Healthcare Spending Will Reshape the Workforce – Here’s How by Array Architects

Healthcare Spending Will Reshape the Workforce – Here’s How By Neil Carpenter, Jillian Barbaro, Isabelle Moratti, Alexandra Laramee

INTRODUCTION Array wanted to break out of the incremental nature of most health care evolution white papers and focus on long term trends that might not be felt strongly for a decade or more. Just as a major pandemic was eminently predictable but rarely addressed because it was never a likely near-term event—so are the structural forces we describe in our papers. We interviewed 16 leading healthcare executives across the industry, including representatives from the provider side, payor organizations, technology innovators, and academia and asked them to visualize health care delivery in 2040. The study documents and expands upon the perspectives of these leading thinkers and the four major trends that emerged from these interviews. Each installment unpacks one of the four trends: • Deterioration of trust: following the societal trend, patients will no longer simply listen to what the provider says. As the care delivery process becomes more participative, what are the implications? • Segmentation of healthcare: the big sort is coming to healthcare practices and different demographics will demand different focuses. • Whole person care: an integrated vision of health will mean a much broader definition of physical and mental wellbeing, with less traditional providers and methods of care. • Evolution of healthcare settings and employment: a major shift in how health care dollars are spent coming. Discover how care settings and the workforce will be the key drivers. Not only do we provide research behind why we believe healthcare is heading this way, but we also provide implications for how different players within the industry can prepare themselves to be successful for what is to come. New installments of the study will be issued every week. The first follows. To contact the authors with questions, comments or strategic planning support, see p 11 for their information or contact us. This paper will be a four-part series with a new emergent trend to be released each week.

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INTERVIEWEES Shahid Shah Co-Founder of Citrus Health (technology at home), Founder of Netspective Communications (technology strategy & sale), Health Sciences & Technology Advisor at Larta Institute.

Rasu Shrestha, MD, MBA Chief Strategy & Transformation Officer, Atrium Health

Robert Kramer Marcy Carty, MD, MPH EVP of Strategy at Ready Responders

Paul Keckley The Keckley Group, Healthcare Industry Research and Policy Analysis

Trenor Williams, MD

Founder and Fellow at Nexus Insights; Co-Founder and Strategic Advisor National Investment Center for Seniors Housing & Care

Sara Vaezy Chief of Digital and Growth Strategy at Providence Health, Health Evolution Forum Fellow

Dan Durand, MD

CEO & Co-Founder Socially Determined

Chief Clinical Officer & Chair of Radiology at LifeBridge Health

Tom Cassels

Braden Lambros

President at Rock Health

Executive Vice President at Olive

Michael Tangrea, Ph.D. Endowed Professor in Biology, Former Scientific Director of Innovation & Research

Sunny Ramchandani, MD President and CEO, Stream Health Group, Former Payor Executive

Peter O’Neill

Susan Mani, MD

Executive Director of Cleveland Clinic Innovations & Innovation Consultant

Payor Executive, Former Chief of Population Health at LifeBridge Health

Mark F Victor, MD

Alan Pitt, MD

CEO, Cardiology Consultants of Philadelphia

Neuroradiologist with Dignity Health and Co-Founder of Vitalchat Telehealth

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Healthcare Spending Will Keep Increasing–Just Not Where You Think While health care spending will continue to increase over 5% annually between 2019 and 2028i, there will be a major shift in how those dollars are spent in terms of care setting and workforce deployed. Technology and demographics are two separate but overlapping factors that will shift the model of the healthcare labor force and alter who receives healthcare dollars over the next 10 to 20 years. Approaching on the horizon is a mountain of an older population and a valley of young family members to administer informal care, the automation of management and information processing, and evolving health care channels.

Overcoming the Growing Number of Older Adults and Shrinking Number of Younger Caregivers Booming Care Needs vs. Declining Unpaid Caregivers Seniors need to (for economic reasons) and want to stay in

Percent of Population by Age Range from 2014 to 2060

their home as they age. In an AARP study done with adults aged 65 and older, 77% responded that they preferred to stay in their

home and community as they get older.iii Of those seniors who require care, 65% rely exclusively on informal care from friends and family, and another 30% supplement family care with paid aides.iv This informal care is the work of more than 43 million unpaid caregivers, which today totals more than $470 billion in the United States.v Meanwhile, the average number of available caregivers per family is quickly dropping in half; in 2010, there were seven, but by 2030, that number will drop to four.vi These

60 40 20 0

factors help drive the Congressional Budget Office (CBO) projections that total long-term care cost will increase at a rate

2014

2020 Under 18

2030

2040 19-64

2050

2060

65 or older

of 2.6% per year above inflation over the next thirty years.vii President Biden has proposed an infrastructure plan that, in part, aims to address the backlog of individuals seeking homecare over care in an institutional or hospital setting. However, only around 28% of those on waiting lists for homecare are among the elderly population while 72% are those with developmental/intellectual disabilities.viii This is why one panelist noted that Biden’s proposed home care investment was very likely to be “a drop in the bucket” compared to what is needed for this enormous demographic and clinical shift. What would an expanded homecare work force need to look like to satisfy the demand? While visiting nurses and Teladoc visit needs will increase, most senior care consists of basic activities of daily living like baths, cleaning, and eating. Thus, most of the new jobs will not require high levels of education but will require high levels of physical and emotional stamina. While the US will need to hire 2.3 million healthcare workers to fill the needs of the aging population, the largest number of new job openings will come in the form of 432,000 home health aides.ix

Leveraging New Housing Options to Close the Gap While seniors would like to age in place, it is important that they age in the right place. While additional home care workers can be added to the workforce, there is still likely to be a gap. New models of group homes may be able to alleviate some of the gaps. For example, among younger generations, there has been a rise of ‘dorm style’ living in expensive, urban settings.x These types of housing situations provide private bedrooms with shared common spaces in a trendy, modern, apartment-style setting. Seniors living in an environment like this would be able to readily combat loneliness (which can significantly worsen health) while still keeping their independence. These innovative living situations could have the added benefit of centralizing patients who are likely to need homecare, which could reduce travel time and create care efficiencies.

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The Growth of Chronic Disease While Americans will get older, there is also a

Predicted Shortage of Physicians and Specialists in the U.S. by 2032*

growing consensus they will get sicker. Absent COVID, chronic diseases represent seven out of the top ten causes of death, and most Americans live with a least one chronic disease (i.e., heart disease, stroke, cancer, or diabetes). Another half of those with a chronic condition have two or more.xi A lot of patients struggling with chronic conditions are often fighting off mental illnesses such as depression or anxiety and sleep problems. By 2030, the Partnership to Fight Chronic Disease estimates that 83 million people in the United States will have three or more chronic conditions. Four years ago, this number was approximately 52 million.xii This is part of the reason why patients are getting orthopedic implants at an increasingly younger age. While the population is aging, the average age of getting an initial implant is declining. In 2000, the average age for hip replacements was 66.3, while in 2015 this had dropped to 64.9. For knee replacements, in 2000 the average age was 68; in 2015, the average age for a knee replacement was 65.9. Also, there is a larger group of very young patients getting implants and within five years, 15% have already undergone revision.xiii While many jobs of the future can be done by AI, one of the professions that is not automatable is that of a physician. While physician shortages is the perennial cry of the AMA, as the population ages and gets sicker, this cry of shortages will likely be true in many fields. One AAMC study predicts that by 2033, the United States could face a shortage of up to 139,000 physicians.xiv The evolution of healthcare will mean a heightened ability to meet the increased demand for homecare including basic ADLs, preventative care, and low acuity care. However, as these cases are automated or move out of the hospital, worsening healthcare habits among Americans across the age spectrum along with the growth of chronic diseases among the aged may lead to a backfilling of significant amounts of acute care needs without the proper workforce to address them.

The Automation of Healthcare Jobs: Further Bifurcation of the Healthcare Workforce While demographics and new care models will create new demand for lower skilled workers at home, new technology in hospitals will reduce demand for moderately skilled workers in hospitals. One report predicted the automation potential for nurses at 29%, medical assistants at 54% and home health aides at 8%.xv Brookings Institute did a study on jobs that will be most affected by AI, and the safe jobs may no longer be safe. They reported the most high-risk employees within the healthcare system are white collar workers: higher paid professionals with bachelor’s degrees. These individuals are five times more exposed to AI than workers with just a high school degree. In the healthcare system, those who are “middlemen” in the industry will either need to get

“It is amazing that people who think we cannot afford to pay for

higher degrees of education or perform lower skilled jobs to

doctors, hospitals, and medication, somehow think that we can

combat the decreased need for their services.xvi

afford to pay for doctors, hospitals, medication, and a government bureaucracy to administer it.”

- Thomas Sowell

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Since the 1990s, there has been an explosion of these middlemen adding to administrative FTEs in health care and completing the litany of tasks now required for the delivery of healthcare and its payment. Insider Intelligence reported that today 30% of healthcare costs are associated with administrative tasks and it has been estimated that the $372 billion spent on administration could be lowered by $16.3 billion through workflow automation.xvii With such high savings potential arising from these middlemen jobs, it is only a matter of time until automation is used to help offset some of the administrative growth that has occurred over the past few decades. Automation is not easily adapted in large organizations with diverse and powerful groups of stakeholders (e.g., health systems), but it is not something that can be ignored as various “disrupters pick off the high margin business,” as one health system executive noted. It also facilitates the move toward value by eliminating time-consuming tasks and allow physicians and nurses to focus on patient communication and even behavior change as discussed in our “Whole Health” section. There is significant capital chasing this opportunity. For example, digital health automation startup Olive had raised $832 million in financing by March 2020, totaling $902 million since its start.xviii While the company started in 2012, it officially released Olive in 2017 with the goal to take over tasks in the healthcare system that were repetitive and high-volume. Billionaire entrepreneur Patrick Soon Shiong has jumped into the fray as well with Nanthealth, which is now a public company with over $200 million in market cap.xix Those companies, among others, cater to shifting jobs away from administrative roles that other industries eliminated decades ago.

Surging Behavioral Health Demand = More Spending on Behavioral Health In a 2019 survey by Cigna, more than 60% of Americans are lonely as individuals, increasingly reporting feeling like they are left out, poorly understood, and lacking companionship.xx The report found a nearly 13% rise in loneliness since 2018, when the survey was first conducted.xxi One can only imagine the increase in loneliness post COVID, and we believe it may have played a role in some of the emotional reaction to COVID safety measures. People may not be in a healthy, happy place to process the public health information and direction given to them. This increase in loneliness will exacerbate what is already predicted to be a drastic rise in demand for behavioral health as a result of population growth, cultural shifts, increasing insurance coverage, and the other psychological impacts of the pandemic as detailed in our Whole Person paper. According to SAMHSA, behavioral health spending accounts for only 2.3% of insurance claims costs and only 5.5% of all health care spending in the country. Our view is that we are not looking at incremental increases in behavioral health costs, but an exponential one as millions of Americans get the care they really need.

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Implications for Providers: The paperwork you hate will be defeated…. in time. For many of you, the reason you went to medical school is arriving: more time with patients, less time coding. If you connect with patients, you will likely start getting the love from above you always deserved. In time, your clinical decision support will be integrated with financial and insurance information. No more recommending paths that insurance will not cover or with surprising co-pays that are not manageable. You may not always be happy with your options, but they will be transparent. For many of you at AMCs: you will say goodbye to protected R and A time. Teaching will still have a huge role in healthcare, and new levels in the hospital will get more “T” time. For all the talent pipeline issues discussed earlier, however, the “A” time will be partly replaced by technology investment that actually works, and the “R” time will be a cross subsidy that will be simply unaffordable to most systems. “R” time can be financed by philanthropy, but the commercial marketplace will redistribute those funds over time as patients choose to spend those dollars where they personally get more benefit. Research still helps systems’ brands, but brand will be one factor out of many, and will be the driving issue for a minority of consumers.

Implications for Health Systems: Outsource administration now so you can cut it later. Over time, continue to use more contracts or outside vendors for administrative middle management positions. As contractors, it will be easier to eliminate those positions in the coming years due to technology change. The provider of the future uses a portal, not the phone. Realize the value of providers who are likely to be more comfortable in a self-service, tech driven environment. Those doctors who require a gaggle of administrators to manage their emotions and complete various tasks will be an expensive outlier in the new world. As we discovered coming out of COVID, don’t take the less skilled for granted. Build a recruitment pipeline for lower-skilled positions with vocational programs, high schools, immigrants… etc. Northwell, Life Bridge and a number of health systems have made real progress in this area, but their pipeline isn’t particularly deep or evenly distributed across the entire continuum of care. HR and the overall talent pipeline need to be on the agenda for every board meeting, and just like there is a finance subcommittee, the subcommittee isn’t executive comp, it’s about talent recruitment and retention. Manager of tomorrow doesn’t look like the manager of today. Due to demographic trends, healthcare, particularly non-acute care, will need foreign labor just like agriculture and construction do today. Place a premium on managers today who are multi-lingual and comfortable in diverse settings. Healthcare today revolves more around managing up than other industries; but go to a construction site, and it’s more about managing down than up. Recognize revenue (if not profits) are going to shift care settings. Get your board and leadership more knowledgeable about life outside the hospital and comfortable with the non-sexy grunt work on keeping old people safe at home. When one looks at the board of the top 20 health systems in America, there are more former neurologists and cardiologists than doctors and leaders with postacute experience and not one had a behavioral health background. Don’t get trapped into a high overhead structure. Physician deals with high nonclinical time/labs, funding local community initiatives etc., will age well under great long-term pressure. Health systems, both AMC and community health systems, are de-facto fund flows of cross subsidies, making significant premiums on some efforts while losing a lot (intentionally or not) on others. The cross-subsidy model may break in many places as new disrupters are picking off services, demographics change, new technology is introduced, and business models adjust to new realities. Be open to a new way to evaluate providers. It’s not farfetched to assume that at some point we could use machine learning to evaluate provider teams like NY State evaluates teachers. That evaluation could use value-add projections based on the projected outcomes of a typical patient with specific demographic and clinical presentation. As said in the New York State Education Department 2017/18 Growth Model for Educator Evaluation Technical Report, “For all growth measures used in New York State for educator evaluation, student’s academic history and other defined characteristics are controlled for to compare similar students in the state – that is, in computing student-level growth, New York’s growth models always assess a student’s progress relative to similar students. The rules of the Board of Regents provide that three specific types of characteristics (ELL status, students with disabilities status, and poverty status) be included in the growth models that produce scores used for educator evaluation.” Evolution of Healthcare Settings and Employment | PAGE 7

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Maintain strategic flexibility on volumes. While care will leave acute care settings for the home, COVID has reminded everyone of the ability of millions to ignore basic health advice. In fact, some are concerned that the backlash against health advice will spread from COVID across to other health care issues. There is at least a sad chance that poor personal choices help backfill hospital volumes almost as fast as payor and providers find ways to care for patients safely in their own homes.

Implications for Medical Schools: Get on the E.Q. bandwagon now. This will advance the long-term success of your graduates. Think more about ability to move demographic cohorts (like we produce docs that are great with seniors, or even the global 1%) than just about clinical specialty.

Implications for Policy Makers: Au-Pairs for Seniors: We need a J-1/H-2 like program for senior care. Either we need to export our elderly to another country, or we import immigrants to live and work short-term with seniors in need. Perhaps it would follow the American Au Pair model when there are thorough background checks and interviews and people come for two years, live with their family, and help take care of their dependent. Caring for a senior can be really hard work, but by offering a stable, vetted, and safe environment for immigrants short term, we feel it could attract some of the tens of thousands of needed staff, especially in parts of the country that are simply short of workers. Managed Competition: More than a few of our providers made it clear the current distribution of costs is not sustainable and the government’s ability to fill the funding gap will decline over time. That creates the need for more government interventions through rate management (Maryland) or beefed-up CON laws (NJ, HI, DC) to foster consolidation for cost reasons where possible, to avoid physician bidding wars for superstar talent, and simply avoid low-capacity buildings. Hospitals are like airlines – it’s all about yield. Even the worst payor mix hospitals are often sustainable today if they are full, all the time. Now apply some of that logic to Cath labs, OR etc. The challenge is that providers largely use consolidation to drive up rates and not consolidate supply of services. Providers are not the only ones who will need to feel the pain. The payor’s profits today are simply not sustainable. It’s not clear to us the mechanism to dramatically rope in those profits, but at least for the public side of the health care business, it needs to happen. See our segmentation paper for our forecasted bifurcation of care between a no-expenses-spared system for top earners who may selfinsure and a cost conscience system for everyone else. May sound dramatic, but that’s life in most sectors of today’s economy.

In Summary While the perennial cry of healthcare is to reduce costs and create value in the system, the fact is that healthcare spending will continue to increase in the years ahead as we must care for an aging demographic that will be riddled with chronic disease and the possible economic impacts of a whole person healthcare system are far off. The change that will be seen more readily lies in the balance of spending: as technical capabilities to treat patients in their home grow, demand will grow, which will direct dollars towards growing this industry in a positive feedback cycle. As the demand shifts, employment opportunities will also shift away from acute care, which will necessitate leaner operations in that setting (including automation). The healthcare mindset of the past was “build it and they will come,” but when we look to healthcare in 2040, the patient will demand that the healthcare system “build the infrastructure to meet me where I am.”

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Footnotes: i. ii. iii. iv. v. vi. vii. viii. ix. x. xi. xii. xiii. xiv. xv. xvi. xvii. xviii. xix. xx. xxi. xxii.

https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/ NHE-Fact-Sheet https://www.census.gov/content/dam/Census/library/publications/2015/demo/p25-1143.pdf https://www.aarp.org/retirement/planning-for-retirement/info-2018/retirees-age-in-place-aarp-study.html https://www.ioaging.org/aging-in-america https://www.caregiver.org/resource/caregiver-statistics-demographics/ https://www.aarp.org/content/dam/aarp/research/public_policy_institute/ltc/2013/baby-boom-and-the-growing-care-gap-insightAARP-ppi-ltc.pdf https://www.cbo.gov/publication/45471 https://www.kff.org/health-reform/state-indicator/waiting-lists-for-hcbs-waivers/?currentTimeframe=0&sortModel=%7B%22colId%22 :%22Location%22,%22sort%22:%22asc%22%7D https://money.cnn.com/2018/05/04/news/economy/health-care-workers-shortage/index.html https://www.geekwire.com/2018/quasi-dorms-adults-gain-popularity-affordable-option-booming-cities/ https://www.cdc.gov/chronicdisease/resources/infographic/chronic-diseases.htm https://www.statnews.com/2018/05/31/chronic-diseases-taxing-health-care-economy/ https://regenexx.com/blog/knee-and-hip-replacements-in-younger-patients/#gref https://www.aamc.org/news-insights/press-releases/new-aamc-report-confirms-growing-physician-shortage https://revcycleintelligence.com/news/how-will-automation-ai-impact-healthcare-employment#:~:text=For%20example%2C%20 home%20health%20aides,a%2054%20percent%20automation%20potential https://www.brookings.edu/wp-content/uploads/2019/01/2019.01_BrookingsMetro_Automation-AI_Report_Muro-Maxim-WhitonFINAL-version.pdf https://www.healthcarefinancenews.com/news/us-healthcare-system-could-save-163b-through-workflow-automation https://www.bloomberg.com/news/articles/2021-06-30/health-tech-firm-olive-valued-at-4-billion-after-vista-round https://www.marketscreener.com/quote/stock/NANTHEALTH-INC-28377295/news/ NantHealth-Files-Mixed-Shelf-for-Up-to-200-Million-in-Securities-32858954/ https://www.multivu.com/players/English/8294451-cigna-us-loneliness-survey https://www.npr.org/sections/health-shots/2018/05/01/606588504/americans-are-a-lonely-lot-and-young-people-bear-theheaviest-burden Barron, Daniel: “Reading Our Minds: The Rise of Big Data Psychiatry.”

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About Array Advisors Array Advisors is a healthcare strategy consulting and operations optimization firm dedicated to both improving the way healthcare is delivered and helping clients overcome their business challenges. The team can help clients with strategic plan development including market analysis, ambulatory and service line planning, provider strategies and integrated capital and facility planning as well as operational analysis including scenario modeling, benchmarking, and lean design.

Author Contacts

NEIL CARPENTER, MBA

JILLIAN BARBARO, MHA

Vice President Strategic Planning

Strategic Planner

d: 202-795-3707

d: 202-788-5631

m: 917-576-9980

jbarbaro@array-advisors.com

ncarpenter@array-advisors.com

ISABELLE MORATTI

ALEXANDRA LARAMEE, LCSW

Array Advisors Intern

Behavioral Health Clinical Operations

imoratti@array-advisors.com

alaramee@array-advisors.com

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