by Jordan Roberts
Former Director of Government Affairs, John Locke Foundation
In part one of this research update series on supply and demand shocks in health care, I used a study from FAIR Health regarding hospital revenue and utilization to examine the impact COVID-19 had on normal hospital operations. The results of the study showed that utilization and revenue dropped nationally throughout March.
One of the results of such low utilization and revenue among hospitals is an increased possibility of hospital mergers and acquisitions. I believe that with the prolonged impact of COVID-19 on the health care system, there will be more mergers among large hospitals and more acquisitions of smaller hospitals by larger systems. As I discussed in part one, hospital mergers and acquisitions usually make patients worse off in terms of cost and quality of health care.
But hospitals aren’t the only health care providers affected by supply and demand shocks of the COVID-19 pandemic. Non-hospital providers such a primary care doctors, dermatologists, and orthopedists were negatively impacted as well. Like hospitals, these providers were hit by supply and demand shocks, which are likely to have lasting impacts on the future operation of these practices.
Another FAIR Health study that focused on non-hospital specialty care illustrates a snapshot of the impact of COVID-19 on these providers. Examining the claims among these providers offers a picture of an even more dramatic drop in revenue and utilization among these specialty providers across the nation.
Changes in Non-Hospital Providers
The FAIR Health study regarding non-hospital providers drew on claims data from January to April 2020 and compared it to the same period in 2019. Non-hospital providers include all specialty health care professionals who are not employed by a hospital. Here are some of the findings from the report:
Implications for the Future
Decreased utilization and revenue during March and April have similar implications for specialty care as they do for hospitals. As practices lose revenue, larger hospital systems will attempt to acquire these specialty practices. Financial incentives exist for hospital systems to have as many specialists in their referral network. This is one reason why prices tend to rise following mergers and acquisitions among provider practices.
Another long-term impact of reduced utilization is poorer health outcomes. As the utilization of regular services such as primary care drops, fewer individuals are getting the treatment they need. This applies to other specialty practices as well. Medical issues that are treated by professionals like orthopedics and oral surgeons typically can become much worse if not addressed in its early stages. With such a reduction in these crucial specialties, one could reasonably assume health outcomes may get worse in the future than they otherwise would have been without plummeting utilization. This means that more preventable conditions may go untreated, therefore costing much more in the future than otherwise. The result is higher health care prices for everyone.
As I said in the first part of this research brief series, there seems to be compelling evidence that health care is facing both supply and demand shocks. The demand shock results from reduced consumer spending and a supply shock from fewer practices open, as well as a sense among consumers that the quality of care has diminished. Health care researchers and public health officials will need to take both of these factors into consideration as they look towards the future of health care because both are likely to have lasting effects.
While the two research updates in this series give us a glimpse of utilization and revenue in March and April among hospitals and other specialty providers, examining the macro impact on the health care system throughout the entire pandemic will be necessary for researchers going forward. Normal utilization of health care services isn’t likely to return anytime soon. Thus, there will need to be some changes in how large hospital systems and non-hospital provider practices conduct business.