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Krishnan A. COVID-19 as a catalyst: the coronavirus pandemic can increase accessibility in the U.S. healthcare system. HPHR. 2021; 27.
DOI:10.54111/0001/aa12
The March 2020 onset of the coronavirus pandemic and the surge of cases that followed it has fundamentally changed the American healthcare landscape. Of course, the health sector is better acquainted with sweeping structural changes than most others, but it has never undergone so multifaceted a transition. Fear of contagion continues to motivate patients to seek care remotely, postpone elective treatments, and grapple with questions of how to pay steep out-of-pocket costs in the face of job instability and financial hardship. The offshoring of medical equipment manufacturing has yielded supply shortages (King, 2020), making providers less agile in their responses to the sudden increase in demand for treatment (OECD, 2020). Payers rushed to streamline access to care by extending coverage to COVID-related hospitalizations, waiving cost-sharing requirements, and cutting back on administrative red tape (Liss, 2020). The evolution of care delivery combined with the formation of unlikely partnerships under the duress of the pandemic may have forged a healthcare sector with fewer administrative barriers, more flexible delivery of care, and a superior pricing model.
The risks associated with in-person contact have upended traditional models of healthcare delivery built around physical visits to the hospital or clinic, forcing providers to supply care remotely. This remote care provision, aptly called, ‘Telehealth,’ has much appeal beyond reducing the spread of coronavirus. For one, both doctors and patients can realize savings: doctors can economize on healthcare facilities expenses, by having fewer exam rooms, for instance, and patients no longer need to make hours-long journeys to attend thirty-minute appointments which are now just a few clicks away (Hargadon, 2020). Additionally, doctors may be able to provide more personalized, comprehensive care by factoring in patients’ living conditions when recommending treatments (Hargadon, 2020). Patients fearing stigma surrounding certain health conditions are more empowered to seek treatment discreetly (Hargadon, 2020). The numbers suggest that patients have responded positively to telehealth—in an analysis of visit data from the four largest telehealth providers in the US, the CDC found a 50% increase in the first quarter of 2020 compared to the same period in 2019. Furthermore, 93% of telehealth visits between January and March 2020 were for conditions other than COVID-19 (Koonin et al., 2020), suggesting that telemedicine is a suitable substitute for a variety of visit types.
Regulatory direction has spurred provider adoption of telehealth. At the federal level, the Centers for Medicare and Medicaid Services (CMS) have issued numerous waivers expanding the scope of Medicare payment in relation to telehealth services. These waivers have allowed telehealth providers to offer a wider array of services and have expanded patient eligibility beyond the scope of traditional telemedicine to include people who do not reside in rural areas, have allowed providers to bill for telehealth services at the same rate as in-person visits, and have eliminated the restriction of telemedicine to only previously established patients. While these waivers are only temporary for now, an article written by CMS Administrator Seema Verma suggests that, in light of the widespread adoption of telehealth bridging traditional rural and urban divides, CMS may be reevaluating the use of telemedicine, which could entail a paradigm shift for American healthcare (Verma, 2020). The permanent allowance of flexibility in the mode of delivery for first-time visits and reassessment of Medicare payment rates for telemedicine seem likelier than ever. By expanding permanent coverage to certain services that were provided on temporary basis during the pandemic, 2021 Physician Fee Schedule Final Rule (CMS, 2020) suggests that some of these changes are already taking place.
While usage of telehealth by patients requires factors that vary across income levels, such as a computer and a stable internet connection, Verma notes that there are no significant differences by race or ethnicity among beneficiaries receiving telehealth services, and that dually eligible1 beneficiaries have higher utilization rates of telemedicine. Although telemedicine is certainly not a perfect substitute for services requiring a hands-on approach (Harvard Health Publishing, 2020), it can cleave through established barriers to access, suggesting regulatory changes that favor long-term adoption.
The pandemic may accelerate the adoption of alternative payment methodologies (APMs) which are cost effective for both patients and providers. Traditionally, medical services have been paid for using a fee-for-service (FFS) model. As the name suggests, in this model, practitioners are paid for each service administered, with patients being billed for each test, appointment, and consultation separately. A 2018 survey conducted by the American Medical Association found that 87% of physicians reported receiving revenue for services they provided on a fee-for-service basis (AMA, 2019), despite congressional efforts over the last decade to shift the focus of financing models from volume to value (Oyekan, 2020).
FFS models come with several weaknesses, many of which have been magnified in the crucible of the pandemic. A common criticism of FFS is the misalignment of incentives between patient and provider. Payment based solely on the number of services performed, independent of outcome, may compromise quality of care. If true, this compromise is significant, especially in light of the fact that Medicare spends roughly $26 billion annually (CMS, 2018) on hospital readmissions. Another shortcoming of FFS is its vulnerability to shocks in the demand for healthcare. During the pandemic, consumers cancelled elective procedures en masse, sounding the death knell for hospital finances. Elective procedures serve as the backbone of hospital finance (Merritt Hawkins, 2019). According to a 2014 report (Weiss et al., 2014) by the Agency for Healthcare Research and Quality, hospitals received more than 30% of their revenue from elective inpatient admissions (See also Khullar, 2020). The American Hospital Association estimates hospital losses averaged $50 billion per month in the four-month period from March to June, largely due to the drying up of markets for these services.
Khullar (2020) notes that such losses deepen preexisting inequities in access to care, as they disproportionately affect rural hospitals. While urban areas have about 53 primary-care physicians for every 100,000 people, rural areas have just 40 (Hing & Hsiao, 2014). Rural hospitals under financial distress are particularly susceptible to closure and tend to have less cash reserves to weather financial instability (Khullar, 2020). A Navigant analysis concluded that 21% of rural hospitals nationwide are at high risk of closing unless their financial situations improve (Mosley & DeBehnke, 2019). These closures would exacerbate a larger trend: from 2013 to 2017, two times as many rural hospitals closed as did in the earlier five-year period. These closures have devastating real-world effects (United States Government Accountability Office, 2018). A recent study found that rural hospital closures increase inpatient mortality by 5.9% points while urban closures have no measurable impact (Gujral & Basu, 2019). Congress has included provisions in the CARES act to address these vulnerabilities, but given that the Phase 1 initial funding was distributed based on prior inpatient Medicare payments (Khullar, 2020), there were concerns (Antos & Bai, 2020) that the legislation would not sufficiently address providers treating a disproportionate amount of patients with different coverage.
These financial difficulties may have prompted change. In a letter to Congress (McClellan et al., 2020), former leaders of CMS note both the substantial financial losses faced by providers using FFS reimbursement schemes and the relative success of practitioners on APMs. Perhaps realizing this too, CMS recently issued new guidance for state Medicaid directors on advancing the implementation of value-based care and reimbursement (CMS, 2020). Value-based care, unlike FFS, seeks to align patient and provider incentives by accounting for factors such as outcome, cost, and social-determinants of health. In transitioning to value-based care, states must rely on value-based payment, availing of APMs to reward providers for providing quality care in a cost-effective manner. Practitioners have their eye on one model in particular, as its stability has great appeal in the midst of the pandemic: capitated arrangements.2 Under a capitated model of financing, providers receive a risk-adjusted per member per month fee, paid prospectively, as opposed to FFS, which is paid on a retrospective basis. Advocates of capitation claim that, because the payments are not tied to the costs the individual actually incurs, the cost burden shifts from insurers to providers (James & Poulsen, 2016), incentivizing them to keep patients healthy in the first place (Lee, 2020). Studies suggest that the increased implementation of preventative medicine in capitated payment systems can save money by reducing reliance upon medically wasteful tests and procedures (Tan & Melendez-Torres 2017).
Regardless of which particular models of healthcare are adopted in the future, one thing is sure: the pandemic has drawn attention to the inadequacy of FFS and the urgent need for a model that places value over volume. Value-based care models such as Accountable Care Organizations encourage quality by coordinating care (Hearld et al., 2019), reducing the financial burden of repeated tests, medication errors, missed referrals (Institute for Healthcare Improvement, 2017), and other costly redundancies generated by a lack of communication along the continuum of care delivery. While a discussion of payment structures may seem abstract, these models of financing are crucial to bringing costs down in what now ranks as the most expensive healthcare system in the world (Tikkanen & Abrams, 2020).
The pandemic may have also opened the door for further payer-provider collaboration. Historically, these relationships have been strained. As healthcare costs rose in the 1990s and early 2000s, payers began to use tools such as prior authorizations,3 claims data analysis, and narrow-network contracting, which providers viewed as intrusive and a hindrance to patient-centered care (Sandy et al., 2019). However, the pandemic has proven that payers can be instrumental in easing the administrative burden providers face. And this burden is a heavy one—A 2017 American Hospital Association (AHA) report found that the nation’s health systems, hospitals, and post-acute care providers must comply with 629 regulatory requirements spanning different domains, spending over $39 billion a year to ensure compliance with these (AHA, 2017). The pandemic has demonstrated the agility that payers can demonstrate to relieve providers of much of this burden. For example, several large, commercial payers waived prior authorizations for COVID-19 related services (Liss, 2020). Others have leveraged automated prior authorization to streamline the process for both parties (Hunt, 2020). Payers with extra cash on hand due to fewer claims being filed, have also provided financial support to providers facing liquidity challenges. Health plans have offered accelerated or advanced payments to hospitals and physician practices, and have been willing to restructure contracts accordingly (Daly, 2020). Payers have also demonstrated their willingness to craft provider-specific relief plans (Jones Day, 2020).
These ‘olive branches’ have the potential to improve the relationship between these traditionally rival parties, whose trust and communication is a prerequisite for value-based contracting (Sokol, 2020). Additionally, these relationships may be key to overcoming barriers of access in rural communities, as payers can help smaller, rural practices transition to value-based care that do not have the resources to get there on their own (3M, 2020). Payer-provider communication is key to establishing mutually beneficial contracts that lay the groundwork for cost-efficient, quality healthcare.
While this pandemic has devastated communities and has caused economic setbacks for years to come, there may be an upshot. The past year has highlighted residual demographic inequities. Efforts to popularize telehealth and value-based-contracting—both of which make healthcare more widely accessible—have previously failed. However, as the pandemic continues, patients and doctors alike are beginning to appreciate the benefits of telehealth, many of which will remain even after the coronavirus is finally vanquished. Furthermore, the pandemic has prompted collaboration between payers and providers, who have been previously opposed. These developments, combined with the wake-up call of huge financial losses incurred by providers using FFS models of financing, may soon dissolve historic barriers to access, providing high-quality, cost-efficient care to everyone, including members of historically underserved communities.
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Correspondence concerning this article should be addressed to Amrita Krishnan. E-mail: [email protected]. Special thanks to Elliot J. Knuths for his insightful comments.
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