Host:
Welcome to Insight Exchange, presented by L.E.K. Consulting, a global strategy consultancy that helps business leaders seize competitive advantage and amplify growth. Insight Exchange is our forum dedicated to the free, open and unbiased exchange of the insights and ideas that are driving business into the future. We exchange insights with the brightest minds of the day, the most daring innovators and the doers who are right now rebuilding the world around us. The confluence of several key trends in US healthcare including an aging population, shifts away from inpatient care. And the rise in healthcare consumerism has led to an increased emphasis on post acute care, particularly care that permits aging in place. In this episode, we'll get insights regarding opportunities for health systems and investors within post acute and end of life care. With us to today, we have, Kevin Grabenstatter, managing director and partner in LEK Consulting, San Francisco office, and Rozy Vig, principal in our healthcare practice.
Rozy Vig:
Hi. I am Rozy Vig. I am a principal out of the LEK San Francisco office. Been working with a firm for over seven years now. I've spent a fair amount of that time working within healthcare services alongside Kevin, who is our resident expert in the provider space. Kevin started his career at LEK and then left us briefly to develop his operational chops at Kaiser. Lucky for us, he's decided to come back and has done a great deal of development and growth of the provider sub practice. Kevin, anything I've missed or anything you'd like to add?
Kevin Grabenstatter:
Thanks for the intro Rozy. It's great to be here. We are two members that have been building the provider practice at LEK for a number of years now and have certainly seen a lot of growth and change including in the areas post acute and end of life care. So looking forward to discussing that today.
Rozy Vig:
Great. So to get started, we all know that the population, the Us population is aging. I believe the latest stat I've seen on this is that one in every five Americans will be above the age of 65 by 2030. We also know that while this group accounts for less than 15% of the population, it represents a disproportionate amount of healthcare spend. Given those dynamics, Kevin, can you speak to the impact on inpatient care as well as the post acute and home based care market?
Kevin Grabenstatter:
Well, I think it's fair to say that we don't have a client on the provider side at LEK today, that is not acutely aware of supply demand imbalances from a labor perspective and thinking really hard about the future and how that's going to look. With the aging population, with the baby boomers, aging into some high utilization years in their lifespan, as well as the labor shortages that have obviously only been accelerated in the COVID 19 pandemic era. That is a question that every operator is continuing to ask themselves.
Kevin Grabenstatter:
And we think that this labor supply constrained environment is something that is going to require a lot of strategic thought for years to come, that's in the hospital setting. It is in ambulatory care, and it is certainly the case in post acute care and care in the home. If you just run the numbers, we're going to need an army of a size that we don't currently have today in the US. And so figuring out how to manage that, and there are a lot of different strategies for doing that, I think is going to be, again, a key topic for strategic focus for years to come.
Rozy Vig:
Right. I think the other dynamics that kind of come into play is just the role of the payer and the extent to which they're pushing for lower cost care settings for this population, as well as preferences among the population itself and the desire to want to age within the home. And so those are also two dynamics that I think come to mind as it relates to this population.
Kevin Grabenstatter:
Those are great points and again, just tailwind, so to speak from a demand perspective. So as we think about where that supply might come from, and I'm sure we'll get into this, but I think virtual has to be a part of the solution there and extenders, real or virtual, to find new and novel ways to expand our supply, to be able to care for folks in the home where much of the care is going today and really across the post acute care continuum.
Rozy Vig:
And Kevin, what are your thoughts around the COVID impact, right? Very hot topic when you really talk about healthcare in general these days, but as it relates to this population, the post-acute care space and end of life care as well, how do you think about the impact of COVID?
Kevin Grabenstatter:
Well, it would be hard to write a more difficult script than the last couple years for the nursing home industry. We've all become very aware of some of the challenges from an infection control perspective. And in our opinion, things that have existed in certain segments of the post acute care, especially facility based post-acute care landscape for a long time and is only now coming to light. So it's going to continue to be an era of change. Nursing homes aren't going anywhere. They play a critical role, as we all know within the care continuum and for patient care, but managing in an environment where there's more of a spotlight on infection control and overall quality, as well as all the other trends that post acute care operators are dealing with today, including the need to manage relationships with payers, with providers to be a referral, destination of choice and manage changing economic landscape for US healthcare. It really is a challenging time. And I think we've felt that again, in the conversations we've had with clients around the country and it looks like the pace of change isn't going to slow down anytime soon.
Rozy Vig:
Right. And I think kind of related to your mention of Telehealth, right? When you think about some of the positives that have come out of COVID, certainly folks talk about how the world has becoming increasingly digitized, right? In terms of the use of digital solutions. So Telehealth is certainly one of them, but there's also solutions that one can deploy, even when you think about caregivers and supporting caregivers as they deal with this population as well.
Kevin Grabenstatter:
Absolutely. I mean, they are more often than not the key decision makers and finding ways to make sure that the caregiver is included in feeling a part of the overall care plan is critical. And I think technology could play a key role in that. You and I have done quite a bit of work on some HCIT solutions that can help extend the reach of provider systems of payers and from a quality and a care experience perspective, really make sure that, that reach is reaching the caregivers as well as the patient themselves.
Rozy Vig:
Right. Well, next I'd like to focus our conversation on the topic of hospice, specifically. What should we know about the hospice market and how that market's evolving?
Kevin Grabenstatter:
Well, I think I should be asking you the questions on this topic, Rozy, since you're definitely an expert, but hospice is a market at LEK that we have been watching for many years, going back to one of our first forays, which was a strategy assignment for a nonprofit called Zen hospice in the city of San Francisco. And we've really only seen it continue to grow. There remain wide disparities in the utilization of hospice, how soon patients are referred into hospice and of course, quality of care. And we think that those disparities will continue to shrink in the direction of increased hospice usage. One of the key things for hospice operators is making sure that they can get patients at the right point in time, which generally today means extending the length of stay earlier to earlier admission. And really just the knowledge and acceptance of hospice care in terms of its ability to meet patient desire to be in the home and physician comfort with referring into hospice. Those are all things that we think will continue to push up the utilization rate of hospice amongst the eligible senior population.
Rozy Vig:
Right. And I think all great points, in addition to that, you do have the regulatory landscape to consider, right? You've got a dynamic around Medicare advantage in terms of being able to be reimburse through MA plans that previously didn't exist prior to the 2021 year. And so that should help drive further adoption of these solutions. You can't read a healthcare publication these days without hearing about growth and MA. So that's also something to kind of think about as it relates to trends in this marketplace.
Kevin Grabenstatter:
Rozy, I think it would be great to get your thoughts on micro market analysis too. And hospice is a great example. I think we too often see generalizations about US healthcare and when we at LEK and our project work, dig into specific metropolitan areas, specific regional markets, there are so many differences and maybe sharing a bit about how we approach that zeroing in on the real provider payer patient dynamics in a given market or region because it is just so important in the work that we do.
Rozy Vig:
Absolutely. I mean, consistently you're going to hear healthcare is local and certainly that applies in the hospice space as well, right? And there are several criteria that we at LEK have used to assess geographic market attractiveness, from supply demand and balanced dynamics to referral network dynamics as well as competitive intensity. And I think when we approach projects of that nature, can't preface enough how critical it is to be thoughtful about how one interprets the prioritization criteria, right? So for example, if you're looking at higher utilization of hospice relative to hospices for end of life care, that likely indicates a population that's receptive to hospice care, but could also imply that the market's fairly saturated. And so you have to kind of look at the broader context. Similarly, lower volumes of hospice nurse full-time employees per senior population may suggest unmet demand, but upstream referral dynamics as well as patient receptivity to hospice services in general, may need to be pressured, test it to kind of confirm assumptions of that nature.
Rozy Vig:
Similarly, you have regulatory components at play here as well in terms of certificate of need laws, right? So while certificate of need laws can make establishing a De Novo facility more difficult for out-of-state providers. If you're a provider located within a certificate of need, you can benefit from the limited competition from those out-of-state providers as well. So those are some of the things that we often think about as we're thinking about ways to prioritize and think about the geographic landscape as it relates to really any healthcare market, but certainly hospice.
Kevin Grabenstatter:
Excellent points, Rozy. And again, just so critical to dig in further than top level national generalities. As interesting as those trends have been recently in the post acute care space. But local markets vary so much. And on the topic of hospital based health systems, thinking about how they can foray into post acute care effectively, well, it really depends on what post acute care options look like in their own backyard.
Rozy Vig:
Well, that's actually a great segue because my next question was related to those particular stakeholders in terms of hospitals and health systems. So to what extent do you believe that hospitals and health systems are benefited by an end of life strategy and that involves hospice?
Kevin Grabenstatter:
I think it's critical. It is and has been for some time increasingly the case that health systems cannot wait for their patients to just show up in the emergency room or for the scheduled surgery. How do they build a relationship that transcends acute care, urgent touchpoints with that patient and really helps to help them manage their care throughout their life. And from that perspective, a strategy in post-acute care and a conversation as a trusted healthcare advisor to the patient around end of life care, there's no entity that's better positioned for that than the physician and the health system, typically these days more often than not that employs or is closely aligned with that physician.
Rozy Vig:
All right. Great. No. All great points. I think some of the high level things that I've seen mentioned in regards to this is really, there's a cost component and the value in terms of driving down costs, particularly if you're a hospital or health system who's adopted value based care payment arrangements, certainly there's the quality argument to be made in terms of serving this population and the extent to which that has impact on readmission rates and whatnot. And then of course there's also just the patient satisfaction piece as well, right? Comfort and satisfaction at the end of life can be quite critical. And so those are things that increasingly hospitals and health systems are thinking about from a value perspective as they kind of, particularly in markets, getting back to that geographic point, particularly in markets where you're competing with other systems for those lives.
Kevin Grabenstatter:
I think it is a natural manifestation of consolidation and integration trends that we have seen across US healthcare, across segments. For years now in which we believe our secular trends that are going to continue for years to come. The health system as one point and the care continuum is quickly becoming old fashion thinking.
Rozy Vig:
Well, so shifting a bit to a slightly different set of stakeholders, what do you believe to be the implications for hospice providers and investors as it relates to the topics that we're covering here?
Kevin Grabenstatter:
Well, I think that physician practice generally, which some might argue is the last great cottage industry in America. There are real opportunities to professionalize and standardize care. There are benefits too, consolidation, and there are benefits to smart money. So to speak, moving into segments of healthcare to improve care, when incentives are aligned appropriately. I think we think that post acute care and hospice in particular present great opportunities for investors that have healthcare chops and capabilities and ideally some advisors including operating partners that can really help them to develop a platform that is effective and meets the market's needs because that need is very real. And there is indeed a hunger on behalf of payers and patients and caregivers, as we talked about earlier for effective services in hospice.
Rozy Vig:
Right. Well, thank you so much, Kevin. This has been very insightful conversation here having with you. And want to close with any last words?
Kevin Grabenstatter:
I really appreciate the time and the questions today, Rozy, and it has been great working with you across the provider landscape. There's probably no more interesting time to be a management consultant in the healthcare industry. And we think that these key strategic questions, some of which we talked about today are going to continue to be important things for operators and investors and health systems to be considering what they're responses will be to them in the years to come.
Rozy Vig:
Thank you so much.
Host:
Thank you, our listeners for joining us today at the Insight Exchange, presented by LEK Consulting. Links to resources mentioned in this podcast can be found in the show notes, please subscribe or follow for future episodes wherever you listen to your podcast. Also, we encourage you to submit your suggestions for future insights online at lek.com.
