Between pandemic concerns, state ordinances delaying elective procedures and unsteady finances, many Americans skipped their scheduled doctor visits last year. And that means big changes for the healthcare industry.
By the summer of 2020, a staggering 41% of adults had already delayed or altogether avoided medical care because of COVID-19, according to a CDC report. Other data showed that in-person healthcare visits fell 60% early in the pandemic.
"There's absolutely some pent-up demand," said Robert Duncan, a healthcare banking relationship manager for BOK Financial®. "We anticipate that hospital patient volumes are going to increase especially as more of the population gets vaccinated and might feel more comfortable going back into a hospital setting for more routine treatments."
Duncan said he expects people will soon be re-scheduling elective and outpatient procedures, as well as preventative care appointments.
So, what does this mean for the industry that has been in such demand during the pandemic?
"I think we need to acknowledge that while a lot of our customers saw deteriorating operations during the beginning of the pandemic, most received significant government assistance which helped offset those declines," said Duncan. "Healthcare industry finance teams are still in the process of reconciling all the stimulus funds they received, and auditors are assisting them with proper revenue recognition. With our hospital clients beginning to see operational case volumes comparable to pre-pandemic, our borrowers are nearing normalized operations again."
Capital improvement projects
With interest rates at historic lows, more hospitals and health systems will be pursuing capital projects such as expansion, renovation and new construction, said Robert Dudley, managing director of health systems banking for BOK Financial.
In 2020, the Dallas metro alone recorded healthcare real estate sales of $11.2 billion despite the pandemic-induced slowdown. The transaction volume for Q4 alone was $3.9 billion, reports show.
"This time last year, everyone was in survival mode and rightly so; there wasn't much focus on capital expenditures," said Dudley. "This year, as things begin to return to some level of normalcy, we anticipate renewed interest in pursuing projects such as new surgery centers, imaging centers and projects that are fundamental to core healthcare practices."
In addition, experts recognize the uptick in construction projects in the institutional sector, which includes healthcare, citing longer-term optimism about the country's overall progress against COVID-19 as one key factor.
“These projects have likely been planned for some time but because of the uncertainty of the past year, haven't moved forward. We continue to see new hospital facilities and clinics either being built or expanded to accommodate growing patient services.”- Robert Duncan, healthcare banking relationship manager
Growing through consolidation
"Healthcare clients are also borrowing to consolidate their operations within either a metro area, county or surrounding counties," Duncan said. "Some are also buying smaller, more rural hospitals to serve a broader range of patients.
"We're seeing clients buy up specialty physician practices to help build more scale. Like businesses in other sectors, they want to expand the scope of services they offer. Sometimes this is imaging centers, new treatment facilities and the like."
For some hospitals and health systems, consolidation means seeking out a partner to give them a little more robust balance sheet that can better withstand unexpected demands—like a pandemic.
"Some hospitals and health systems may be sitting on surplus cash as a result of holding off on planned projects, or they might have access to additional capital right now," said Dudley. "With these resources, they may decide to pursue opportunities such as a strategic physician practice group they've had their eye on and grow that way."
Capital may also be deployed in healthcare services outside the walls of hospital and physician offices. "The pandemic shined a bright light on the benefits of telemedicine, virtual appointments and other forms of digital delivery," he said.
Those delivery models grew out of necessity during the pandemic but now provide ways to extend primary services without the costs of building new hospitals and physician offices.
Because of rising construction costs, Duncan said many healthcare executives may opt to make capital improvements inside their buildings and shift toward the purchase of equipment and technology.
Return to work
Some hospitals, doctors' offices and the like may be facing the increased patient demand with less staffing due to difficulty in attracting talent.
"Many facilities had layoffs or furloughs, so it will be challenging to return to sufficient staffing levels to keep up with that higher demand," said Sara Ramos, BOK Financial healthcare banking relationship manager.
Data from the U.S. Bureau of Labor reported that only two months into the pandemic in 2020, the healthcare industry shed 43,000 jobs.
By the end of April 2021, employment numbers in the healthcare sector were showing little to no change. According to U.S Bureau of Labor reports, a boost of 21,000 jobs in ambulatory healthcare was offset by the loss of nurses in nursing care facilities, where an estimated 19,000 positions were lost.
More than 15 months into the pandemic, those still working are physically and emotionally drained. Many healthcare workers report being burned out further compounding staffing issues.
In the midst of all this, many healthcare workers have changed jobs, or job assignments, in favor of remote work. A recent study by McKinsey found that while healthcare professionals who require specialized tools and hands-on access to patients may return to their traditional environment, others have embraced digital technologies with no intention of returning to an office, hospital or practice setting.
"It may be harder to get staff back in than they expected," Ramos added. "And whether it's going through a hiring agency or offering incentives, bringing staffing back to required levels might come with a higher price tag."
According to the most recent Medical Group Management Association report, cost-conscious practices looking to grow and meet increasing levels of patient volume are likely considering adding more specialized advanced practice providers (APP) to their team. At the end of 2020, more than half of survey respondents were reporting plans to add an APP to their practice in 2021.
In addition to staffing challenges, Dudley said healthcare executives will have to navigate the impact of new policies that always come with a new presidential administration.
"Every new administration wants to make changes," he said. "And healthcare has to pivot and adapt to whatever the new policies and initiatives are. There's an expected period of adjustment."
He sees possible changes around pricing transparency. "A recent proposal eliminates some of the required disclosures of contract terms with Medicaid Advantage insurers. Hospitals have fought the disclosure of prices saying it will not help consumers and will create a significant burden for providers."
In ordinary circumstances it's a challenge to accommodate all of the needs and unexpected variables, he said. "Add in pandemic protocols and regulatory changes from the federal level, and it is even more of strain on healthcare executives. These changes sometimes mean additional burdens on healthcare executives. But we have folks on our team ready to help navigate these challenges."
He added, "If I were in the CEO seat of a hospital or health system right now, I would be cautiously optimistic that some of the proposed changes coming down the pike will be a net positive for the hospital world."