Healthcare Trends for the Rest of 2020
By: Mike Gaffney
2020 has been a rollercoaster for everyone — particularly those in the healthcare industry. Many practices are getting back on their feet but have not fully recovered from the Spring shutdowns — and everyone is concerned about what the Fall holds. Below are some thoughts about general trends in the industry.
Healthcare Investment
Not surprisingly, healthcare mergers declined in the first half of 2020, but not as much as some had expected. A Pricewaterhouse Coopers report focusing on mergers between healthcare providers, payers, and other services found that the volume of deals dropped 21% compared to the same period in 2019, with a total of 483 deals in the first half of the year. However, the total deal value did have a sharp 52% decline from 2019.
While most sectors saw a reduction in activity, diagnostics companies contributed to two of the year’s largest deals. The MRI and dialysis sector for labs reported $12.5 billion in deal values while long term care had the largest volume of deals, with 158 in the first half of 2020 — although this is a decline from 2019.
Not surprisingly, many private equity firms have reduced new deal sourcing or put it on hold to better focus on managing their portfolios through the current difficulties. Experts expect to see an uptick in transactions through the second half of 2020, although figures will probably be lower than the same time in 2019. They also anticipate seeing an increase in transactions of distressed assets and organizations in the remainder of 2020, a more complicated deal environment, and greater scrutiny of the deals that do move forward.
Telehealth
Telehealth has been a bright spot for the healthcare industry as patients and providers use the technology to substitute for face-to-face visits. Some providers have difficulty being reimbursed for telehealth visits. However, in response to the pandemic, the Centers for Medicare & Medicaid Services (CMS) issued temporary waivers that allow for increased telehealth reimbursements. According to the CMS, “Medicare can pay for office, hospital and other visits furnished via telehealth across the country and including in patient’s places of residence.”
The waivers allow these visits to be paid at the same rate as regular, in-person visits. Previously, Medicare only paid for telehealth in limited circumstances, such as when patients lived in designated rural areas. Furthermore, when CMS issued relaxed guidance on reimbursements, many commercial payers followed suit, reimbursing virtual visits and allowing $0 copays for patients.
Consumers have taken advantage of telehealth benefits, particularly for behavioral health visits as COVID-19 affects people’s mental health. A recent survey by the Piper Sandler Company suggests 63% of consumers were likely to use telehealth for physician services and 56% for mental health.
Providers hope that the CMS will make some of the waivers permanent in order to maintain the momentum of the current telehealth growth. If the CMS ends some or all of the telehealth waivers, it will have a big impact on the market.
Consumer Behavior
Most private practices are operating at 70–85% of their pre-COVID volumes, although there is considerable variation from specialty to specialty. Some patients who had been delaying care are returning to doctors and hospitals, while others are still hoping to wait until a vaccine is available. The tendency to delay care is having repercussions across the healthcare industry. In oncology, for example, it causes patients to enter the treatment cycle later, resulting in more complications and increased downstream costs. Fewer visits to private practices mean fewer diagnostic tests and drug prescriptions — and result in hospitals with lower billable services and surgeries.
Physicians and hospitals have invested heavily in changes to assure consumers that healthcare facilities and practices are safe so patients will feel more secure. This has been good for PPE and related businesses. There is some concern that patients will tire of safety precautions — such as waiting in their cars before a visit — and turn to providers with simpler, and less safe, procedures.
Practices that thrive will be the ones that put a lot of effort and thought into the consumer experience. This could be an important differentiator. Many patients will not want to resume face-to-face office visits unless clinically necessary, and practices will need to accommodate an increased desire for telehealth.
A Second Wave
The future of healthcare in Fall 2020 is difficult to predict because there are so many variables. Experts expect a resurgence of COVID-19 cases as colder weather drives people indoors and worry that a second wave could be worse since it would coincide with flu season.
A second wave could also prove to be more economically detrimental. The damages from shutdowns in the Spring were partially offset by economic relief that is not likely to be available in the Fall. If the public reacts to the pandemic the way it did in the Spring, the results could be quite damaging for healthcare practices.
The consequences of the November election will also have an impact. In the event of a sweep by either party, this sector is one of the most likely to be impacted by dramatic political change. Republicans may try to further dismantle ACA while Democrats may institute more government involvement in healthcare.
Need some advice about navigating 2020’s turbulent healthcare market? Contact Bancroft and see how we can help you!
