Can Health Care and Life Sciences Companies Thrive in a Post-COVID-19 World? | Deloitte US has been saved
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By Dan Ressler, principal, and Amy Kroll, principal, Risk and Financial Advisory, Deloitte & Touche LLP
There are still many unknowns related to the COVID-19 pandemic, but we are beginning to see some of the key challenges that organizations could face as they move past the immediate need of caring for COVID-19 patients. We see the road forward being broken into three overlapping phases that will likely unfold over time:
While it’s not possible to predict how long each phase will last, close monitoring and analysis of incoming data—along with measurement of consumer attitudes and actions—can be critical to formulating effective strategies in each phase and the process as a whole.
What are the top issues for health systems and health plans?
Financial planning is clearly one of the most immediate challenges given the significant drop in patient volume most health care providers have experienced. Along with costs related to caring for COVID-19 patients, hospitals, health systems, and provider groups have lost revenue from delayed non-urgent procedures. For many, the loss of revenue has been significant. Determining how to bring operations and delivery capabilities back is a complex and, at times, uncertain process. Moreover, it is unknown when or if consumers will be comfortable coming back into health care settings.
Financial uncertainty is also a major issue for health plans. If utilization doesn’t recover in 2020, they could be at risk for refunding premium dollars back to policyholders because of the Medical Loss Ratio provision included in the Affordable Care Act (ACA). Many health plan leaders are assessing how their payer mix will change, as David Biel and Jim Whisler noted in their blog on May 12.
Many employers are trying to extend worker benefits in a variety of ways, which means health plans might not see enrollment changes immediately. Another area of financial uncertainty lies in all the coverage mandates for COVID-19 diagnosis of and treatment, which health plans and employer-sponsored plans need to understand.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted March 27—and the subsequent Paycheck Protection Program and Health Care Enhancement Act, enacted April 24—offers some immediate relief to providers, as our colleague Anne Phelps outlined in her April 20 blog. But the federal stimulus packages are not a panacea. There are questions about how well funds will target organizations that have the greatest financial impact as well as whether there will be risks in documenting how the funds were spent and how to sort out the many sources of funds tapped during the crisis. Organizations should closely manage processes and oversight to avoid inadvertently double-dipping and should also monitor the use and integrity of funds over time.
On the regulatory side, many rules have been relaxed to respond to the recovery, but this likely will not last indefinitely. There are also overlapping state regulations, which can make the rules more difficult to understand.
In response to the pandemic, many health care organizations have accelerated their adoption and use of virtual care in ways that would have been hard to imagine a few months ago. As we move forward, risk acceptance and thresholds should be monitored in cyber, compliance, privacy, and consumer consent as we settle into the revised care-delivery and payment models that could be here to stay.
How about life sciences companies?
Life sciences companies are trying to financially muscle through the crisis. Many big pharma companies are global, well capitalized, and have been able to quickly adapt to remote work. But like health care organizations, they are trying to determine the long-term impact the crisis might have on their business. As our colleague Dawn Anderson noted in her April 16 blog, many clinical trials have been put on hold, and product launches have been delayed. Companies working to develop treatments, tests, and vaccines for COVID-19 may face financial risks if their products aren’t effective. Even successful innovators will likely face risks tied to their ability to scale and market products for people around the world, and they will likely need to navigate myriad rules and work with a wide range of government purchasers.
Medtech manufacturers that produce products used for non-urgent procedures could be experiencing a cash crunch. While it’s too soon to know how quickly the economy will rebound, we are trying to help our medtech clients understand the various ripple effects that are likely to have the most significant impact on their businesses. In an April 2 blog, our colleagues Glenn Snyder and Bill Murray outlined six ways medtech could respond, recover, and thrive.
After recovery, how will organizations thrive?
As the financial, economic, and public-health aspects of this crisis become clearer, we see several opportunities beginning to emerge.
For health care, the crisis probably has the potential to do more for virtual health care in a short period than all the consultants (with all their best PowerPoint decks) could have done over five years. Virtual care also can be an opportunity for life sciences companies to support adherence and to improve access to diagnosis and treatment. Virtual care is a great example of how new innovations can be unleashed in a time of crisis.
As health care and life sciences organizations emerge from the crisis, merger and acquisition activity will likely accelerate and become an important strategic tool. Organizations that weathered the crisis may refine and recast growth strategies given the impact the pandemic has on market and consumer trends. Many companies could be in position to identify weakened or strategic targets/partners that offer capabilities and assets that could help them respond to future demands. For example, we might see more physician practices transacted, or private equity companies might decide to sell some of the practices they had acquired before the crisis. Overall, many companies will want to shed assets or explore partnerships to firm up balance sheets.
Looking ahead: Getting from here to there
Despite the many devastating impacts of COVID-19, it does present the life sciences and health care sectors companies with a powerful opportunity to innovate at a quicker pace and, in some ways, reinvent themselves. We are advising our clients to plan for risk as they push forward. They should look for smart ways to assess and accept risks to continue to support agility and adoption of new ideas. Our advice is, don’t panic—plan for resilience.
Dan is the Life Sciences and Healthcare leader for Global Risk Advisory. He is also a principal in Deloitte Risk and Financial Advisory’s Life Sciences practice, serving as the US Advisory Life Sciences leader. With nearly 25 years of consulting experience in biopharmaceutical R&D, his experience includes capability strategy, complex delivery program leadership, tech integration, post-merger integration, global operating model design, and internal/external sourcing strategies. He has worked with large global pharmaceutical companies, mid-sized biotechs, academic medical research, and medical device companies.
Amy Kroll, Deloitte & Touche LLP, is a principal and the health care sector leader within Deloitte’s Risk and Financial Advisory practice. She has more than 20 years of experience assisting clients by improving their governance, operations, and risk management processes. She advises clients on integrated risk management strategies and assessment frameworks focused on effective risk management and efficient use of resources. Kroll holds a BSBA, management information systems, from the University of Minnesota Carlson School of Management. She is based in Minneapolis.