The Pandemic Effect: Health Care’s Changed Landscape

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The long-term impact of the COVID-19 pandemic within the health care industry may not be known for some time, but there are signs today that things may never be the same for many health systems and providers. Many of the concerns point to health care’s struggles with a tight labor force, however, there are other issues at play as well.

From financial impacts to clinical care quality, there’s much to assess and understand in this new landscape regarding challenges and opportunities for improvement in the industry.

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Financial impact: Margin pressures

In the short term, we have seen increased cost pressures on health systems. Health systems across the United States have been spending more and more on everything they need to provide medical care. The majority of expenses incurred by most health systems are related to their labor force, and costs for labor have risen dramatically. As the chart below shows, costs for labor are up by over 27% from 2020 and even 13% from 2021. As expenses continue to rise, the pressure on health systems to manage margin becomes very difficult.  

 Source – June 2022 Hospital Flash Report 

Patient satisfaction impact: concerns

The impact of COVID-19 extends beyond the cost of labor and other expenses incurred by health systems to overall clinical quality and patient experience. A study performed by Leapfrog found that based on Centers for Medicare and Medicaid Services (CMS) data, and Leapfrog’s own data, nearly every measure of patient satisfaction has declined at the mid-pandemic measurement (defined as the time period between July 1, 2020 and March 31, 2021) as compared to pre-pandemic measures (defined as calendar year 2019). Notably, the patients replying positively to questions related to the responsiveness of hospital staff decreased 6%. Almost as concerning was the 4% decrease in positive responses related to hospital cleanliness.

 Source – Leapfroggroup.org 

Quality impact 

Beyond customer satisfaction, another pandemic-impact concern is related to quality of care. With the constant demand for nursing and other talent, as well as the increased reliance on staffing agencies, many industry insiders have been concerned that quality-related metrics would deteriorate as compared to pre-pandemic measures.  

Quality data across the health care ecosystem is somewhat limited. One common measurement of quality data is CMS’s Star Ratings. CMS determines a hospital’s Star Rating by evaluating a hospital’s performance in the areas of mortality, safety, readmissions, patient experience, and timeliness and effectiveness of care. 

The data measured for Star Ratings is somewhat of a lagging indicator. In the following chart, the years indicated represent the year the rating was reported, not the period in which the data was measured. Additionally, the measurement factors in CMS’s scoring approach changed between 2019 and 2020. The lagging effect of the data and the changes in CMS’s approach make it hard to draw a conclusion on quality solely based on Star Ratings. It is interesting to note the ranking of 5-star (highest rated) hospitals remained consistent during the height of the pandemic. Now, rankings have persistently registered with a reduction in the number of 1 star rated hospitals. It is important to note, as with any statistic, there are flaws in drawing a perfect conclusion between this and actual quality.

Source: CMS 

Another data point to evaluate is the overall quality performance adjustments from CMS to hospital. This is a measure of actual reimbursement adjustments for three specific measurements:

  1. Readmissions
  2. Value-based purchasing
  3. Hospital-acquired conditions. 

CMS makes adjustments (positive and negative) related to reimbursement a specific hospital receives based on their experience in a given year with these three measurements. The chart below shows the average hospital adjustment over time for these measurements.

Source: CMS/Definitive Healthcare 

The takeaway  

Patients have felt the effects of staffing shortages and the overall strain the pandemic has put on the health care ecosystem. As consumerism continues to be a driving force in health care, patient satisfaction will continue to be critically important. Health care providers need to consider how to focus their efforts to maintain, or even improve, patient satisfaction, all while managing margin. Additionally, quality continues to be at the top of the list of areas of focus for health care providers, and that should not change. 

Accomplishing these improvements likely requires reassessing processes and procedures, and leveraging technology and analytics to better understand challenges and gaps. Technology can be used to bring the changes in patient satisfaction and quality on a more real time basis. Additionally, it can help disaggregate the data into meaningful data cuts.  

Rick Kes
Health Care Senior Analyst at

Rick Kes is a health care senior analyst with RSM US LLP.