The Nature of COVID-19: Impact and Recovery in US Hospitals

By Monish Rajpal, Jonas Funk and Ilya Trakhtenberg of L.E.K. Consulting

In light of COVID-19, L.E.K. Consulting has been actively probing questions on U.S. surgical procedure volumes, new and backlogged patients, hospital capacity and operational constraints, hospital priorities and budgets, hospital preferences around supplier sales and engagement, telehealth, and more. This includes recurring surveys (L.E.K.’s 13th annual Hospital Survey was published in August) with 50-120 hospital administrators per edition; our separate survey of approximately 1,200 patients; and numerous discussions with health systems, medtechs, investors and other stakeholders.

The surveys highlight a range of procedure volumes

What started out as a health crisis quickly became a deep financial hole with far-reaching impacts. The recovery is well underway — aided by returning backlogged patients — but has been variable and uneven. Although some hospitals (larger hospital systems), specialties (like orthopedics) and medtechs (based on exposure to hospital and specialty segments) are reporting near-100% (relative to pre-COVID-19 level) volumes, others report significantly lower rates, leading to an average volume of approximately 85%. As of August 2020, 30%-35% of procedure volume was reported to be from backlogged patients. Operating constraints are improving, but even net of expanded working hours, hospitals are operating at reduced capacity. The recovery had a steep V shape in the summer, but has become more gradual of late. A reservoir of reluctance persists among patients, suggesting that the new normal would remain a few percentage points below pre-COVID-19 levels, and that recovery would extend into next year (and in some segments, beyond that).

Our research also indicates that hospitals and health systems are changing as they adapt

There is enhanced focus on efficiency, risk aversion and digitalization. Areas like infection prevention, personal protective equipment (PPE) conservation, larger supplier panels and inventory levels, and telehealth have emerged as priorities. Growth in ambulatory surgery center (ASC) settings was somewhat delayed (relative to our expectations) but has gathered momentum. And while there were mixed signals regarding the continued shift toward risk and accountability, that trend appears to be reemerging, especially as physicians are increasingly open to alternate models that preserve their ability to operate (and maintain an income stream) under adverse conditions. Hospitals’ capital budgets are impacted — some until their next annual budgeting cycle — but there is increasing receptivity to leasing and other capex alternatives, shared-risk pricing, bundling, and other models.

Direct findings and implications for medtechs range across a number of key areas

To succeed, medtechs will need to expand their view of thepatient continuum to include ASCs and home settings, consider stratifying their product portfolio (e.g., good/better/best), and evolve their commercial model and launch capabilities, especially given the variation in hospitals’ recovery success and future prospects — a situation that highlights the existing need for a key-account approach as well as the growing importance of ASCs and complementary virtual sales/marketing channels. They will also need to accelerate their data and digital strategies, consider corresponding changes in their supply chain and operations, and further clarify their M&A strategies.

To learn more about the impact COVID-19 has had on hospitals in the United States, be sure to check out the following links: