1. Covid-19 continued to dominate the entire health care industry.

Yulan Egan, Managing Director, Executive Insights 

At the risk of pointing out the obvious, the biggest health care story of 2021 was the same as that of 2020: the Covid-19 pandemic. This has been particularly clear in the second half of the year. As the delta and omicron variants have emerged, we've witnessed cases surge up from the optimistic lows we achieved following the initial vaccine rollouts.

11 surprising ways the pandemic changed health care, according to Advisory Board experts

The continued emergence of these variants has had tangible impacts on the U.S. health care industry in 2021. We've witnessed rising burnout and trauma among health care workers, ongoing fluctuations in hospital volumes, and continued investment in researching and developing Covid-19 treatments, among others.

Aside from the obvious—and devastating—impacts these surges have had, the entire health care industry experienced (and is still experiencing) delayed resolution to many of the biggest strategic questions raised by the pandemic. Here are a few I am watching:

• What will the pandemic ultimately mean for the uninsured rate? We won't know for sure until the PHE ends, and with it, the current suspension on Medicaid disenrollment.
• Where will telehealth reimbursement land, and who will win the race for telehealth market share? Amid enhanced reimbursement policies and a slew of relaxed regulations, local providers continue to dominate this market. However, there is no guarantee that will remain true into perpetuity.
• Will the pandemic reignite the shift to value-based payment, or have we already passed VBP’s peak? With the federal government largely focused on navigating the continued impacts of the pandemic—and reluctant to place new requirements on providers—we've seen limited innovation on this front in the past two years.

These were the same questions we were asking at the end of 2020, and the continuation of the pandemic means we still don't have clear answers. But as we approach the end of 2021, the conversation is shifting in a meaningful way. This year has forced us to acknowledge that we are working toward a future reality in which Covid-19 will be endemic. The rollout of the Covid-19 vaccines combined with the continued development of promising treatment options, will allow us to evolve our thinking on what "success" means in the future.

As we head into 2022, I remain optimistic that the collective efforts of organizations from across the health care sector will bolster our ability to successfully manage this virus, and to tackle the structural issues raised above to envision and build a new—albeit very different—future for this industry.

2. 2021 was the year of the variant.

Thomas Seay, Managing Director

It's difficult to remember now, but early this summer, America was seized by an optimistic narrative: Thanks to super-effective vaccines, we were on the verge of achieving herd immunity.

Sure, we could still expect breakthrough cases here and there, and unvaccinated individuals would remain vulnerable to intermittent outbreaks. But we would never again see a nationwide surge that overwhelmed our health care system or disrupted our broader society.

Then the delta variant arrived, and that narrative collapsed.

• Delta's radical transmissibility made it impossible to achieve herd immunity via vaccination. When the coronavirus first emerged, experts estimated the population would reach herd immunity once 60 to 70% of people were either infected or vaccinated. But delta is so radically infectious—more than twice as transmissible as the original coronavirus—that the threshold for herd immunity climbed to around 90%.
• In the face of widespread vaccine hesitance, America had little hope of reaching that level through vaccination alone. We instead endured a brutal summer spike in infections and deaths, followed by a long, slow burn as delta sought out every pocket of vulnerability in the country.

• The delta surge overwhelmed America's health care system again, preventing providers from recovering from the emotional wounds of 2020. By the end of last year, doctors and nurses were not merely burnt out. They had suffered the moral exhaustion of laboring beyond their capacity, witnessing death on a scale more suited to a war zone than an ordinary hospital wing.
• The arrival of vaccines was supposed to usher in a moment of healing. Instead, staff shortages got worse in some places as delta-infected patients crowded hospitals and as exhausted providers left the profession.

• As delta surged, many people—even those who were vaccinated and healthy—once again found their lives derailed by Covid-19. Although vaccines at first maintained their effectiveness against delta, vaccinated people became vulnerable again as their immunity waned. As health systems neared capacity limits, many jurisdictions asked people to mask up or limit their activities to, yet again, flatten the curve. And hundreds of thousands of people's lives were permanently scarred by long-lasting Covid-19 symptoms or the loss of a loved one.
• I confess that, as someone who reads and writes about health care news for a living, I probably overestimate how much other people think about Covid-19. Some of my friends and family, especially outside of major cities, tell me their lives are back to normal. But this "normal" includes restrictions on travel, occasional masking, and a sense of dread when they pass a stranger with a sniffle. It may be a new normal, but it is not the carefree, post-vaccine wonderland that seemed plausible earlier this year.

But perhaps the worst news about delta was that it presaged the emergence of more variants. It revealed the coronavirus is not an unchanging enemy that can be vanquished by one perfect vaccine, but rather a wily, fast-adapting foe that will demand ever-evolving defenses.

As I write these words, the omicron variant has surged from a handful of U.S. cases to hundreds of thousands—all in a matter of days. More variants are still to come, and each will bring its own dangerous blend of transmissibility, virulence, and immune escape.

That doesn't mean America will be trapped in the hell of 2020, or even 2021, forever. We've improved our situation dramatically.

We've created superb, if imperfect, vaccines. We've manufactured plenty of PPE. New antiviral treatments are on their way. Our doctors and nurses are learning to treat the most severe symptoms of Covid-19. And we're slowly training our individual immune systems, whether via vaccination or infection, to handle future infections more effectively.

Still, the rise of variants in 2021 means our society will never truly defeat the coronavirus. The best we can hope for is that, when we inevitably encounter the variants to come, we'll be more fully prepared to fight the battle.

3. The ultra-rapid advancements in Covid-19 therapeutics.

By Pamela Divack, Consultant , Life Sciences Research

In 2021, we were able to bring new drugs and therapeutics to the market at a record pace. In addition to the Covid-19 vaccines, researchers were quickly able to advance antibody treatments, oral antivirals, and other treatments from the pipeline into late-stage trials and authorizations, adding more tools to our toolbox against Covid-19.

One key reason for this success is because different parts of the health care industry—life sciences, providers, regulators, and more—came together to radically change the speed at which we generate medical evidence. Clinical trials were completed in record time. Researchers also aggregated data outside clinical trials to generate real-world evidence about these therapeutics' safety and efficacy, informing decisions about authorizations, booster shots, and more. 

Covid-19 accelerated the pace of clinical evidence dissemination and circulation. Clinicians relied on online clinician communities to discuss emerging evidence and reach consensus about emerging therapeutics, informing how they treat and manage Covid-19 in real time. This allowed clinicians to form medical consensus outside of traditional pathways, keep up with changing guidance, and learn from peers across the world. But it also highlighted the very real risks of medical misinformation proliferating online, even in online clinician communities—and the essential role that health care leaders must play in combatting misinformation in real-time.

Additionally, the industry placed a renewed focus on making clinical trials more equitable, diverse, and accessible. For Covid-19 vaccines, we saw some of the most diverse and representative trials yet. For other therapeutic areas, we saw innovators come together to make trials more convenient for patients and representative of patient populations, relying on decentralized and virtual trial models. More work is needed to make clinical trials even more equitable and accessible, but 2021 put this innovation in the spotlight.

These advancements in therapeutic development and evidence generation provide hope that we can continue to innovate how we bring life-saving therapeutics to the market in record time.

4. The rampant nurse exodus from the inpatient bedside.

By Lauren Rewers, Consultant

2021 had no shortage of challenges for hospitals, including continued surges of Covid-19 inpatients that periodically threatened to overwhelm capacity. But perhaps the biggest challenge—and one that continues to be a major industry vulnerability heading into 2022—is the exodus of nurses from the inpatient bedside.

Nurse turnover has been rising for years, culminating in an all-time high in 2020 turnover, vacancy, time-to-fill, and premium labor costs. Given the immense toll the pandemic wreaked on frontline emotional well-being and safety, in addition to increased competition for nurses required to expand inpatient capacity, this instability makes sense. But here's the worse news: clinical leaders report that even as overall Covid-19volumes declined in 2021, nurse staffing shortages grew more severe.

One silver lining: workforce leaders have the full backing of the C-suite peers to do so. A 2021 survey of hospital CEOs named retaining talent and RN recruitment as their second and third biggest priorities respectively, even above competing for patient volume and cost containment.

Additional reporting by Junhong Peng

5. The record-setting funding in digital health firms (and the consolidation of tech players).

By Jordan Angers, Senior Analyst

Surging digital health market sets off platform race

This year was all about the rise of digital health beyond the explosion of telehealth we saw last year. The rise in digital health was driven by the surge in funding over the past couple of years. Digital health funding reached an all-time high in 2021, with the first three quarters of the year bringing in $21.3B, already outpacing 2020's total of $14.6B. Not only is there more money going into digital health, but companies are getting more money earlier in the funding process. In 2021, companies were bringing in more money for Series A funding than they had for Series B funding in 2017 ($18M and $17M, respectively). It's clear that investors are excited about the potential of digital health. They've seen what digital health has accomplished over the past year and want to take those accomplishments to scale.

We've also seen provider organizations double down on their digital health offerings. According to a 2021 Advisory Board survey, health system and hospital leaders ranked digital health and technology investments as their top capital spending and strategic priorities. And investing in digital health will be more important than ever for patient satisfaction. Patients are demanding the same high-quality digital experiences they've accustomed to in all other aspects of their lives. In fact, over 40% of consumers are expressing that they would consider switching doctors if they didn't provide a good digital experience for their care.

Incumbent organizations and third-party vendors battle it out for top digital health experience

All this activity has essentially set off a digital health platform race. We might have guessed that third-party vendors would have easily come out on top. But so far, traditional health care organizations have held their own because of their existing relationships with patients and the industry's concern that third-party vendors will worsen care fragmentation.

Both traditional and third-party organizations are addressing their weaknesses so they can provide better experiences and build more comprehensive platforms that will enable care continuity.

We will likely see more hybrid care in 2022

Going into 2022, leaders should continue to improve their existing digital health solutions, while also working to seamlessly integrate digital offerings with in-person care. There are limits to digital health's reach, and we've seen organizations that take a hybrid approach to care delivery fare better during periods of uncertainty.

6. Aduhelm: One of the most anticipated (and controversial) drugs approved by FDA.

Nicholas Hula, Senior Analyst

It's hard not to get excited by a headline like "First treatment for Alzheimer's disease hits the market." After all, Alzheimer's disease is a top ten leading cause of death in the US, and one of the only diseases on that list to have no cure or disease-modifying therapy. In 2021, we finally saw that headline.

However, when FDA approved Biogen's much anticipated and controversial drug, Aduhelm, in June, the excitement was short-lived. While Biogen and many patient advocacy groups hailed this historic moment, the broader market showed serious reservations. Health systems and health plans announced they would decline to administer or cover the drug, citing concerns about its efficacy, safety, and cost. The public and Congress questioned FDA's approval process, damaging overall trust in the agency. The acting FDA commissioner at the time even called for an independent investigation into the decision. The drug's $300,000 revenue for Q3 was far short of Wall Street's projections.

But despite these negative reactions, this is actually one of 2021's biggest stories for a positive reason—this approval signals hope that the 2020s will be a historic decade for innovations in Alzheimer's disease. FDA has clearly indicated that finding treatments for this disease is a priority. Biogen moved up its timeline for completing Aduhelm's phase four confirmatory trial to 2026. Other pharma companies are investing in their own Alzheimer's disease assets. The entire industry is improving its understanding of the disease's pathology. As a result, it's not unrealistic that there could be multiple disease-modifying therapies on the market by 2030. Like we at Advisory Board have been saying for months now, this story is a starting point, not a finish line.

In the meantime, I encourage stakeholders across the health care ecosystem to ask themselves the following four questions to prepare for the future of Alzheimer's disease:

1. How can we meet the needs of younger memory care patients if new therapies and diagnostics allow individuals to identify and treat cognitive decline earlier on?
2. Are we complementing advances in treatment with accessible and innovative diagnostics and care pathways?
3. How can we ensure clinical and technological advancements avoid creating care pathways that deepen inequities in Alzheimer's care?
4. Are we prepared to coordinate with other stakeholders across the health care ecosystem to ensure individuals have financial access to treatment and care management?

7. Whether health care organizations actually committed to advancing health equity.

Darby Sullivan, Consultant

If 2020 was the year of our country's reckoning against racial injustice, 2021 was the year when the health care industry would take real action—or let momentum slip away. Our research team closely tracked the unprecedented commitments across the industry to advance health equity. Unfortunately, too many started and ended with a lofty press release and a few extra DEI trainings. A groundbreaking Washington Post analysis from last summer shows that the trend was not isolated to the health care industry. For many, it was all too easy to return to business as usual, especially when Covid-19 surges and new variants continued to strain the workforce.

This is not the result of bad intentions, at least with the health care executives I've spoken with. Many organizations dedicated new resources to advancing equity, most notably with the creation of new leadership positions tasked with identifying and addressing disparities. But progress has already slowed for a few reasons:

• Leaders lack a clear roadmap of where to begin. This led to under- or mis-investments, like devoting funding to passion projects rather than true community need—further damaging trust. Even internal investments like a new DEI leadership position sometimes fell short, as these new hires were tasked with too much to achieve with too little resources. Equity efforts often remain siloed within the organization and didn't take aim at the root causes of inequity.
• The health care industry continues to operate under sometimes perverse incentives. This isn't new, but it remains unchanged. Until securing equitable outcomes is a business mandate—required for surviving and thriving across all corners of our industry—I fear that health equity will always remain a nice-to-have, not a need-to-have. Beyond policy advocacy, health care executives can use their leverage to hold cross-industry stakeholders financially accountable for change—and ask partners to do the same for them.   

Though this year hasn't ushered in real, structural change, 2022 could—if health care leaders choose to make it a reality. For leaders committed to building equity in the long-term, review the 3 pillars of an equitable health care organization to learn how to make meaningful progress.

8. Legacy turnover challenges threaten to financially destabilize post-acute care.

By Monica Westhead, Managing Director

Staffing challenges aren't new to most post-acute providers. To illustrate my point: a recent study estimated average turnover among SNF-employed RNs and CNAs at 130%. And that was in 2017!

But while staffing challenges aren't new, the acuity of the problem is. A September survey of nursing homes noted that 99% of respondents reported a staffing shortage, of whom nearly 60% say they are "high-level" shortages.  

Post-acute providers aren't alone in struggling to retain their workforce. But for post-acute providers, these challenges are existential. 35% of nursing homes say that they are "very concerned" that if workforce challenges persist, they may close their facilities. Already, many post-acute leaders report that they are temporarily closing beds or entire wings they can't staff. In doing so, it isn't just post-acute providers or the vulnerable seniors they care for who suffer—it's also hospitals and physician groups who are unable to safely discharge inpatients.

How did we get to this point—and why are post-acute shortages so severe, compared to the rest of the industry? I point to three main reasons:

1. Historical turnover and staffing pressure gave SNFs far less cushion to weather Covid-19staffing instability, let alone the devastation that SNF patients and staff weathered during the pandemic.
2. Inpatient staffing shortages are creating a negative vacuum pressure drawing post-acute clinicians to comparatively lucrative bedside roles.
3. Increased competition for entry-level workers, both from other health care providers and from out-of-industry competitors such as Amazon and retail stores, is increasing turnover for CNA, EVS, and dietary services staff (among other key roles).