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HUB International 2022 Outlook

Healthcare Industry

 

Stability, Creativity and Growth

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Returning to Equilibrium After a Difficult Year

With labor shortages, changes in the delivery of care and cyber security threats, healthcare will embrace new approaches to risk management and turn 2022 into a year of opportunity rather than survival.

Risks and opportunities abound

Risk management and insurance will be essential in 2022 as payment models, delivery of care and cyber security change — meaning enterprise risk management (ERM) will take on a new urgency to help manage risk and prioritize opportunities.

For providers who are prepared, 2022 will be a year of opportunity rather than survival.

The healthcare delivery model has been turned on its head, forcing providers to reassess risk management

As hopes for a quick end to the COVID-19 pandemic faded, the U.S. healthcare industry focused on its most pressing problems in 2021: an ongoing labor shortage, worker burnout, a surge in cybercrime and other seemingly intractable issues.

The result has been a delivery model turned on its head, causing a reassessment of how healthcare providers view and manage risk while providing quality care and a safe working environment. And because COVID-19 exacerbated the shortage of direct care professionals in 2021, routine safety measures may have been delayed. 

But forward-looking organizations that embrace an enterprise risk management strategy (ERM) will be best able to manage the issues that will dominate 2022. A holistic approach to risk can serve the organization like a holistic approach to health serves patients. 

Here's what to expect in the healthcare industry in 2022:

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An unexpected result of vaccine mandates will be a rise of workers’ compensation claims

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An unexpected result of vaccine mandates will be a rise of workers’ compensation claims

1. The healthcare labor shortage will not abate

If any industry needed “Help Wanted” signs, it's healthcare.

The industry has 550,000 fewer positions staffed since February 2020;1 the shortage is particularly acute in nursing, where 84% of hospitals identify the nursing shortage as their biggest challenge in dealing with COVID-19.2

Senior care is really struggling. In 2020, 94% of nursing homes and 81% of assisted living facilities reported employee shortages, and it only got worse in 2021.3 Vaccine hesitancy among healthcare workers could further squeeze labor markets as various vaccine mandates take effect.

Perhaps just as troubling: The mandates’ effect on labor may lead to a rise of workers’ compensation claims, as existing staff work longer hours to make up for employees who are no longer working (i.e., those who leave because they refused vaccination or have been burned out by stress). 

But healthcare providers are responding. For instance, a widespread embrace of mental health services in 2022 will help reduce burnout. Improved pay, benefits and working conditions can start to alleviate nursing shortages. 

This is where a holistic view of risk management comes into play; a strong base of workers has ripple effects across the enterprise, improving patient and employee safety, quality of care and employment liability risk. ERM can help devise solutions to labor shortages through directing providers where and how to invest in its employees.

1 Healthcare Finance, “Demand is high for healthcare workers while labor numbers stagnate,” May 12, 2021.
2 McKinsey & Company, “Increased workforce turnover and pressures straining provider operations,” August 19, 2021.
3 The 19th News, “Only 1 in 4 nursing homes are confident they can survive a year,” July 16, 2021.

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It doesn’t matter if the practice, hospital or senior care facility is large or small: Everybody is at risk of cyberattack

2. Cybercrime will get worse 

There’s no pleasant way of saying it: The wave of cybercrimes directed at the healthcare industry in 2021 will get worse in 2022. 

Ransomware, the practice of locking up provider and patient data until a ransom is paid, is an enormous issue in particular. Empowered by the pandemic, ransomware comprises nearly half of all cybercrimes against healthcare providers.4

And it doesn’t matter if the practice, hospital or senior care facility is large or small: Everybody is at risk.

In fact, it's been estimated that ransomware attacks quadrupled from 2017 to 2020 and will subsequently quintuple in 2021.5 Premiums on cyber policy renewals are rising 20% or more. Of course, that's for those organizations that can renew. Those that have made a previous cyber-related claim may not be able to renew at all.

Ransomware and cybercrime are threats that encompass all healthcare practices, whether it's hospital systems paying out millions in ransom or small practices forced to close. 

As a result, improved firewalls, multi-factor authentication, regular training and third-party vendor security audits won't be optional in 2022. These will be mandatory steps to ensure continued operations and patient health — and providers will have to take those steps in order to obtain cyber insurance.

4 Medical Economics, “The cyberwar against health care practices,” March 5, 2021. 
5 TechJury, “29+ Alarming Healthcare Data Breaches Statistics 2021,” September 9, 2021.

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The transition to value-based care will be difficult, as most providers’ business models are predicated on fee-based reimbursement

3. Value-based care will grow

Value-based care (VBC) was already gaining momentum as 2021 begun. COVID-19 pushed it to a new level.

The pandemic curtailed face-to-face consultations and underscored flaws in fee-for-service reimbursement. The clincher: The Centers for Medicare & Medicaid Services (CMS) is pushing entities to participate in value-based care payment models. For instance, CMS is expanding its home health VBC model in 2022.6

Though more providers will move towards VBC models in 2022, it won't be easy. In 2019, seven out of 10 physician practices generated at least 75% of their revenues via fee-based services.7 The business models for most providers are predicated on fee-based reimbursement, and for some, the transition to value-based care will be difficult and filled with risk.

Why? A value-based care contract is based on a negotiated target price for a procedure. Exceeding that price triggers a substantial penalty. An onerous enrollment process can be another significant hurdle.

Healthcare organizations must find an experienced partner to shepherd them through the transition. Managing the downside risk will require stop-loss insurance, which is tied to the contract's target price. It's also important to lean on a partner to vet VBC vendors, ensuring these third-party providers are a good fit and can provide the analytics needed to succeed in a value-based care environment.

6Fierce Healthcare, “CMS expanding home health value-based purchasing model nationwide in January 2022,” June 28, 2021.
7 Forbes, “How The Healthcare Industry Can Drive Change Through Value-Based Care,” July 1, 2021. 

Regular safety protocols may have gotten short shrift during the COVID-19 pandemic

4. It’s going to be about enterprise risk management

Healthcare organizations have tended to silo their risk management within individual functions such as clinical risk, human resources risk and safety risk. The pandemic revealed that siloed risk management approaches only aggravate problems.

When a pandemic is raging and providers are overwhelmed, employees become burned out and quit, meaning regular safety protocols can get short shrift. To date, regulators have actually been less strict on adherence to safety measures during the pandemic.

But that's going to change in 2022. Organizations that have adopted an integrated ERM approach to safety will achieve multidisciplinary accountability and ensure organizational readiness, especially to manage uncertainty. For instance, understanding how one risk such as the labor shortage influences risks across the enterprise is the first step towards stronger risk management, lower insurance premiums and less litigation.

In the end, they will have a much better story to tell regulators, patients, residents, and, of course, their insurers.

Read our 2022 Employee Benefits Outlook and learn how benefits can support recruitment and retention.

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Moving forward in 2022

Since the pandemic emerged, healthcare providers have faced management challenges they never anticipated. And there aren’t any silver bullets to solve labor shortages or cyber risk, much less the risk involved in value-based care and safety issues that may have been ignored. 

However, even if these risks can’t be eliminated, they can be managed, controlled and insured. To thrive, the capabilities of a good broker will be invaluable — not merely in securing the right insurance, but in helping healthcare organizations get ahead of the curve in managing risks in an uncertain environment.

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