From a consolidation boom to telehealth, here are 5 predictions for the hospital industry in 2021

A person talks to their doctor on their phone with a laptop in the background
An acceleration of telehealth that started at the onset of the pandemic is likely to continue into 2021, experts say. (Getty/airdone)

The hospital industry has faced a massive financial crisis this year caused by COVID-19, as systems have struggled with low patient volumes and massive hits to liquidity.

The pandemic will likely continue to have a major impact on the hospital industry going into 2021, from the telehealth boom to consolidation and payer mix.

Here are five expert predictions on what the industry is in store for in the next year:

Hospital consolidation likely to increase at a rapid pace

The hospital industry had a large trend of consolidation before the pandemic. However, this is likely to be accelerated as some smaller, independent hospitals face revenue shortfalls caused by low patient volumes, according to an outlook report from Fitch Ratings.

These smaller providers may “need to align with larger providers after the pandemic starts to subside,” Fitch said.

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Mergers are also likely to continue as health systems pivot toward more virtual care, according to a report from consulting firm Deloitte.

“Health systems with their business and revenue-focused on hospital care should transform their business models toward a broader portfolio of nonpatient care delivery and other revenue-generating business offerings,” the report said.

Patient volumes will continue to be disrupted

The onset of the pandemic forced patient volumes to plummet as hospitals had to cancel and postpone elective procedures to preserve capacity to fight the virus. Even though levels have rebounded for most systems, experts predict that volume growth will be soft next year.

“Rising infection rates will likely contribute to ongoing disruption of volume trends because of capacity and clinician shortages and decreased patient willingness to seek medical care,” according to an outlook report from Moody’s.

Fear of contracting the virus could affect hospital departments in different ways. For instance, Moody’s predicts emergency room volumes, which have continued to be depressed through 2020, will “lag pre-outbreak levels as patients avoid access points viewed as riskier for contracting COVID-19.”

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Another issue is the unusually low volumes of stroke and heart attack patients, according to an analysis from the Advisory Board. These declines could be due to patients’ fears of contracting COVID-19. “These patterns, should they persist, would mean a deeper hole for hospital finances as well as worse outcomes for patients,” the analysis said.

An unstable payer mix could roil finances

A major byproduct of the pandemic has been job losses across the economy, which could lead to major changes to the payer mix for certain hospitals.

"Elevated unemployment will lead to a rise in Medicaid and uninsured patients as individuals lose employer-sponsored commercial insurance, typically more profitable than government payers," according to Moody's.

The firm looked at several insurers that it rates and found commercial membership declined by 1% in the third quarter of 2020 compared to 2019. The rate of changes in payer mix is likely to increase in 2021 for hospitals "as furloughs turn into layoffs and health insurance benefits (including COBRA) end," Moody's said.

Telehealth visits will continue to skyrocket

Many hospitals and physician offices pivoted quickly to telehealth for some clinical visits as patients were afraid to head to healthcare settings and the Trump administration gave more flexibility for reimbursement. That push for telehealth is likely going to continue, especially in the first half of the year as COVID-19 continues to spread.

A report from Deloitte predicts the percentage of virtual video visits to doctors “will rise to 5% globally in 2021, up from an estimated 1% in 2019.” Deloitte added that consumers have grasped a better understanding of video-calling apps, especially seniors.

But reimbursements could be a challenge. The Centers for Medicare & Medicaid Services (CMS) gave major flexibility for Medicare reimbursement for telehealth, but those flexibilities can only last through the COVID-19 public health emergency, which expires in January and can be extended through March.

CMS has expanded some telehealth flexibilities permanently but has said it will need Congress to act to make the rest of those changes permanent.

Don’t expect a major new round of relief funding 

A major boon to hospitals this year has been a $175 billion relief fund passed by Congress as part of the CARES Act back in March. But Congress hasn’t approved another round since then, and some experts don’t believe a new round is coming.

“Even if enacted, a new round of funding would likely be less than provided earlier this year under the CARES Act,” according to Moody’s outlook report.

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The Department of Health and Human Services is still distributing the $175 billion, giving specific allocations to COVID-19 hot spots, rural hot spots and other specific providers. The relief funding helped keep hospitals afloat but didn’t fully get them out of the hole, said Jim Blake, managing director of consulting firm Kaufman Hall.

“Without any further federal dollars, there will be a significant hole,” Blake told Fierce Healthcare.

Congress has been in a stalemate for months over another relief package as Republicans push for liability protections for businesses from COVID-19 lawsuits and Democrats press for state and local aid. Leaders from both parties have expressed a desire to help providers again but have not floated massive new injections of stimulus funding in any of the latest proposals.