Hartford Business Journal

24 HARTFORDBUSINESS.COM | JANUARY 9, 2023 INDUSTRY OUTLOOK | HEALTH CARE Jeff Flaks is the CEO and president of Hartford HealthCare. HBJ PHOTO | GARY LEWIS Hospitals, other providers face financial headwinds, pressure to rein in healthcare costs By Robert Storace rstorace@hartfordbusiness.com T he healthcare industry often changes at a slow pace, and one issue that remains a prob- lem is workforce shortages. Burnout — driven by the pandem- ic's strain on hospitals and other care providers — has caused physicians and nurses to leave the profession. According to the Association of Medical Colleges, the U.S. could be short 48,000 primary care physicians by 2034. And, according to the American Medical Association, one-fifth of the doctors in a 2022 survey said they will likely leave their current practice within the next 24 months, while one- third of doctors intend to reduce their work hours within the next year. Filling open positions will be among the key challenges faced by the healthcare sector in 2023, in addition to a challenging financial environ- ment, industry leaders said. While Connecticut hospitals saw substantial revenue gains in 2021, last year proved to be more challenging as federal pandemic relief diminished, patient volumes remained sluggish and workforce shortages and inflation caused finan- cial headaches. The Hartford Business Journal recently asked four top healthcare leaders what key trends will impact the local industry in 2023. They included Kurt Barwis, president and CEO of Bristol Health, which oversees Bristol Hospital; Jeffrey Flaks, president and CEO of Hartford HealthCare; Roberta Wachtelhausen, pres- ident of WellSpark Health; and David Hass, president of the Connecticut State Medical Society. Here are the top healthcare trends to watch in 2023. Physician availability In 2023, experts believe Connecti- cut will continue to see a decrease in the number of physicians across all areas of clinical practice. It's an issue of concern for the Connecticut State Medical Society, which represents and lobbies for Connecticut doctors. "These shortages are and will con- tinue to be particularly evident within the disciplines of psychiatry and primary care," Hass said. Connecticut has struggled for some time to attract and keep physicians, Hass said, noting that the state ranks 47th in the country in retaining physi- cians it trains. Why? There are several factors, Hass said, causing doctors to leave, including Connecticut's high cost of living, burdensome malpractice standards and limited loan forgive- ness programs. Private equity's influence A 2019 study by the Physician's Advocacy Institute (PAI) found that 20.2% of physician practices in Con- necticut partnered with a corporate investor, including a private equity firm or insurer. By 2022, that number had increased to 25%. It's likely the trend will continue as the industry's con- solidation wave remains active, and aging, independent doctors increas- ingly reach retirement age and look for a buyer for their practice. While Hass said there can be pos- itive aspects to private equity invest- ments in physician practices, there are also concerns. "The overarching concern is the prioritization of corporate profits over the quality of medical care provided," Hass said. As the state continues to expe- rience a decline in independent physician practices, Hass said: "We will inevitably see further injection of private equity funding, as physicians are faced with the options of closing a practice, joining a larger healthcare system, or accepting an equity infu- sion from private equity." Financial challenges Hospital executives said they are experiencing significant financial headwinds as reimbursements from government and commercial insurance payers haven't kept up with rising costs, leading to financial losses for some, including large health systems and small indepen- dent care providers. Meanwhile, insurers have pointed the finger at hospitals, pharmaceu- tical companies and others for the rising cost of care that has led to higher premiums for employers and individuals. In September, Connecticut health insurers received approval from state regulators to increase their 2023 fully insured rates 20.4% across individual plans and 14.8% across small group policies. Connecticut Insurance Depart- ment Commissioner Andrew Mais blamed the "skyrocketing cost of health care" for the increases. There's also been turmoil in the small group insurance market, as two major insurers — ConnectiCare and Harvard Pilgrim Health Care — last year announced plans to stop selling small group fully insured policies, leaving only a handful of competitors remaining. Among the challenges hospitals face, Barwis said, are revenue losses from the evaporation of fed- eral COVID-relief funds and patient demand for certain services still not returning to pre-pandemic levels. Rising costs from wage increases and supply chain issues have also impacted hospital bottom lines, he said. "Predicting, budgeting and plan- ning for 2023 is beyond difficult for hospitals and health systems," Barwis said. "The negative financial trend for smaller independent sys- tems will continue in 2023." Barwis' hospital felt the effects of the pandemic and inflation in 2022, eliminating 31 positions in June. Bristol Hospital's executive team also took a voluntary 8% salary reduction. Layoffs hit the biggest systems as well. Yale New Haven Health announced in September that it cut 155 management jobs amid a projected $250-million fiscal year 2022 deficit. Transforming the payment model For decades, payment for health- care services has been based almost entirely on volume — a "fee-for-ser- vice" model that many have blamed for rising care costs. Some Connecticut healthcare leaders have advocated shifting to a model that rewards quality care at the lowest possible price. Getting there has been a chal- lenge because it requires greater risk sharing between insurers and care providers, spurring contract negotia- tions that can become contentious. "Basing healthcare payment on value, not volume, requires a willingness to disrupt traditional hospital-based care," said Hartford HealthCare's Flaks. "It demands an infrastructure that creates less costly, appropriate access through ambulatory surgery centers, outpa- tient imaging centers and urgent care options. And, it means embracing alternative payment models that David J. Hass Kurt A. Barwis

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