(October 2024) – Every year, the American Hospital Association publishes its Environmental Scan, including wide-ranging data and trends to help health care leaders understand current issues in the health care environment. The comprehensive scan is a valuable tool for strategic thinking, but the abundance of data can be overwhelming. This article provides high-level insights from the AHA scan, with questions for boards to consider as they prepare their strategic plans.

Financial Stability
Moody's predictions are positive, but the workforce is a significant factor. Moody's Investor Service recently revised its 2024 outlook for the health care sector from negative to stable. Part of this shift is due to decreased labor costs as the reliance on contract nurses has declined. At the same time, the health care workforce shortage is far from over and continues to have massive implications for hospitals and health systems. Hospital chief financial officers report that the top concerns they lose sleep over are employed labor, contract labor, inflation and supply chain expenses.

Billing and insurance are resource-consuming. Administrative costs comprise nearly one-third of total health care spending, and most of those expenses (82 percent) are attributed to billing and insurance. Hospitals report increases in the cost of seeking prior authorization approvals, complying with insurer policies, worsening experiences with commercial insurers and denials that are ultimately overturned.

Reimbursement costs do not cover expenses. Hospital expenses remain high, and reimbursement has not kept pace with rising costs. Hospital expenses increased more than twice what Medicare reimbursement increased from 2019 to 2022.

Care redesign is happening. AHA predicts that care will continue to shift to alternative settings, including virtual visits. The increased complexity and acuity of patients and changing care settings will require care redesign.

Rural hospitals face unique financial pressures. Rural hospitals and health systems face many pressures, including low reimbursement, staffing shortages, low volumes, a sicker patient population and regulatory barriers. More than three times as many rural hospitals closed in 2022 compared with 2021. When a rural hospital closes, the impact on community health and the local economy is significant. Some rural organizations are exploring other designations including rural health clinic, rural emergency hospital or Critical Access Hospital designation.

Financial Stability: Questions to Consider

• What is our organization's financial outlook for the next two years?
• Does our board understand the major financial factors at play?
• How does that influence our mission and strategic thinking?
• What does our CFO "lose sleep over"?
• How is care redesign happening in our local area?
• Are we proactive or reactive in the changes as consumer preferences change?

The Health Care Workforce
Workforce shortages continue to grow. 100,000 registered nurses left the workforce during the pandemic, and one-fifth of RNs nationally are projected to leave the health care workforce by 2027. It takes more than three months to recruit an experienced RN, and the turnover cost is significant. While the nursing shortage often garners the most attention, the professions most common to leave the health care workforce are physical therapists, nurse practitioners, licensed clinical social workers, physician assistants and physicians.

The work environment matters. The top factors influencing RNs to stay in their current positions include meaningful work, positive interactions, caring and trusting teammates, good health and a safe environment. Conversely, the top factors influencing RNs to leave their jobs are not being valued by their organization, inadequate compensation, no work-life balance, an unmanageable workload or a better job offer. Provider burnout is not unique to nurses. Pharmacy professionals are the most likely to report burnout among all health professions. Physicians also report a significant shift in "happiness at work," with 75 percent reporting they were very/somewhat happy before the pandemic and only 48 percent reporting they are very/somewhat happy today.

Technology has the potential to alleviate some challenges. Technology could provide relief for some of the workforce challenges faced. The AHA Environmental Scan predicts that as much as 30 percent of nurse tasks can be shifted to automation. The increase in virtual nursing programs also has potential, with one pilot program resulting in a significant decrease in first-year turnover rates.

Mental health shortages are substantial. More than 6,000 areas in the U.S. face mental health professional shortages, impacting 163 million people. This gap isn't expected to change, as more than 60 percent of all psychiatrists in the U.S. are 55 or older. The shortage of mental health providers has far-reaching implications. Studies increasingly demonstrate stronger patient outcomes when patients receive integrated primary care behavioral health services. In addition, integrated models demonstrate cost savings and reduced emergency visits.

Workforce shortages are the top concern for rural hospitals. More than 60 percent of all health professional shortage areas are in rural areas, including mental health shortages. The top two challenges rural organizations reported in 2023 were the cost of labor and labor shortages/employee turnover.

The Workforce: Questions to Consider

• What are our greatest workforce challenges and what long-term strategies do we have to address them?
• How does the board set the tone for a positive workplace environment and minimize provider burnout?
• How do employees view our organizational culture?
• Where is our organization in the process of implementing technology that could provide administrative relief for providers?
• What would greater integration of behavioral health services look like at our organization?
• What steps do we need to take to make it happen?

Quality and Value
Value-based payment models influence how care is delivered, with the goal of paying for quality rather than the volume of services provided. The increase in value-based payment models has leveled off. Delivery transformation models, such as team-based care, telehealth and alternative care sites, also improve quality and value.

Patient safety culture measures show opportunities for improvement. In a survey conducted by the Agency for Healthcare Research and Quality, the highest reported measurements of patient safety culture in hospitals include teamwork, supervisor, manager or clinical leader support for patient safety and communication openness. The lowest measures of patient safety culture in hospitals are a response to errors and learning from mistakes, handoffs, and information exchange between hospital units and during shift changes, staffing and work pace.

Care will increasingly shift to the home. Hospital-at-home programs have existed since the mid-1990s and have been shown to reduce costs, improve outcomes, and enhance the patient experience. HaH waivers continue to provide flexibilities for remote care, and experts predict that as much as one-quarter of all Medicare beneficiaries care could shift from traditional facilities to the home by 2025.

Health equity and social factors that Influence health. Health equity and addressing social determinants of health is a big part of improving population health. The majority of hospitals report collecting data on patients' health-related social needs and receiving social needs data from external sources. The Centers for Medicare & Medicaid Services has added two social determinants of health measures to the Inpatient Quality Reporting program. While these measures were voluntary in 2023, they are mandatory in 2024.

Quality and Value: Questions to Consider

• Do we, as a board, understand delivery transformation models and how care is changing? Does our strategic thinking reflect that?
• What are infection rates like at our hospital or health system compared to national trends?
• How does our board set the tone for a culture of patient safety, and how is that measured?
• How does care increasingly shift to the home impact our organization?
• Are we measuring and taking active steps to address social determinants of health in our community?

Consumerism
Patients want trustworthy care that meets their unique needs, increases patient engagement and provides the tools and resources to manage their health.

Technology allows care to be more individualized. Continued advancements in medicine and technology have expanded the potential of "individualized" care or "precision medicine." The most advanced applications are in genomics, using patient DNA to diagnose and custom-treat diseases.

EHRs provide opportunities for increased patient involvement. More than nine in ten hospitals provide patients with an electronic health record that allows them to view their information online in a portal. Hospital EHRs also increasingly allow patients to download information from their medical records, transmit medical information to a third party and submit patient-generated data (such as blood glucose). Most hospitals also provide patients with access to their health information using apps.

Where patients access primary care is changing. Between 2017 and 2022, claims grew 200 percent for retail clinics and 70 percent for urgent care centers. During that same time, claims declined by 1 percent for emergency departments and 13 percent for primary care physician offices. Experts predict that while traditional primary care will still exist in the future, many will shift toward non-traditional providers such as retailers (CVS Minute Clinics, Kroger Health, Amazon), virtual care, payers and payer-owned services.

Coverage impacts whether patients access needed care. More than 40 percent of working-age adults were inadequately insured in 2022. Four out of ten insured adults report skipping or delaying care due to cost; another one in six said they had problems paying their medical bills. When patients delay care, they report more use of emergency departments and urgent care centers and less routine preventive care. Some challenges could be addressed by improving the transparency of health care costs, helping customers understand their options and helping patients navigate the care they need.

Trust in public health must be re-established due to misinformation. The pandemic resulted in information overload and a prevalence of misinformation, including confusion about vaccines, COVID-19, pandemics and emerging infectious diseases. There is a need for health leaders to strengthen information management strategies to build trust and better prepare for future emergencies.

Telehealth utilization is predominantly for mental health. Nearly 70 percent of telehealth claims among privately insured patients are for mental health conditions. New mental health apps are being created for specific populations, such as people of color and Indigenous people, LGBTQI+ individuals and people with serious mental illness. These shifts can potentially impact rural behavioral health needs, but one-third of rural patients currently do not have access to consistent or affordable internet.

Consumerism: Questions to Consider

• Is our organization providing "individualized" care?
• How are we utilizing EHRs and other forms of technology to better engage with patients?
• What is our organizational strategy for participating in the transition in how care is accessed? For example, have we considered partnerships with retail-based clinics or adopted retail-like strategies?
• How can we better help uninsured and underinsured patients navigate the health care system to increase access to care when needed?
• Are we leveraging telehealth?

Special thanks to The Walker Company and governWell™ for the use of: What Boards Need to Know from the AHA Environmental Scan. Additional trustee resources are available in Kansas governWell and the Trustee Section of the KHA website.