealth and hospital-at-home programs as models with proven efficacy that “lacked uptake” before the pandemic because of payer concerns about supply-induced demand.

As most major payers boosted payments for these models during the pandemic, health systems were able to deploy them “at unprecedented scale,” the authors wrote. When the public health emergency ends, however, “questions remain about potential thresholds on payment, metrics for quality and guardrails for fraud and abuse,” among other issues surrounding telehealth.

With respect to hospital-at-home, “regulators will need to develop new pathways for reimbursing home-based hospitalizations to account for the potential savings.”

Site-neutral payments are another policy area in which clarity will be needed post-pandemic, the authors wrote.

Some solutions pertain to inefficiencies in healthcare financing rather than to broader care delivery models. The authors say an emphasis on efficiency can help health systems handle a potential influx of patients who have deferred their care.

Namely, health systems should focus on reducing low-value and wasteful services, such as inappropriate screenings. Partnerships with entities in other sectors could provide opportunities to address “administrative inefficiencies around payment and care coordination.”

Other areas of emphasis after the pandemic

The paper also examines pandemic-related experiences and future improvement opportunities for health systems in the areas of supply chain, workforce development and capacity building.

Considerations for strengthening health system supply chains coming out of the pandemic:

  • Reevaluate vendor selection and GPO contracts, and explore opportunities for regional collaboration
  • Develop a regulatory mechanism for tracking and reporting inventory across systems and stakeholders
  • Increase funding for the Strategic National Stockpile and update protocols for resource allocation

Considerations for investing in workforce development:

  • Explore updates to continuing medical education and the creation of flexible staffing models
  • Reaffirm a commitment to investing in workplace wellness, including new and preexisting strategies to reduce clinician burnout
  • Evaluate opportunities to standardize healthcare workforce regulations for emergency situations

Considerations for building health system capacity:

  • Evaluate and codify COVID-19 crisis standards for care for future emergencies
  • Invest in remodeling the built environment of healthcare facilities to better support surge capacity


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