2020 was an historical year in the health care industry with the global COVID-19 pandemic being the most impactful issue for most of the year. As we enter 2021, we are tracking the following issues which will have an impact on the health industry in North and South Carolina, and the rest of the country.
1. Continued Response to COVID-19 Including Roll Out of the Vaccine Strategy
The COVID-19 pandemic continues to have a major impact on the country and the number of cases continues to rise dramatically in North Carolina (NC) and South Carolina (SC). Both states have taken measures to slow the spread of the virus. NC has taken additional steps—the Governor of NC extended his modified stay at home order and the Secretary of the NC Department of Health and Human Services issued a directive encouraging North Carolinians to take individual action to curb the rapid spike in cases that have occurred since the Thanksgiving and Christmas holidays. Since the start of the COVID-19 pandemic through January 25, 2021, SC and NC have seen more than 421,000 and 723,000 total cases and 6,500 and 8,700 deaths, respectively (including probable cases and deaths).
Hospitals are expanding their vaccination efforts to the general public after vaccinating their workforces. SC recently expanded the types of health care providers who can administer the vaccines to include dentists, medical school students, and unlicensed providers who have certain certifications, and created an expedited process to authorize retired nurses, physicians and physician assistants to provide COVID-19 vaccinations. National pharmacy chains are rolling out expanded vaccination sites across both states. Both states are monitoring their access to vaccine supply and working on the logistics of doing mass vaccinations in the spring and summer.
We are also watching to see if the state and federal governments will roll back some of the deregulation put into place by the federal and state governments to combat the COVID-19 pandemic. It is expected that health care providers will push for some of this deregulation to be permanent.
2. Continued Growth of Shift from Volume-Based Care to Value-Based Care
We continue to read a lot about the need to shift the existing volume-based system where health care providers are paid for seeing more patients and providing more care to a value-based system where health care providers are paid for keeping people healthy. This value-based care model involves more preventative and proactive treatment strategies and requires more engagement and communication with the patient.
More hospitals and physicians are now open to exploring value-based care, and large payors like Blue Cross Blue Shield North Carolina and Blue Cross Blue Shield South Carolina are rolling out value-based products in their respective state and encouraging hospitals and physicians to participate in these programs. Most of these value-based arrangements allow providers to earn additional money through incentive goals for reaching certain quality and cost measures. The ultimate version of value-based care will include the concept of downside risk, where providers could receive less reimbursement if they do not achieve certain quality/cost metrics for certain patient populations. The majority of providers are still paid on a fee-for-service basis, which is a part of the volume-based reimbursement system, but there is a continued incremental trend toward value-based reimbursement.
Both states have seen a growth in the development of accountable care organizations (ACOs) and clinically integrated networks (CINs) which allow health care providers to participate in a larger organization with a focus on providing better quality with lower costs, which can then turn into higher reimbursement. ACOs and CINs are also being used more often under value-based programs. We expect this trend to continue.
3. Future of Certificate of Need Law
The certificate of need law is designed to act as a state regulatory framework for evaluating the need for expansion of health care facilities and services within a certain service area. For states that have certificate of need laws, a state health planning agency must approve major capital expenditures or development of covered services or facilities. The policy behind these laws is to control the rise in health care costs by guiding the establishment of services to best serve public needs while also reducing duplicative services for which there is no established need. Currently, 35 states operate some type of certificate of need process.
The balance between increasing access and avoiding duplication is precarious at best. In the Carolinas, the certificate of need laws have resulted in a great deal of administrative litigation over the health planning decisions made by the state agencies where health care providers, predominantly hospitals, dispute the need for projects sought by competitors within the same market. These appeals can significantly delay the implementation of projects that have been approved by the state agency and can be very expensive.
In recent years, both NC and SC have debated the need to reform or repeal certificate of need laws, and there have been reforms of the existing laws in both states (i.e., SC: S354 [2017]; NC: H512 [2018]). It is anticipated that new legislation will be filed in the NC General Assembly in 2021 that would repeal or reduce the scope of the existing certificate of need legislation, such proposed legislation already pre-filed in the SC House and Senate. We will need to watch this trend to see if these potential reforms or repeals gain traction and are debated, passed, and signed by those Governors.
4. Increased Focus and Funding on Public Health Initiatives
Because of the COVID-19 pandemic, there is an increased focus on the importance and benefits of public health. Based on the results and statistics to date, it appears that the entire country was not prepared for the scope of testing, contact tracing, and now a national vaccination effort which have been caused by the COVID-19 pandemic. Public health has not been a high profile concept in terms of policy, funding or education over the last several decades. Local health departments across the country lost more than 56,000 jobs since 2008, according to Trust for America’s Health, a non-partisan public health policy, research and advocacy organization. Per Trust for America’s Health, the United States spends $3.6 trillion each year on health care, but less than 3% of that goes to funding public health and prevention.
Because of the COVID-19 pandemic, it is anticipated that we will see a much higher visibility of public health in the media, increased funding, increased use of public health in education, an increase in public health jobs and an increase in collaboration between health care providers, public health officials and health care payors in the future.
5. Continued Growth of Use of Telehealth
One trend that has developed during the COVID -19 pandemic that will likely continue after the pandemic is behind us is the growth of the telehealth industry. The results of a national study conducted in May 2020 and commissioned by Change Healthcare, an independent health care technology company, found that 81% of consumers said “COVID-19 made telehealth an ‘indispensable part of the healthcare system,’ 65% said they plan to use telehealth more after the pandemic, and 78% said COVID-19 has shown how badly the U.S. needs more telehealth options.”
As an example of telehealth growth, according to a report by the Centers for Disease Control and Prevention (CDC), telehealth encounters during the first quarter of 2020, as compared to the first quarter of 2019, showed a 154% increase in visits. According to an infographic by FAIR Health, an independent nonprofit that manages the nation’s largest database of privately billed health insurance claims, the volume of telehealth claim lines from March 2019 to March 2020 increased by more than 4,000%.
There has also been an increase in the use of telehealth for behavioral health treatment. According to recent data from the Journal of General Internal Medicine, from mid-March until early May 2020, over 50% (30% by video) of those with a behavioral health condition used telehealth. Another overt sign that telehealth is primed for growth is the fact CMS has permanently expanded the number of telehealth services available to Medicare beneficiaries and enrollees, as of December 1, 2020.
Payors across SC and NC are utilizing telehealth technology to deliver care. With the advent of digital personalized medicine offerings, telehealth will continue to grow and so too, the demand for easy, quick, and cheap access to virtual health care increases at the consumer level.
6. Projected Continued Growth in Post-Acute Care Markets
SC’s Department on Aging describes SC’s growth in the state’s older population as a “Silver Tsunami” with the senior population expected to double by 2030. NC similarly projects its 65 and overpopulation to increase by 61% in the next two decades. As a result, the long-term care industry continues to grow in the Carolinas with the continued development and expansion of independent living, assisted living, and skilled nursing facilities. Although NC is not projecting a need for additional nursing home beds in the foreseeable future, SC projects it will need an additional 10,603 long-term care beds by 2022. Strong growth is also indicated in the home health and hospice industries, driven by the same projected population growth rates.
In addition, there has been a rapid growth in the independent and assisted living developments in SC and NC over the last decade. In SC, there are about 300 assisted living communities with a maximum capacity of about 12,300 beds, which have a total economic impact of about $580 million dollars, according to a fact sheet from National Center for Assisted Living (NCAL). In NC, there are about 900 assisted living communities with a maximum capacity of about 39,000 beds, which have a total economic impact of about $2.3 billion dollars, according to a fact sheet from NCAL.
7. Possible Increase in Antitrust and Fraud & Abuse Enforcement Activity under the Biden Administration
In light of the historical coronavirus relief efforts through the Coronavirus Aid, Relief, and Economic Securities (CARES) Act which provided $1.8 trillion in direct financial aid to individuals and businesses and direct allocation of stimulus funds ($175 billion) to hospitals and other health care providers by the Department of Health and Human Services (HHS), it is anticipated that there will be an increase in focus on the risk of fraud, waste and abuse associated with these relief dollars. The CARES Act created a special inspector general for pandemic recovery monitoring. It is anticipated that the Biden Department of Justice will prioritize pursuing investigations, including federal False Claims Act claims (FCA) alleging fraud on CARES Act programs.
It is also anticipated that as we come out of the COVID-19 pandemic there will be increased focus on FCA claims by the Biden Department of Justice. This would include claims related to the federal physician self-referral law (the Stark Law), federal Anti-Kickback statute violations and disputes about federal managed care and electronic health record fraud. President Biden will be appointing new U.S. Attorneys in NC and SC in 2021 and this could also potentially result in an increase and more aggressive prosecution of fraud and abuse enforcement based on who is appointed.
In addition, it is anticipated that the Federal Trade Commission (FTC) and Department of Justice under the Biden Administration will be more aggressive on antitrust enforcement. According to reporting in Reuters in regards to the Biden Administration’s aggressive posture, one of its sources described the aggressive posture as “[b]ring cases even if you’re going to lose.”
The FTC has already been active in analyzing potential hospital mergers and acquisitions by investigating and challenging hospital mergers or acquisitions in Tennessee and Pennsylvania in the last 12 months. The FTC has also recently analyzed transactions in the Carolinas.
Moreover, President Joe Biden has designated Rebecca Kelly Slaughter, an FTC Commissioner since May 2018, as Acting Chair of the FTC. Ms. Slaughter in prepared remarks to the Center for American Progress on May 14, 2019, indicated the FTC “should target some recently cleared, close-call hospital mergers, as well as hospital mergers that raised significant antitrust concerns but were shielded from antitrust scrutiny by COPA interventions. In addition, the FTC should consider conducting retrospectives of vertical health care provider mergers, such as hospital-physician transactions.” On January 13, 2021, the FTC voted 5-0 to approve issuing orders to six health insurance companies—(1) Aetna Inc.; (2) Anthem, Inc.; (3) Florida Blue; (4) Cigna Corporation; (5) Health Care Service Corporation; and (6) UnitedHealthcare—requiring them to submit information to the FTC that will allow the agency to study the effects of physician group and health care facility consolidation from 2015 through 2020.
8. Continued Growth of the Life Sciences Industry in the Carolinas
Life Sciences remains one of the fastest growing segments in SC’s and NC’s economy.
In SC, based on new data provided by SCBIO, there are now over 800 life sciences firms or related companies operating in the state that generate an economic impact of approximately $12 billion and have created tens of thousands of direct and indirect jobs. In addition, SCBIO reports the average salary for these SC life sciences jobs is almost $80,000. NC is home to 775 life sciences companies and almost 2,500 service providers that support the rapidly growing life sciences industry in the state, according to the N.C. Biotechnology Center (NC Biotech). According to a report prepared for NC Biotech, the NC life sciences industry directly employs more than 75,000 people for jobs that pay, on average, over $90,000 annually, which generates a total direct and indirect economic impact of more than $80 billion. The life sciences industries in both states provided strong support to respond to COVID-19 in 2020.
There is also growing national and regional support for creating domestic production capacity for a variety of health care related products including personal protective equipment (PPE) like masks and gowns in NC and SC to avoid future reliance on goods produced in other parts of the world, primarily in Asia. There is also growing support for reshoring the production of pharmaceuticals to domestic production sites located in the Carolinas.
9. Potential Licensure and Scope of Practice Issues
There is an increased focus on the proposed regulation of unlicensed health care professionals and potential expansion of the scope of practice for certain licensed health care professionals. The role of certified medical assistants (CMA) has been a source of concerns for several years in the Carolinas. Legislation is being proposed in SC that would regulate CMAs to formally clarify their scope of practice. This is coming at a time when there is a push by the health care industry to push clinical work down to the provider who can provide it for the lowest cost, which could replace certain types of licensed providers like license practical nurses (LPNs) and registered nurses (RNs). At the same time, it is anticipated that advanced practice registered nurses (APRNs), certified registered nurse anesthetists (CRNAs), and physician assistants (PAs) may attempt to get legislation passed that expands the scope of practice for these licensed professionals to allow them to work more independently. Additionally, license portability will continue to be a topic of discussion in both states.
10. Increased Focus on Transparency
CMS has implemented new transparency rules effective January 1, 2021, that require hospitals across the country to publish certain rate information on their websites. The American Hospital Association challenged the legality of this Final Rule but lost at the district court and court of appeals level. Although the rule became effective on January 1, 2021, hospitals are still in the process of coming into compliance with this new rule. It will be interesting to see how aggressive CMS will be in enforcing this new rule, which carries potential civil monetary penalties of up to $300 per day. CMS has also proposed new rules for group health plans and insurers requiring these entities to publish information related to their costs and rates in 2021. It is anticipated that the payors will also challenge the proposed transparency rules that affect them. It is clear that transparency in pricing is a trend that is not going away.
This list does not presume to be an exhaustive list of all of the most important health care issues that will emerge in 2021, but this list includes the issues that we are currently following. Just like in 2020, there could be other unanticipated health care issues that emerge as having a significant impact on the industry like COVID did in 2020, but we think that it is helpful to start 2021 with a focus on these key health care issues.
