The Covid-19 pandemic has completely changed the world, including the health care industry. As the pandemic continues on, health care leaders are faced with a variety of strategic decisions that will have long-lasting implications for the future of the industry.

Radio Advisory's Christopher Kerns sat down with Advisory Board's Yulan Egan to discuss how the Covid-19 pandemic has affected health plans, physicians, suppliers, and patients so far and what health care CEOs need to know for 2022.

Read a lightly edited excerpt from the interview below and download the episode for the full conversation.

Christopher Kerns: Let's talk about health plans. This is the sector that got a lot of attention, just because of the huge declines in expensive utilization that we saw across the past two years. So surely health plans must be flush with cash right now. Is that fair?

Yulan Egan: Well, most of the headlines would have you believing that narrative, but we actually think that it's more useful to look at enrollment trends rather than some of the more obvious financial metrics, like profits or our revenues or margins.

And when you look at enrollment trends, what you see is a pretty clear dichotomy, which is that the big national health plans did a much better job of growing their memberships amid the pandemic than smaller regional plans or many of the blues. And we saw that dynamic particularly within the Medicare Advantage space. So the big plans saw huge, huge growth in MA and outsized growth relative to their other competitors in the market.

Kerns: In some ways that makes sense though, because the blues have a lot more exposure to the commercial markets, which saw big increases in unemployment.

What about the hospitals and health systems? One thing that I remember us talking about a little bit earlier in the year was just how wide the divergence in performance was between the haves and the have nots. How has that manifested itself across the past 20 months?

Egan: Yeah, and this is something that you wouldn't necessarily notice if you were just looking at average margins or median margins across the industry. Because if you look at the averages, it really looks like hospital margins have essentially stabilized and sort of returned to pre pandemic norms.

If you look at the spread in performance though, the range in performance, so the difference for example, between those who are at the 25th percentile of performance, and those who are at the 75th percentile, that gap grew significantly pretty much immediately following the onset of Covid-19. And we've continued to see that gap maintained even as the average has returned to normal.

And one of the things that I've noticed is those that were able to succeed and actually thrive during the pandemic are those that really embraced systemness. It tends to be the larger organizations and the ones that built out certain types of systemness aspects that enabled them to thrive.

Effectively it allowed them to move staff around, allowed them to move supplies around, allowed them to move physicians around as necessary. And they didn't suffer as much as some of the others that weren't able to do that.

Egan: Yeah, it's certainly not a universal rule, but I think we did see that scale tended to be an advantage. So the bigger you were, the better off you tended to be. And some of the smaller standalone community hospitals struggled a lot more because they couldn't take advantage of that same type of systemness that you're describing.

Kerns: And I think you're talking about something we really important there. It's not just being big, it's being big and knowing how to use that scale effectively. It wasn't a magic bullet, but it certainly helped.

Physicians on the other hand, got a lot of attention early on because of the huge amount of support that they were expected to need. But I think you showed me some data a little bit earlier in the year that showed that physicians seemed to be okay, financially speaking, at least in aggregate, is that fair?

Egan: Yeah. Physician income actually held steady between 2019 and 2020. I think as with hospitals, there was obviously some variations. So there were some physicians and some physician practices that did incredibly well and others who struggled.

But I think by and large, what we're seeing on the physician side is that the big challenge is not necessarily financial sustainability, but workforce sustainability. They're dealing with trauma, they're dealing with burnout. We'll talk a lot more about those trends in part two of this conversation.

Kerns: And the trauma and burnout that they're experiencing is actually feeding some of the power that they have right now because they have new demands on those that would like to engage them. Last, let's talk about suppliers, how have they done? A lot of attention given to the drug companies in particular at the beginning of the pandemic, especially as they were so instrumental in developing the vaccine. How did they fare financially overall?

Egan: So I would say that suppliers are maybe the one exception to that have, and have not dynamic that I described earlier on. What we saw on the supplier side was actually a pretty rapid return to the norm. So they didn't face particularly monumental financial challenges. They also didn't get a particularly big financial boost out of the pandemic or a big political halo coming out of the pandemic either.

So when you think about pharma and med device, I would sort of describe it as back to business. The one exception I would flag is probably digital health and that's kind of the obvious one, but huge, huge amounts of investment and dollars that flowed into that sector of the industry across the past year and a half.

Kerns: What about the most important aspect of health care that we have not talked about yet, which is patients? How did their finances hold up? The last time that health care received a shock, anything resembling the pandemic of course, was the financial crisis of 2008 and nine when uninsured rate shot up, but that didn't really have this time around, did it?

Egan: Yeah, this was the first time I would say that the Affordable Care Act's insurance safety net was really put to the test in a big way. And although we did see big temporary spikes in unemployment and some drops in employer sponsored coverage as a result, what we saw was that the new safety net largely worked as it was designed to. And so overall the uninsured rate actually hasn't increased all that much, which is pretty remarkable given what we've seen on the employment side of the equation.

Kerns: Recently, I asked a lot of my colleagues to submit a few ideas for a piece that we did for the Daily Briefing on what about the pandemic most surprised you in terms of the industry's response and our colleague, Amanda Berra pointed out that it was the safety net working as designed, that really surprised her most. And it really says a lot about our time today, that working as designed is big surprise, but here we are, 2021.

Going back to 2008 and 2009—the financial crisis—that unemployment spike that we saw was of course one of the reasons why the Affordable Care Act was put in place to begin with. During that crisis employers needed to cut costs by any means necessary.

Now some of that was achieved through layoffs, but a big bet was made on high deductible plans also with the hope of using them to encourage a lot more price shopping and decrease a lot of unnecessary utilization. But the pandemic did the latter job for employers this time around. Is that fair?

Egan: Yeah, I think that's fair. I think what we saw on the employer side is that health care budgets were something of a bright spot actually for many employers in 2020, and even in 2021, because of those declines in utilization. The big concern on the part of employers is that they know that that decline is probably going to be temporary. And they're in fact afraid that a lot of that deferred care is going to lead to big spikes in utilization down the line. So their concern is not so much the current reality, but what might happen in the next two to three years.