The Healthcare Dive Outlook on 2021

The coronavirus pandemic set in motion a cascade of changes in healthcare, and no sector was impacted more than digital health. The fledgling industry rapidly accelerated as COVID-19 changed technology helping patients receive care outside of the hospital or doctor's office into a necessity, instead of a luxury.

That acceleration has continued into 2021, and could even increase this year, experts say, creating a sea change in healthcare delivery and operations. Global healthcare industry revenues are expected to exceed $2.6 trillion by 2025, up from $2 trillion last year, with the majority of that growth propelled by artificial intelligence and telehealth, according to consultancy Frost & Sullivan.

Much of that growth could take place as the U.S. continues to grapple with the pandemic. As tech and data sharing becomes more pervasive, healthcare will likely pivot to become more predictive instead of reactive. Virtual care will continue to invade previously analogue modes of care delivery, giving rise to new modalities of care, and companies will invest more in cybersecurity as a result.

It's a time of historic volatility and few sure bets. But here's what experts are prepping for in digital health this year.

Healthcare continues to become more predictive

Healthcare will become more proactive as it moves toward being more predictive, according to Thomas Kiesau, director and digital health leader with advisory firm The Chartis Group.

Connected devices, both at the consumer level and clinical grade, will become more common, helping physicians get real-time data from patients to better monitor their health status, making interventions more "timely and more context-aware," Keisau said.

Along with greater proliferation of wearables, artificial intelligence is a key facet of this change. Proponents of the technology have long heralded AI with potential to transform healthcare functions, from clinical trials and drug discovery, to back-end administrative processes, to complex illness diagnosis.

Investment in AI has exploded of late. With the advent of the cloud, which allows organizations to ingest and analyze large amounts of data, AI could help drive major insights in care while saving the industry a lot of money. According to a 2019 Optum survey, senior health executives plan to spend almost $40 million over the next five years on AI-related projects, compared to an estimated $32.7 million in 2018.

However, industry could also see this year a greater backlash on algorithms, which were used in 2020 to prioritize vaccine distribution and resource allocation in hospitals hard hit by COVID-19. The widespread use of AI to choose who gets what at such a pivotal public health time has raised valid yet difficult questions about how machines make decisions, and whether their decisions are in the best interest of patient care.

In 2021, industry could see further oversight of AI for healthcare use cases, especially those in the exam room, to try to address these questions of data bias, difficulties in scaling algorithms to different settings, interpreting the AI decisionmaking process and addressing liability, among others.

"If an AI makes a mistake, who's liable for that?," said Karen Howard, the director of science, technology assessment and analytics for the Government Accountability Office, at a late January webinar on AI policymaking.

Scant days before the inauguration of President Joe Biden, the outgoing Trump administration created a new office to oversee AI research and policymaking, while the Food and Drug Administration released an action plan to improve oversight of AI in healthcare. The moves, though from a departed administration, could signal a desire in Washington to increase regulation of the nascent industry, though HHS also proposed in January permanently exempting a number of products using AI to diagnose illnesses on medical images from FDA review.

It's a thorny issue, and one that will likely get more play this year as predictive tools become more commonplace in the healthcare industry.

Telehealth continues to snowball

The virtual care industry saw unprecedented growth last year as the coronavirus pandemic led patients to look for avenues to access the healthcare system at home. Growth will likely continue if not accelerate in 2021, experts say, as virtual care options expand while integrating further with in-person care.

Automated screening, triage and routine care use cases will continue to move beyond simple urgent care and the prescription refills that used to characterize telehealth. This will be most evident in the areas of virtual diagnostics, patient-reported outcomes applications and digital homecare platforms, according to Avalere Principal Tim Epple.

"Healthcare will witness virtualization to a large extent," said Chandni Mathur, senior industry analyst at Frost & Sullivan, and "novel business models will emerge to support this paradigm shift."

Telehealth companies have already evolved beyond the direct-to-consumer models, with even some of the freshest startups inking coverage deals with major payers and employers and vendor partnerships with health systems, integrating into the traditional delivery ecosystem. Increased acceptance of virtual care could also result in more comprehensive value-based models, as payers and providers look to bundle the offering for specific patient populations, like end-to-end care for patients with chronic conditions, for example.

"Value-based payment models may create lasting financial incentives for virtual care," Nathan Markward, principal research scientist at Avalere, said.

Rampant telehealth adoption has been driven in large part by novel regulatory flexibilities, especially Medicare coverage, now temporary for the duration of the public health emergency. It's still unclear how many will outlast COVID-19, though proponents of the tech are banking that some level of increased access will remain. But the groundwork is laid for a broader, more pervasive change in healthcare delivery that will be hard to roll back, especially in 2021.

Virtual care will also continue to increase access and interest in previously niche fields, like women's health and telemental health. Last year was a banner year for both fields, with mental health seeing a record high of equity funding accelerating in the fourth quarter, and women's health companies reporting a record number of deals, according to CB Insights. Both fields also reported a strong number of early stage deals in the fourth quarter, suggesting the industry is poised for further snowballing even after the pandemic comes under control.

As dollars continue to flow into the sectors this year, more startups will crop up and existing players will turn increasingly to M&A in a bid to claim larger market share.

​"The consolidation we saw in mental health during 2020 will continue into next year but I think we'll see new trends appear too," Trip Hofer, CEO of virtual behavioral health startup AbleTo, said. "There's such a proliferation of investment dollars in the market that we can expect to see some organizations come and go if they don't produce the expected returns."

With rising technology, hospital at home will become more of a reality, too. New non-clinical sites of care will crop up, further accelerating a trend made into a necessity by COVID-19, though it doesn't sound the death knell for hospital-based acute care for high-acuity cases, Chartis Group's Kiesau said.

Just as providers look to invest in health tech to cost costs and reach patients at home, telemedicine companies could even look to acquire in-person care assets, including primary care practices, ambulatory surgery centers and more to smooth the online-offline handoff in areas with high patient densities, predicts Nikhil Krishnan, founder of health newsletter Out-Of-Pocket.

"Telemedicine companies will race to build the online-offline handoff faster than hospitals can build telemedicine workflows," Krishnan said.

As data is freed, cybersecurity becomes paramount

As a result of increased tech use and data sharing, along with the vaccine rollout effort and continuation of remote work, cybersecurity will become more of a focal point for healthcare companies in 2021, experts predict.

Over the past three years, the fourth quarter of 2020 was the second-biggest funding quarter to health cybersecurity companies, according to CB Insights. Reported data breaches in the U.S. healthcare sector increased by almost three times last year, per HHS data, with malicious actors targeting industry as it struggled to respond to COVID-19.

These worries carry into 2021, especially as the U.S. races to strengthen the vulnerable vaccine supply chain, according to Experian researchers. Additionally, the majority of COVID-19 contact tracing apps, meant to track and minimize the spread of the virus that need widespread use to be effective, don't employ sufficient security protections, making it easy for hackers to gain access to private information.

Attackers could look to the vaccine to conduct a massive phishing effort in 2021, as the public looks for information and updates on distribution, predicts James Carder, chief security officer for security company LogRhythm.

The rise of telehealth has also led to more cyberattacks. Telehealth providers reported a huge increase in targeted attacks last year as adoption skyrocketed, including a 30% increase in cybersecurity findings per domain, according to Security Scorecard.

And healthcare is still reeling from the massive ransomware attack on major hospital operator UHS in September, which brought the IT systems of all its 400 U.S. facilities down. The hospitals were forced to divert ambulances to other sites and fall back on backup paper operations, delaying test results and complicating needed care, though UHS said no patients were affected.

Heightened investment in cybersecurity also makes sense as two new HHS regulations meant to nudge the industry toward interoperability are taking effect in April. They will result in health data being shared more broadly, raising significant privacy and security concerns. Additionally, Trump administration regulatory rollbacks finalized in late 2020 include provisions allowing providers, including hospitals, to share cybersecurity software with one another, meaning the proliferation of such tech safeguards among physicians is likely to increase in 2021.

A year since COVID-19 hit U.S. shores, the pandemic is still raging as deaths and cases strain hospital resources. 

Amid the scrambling, however, providers and payers are adjusting to a new normal likely to continue for months if not beyond. Though arrival of vaccines has prompted hope, the rollout has been slow and fragmented, left up to each state to decide how to disseminate the shots. 

And the deadly pandemic has spurred historic job losses and economic upheaval, which will have lingering effects on the health sector for some time.

These factors have accelerated moves to value-based care and led some providers to inquire about partnering or acquiring insurance assets as the pandemic exposed the risk of relying on fee-for-service models. At the same time, consumers are likely to seek continued access to telehealth, made widely available as an alternative to in-person care.

The pandemic also served as a grim reminder of the stark health inequities that exist in the U.S., as the novel coronavirus has disproportionately infected and killed people of color. Healthcare executives will attempt to close gaps.     

As President Joe Biden takes the helm of the federal government, Democrats will control the White House and Congress. But even with control of the Hill, experts don't expect sweeping healthcare legislation to pass due to the razor-thin margins in the Senate, competing priorities and other factors.

Here are four big trends that will be likely to play out in 2021.

Accelerating value-based arrangements and insurer partnerships

Providers — especially those heavily reliant on fee-for-service reimbursement — were walloped last year when they were forced to halt services to help stem the spread of the virus. 

Though, if there is an upside, it may have given the extra push providers need to jump into more value-based payment arrangements, a move many hope will ultimately curb health spending in the U.S. as payers reimburse for improved outcomes as opposed to volume. 

"One of the greatest ironies in all this is that because of COVID-19, people are realizing that there's just as much — if not more — risk in staying in an antiquated, fee-for-service model than there is in embracing an alternative," Rita Numerof, president of Numerof and Associates, said.

At the same time, as a result of the challenges from the pandemic, health systems have openly acknowledged they are on the hunt for health insurer deals and partnerships.

A recent report from consultancy firm Kaufman Hall echoes that sentiment, noting it expects a drive in payer-provider partnerships as a result of the pandemic.

And other health leaders have touted the benefits of being a fully-integrated health system as it provided them a diversified revenue stream to weather the pandemic.  

The shift toward value will force providers to move further upstream, experts said, focusing more on how to keep patients healthy and less on sick care.

"We are going to get to the point where people are going to ask questions about, 'well, it's great that you took care of that patient and what they needed when they came in. But, you know ... what could you have done to prevent that patient from coming in, in the first place?'" Anu Singh, managing director and the leader of the mergers, acquisitions and partnerships practice at Kaufman Hall, said.

Payer shift, erosion in commercial plans

The pandemic spurred historic and staggering job losses, a concerning outcome for a nation whose workers tend to rely on their employers for health insurance coverage. 

Not every job resulted in a loss of coverage as some employers furloughed workers so they (and their dependents) could maintain insurance amid a global pandemic. But early estimates show that as many as 14.6 million may have lost insurance coverage. Some experts expect it will be the greatest loss of coverage ever recorded.

As such, provider executives are bracing for an increase in Medicaid and self-pay patients over the next year. A rise in these types of patients will likely pose a financial strain for providers that prize patients with commercial coverage due to the higher reimbursement rates compared with government programs.

At the same time, as more people lose coverage and turn to programs such as Medicaid, states will see their rolls grow at a time when state budgets are strapped, putting pressure on lawmakers to reduce spending in this area. 

For some payers, like Molina and Centene, that dynamic will be a tailwind as their core business is selling Medicaid and marketplace coverage. At the same time, states have suspended redeterminations, halting kicking Medicaid members off the program during the pandemic, which has led to continued growth for these payers. 

"Suspension of redetermination is a real catalyst for membership growth," Molina CEO Joe Zubretsky said during the annual J.P. Morgan conference last week. The payer added 100,000 Medicaid members in the fourth quarter as a result.

But for other insurers like UnitedHealthcare and Anthem, the trend threatens to erode their large commercial bases.   

UnitedHealthcare did experience a decline in its commercial base during the fourth quarter, though it was a smaller dip compared with previous quarters last year. 

Early January membership tallies are "supportive of positive commercial growth in 2021," UnitedHealth CFO John Rex told investors Wednesday.

On the other hand, the cost of claims are likely to rise as patients return for care they put off, potentially sicker due to deferring care. For insurers, that means spending more on care, but the question is by how much.

Continued focus on telehealth

The pandemic resulted in a surge of telehealth appointments as doctors, health systems and patients were either forced to curb in-person interactions or opted for online meetings amid the worsening pandemic. 

Many in the industry have acknowledged it will be hard to dial back this offering after ushering in such prolific access for patients, many of whom crave easier and speedy access to appointments.

CommonSpirit, one of the nation's largest health systems, conducted more than one million virtual visits in 2020, according to CEO Lloyd Dean. To put that into context, CommonSpirit recorded 1.5 million adjusted admissions, nearly 3.7 million ER visits, and 24.4 million outpatient visits during its latest fiscal year ended June 30.   

However, experts worry these types of visits could lead to overuse and an accompanying explosion in costs, especially for public programs like Medicare, which already faces financing challenges in the near-term. 

Members of the influential advisory committee overseeing Medicare have openly expressed such concerns as they help shape future payment policies around telehealth.

"Demand for telehealth likely will remain above pre-pandemic utilization levels as consumers recognize the convenience of digital services; health systems will need to adapt to a new balance between virtual and in-person visits," consultancy Kaufman Hall said in one of its latest reports. 

Tackling inequity

The global pandemic has further exposed the deep inequities in the nation's healthcare system as people of color are dying at higher rates than their White counterparts. 

It has forced a reckoning in the healthcare industry. 

Leaders from some of the nation's largest health systems vowed to do their part to improve health outcomes, particularly in more vulnerable communities. 

Dean said deep-rooted disparities and racial inequities continue to prevent millions from accessing healthcare. It's why his organization has pledged to improve training opportunities for Black physicians while at the same time improving access to Black physicians. 

To achieve this, CommonSpirit recently announced a 10-year, $100 million partnership with Morehouse School of Medicine, a historically black college.   

"People must have access to health care ... the system must achieve more equitable and sustainable outcomes," Dean, one of the few Black CEOs leading a large health system, said at J.P. Morgan's recent conference.

Salt Lake City, Utah-based Intermountain Healthcare also pledged to tackle issues of inequity. 

CEO Marc Harrison said about 2% of the organization's investments are now funneled toward "social impact investing," which has so far resulted in the creation of 500 affordable housing units. 

Even U.S. News and World Report — the outlet well known for ranking the nation's hospitals — is vowing to measure hospital performance on health equity by focusing on access, outcomes and social determinants of health. Ben Harder, managing editor and chief of health analysis for the outlet, said, "lack of equity is the problematic reality of American healthcare," and acknowledged the task is far from easy. 

Even with Democrats' surprise flipping of the Senate, enacting big healthcare policies in Congress will be a heavy lift given the razor-thin margin in that body and division within the party on strategy.

A clearer path for incoming president Joe Biden is to focus on reversing policies enacted by President Donald Trump at the executive level. Trump's tenure has been defined in large part by a chipping away at key tenets of the Affordable Care Act, curtailing the Medicaid program and sweeping deregulations critics allege harm consumer protections.

The nearest-term actions the incoming administration is likely to take will center on bolstering the landmark health law and Medicaid, both of which has drawn more bipartisan backing in recent years. Below are what the Biden health administration is likely to roll back quickly after inauguration Wednesday.

Boosting Affordable Care Act marketplace

One of Biden's first moves may be to open a special enrollment period to sign up for coverage during COVID-19, combined with more outreach and enrollment assistance, Cynthia Cox, director of the ACA program at the Kaiser Family Foundation, said.

Beyond COVID-19, it's likely the Biden administration will restore federal spending on navigation, marketing and outreach for exchange plans. For example, the Trump administration reduced the minimum number of navigator programs in each state using the federal marketplace to one. Biden could return it to two, and might also bring back the requirement that navigators have a physical presence in their service area.

Biden is also likely to unilaterally shore up standards for brokers, and take steps to bolster the exchange website healthcare.gov.

The Trump administration in December proposed a rule encouraging states to privatize their health insurance marketplaces instead of using healthcare.gov, which will make it more difficult for consumers to shop between plans and could divert people to subpar coverage, Tara Straw, senior policy analyst at the Center on Budget and Policy Priorities, wrote in a December blog post.

The rule doubles down on the administration's approval of a Georgia waiver to privatize its marketplace in November, but would allow states to follow suit and rely entirely on third-party brokers without a waiver.

That rule is not yet final, so Biden's HHS will likely remove it from the Federal Register to avoid fragmenting marketplace functions.

Biden could also beef up consumer protections and standards for web brokers, which also sell skimpy short-term health insurance and other non-ACA-compliant coverage.

Biden is also likely to re-expand the annual enrollment period. In 2017, the Trump administration shortened the annual enrollment period to 45 days. Biden's HHS could use rulemaking to return that period to three full months.

The incoming administration could also reverse previous CMS guidance on Section 1332 waivers that let states subvert or sidestep ACA protections on coverage and cost. The Trump administration proposed a rule in November to codify the waiver standards in regulation but — despite a recent wave of proposed and final regulations as the Trump administration hustles to preserve its health agenda — the rule has not yet been finalized, so HHS could remove it from the Federal Register as well.

By nixing the rule, Biden could also help reverse Trump administration cuts from 2018 that slashed user fees on healthcare.gov plans. The November proposed rule would further decimate the fees, which finance a large swath of marketplace operating expenses, to 2.25% in 2022, versus 3% in 2021 and 3.5% last year.

One key tenet of Biden's health agenda is to expand ACA subsidies to more low-income Americans, something he can't do without Congress. However, Biden could use administrative processes to reverse a Trump-era method for indexing marketplace subsidies that kicked in for the 2020 plan year, which led to a small reduction in the financial aid.

Dialing back short-term and association health plans

Biden's HHS could also roll back the controversial expansion of short-term health plans, bare-bones coverage that isn't required to cover the 10 essential health benefits under the ACA.

Short-term plans were created as inexpensive stop-gap insurance that could last for up to three months, giving consumers peace of mind while they shopped more comprehensive coverage. However, in 2018, the Trump administration expanded the duration of the plans to 12 months, with a three-year renewal period, and also allowed all consumers — not just those who couldn't afford other options — to purchase them.

HHS touted the expansion as giving consumers more options, while noting they weren't meant for everyone. A yearlong investigation by House Democrats found the plans widely discriminate against women and people with pre-existing conditions, and had major coverage limitations leaving unwitting consumers susceptible to surprise medical bills.

The Biden administration could enact stricter limits against the sale of the plans. Through additional rulemaking, HHS could limit future enrollment or make it harder to renew short-term coverage, enact stronger consumer protections or beef up standards to limit their sale.

Though actions around limiting new people coming into the plans are likely, Biden may wait to see if Congress takes up the issue, experts say.

A growing number of Americans in the individual healthcare market have subscribed the inexpensive coverage amid skyrocketing medical costs. Roughly 3 million consumers bought the plans in 2019, a 27% growth from 2018, the investigation found. The explosive growth in use makes it a bit less likely Biden's HHS would pursue immediate, unilateral movement in the space, for fear of kicking Americans off their coverage.

Biden could also reverse Trump's regulatory changes that have been friendly to association health plans, which allow small businesses or groups to band together to offer coverage. Though the ACA enhanced oversight of the coverage, the Trump administration in June 2018 issued a rule exempting them from rules regulating individual and small-group employer coverage.

As a result, association health plans were allowed to exclude or charge more on the basis of gender, age or other factors.

A federal court invalidated the rule later that year, and some states took legislative or regulatory actions to discourage the use of association health plans. However, the plans — which cover an estimated 3 million Americans — are still not required to cover all essential health benefits, making them a likely target for the Biden administration.

"It is something that we're going to see some action on pretty soon, but it's challenging. You don't want to take those plans away from people, especially during a pandemic," Cox said.

Expanding Medicaid coverage, eligibility

The Trump administration has given red states new avenues to constrict their Medicaid programs, which provide safety-net health insurance to some 75 million Americans.

Biden will likely first revise state demonstration waiver policies to expand coverage. Among other measures, Biden could get rid of past CMS guidance allowing states to play with Medicaid eligibility through work requirements, controversial programs tying coverage eligibility to work or volunteering hours, and to cap program funding.

Tennessee this month became the first state to receive a federal green light to convert its Medicaid funding to a block grant, following controversial CMS guidance issued early last year. Republicans tout block grants as a way to lower costs, while Democrats oppose the models as capped funding could lead to restricted benefits down the line, especially during times of emergency like a pandemic or natural disaster.

It's more difficult to roll back a waiver if it's already been approved, but Biden could put restrictions on it or reverse the decision before it goes into effect, experts say, though Tennessee would have an opportunity to object.

There are also actions Biden could take to reinstate certain beneficiary protections, which would require regulatory changes, KFF researchers say. Those include revising or stopping pending proposals that would change how Medicaid eligibility is determined in a way that would probably result in previously eligible people losing coverage by enacting more documentation requirements; change the government's methodology for recouping improper payments; and reduce enhanced federal funding for eligibility workers.

Biden's administration could also tweak regulations that have already been finalized, including the final Medicaid managed care rule for 2020 that relaxed network adequacy, beneficiary protections and quality oversight.