Planning health system growth now involves modeling growth both with and without the 2020 pandemic effect, says analytics firm.
Healthcare providers experienced significant disruptions in 2020 as the COVID-19 pandemic began, challenging their operations in many ways. In response, many rapidly deployed telehealth solutions both to fill revenue gaps and support ongoing patient care. However, at the same time, a flood of fresh venture capital investment flowed into new telehealth vendors, while entrenched retail companies eyed the telehealth opportunity as well. As a result, healthcare providers are now facing competition from a different direction in a post-COVID healthcare economy.
The convergence of these issues—and many more—have made health IT analytics a central part of health system success, which is especially true for those wanting to fuel future growth in a highly competitive landscape. For companies like Trilliant Health, which provides advanced analytics to some of the top health systems, that means building out capabilities that analyze troves of data, enabling providers to understand macro and micro market-level dynamics. Most recently, the company announced a new application, Demand Forecast, to help health systems plan their growth strategies. Trilliant Health also published a report that unpacked many of the big trends occurring in the post-COVID-19 healthcare economy.
HealthLeaders connected with Trilliant Health President and CEO Hal Andrews to discuss the challenges currently facing healthcare providers, and to understand how Trilliant Health is evolving to serve its health system partners.
HealthLeaders: Many health systems took big revenue hits during the pandemic because of the disruptions to preventive care, elective procedures, and other in-person services. Are these disruptions longer-term problems and/or permanent?
Hal Andrews: From a long-term and/or permanent perspective, I would distinguish between revenue and volume. Based on the most recent financial reports, most large health systems were able to recover from revenue losses through relief from the CARES Act and other governmental initiatives. In addition, the rapid recovery in financial markets has generated unexpected investment income that has also softened the damage attributable to volume declines. However, the volumes that disappeared between March 15 and June 2020 appears to have been largely lost, not postponed.
HealthLeaders: In response to COVID-19, a lot of health systems stood up virtual care operations, but now some are walking that back, due to declining demand. What do you think will happen in the virtual care market, how does that affect health systems, and should they be investing or divesting?
Andrews: There are three key issues to consider. First, the massive percentage increase in telehealth utilization is primarily attributable to the law of small numbers, i.e., health systems have historically delivered very little care via telemedicine as a percentage of their total volumes. Second, telehealth is very efficient and effective for certain clinical services, especially behavioral health, but consumers are clearly choosing in-person care over telehealth in the aftermath of the pandemic. Third, and most importantly from a strategy component, health systems are incapable of providing a commodity service —which telehealth is—at a competitive price against Amazon or Walmart, among others. Health systems would be better served to invest in clinical services that Amazon and Walmart cannot, or will not, provide, as opposed to trying to compete to deliver a commodity service that fewer than 20% of Americans utilized during the pandemic.
Hal Andrews is the president and CEO of Trilliant Health. Photo courtesy of Trilliant Health.
HealthLeaders: Health IT analytics takes a backward-looking view of the market, to provide predictive insights into different trends and market vectors moving forward. However, 2020 was a volatile year that's hard to model, and it's looking like 2021 may not be much easier. How are these analytics evolving to better serve health systems in an uncertain time? How has Trilliant Health adjusted its platform?
Andrews: I would differentiate between reporting, which is the focus of the vast majority of health IT analytics, and predicting, which has only become possible at scale in the past five or six years. As you suggest, I am not aware of anyone who predicted 2020, which, in turn, creates challenges in developing demand models for the next 5–10 years. For us, there are several considerations. First, our Demand Forecast model is the aggregation of more than 3.5 million individual models, which dampens, if slightly, the impact of the "lost volume" in the second quarter of 2020. Second, our Demand Forecast model incorporates confidence intervals, which accounts for the volatility of 2020 through wider confidence bands. Third, we believe that our clients want and need to have the ability to compare the models "with" and "without" the volatility of 2020, and we will begin delivering that to our clients in the next few weeks.
HealthLeaders: Like politics, all healthcare is local. For large health systems that may have multiple locations nationwide—or even within the same city—how can they better serve these populations, who often have different trends or care needs from neighborhood to neighborhood? What are the opportunities and challenges that go beyond just data collection and analysis? How can they make sense and allocate resources appropriately?
Andrews: As you note, healthcare is local, but health systems have been poorly served by analytics companies in explaining how healthcare is local. The first step is recognizing that patients are consumers, and consumers have preferences that are based on psychology.
Every industry in the world, except healthcare providers, starts with the consumer: how many there are, where they are, what goods and services they want and need, and how they want to consume those goods and services. Despite lots of talk about healthcare consumerism, healthcare providers are prone to think about patients, which is why health systems often market EMR access as "patient engagement."
The reason that healthcare is local is, as you note, the fact that every market is comprised of different neighborhoods with different people who have different preferences. As in every other purchasing decision, consumer preferences influence patient decisions. As a result, there are patient cohorts that are identical from a clinical standpoint, and completely different with respect to their preferences; conversely, there are patient cohorts that are identical with respect to their preferences and completely different from a clinical standpoint.
Having differentiated between the clinical conditions and consumer preferences in a population, it is fairly straightforward to understand where they live and work and consume clinical services. It is then—and only then—that healthcare providers should bring to bear what they do—the services they can deliver efficiently and effectively and competitively.
HealthLeaders: In your recent report, "2021 Trends Shaping the Post-Pandemic Health Economy," you discuss how large healthcare market entrants like Walmart and Amazon are changing the market dynamics for health systems. What are the big takeaways for health system executives planning their growth strategies?
Andrews: Price is a critical lever for competition in a low-demand, high-supply economy. With more suppliers in the market chasing after consumer share of care, the competition is intensifying. While the competitive landscape affects all players in the health economy, the stakes are greater for health systems already playing a "negative sum game." There are always a few winners in a negative sum game, as HCA consistently demonstrates by winning market share of inpatient admissions in nearly all of their key markets.
Ultimately, winners in the post-pandemic health economy will be those that compete on price. Prices and reimbursement rates vary widely by market and payer type, except for Walmart, which has stayed true to its roots as a purveyor of goods and service with "low prices." Even though health systems have felt price pressures for years, the competition has never been greater as retail entrants like Walmart set the gold standard for engaging patients as consumers.
HealthLeaders: You recently announced the launch of a new application "Demand Forecast," which gives a 10-year view of market trends. Why is your solution different from the plethora of other health IT analytics options available to health systems?
Andrews: We think about analytics in two spheres: what just happened, which we call market analytics, and what is about to happen, which we call predictive analytics. In my 25 years in the healthcare services industry, I have seen a lot of the former and almost none of the latter, which is the reason we decided to develop our Demand Forecast model.
The challenge of delivering a Demand Forecast model at the county level for every county in America is twofold. The first, and arguably more difficult, challenge is an engineering problem. As noted previously, our Demand Forecast model is the aggregation of more than 3.5 million distinct models applied to more than 1 petabyte of data. Historically, the limits of computer processing made our approach unaffordable, if not impossible. With the advent of distributed computing in the past few years, delivering the model is now possible and affordable. The second challenge is to develop the millions of models required to create the forecast. If anyone else had created something similar, then I am pretty sure they would be talking about it—as they should.
HealthLeaders: If there was one thing that those responsible for growth at large health systems should know for planning 2022, what would that be?
Andrews: The hospital business is a negative sum game, with a growing number of suppliers pursuing a decreasing number of commercially insured consumers, who are the lifeblood of the system. Every health system overestimates their market share because no health system (or payer) understands how many suppliers are in the market. Understanding market share is essential to developing effective strategies to win a negative sum game.
Scott Mace is a contributing writer for HealthLeaders.
The new Demand Forecast app helps systems plan their growth strategies in the post-pandemic era.
An accompanying report suggests that health systems not try to compete with Amazon and Walmart to deliver commodity telehealth service.
Understanding market share is essential to hospitals winning a negative sum game, says the president of an analytics firm.