Hospitals and health systems are gradually transitioning from an intensive internal focus demanded by the operational strains of the COVID-19 pandemic toward a renewed external focus on strategic growth. As leaders determine where to concentrate attention and resources, it is clear that the changes taking place in 2022 could significantly impact the cost and means of delivering care and thus affect their strategy.

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Rating agencies differ on their outlook for the healthcare industry in 2022. Moody’s Investors Service (“Moody’s”) predicts staffing shortages will drive operating cash flow declines(1). Also putting pressure on balance sheets: inflation, supply chain dislocations, cybersecurity pressures and drug costs. Even as elective volumes recover, Moody’s predicts these organizations could struggle to grow revenue given the continued shift toward lower-cost settings, a declining payer mix—with more people moving from commercial insurance to Medicare—and an inability to meet demand due to labor constraints. These are just some of the reasons why Moody’s issued a negative outlook for healthcare for the second consecutive year.

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Fitch Ratings (“Fitch”), meanwhile, issued a neutral outlook for the healthcare sector, a change from its stable forecast for 2021(2). Strong balance sheets could help absorb the blow of rising labor costs and supply chain expenses, while in some markets, population growth and strengthening economies could help build scale, diversify services, and reduce risk. S&P Global Ratings (“S&P”) predicts a stable outlook for the sector in 2022, an upgrade from the negative outlook issued for 2021(3). It’s a view based in part on healthy balance sheets, effective leadership, the use of data and technology to manage challenges, rising demand for services, and improved revenue yield combined with remaining stimulus funds and FEMA support through 2022. Although investment market volatility may adversely impact credits, high cash levels and low debt will help offset any temporary operational weakness, S&P predicts, while low interest rates and good access to capital continue to benefit healthcare systems.

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Despite the differing rating agency outlooks, what is clear is that the ways in which healthcare organizations respond to near-term challenges hold strong potential to affect revenue, credit quality, and their ability to meet consumers’ needs. According to S&P, weaker organizations may be at a heightened risk if they are unable to make the strategic and capital investments necessary to maintain viability and a strong market position.

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5 Near-Term Themes

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Here are five near-term themes driving healthcare in 2022, based on a survey of “Leading Health Systems” presented February 2022 by the Health Management Academy (“HMA”)(4). Leading Health Systems include the Top 100 Hospitals and Health Systems across the nation.

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1. Workforce challenges. Consistent with the rating agencies’ perspectives, struggles to retain and recruit healthcare professionals of all types will continue to be a growth limiter for the Leading Health Systems surveyed by HMA. They are also a margin depressant—with contract labor costs averaging $4.59 million per hospital(5) in 2021, higher recruiting and training costs, and increased compensation and benefits costs to hold onto existing staff—and the area of highest concern for healthcare leaders. While Moody’s projected higher-than-usual staff turnover due to burnout rates in late 2020, the extent to which the Great Resignation affected healthcare staffing at every level is just beginning to be understood.​

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As the pressures of working in a COVID-19 environment begin to subside, now is the time to build an organization’s workforce pipeline and explore new opportunities to ease stress on healthcare staff. These opportunities include:

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• Investing in data-driven workforce planning tools to optimize staffing as elective procedure volumes increase

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• Reimagining how clinical and nonclinical areas could be staffed, such as with a mix of full-time employees, travel or gig workers, and tech-enabled work—a triumvirate that could create improved quality, enhance staff loyalty, and increase access

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• Exploring opportunities for increased workforce flexibility, from scheduling to role scope, skill mix/ratios, career pathing, on-demand training, or an in-house agency within the organization

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• Developing a strategy for “cognitive load reduction” through automation—including robotic process automation—to enable staff to work at the top of their skillset 

 

In addition, just as S&P predicted that operating controls—"especially innovative ways to contain expenses and find broader efficiencies in clinical care”—would be essential to controlling both labor expenses and burnout, such controls will be vital to supporting workforce health and margin recovery in 2022.

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2. Consumer engagement. Ramping up consumer engagement is the second-highest priority for healthcare leaders, according to the HMA survey. Many systems are exploring omnichannel communications to appeal to consumers based on generational preferences and the need to “meet patients where they are”— specifically, via their mobile phone. There is also a strong desire to consolidate the many applications needed to provide a well-rounded digital health and communications approach into a single platform. In the area of telehealth alone, a Fall 2021 survey(6) by Amwell/HIMSS found most health systems use three to four platforms, on average, to provide virtual care. This is a consequence of ramping up access to digital health quickly—often, within two weeks or less—at the start of the pandemic, when access to in-person care was suddenly and severely limited.