FIU Business Now Magazine - Fall 2021
The New Business of Healthcare: COVID-19 Created Major Changes; Many Will Endure

The New Business of Healthcare: COVID-19 Created Major Changes; Many Will Endure

By Karen-Janine Cohen

Healthcare might have accessed the same digital and AI technology that transformed banking, shopping and working in the last decade. But the software options — expensive, fragmented and subject to regulation — were not easy to adopt. And there seemed to be no compelling reason to hurry.

Then COVID-19 forced doctors, hospitals and patients to innovate and employ technology to maintain patient contact while scrambling to modify a business model heavily dependent on in-person visits. Now those changes are remodeling the business of healthcare.

Healthcare mergers and acquisitions, already happening at a swift pace, have increased. During the pandemic, some doctors had to close private practices, and were happy to join a hospital-based group. Hospitals themselves, seeking economies of scale, continue to buy up competitors. Others seeing their businesses surge include technology companies that facilitate remote interaction between healthcare workers and patients.

"CMS [Centers for Medicare & Medicaid Services] reported an 11,000% increase in virtual appointments during the pandemic," said Miriam Weismann, academic director of the Healthcare MBA program at FIU Business, noting that in the first three months, Medicare primary care visits over telehealth platforms increased by more than 43%.

All those telehealth patients were not making in-person visits to hospitals and doctors. "The hospitals lost the income from discretionary surgeries, a substantial part of hospital revenue, due to COVID-19," Weismann said.

Mammograms, knee replacements, face lifts, primary care and specialist visits evaporated, depriving hospitals and doctors of their largest revenue stream. The fallout has created a supercharged mergers and acquisitions trend that was already fierce in the last decade. Meanwhile, the sector began attracting a surge of new capital, said Eli Karlin (MBA '15), chief investment officer at Flagler Healthcare Investments, which specializes in buying hospitals and medical office buildings either in concert with providers or as investments.


Eli Karlin

"Prior to the pandemic, [healthcare] real estate was seen as an alternative investment," he said. But as the pandemic went on, institutional investors realized that unlike retail, hospitality and manufacturing, healthcare was resilient. This means, he noted, the sector is awash in capital.

Doctors are now more willing to join syndicates or hospital-owned groups, and not just because of daunting malpractice insurance costs. "It's also a cultural thing," Karlin said. "My cohort is not willing to work outside nine-to-five, and hospitals see this."

To achieve economies of scale, hospitals are opening their own trauma centers or acquiring other hospitals within a region and designating specialties for each. For example, one hospital might be a cancer center, another dedicated to orthopedics. "It's an alternative business model, and it seems to be working," noted Weismann.

Indeed, the pace of mergers and acquisitions is only expected to quicken throughout 2021, according to an April report by Moody's Investors Service. Larger health systems aim to increase market share through acquisitions, while smaller providers are looking to add clinical specialties and financial resources, and to change and reduce labor, supply chain and IT costs, according to the study. In addition, a growing share of reimbursement coming from Medicare and Medicaid, which tend to pay less than commercial insurance, is putting economic pressure on healthcare systems and fueling the consolidation trend.

Beyond the Fitbit

They are all around us: computers, smart phones, and sensory surveillance devices like smart watches. During COVID-19, providers — with state and federal assistance — began to seriously enlist such technology to connect with patients and monitor health.

"The technology existed before, it was just not being adopted. No one believed in it. It was too difficult and was perceived to have security and privacy issues," said Lina Bouayad, associate professor of information systems and business analytics at FIU Business.

Some of the products people may be familiar with include:

  • Pulse oximeters, which became popular during COVID-19 as for some patients, oxygenation decreased well before they felt distress. Now, apps can let healthcare providers access that information.
  • Remote cardiac monitors, which help those with implanted pacemakers. While doctors could long download information from the device during a visit, Bluetooth technology allows access from the patient's home in real time.
  • Continuous glucose monitoring, which tracks blood sugar levels and can transmit results to others, such as parents of diabetic children, or health care providers.
  • Fitness trackers, like smart watches, which collect data but do not yet connect to providers, and can't be used in formal diagnostic and treatment. They may gain such functionality as technology matures.

Pulling this together are portals – secure online sites that allow two-way communication. These third-party software options, being snapped up by doctors, have cloud storage and a customizable menu offering, for example, lab results, referrals and prescriptions.

States and Feds Smooth the Path

Little would have happened in telehealth without states and the federal government making regulatory changes as the scope of the pandemic became clear. "We are talking about a suspension of limitations," said Weismann.

In March of 2020, Florida's surgeon general allowed out-of-state doctors to provide telehealth services, reversing the typical rule whereby doctors only practice in the states in which they are licensed. Even more consequential, Medicare and Medicaid agreed to compensate virtual doctor visits in the same way it paid for in-person visits, a stance long desired by doctors' lobbies and soon followed by private health insurance. It's uncertain whether these changes will persist, and they're subject to both the regulatory climate and the extent to which the coronavirus remains in the population.

Weismann noted that while telehealth has advanced slowly in the U.S. compared to other advanced nations with a single payer system, it's here to stay.

"Telehealth, combined with home healthcare, is a very good option for the elderly," Weismann said. A hybrid model will likely develop with an in-person visit and a telehealth follow-up. "It was always believed that telehealth would decrease unnecessary medical costs and decrease the use of emergency departments as primary care service centers," she said.

Anyone with transportation or access issues will also likely continue to use telemedicine options, Weismann added. "Certainly, the disabled and those who live in rural areas in particular," will gravitate to telemedicine. Yet patients without computer access will continue to use emergency rooms, especially as the pandemic wanes.

New technology, same troubles

Ongoing challenges include privacy and fraud. In September of 2020, the U.S. Justice Department said that allegedly false and fraudulent telemedicine claims resulted in a $4.5 billion loss.

In many instances, people were persuaded to give up personal information used to bill for, among other things, sham telehealth visits.

"With telehealth fraud and abuse there is serious data mining, and patient privacy abuse," noted Weismann, who added that it remains to be seen whether the cost of fraud will cancel out telehealth's economic efficiencies.

Cybersecurity experts, including CISOs (chief information security officers) from two large Florida-based hospitals, are turning to behavioral research and analytics in order to confront the problem, said Bouayad. "It's about detecting the risk in human behavior," she explained. "Some people are more prone to click on malware links or use unsecure network connections." These types of analyses don't necessarily look at sensitive healthcare data, but analyze already available behavior information.

A Snapshot of Synergy

While traditional healthcare seeks to redefine its business models, some newer organizations that anticipated many of the trends accelerated by the pandemic are now reaping rewards.

Recognizing the importance of technology, Carlos de Solo (BBA '01), cofounder and CEO of South Florida-based CareMax, a chain of stand-alone medical clinics aimed at senior and underserved communities, integrated IT into the clinics' workings from the company's 2011 inception.

De Solo recognized that taking risk and receiving a monthly flat amount per patient – rather than the traditional fee for service – could lead to better outcomes and a thriving company by aligning the interests of the company and the patient. It is an approach encouraged by provisions in the Affordable Care Act, and de Solo said it proved itself during the pandemic. "Every time we spend money on preventative care, we save so much money on the back end," he said. "We really close the loop."


Carlos de Solo

In fact, noted de Solo, CareMax patients diagnosed with COVID-19 had 50% fewer hospitalizations and 50% fewer deaths compared to the general population. He attributes that to aggressive outreach, which included delivering computer tablets to patients' homes in order to support telemedicine. The company also put more information on its YouTube channel and Facebook Live to increase communication. "We had already been doing it, but we scaled it during the pandemic," he said. "We basically inverted the clinic inside-out."

CareMax has also capitalized on its data information system, CareOptimize, built along with the company from its beginning. The proprietary portal allows providers to access patient information from a variety of sources, including pharmacies and medical histories.

De Solo sees how the challenges of the pandemic will lead to advancements in healthcare down the road. "What COVID-19 did was open up the public to be more open to using technology," he said. "From a community standpoint, we have seen a benefit, especially with the senior population."