After the Surge...With the arrival of the COVID-19 pandemic, the future of healthcare delivery fundamentally changed. In mid-March, as cases began to surge in regional hotspots from

With the arrival of the COVID-19 pandemic, the future of healthcare delivery fundamentally changed. In mid-March, as cases began to surge in regional hotspots from Seattle to New York, almost every U.S. healthcare system hit the “pause” button on normal operations. Now as providers look to “restart,” few will return to their prior clinical operating or business models.

While the COVID-19 curve of the first surge has flattened in some regions, the crisis is far from over. Beyond that, health systems may find that the aftermath of the current crisis will be more challenging than the initial surge itself. The post-COVID-19 surge landscape will be characterized by a materially resized and reshaped patient and consumer base. This landscape is paired with a pressing provider need to substantively reduce costs, while refining clinical operations to provide coexisting dual systems of care for both COVID-19 and non-COVID-19 patients.

As health system leaders prepare to “restart” broad-based care delivery, they must put in place a careful, coordinated, timely and comprehensive plan.

They must manage the concurrent short- to mid-term challenges of recapturing volume and restructuring their cost base and supporting operations. Additionally, they must strategically position themselves for the long-term as care delivery leaders in their community. Without such an approach, it is not a stretch to contemplate that a $1 billion revenue health system emerges from the post-COVID-19 surge as an $850 million one.

In times of crisis, it is often challenging to look beyond the emergency at hand. However, in the post-COVID-19 surge landscape, health systems have no choice. The future is no less daunting. In this paper, we summarize the current market state and highlight five imperatives that health systems must successfully navigate in the new reality.

...health systems may find that the aftermath of the current crisis will be more challenging than the initial surge itself.

Five Health System Imperatives in the Age of COVID-19

After the Surge:

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After the Surge: Five Health System Imperatives in the Age of COVID-19

z For the next 12–24 months at least, providers must be able to deliver “dual systems of care” — treating both COVID-19 and non-COVID-19 patients. And they must be able to do so flexibly through periods of COVID-19 surge and relative lesser plateaus. COVID-19 care will require its own system of care with unique care pathways and protocols and corresponding containment/safety models. This will be imperative for the welfare and well-being of both COVID-19 and non-COVID-19 patients and their care givers.

z Consumer fear of COVID-19 exposure will cause many to delay or forgo care, or seek it from alternative sources.

z Patient financial profiles have deteriorated due to major increases in unemployment and underemployment, changes in private insurance coverage and greater individual cost accountability. Providers should expect a material change to their payor mix.

z Greater consumer fear coupled with greater price sensitivity has reduced overall market size for the foreseeable future.

z The clinical care delivery model has evolved. Virtual care has seen a decade of projected adoption occur in four weeks. Consumers now expect — in fact, strongly desire — virtual care as a principal modality of care. The movement to care-at-home and other alternative sites and procedures is now emerging as a preferred norm of care as well.

z Health system economics have shifted. The marginal cost of care in this dual environment will be higher. Respective sources of margin will have changed. Volume and financial planning will require different algorithms than those employed in the past.

z The health status of the community has likely worsened due to patient care avoidance and the disproportionate impact of COVID-19 on vulnerable populations.

What has Happened and What Lies AheadCOVID-19’s impact to date has varied across the country, with some regions experiencing significant pressures from high COVID-19 volumes and others preparing for surges that may or may not materialize. In both cases, the near shutdown of some urgent and almost all elective care, as well as surprising declines in emergent volume, such as myocardial infarction and stroke, has led to a massive reduction in patient volumes and a corresponding degradation in financial sustainability. Now as providers seek to return to business as usual, they will find the care delivery landscape environment has fundamentally changed.

COVID-19 has Fundamentally Changed the Care Delivery

Landscape

“Dual Systems of Care” for COVID-19 and Non-COVID-19 Patients

Consumer Fear of Infection Causing Delays or Forgoing of Care

Deteriorated Patient Financial Profiles

Reduced Overall Market Size for the Foreseeable Future

Evolved Clinical Care Delivery Models including Virtual Care and Care-at-Home

Shifting Health System Economics and Changing Sources of Margin

Worsened Community Health Status

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Imperatives for Future Health System SuccessAgainst this context, health systems must reengage with their consumers and communities and begin to rebuild a sustainable patient base. At the same time, they must also restructure their clinical operations, asset bases and expense structures to remain viable in this changed environment. Doing so will require meeting five imperatives.

Providers must engage consumers and other referral sources to recapture patients.

LOW

DExited

AHigh

Acuity

CReticent

BHesitant

10% 10% 10%70%HIGH

Overall, the patient market size will be smaller, reimbursement lower and the competition to serve them more intense. Health systems need to act now to reengage with patients and begin to build a platform for material sustainable demand. Patient reengagement will be critical, but it will not be sufficient. Most health systems will need to foster new referral channels if they hope to approach pre-COVID-19 levels of patient activity and revenue. Health systems should focus on four key strategies to rebuild volume and revenue:

Profile the consumer base.In most markets, providers should expect to see a distribution of consumers (please see Figure 1, right) where despite a small defined number of high-need patients (A), the great majority (B) will be hesitant to return to the care delivery setting. Another cadre will be even more reticent to return (C) and some will have exited the market (D). Providers must profile, size and segment their market by clinical service to understand volume recapture potential and requirements.

Figure 1: Consumer Likelihood to Seek Carei

RecaptureDemand

01 0503

02

04

Fundamentally Reduce the Cost Base

Restructure the Physician

Enterprise

Transform the Clinical Operating

Model

Partner with Purpose

01

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Reactivate and accelerate your high-acuity/high-need/high-willingness patient base.Providers should aggressively reactivate outreach to those patients with clinical profiles requiring or desiring immediate care — starting with their existing backlog of patients whose care had been deferred. Beyond that, active engagement of high-need clinical cohorts must be supported by clinical care operations and models that demonstrate to “early adopter” patients, and the community at large, that urgent and elective care can be safely and effectively provided in the post-COVID-19 landscape.

Engage consumers and regain community confidence.Clinical leadership must employ targeted and personalized direct-to-consumer campaigns to communicate how their care will be delivered in the future and how new processes and discrete care environments for COVID-19 vs. non-COVID-19 patients have been implemented to safely serve all patients entering the system.

ii

i

iii

iv

Providers must fundamentally reduce their cost base.

Given the projected shrinkage of most markets, and the expected payor mix degradation, it is unlikely that volume recapture and growth strategies alone will restore required levels of liquidity or financial margin. For many organizations, the cash and margin needs are significant and immediate, creating a requirement to actively reduce and restructure their cost base now. To do so will require focusing on two key areas:

Reshape the asset base.Health system leaders should apply a disciplined analysis to their portfolio of assets to determine which are both critical to their future strategy and also contribute to sustainable economic performance. Health systems should consider the sale or closure of assets which are not. This analysis must take into account the characteristics of the post-COVID-19 market and the future trends that it portends. For example, fewer primary care offices may be needed as care shifts to virtual models and to improve utilization of the remaining sites. Additional ambulatory surgery centers and access points in the community may be needed to address patient concerns about going to a hospital for care and to create lower-cost settings.

In addition, health systems must view their asset base in the context of taking advantage of new consolidation and market opportunities while also defending against market moves by payors, private equity firms and technology companies.

Pursue accretive demand and growth.Most health systems will need to identify new referral sources and growth channels to grow to and beyond historic proportionate levels. The referral landscape has changed. Independent physician practices will reassess their practice operations, economics and provider relationships. Market disruptors ranging from retail to digital providers to alternative site providers will have growing influence on patient channels. In many instances, health systems will find strategic advantage in quickly and actively exploring new traditional and non-traditional referral relationships.

02

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ii Reduce operating costs.Many healthcare organizations have already begun to offset volume losses by reducing employee hours, enacting furloughs, rolling out compensation reductions, and aggressively reviewing supplies expenditures and purchased services. However, the challenging economics facing health systems will require leaders to take an even more rigorous and disciplined approach to reducing their operating costs, including:

Conduct a zero-based review of all fixed costs from programmatic to third-party service providers to administrative and management structures. For health systems whose operating models are still confederated, this effort should result in a substantial shift toward a truly consolidated and integrated scale-driven model, structure and fixed cost base.

Define the optimal approaches to patient and site of/modality of care management to ensure the most effective approach to unit cost and total cost of care management.

Assess performance of all programs and operating units against absolute best practice productivity standards and appropriate program sizing levels to determine which areas must aggressively improve performance, downsize, close or operate through partnerships or other models.

Develop and deploy a corresponding workforce management plan that can flex with evolving volume levels during the “restart” period and ultimately is aggressively right-sized to reflect the health system’s future baseline activity in the market.

Providers must restructure the physician enterprise. 03

The underlying economics for most health system medical groups was challenging before the pandemic. In many cases, it was worsening due to physician compensation increases and the growth in advanced practice providers (APPs) without a sufficient increase in revenue. Annual investments, often reaching more than $250,000 per physician, are no longer sustainable. Health systems must rethink their overall physician enterprise model and their associated operational and business support functions to reduce their annual expenditures and improve the return on this investment.

Such refinements might include:

Deploying tailored primary care models to serve different patient cohorts that deploy APPs and all other clinicians on the care team to their highest and best use.

Restructuring procedural specialty practices where complementary providers screen patients so that surgeons can remain procedurally oriented.

Organizing integrated specialty care teams comprised of physicians, highly leveraged APPs and complementary care team members, all dedicated to the needs of specific disease cohorts — enabling patients to efficiently get most of their care in one setting and physicians to be increasingly more productive.

Overall, the provider workforce will need to be deployed in a fundamentally different manner to enable new care models that more effectively leverage physician time. In the process of doing so, physician compensation plans may also need to be recalibrated and the size of the physician platform itself reassessed in select specialties.

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Providers must transform their clinical operating model.

Partnerships, both horizontal and vertical, traditional and non-traditional, should be closely evaluated.

04

05

Health systems must be able to provide coexisting systems of care for the COVID-19 and non-COVID-19 patients they will simultaneously serve. Furthermore, these systems of care must be able to flex with the roller coaster of surges that are expected over the next 12–18 months. Effective, efficient and safe dual systems will have myriad clinical operating requirements — including more detailed and defined clinical pathways and patient protocols/triage and navigation models; service rationalization across locations; designated points of specific access and entry; new approaches to capacity management; and more advanced infection control and safe space maintenance for patients and staff.

Health systems should assess their partnerships portfolio and determine where affiliating with other organizations can help them enable or accelerate their action plan. Organizations should objectively analyze and consider opportunistic partnerships that may emerge from market shifts or that may be advantageous in the future care delivery landscape. Opportunities may range from financially distressed physician practices to non-traditional partners such as digital health and technology companies, payors and employers, retailers and private equity firms. Finally, for health systems that have recently finalized or are currently in the process of partnership planning with another organization, integration will become increasingly important through a disciplined approach that front-loads the best value creation opportunities in an expedited manner.

For example, some health systems anticipating restarting their elective surgeries in early May have planned several protocols to reduce infection risks including dedicated COVID-19 patient care units, separate points of entry and elevators for COVID-19 patients, and aggressive temperature and other forms of screening for all who enter the hospital.

Roadmap for the Path ForwardThe best-positioned health systems coming out of the crisis will have done two things exceptionally well: (1) immediately addressed their short-term needs around recapturing patient volumes while quickly improving their financial position, and (2) did so while continuing to advance their longer-term strategic priorities in the context of the “new normal.” Achieving both these outcomes simultaneously requires a multifaceted, integrated approach where the elements are optimally sequenced and mutually reinforcing and whose implementation is well-orchestrated.


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While every health system’s plan will reflect its unique situation, the importance of a plan itself cannot be overstated. Having a plan that coordinates initiatives ranging from ensuring that an organization’s clinical operations restructuring is aligned with its cost reduction efforts, and that both those elements support its volume recapture plan, to communications and stakeholder engagement, is essential.

To manage against the plan, health system leadership should take a page from its current response to the COVID-19 crisis and designate a post-COVID-19 Surge Recovery Team to lead a rapid and integrated implementation across all plan dimensions. Doing so will enable health system leadership to prosecute the effort with the same urgency, innovation and agility with which it met and overcame the COVID-19 surge itself.

Time is of the essence. Those providers who promptly mobilize appropriate resources and bandwidth to address these five imperatives will find that they not only have countered the effects of COVID-19 on their organization, they will have also captured a unique opportunity to transform themselves and emerge leaner and stronger.

Figure 2: Illustrative Action Plan for COVID-19 Recovery Client LogoPlaceholder

© 2020 The Chartis Group, LLC. All Rights Reserved. Date Page 1

MID-/LONG-TERM PLANING Next 6-18 Months

# of COVID-19 cases

01Recapture

Demand

Profile the consumer base Reactivate high-acuity/-need/-willingness patients Engage consumers, regain community confidence Pursue accretive demand and growth

Develop 12- to 24-month multi-channel growth plan

Launch comprehensive digital and access strategy

02Fundamentally

Reduce Cost Base

Reshape asset base Reduce operating costs through comprehensive

financial performance improvement plan

Deploy network reconfiguration plan Revisit long-term capital plan and priorities

03Restructure

Physician Enterprise

Deploy tailored primary care models by cohort Restructure procedural specialty practices Organize integrated specialty care models/teams

Right-size physician platform Redesign physician enterprise economic model

04Transform

Clinical Operating Model

Develop coexisting systems of care for COVID-19 vs. non-COVID-19 patients

Develop flex capacity plan

Expand capabilities across the continuum (e.g., care-at-home)

Complete IT enablement of care model redesign

05Partner

with Purpose

Assess partnerships portfolio and analyze opportunistic relationships Rapidly integrate new partners

IMMEDIATE ACTIONS Next 1-6 Months

Illustrative Examples — Not Exhaustive and Must Be Customized to Each Circumstance

Immediate actions must be linked to and mutually reinforcing of longer-term strategies

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About the Authors

Ken GraboysChief Executive [email protected]

Ken Graboys is the Co-Founder and Chief Executive Officer of The Chartis Group. His experience in healthcare consulting spans 20 years helping leading academic medical centers, integrated delivery systems and healthcare service organizations achieve their strategic and economic imperatives. Mr. Graboys’ work is concentrated in the areas of: economic and strategic planning, collaborative venture strategy and affiliations, network formation and organization, and provider/physician/payor alignment.

Steve LevinDirector, Academic Health System Segment [email protected]

Steve Levin is a Director with The Chartis Group. He has over 35 years of experience as a management consultant to the healthcare industry. He is a nationally recognized expert in a number of areas pertaining to academic health system organization, governance, funds flow and strategy. He also has significant expertise with clinical program development, mergers and affiliations, and academic strategy. He has worked closely with the leadership of numerous universities and their academic health systems to help define their strategic direction and to help the leadership team to implement that direction over several years.

Michael [email protected]

Michael Tsia is a Principal with The Chartis Group. He serves as an advisor to executive leaders at leading academic health centers, children’s hospitals and community integrated delivery networks on numerous topics, including enterprise strategic and financial planning, provider workforce planning, payor-provider partnerships, and organizational economic alignment/funds flow. Mr. Tsia has been a leader in management consulting with The Chartis Group for over 10 years and regularly speaks on a variety of healthcare strategic planning topics. He also serves on the Board of Directors for Methodist Hospital of Southern California.

© 2020 The Chartis Group, LLC. All rights reserved. This content draws on the research and experience of Chartis consultants and other sources. It is for general information purposes only and should not be used as a substitute for consultation with professional advisors.

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About The Chartis Group

The Chartis Group® (Chartis) provides comprehensive advisory services and analytics to the healthcare industry. With an unparalleled depth of expertise in strategic planning, performance excellence, informatics and technology, and health analytics, Chartis helps leading academic medical centers, integrated delivery networks, children’s hospitals and healthcare service organizations achieve transformative results. Chartis has offices in Atlanta, Boston, Chicago, New York, Minneapolis and San Francisco. For more information, visit www.chartis.com.

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After the Surge...With the arrival of the COVID-19 pandemic, the future of healthcare delivery fundamentally changed. In mid-March, as cases began to surge in regional hotspots from