COVID-19 and the health industry

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Practical steps for responding to the coronavirus crisis

The coronavirus (COVID-19) outbreak is causing widespread concern and economic hardship for consumers, businesses and communities across the globe. We’ve prepared some general guidance on COVID-19: What US business leaders should know: crisis management and response, workforce, operations and supply chain, financial reporting, tax and trade, and strategy and brand.

The crisis raises a number of unique challenges. In PwC’s inaugural COVID-19 CFO Pulse Survey, finance leaders in the United States and Mexico shared their top concerns.


What are your top 3 concerns with respect to COVID-19? (Select up to three.)

Financial impact, including effects on results of operations, future periods and liquidity and capital resources
%
Potential global recession
%
The effects on our workforce/reduction in productivity
%
Decrease in consumer confidence reducing consumption
%
Supply chain disruptions
%
Difficulties with funding
%
Not having enough information to make good decisions
%
Impacts on tax, trade, or immigration
%
Cybersecurity risks
%
Fraud risks
%
Privacy risks
%
Source: PwC COVID-19 US CFO Pulse Survey
April 22, 2020: base of 305

What makes the health industry different

Here is our take on some issues that companies in the health industries may face. Additionally, we’ve identified six considerations for health companies through our detailed analysis.

Crisis management and response

The health industry is the front line of the US response to the SARS-CoV-2 virus that caused COVID-19, an infectious respiratory disease. As of March 20, more than 10,000 people were known to have died of COVID-19 around the world — just a few months after the apparent start of the outbreak.

Health providers must simultaneously continue operations while preparing their pandemic response and in some cases, responding to immediate health needs due to infection outbreaks.

Pharmaceutical and life science companies are spooling up production of test kits and research and development infrastructure for vaccine development.

Steps to consider:

  • Make sure communication systems are up to the challenge of a pandemic response. Systems should communicate seamlessly inside the organization and with outside health and community groups.
  • Evaluate the most critical data needs for decision-making around surge staffing and supply chain strategies.
  • Help reduce technology vulnerabilities by testing systems under a variety of scenarios.
  • Confirm that communication can cascade to front-line workers who may not be as reachable as usual.

Workforce

Avoid overcounting available staff. This is especially true for healthcare organizations with staff who work for more than one hospital or clinic. In the event of a community-wide emergency, which facility are those employees obligated to staff?

According to the AHA, 55% of hospital executives surveyed reported gaps in specialty coverage in emergency departments that may be harder to fill in a crisis. Pharmaceutical and life science companies may need to ramp up production and increase or move workforce around to help fill gaps.

Previous crises such as the Ebola outbreak have resulted in hospital emergency departments becoming contaminated, resulting in facility “lockdowns” in which no one could enter or exit until an all-clear was declared. Sometimes, the lockdowns last for days.

Steps to consider:

  • Evaluate the entire workforce to identify employees who could work remotely to keep them and their families safe from possible exposure.
  • A pandemic requires extra communication and reassurance to employees that you have taken into consideration their safety and that of their families. This may take the form of specialized training and equipment, continual updates on best practices or reinforcement of basic prevention information.
  • Make sure supplies for basic subsistence are in your location in case you need to lock it down or house additional people during the crisis.

Operations and supply chain

Surge requirements run counter to common inventory management practices. Because of financial pressures, many hospitals manage their supplies on a just-in-time basis and measure their inventory cycles in terms of days or even hours.

Although many health providers stockpile some supplies, the practice is far from universal. Stockpiled supplies are often stored behind those used on a more routine basis, and because they are rarely accessed, staff members may not know they are there — or how to use them.

There are already responses to potential shortages of critical supplies, equipment and drugs, which in some cases means limiting nonessential surgeries or other treatments, validating stockpiles and looking for alternate suppliers.

Steps to consider:

  • Include a surge component in your supply chain planning.
  • Review processes for monitoring expiration dates and replacing old supplies, secure additional space to store larger stockpiles if needed, and stage supplies to be accessed quickly during a pandemic.
  • Implement comprehensive vendor reviews and make sure you have alternatives for sourcing medical supplies that may run low, rare material for specialized lab and device manufacturing, and active pharmaceutical ingredients.

Financial reporting

Revenue sources and payment rules may be in flux during the crisis. Federal rules around cost sharing for tests and preventative measures can change, and private insurance companies and employers may change benefits in a way that may ultimately affect revenue. 

As pharmaceutical and life science companies make changes to supply chain and sourcing, revenue recognition issues may come into play.

Steps to consider:

  • Health companies may need to reassess the probability of payments during the crisis.
  • Companies should revisit key assumptions in financial projections in light of potential disruptions.

Tax and trade

Tax perspectives for health companies may be a follow-on issue to address after more immediate pandemic issues. 

However, there are multiple potential issues for pharmaceutical and life science companies working in a global ecosystem, as well as for providers and payers that have to move members of their workforce to remote sites.

Steps to consider:

  • Health organizations with extensive international supply chains need to consider the tax and transfer-pricing components of restructuring their supply chains.
  • To the extent that employees begin to work offsite, state and local tax implications should be addressed (e.g., potential registration, withholding, and reporting.)

Strategy

The pandemic may illuminate the need to consider new business models that are more flexible and resilient.

Steps to consider:

  • Evaluate the use of a wider primary care team that can supplement and sometimes substitute for general practice physicians.
  • Implement or expand virtual health offerings and the ability to conduct remote research.
  • Use process automation and AI to create efficiencies and relieve labor shortages where possible.

Other considerations

Health industry companies also may focus on these other issues.

Focus on prevention

Health companies are evaluating new policy and business decisions to respond to the unique needs of a pandemic. Business rules around insurance coverage and employee benefits may need to be updated temporarily to help support better health and safety.

Hospitals and health systems will need to make operational and staffing changes based on real-time knowledge of workforce and supply limitations.

Steps to consider:

  • Evaluate insurance benefits to reduce barriers to preventative care, such as COVID-19 testing, mail-order drug delivery and virtual care visits.
  • Run new scenarios on staffing needs and potential supply shortages based on the latest infection data.

New R&D strategies

Pharmaceutical and life science companies may consider changes to research and development strategies as new federal incentives for vaccine development and clinical trials emerge.

Steps to consider:

  • Evaluate clinical trial timelines if fewer participants are able to access clinical trial sites.
  • Evaluate R&D strategy in light of new federal money and incentives to develop tests, medical supplies and vaccines.

The way forward

Health companies may come out of this pandemic stronger than ever. For years, health organizations have been moving to a more digitally enabled and virtual environment. This crisis may accelerate those efforts and ultimately make them more comprehensive. For example, the ability to provide nonclinical remote workforce capabilities has new urgency. Health providers that have worked in fits and starts on streamlining delivery systems around the creation of virtual health capacity through telehealth, remote monitoring and virtual clinical trials may now make more sustained efforts. The result may be the creation of a comprehensive virtual capacity that results in a more resilient system. Lastly, it has become clear that moving healthcare to the home is not just good for the consumer experience, but, in case of pandemics or even natural disasters, it may be key to keeping people healthy.

Some companies may also use this opportunity to shore up their core processes. They may look at implementing new consumer segmentation and behavior tools, reviewing vendor capabilities and alternative sourcing, and using dynamic and resilient strategy scenario-modeling capabilities.

Contact us

Karen Young

US Health Industries Leader, PwC US

Glenn Hunzinger

US Pharmaceutical and Life Sciences Leader, PwC US

Gurpreet Singh

US Health Services Leader, PwC US

Benjamin Isgur

Health Research Institute Leader, PwC US

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