Prioritizing Patient Care and Staff Safety in a Pandemic

Posted on November 13, 2020

Rita Ferreira
Rita Ferreira
Associate, Healthcare & Chemicals Research

Medical facilities, including hospitals and long-term care facilities, are under tremendous pressure to provide quality healthcare for patients while ensuring patient and staff safety amidst the COVID-19 pandemic. By using Sustainalytics’ ESG Risk Rating to understand better the risks faced by companies, and the current state of preparedness within the medical facility subindustry, investors can identify the most relevant points to address when engaging with companies and analyzing potential ESG impacts in their portfolios.

Between March and June 2020, hospitals and health systems in the US experienced an estimated financial impact of over USD 200 billion due to postponed or cancelled medical procedures and any new costs related to COVID-19 protocols. Interestingly, US hospital admissions this year are estimated to be 10 percent below the predicted volume[i] while telehealth claims were up more than 4,000 percent in June 2020 year over year.[ii]

Health Care Staff Safety

Globally, healthcare professionals are at a higher risk of exposure to COVID-19, and the issue is particularly prevalent within medical facilities. Research conducted in the EU/EEA confirmed that a disproportionate number of COVID-19 clusters are present in medical facilities, including hospitals, long-term care facilities, and primary-care facilities.[iii] To manage increased occupational health and safety risks, medical facilities must have robust measures in place to protect staff. This should include having sufficient supply of personal protective equipment, developing effective systems to assess and isolate COVID-19-suspect patients, and training staff on safety protocols. 

Sustainalytics research reveals that 60 percent of companies within the medical facilities subindustry having a weak management score for the Occupational Health & Safety Material ESG Issue, while 40 percent reflect an average management score. Presently, no company within the subindustry holds a strong management score. Companies and investors alike should be cognizant of this issue and understand how to be better prepared for imminent challenges.

Ensuring Patient Safety

Since the beginning of the outbreak, medical facilities have been subject to numerous allegations of proper care at, in particular at long-term care facilities. In the exhibit below, Extendicare and Sienna Senior Living stand out for having two of the highest controversy levels for product quality and safety events linked to the COVID-19 outbreak. These two Canadian-based long-term care companies have been involved in allegations of mistreatment of residents, including failure to uphold basic care needs and lack of use of appropriate protective equipment. These malpractices have allegedly resulted in severe, non-reversible impacts on residents, including death. They have resulted in several of Extendicare’s and Sienna Senior Living’s facilities being taken under the management of either the Ontario Province or other healthcare institutions, such as the Ottawa Hospitals. Incidents related to patient safety amidst the COVID-19 outbreak are captured through Sustainalytics Controversy Research and feed into companies’ ESG Risk Ratings as part of the MEI Product Governance.

To ensure patient safety, companies need to implement strong service quality and safety management systems. As shown in exhibit 1, for a sample of companies[iii] within the medical facilities subindustry, companies involved in product quality and safety incidents linked to the COVID-19 outbreak currently hold a weak management score for the product governance MEI, except for Orpea (average management, category 2) and Life Healthcare Group Holdings Ltd. (average management, category 1). Before COVID-19, allegations related to negligence or abuse of patients were already relatively common for medical facilities companies. However, the outbreak highlights the existing gap in management practices, increasing the reputational and legal risks for companies that do not have adequate mechanisms to ensure the safety and quality of their services.

Exhibit 1: Product Quality and Safety Controversies (linked to COVID-19) & Product Governance Management Score

Source: Sustainalytics; (Comprehensive Framework) companies within the medical facilities subindustry involved in controversies for product quality and safety linked to the COVID-19 outbreak.

Telehealth: Opportunities and Risks

Despite new and existing risks in healthcare, the industry is encouraged by new opportunities as providers seek alternative health care delivery channels in light of COVID-19:

  • Hospitals can benefit from the use of virtual care service to earn additional revenue as they enable patients living in remote areas to see specialized physicians.[iv]
  • Telehealth can help prevent in-hospital transmission of highly contagious diseases, such as COVID-19, by limiting the number of hospital visits for patients.[v]

A McKinsey study shows that the percentage of US-based consumers using telehealth increased from 11 percent in 2019 to 46 percent in the first months of 2020. Although telemedicine is expected to supplement traditional in-person medical visits, and not entirely replace them, the increased demand for telehealth represents an opportunity for healthcare companies to potentially virtualize up to USD 250 billion of current US healthcare spend.[vi]

This opportunity does come with associated cybersecurity risks as the healthcare industry spends more than any other industry on data breach recovery[vii]. Research conducted between March and April 2020 observed a thirty percent increase in security alerts sent to IT staff at 148 of the most popular telehealth applications compared to the period between September 2019 and February 2020. Companies providing telehealth services or planning to enter this field should consider these risks and have robust cybersecurity management systems in place to prevent patient litigation and costly fines in cases of regulation breaches.

The COVID-19 outbreak has highlighted the importance of quality of care issues and human capital management for companies owning or operating medical facilities, while also generating opportunities linked to remote healthcare. As a starting point, investors looking to examine ESG impacts in their portfolios could benefit from reviewing Sustainalytics’ ESG Risk Rating scores for key issues including Occupational Health and Safety, Human Capital and Product Governance.

 

Sources:

[i] Reed, Tina. “Hospitals Could See 10% Drop in Admissions in 2020: KFF.” FierceHealthcare, 19 Oct. 2020, www.fiercehealthcare.com/hospitals/hospitals-could-see-10-drop-admissions-2020-kff

[ii] Robin Gelburd, JD. “Contributor: Telehealth Claim Lines Increased 4132% Nationally From June 2019 to June 2020” https://www.ajmc.com/view/contributor-telehealth-claim-lines-increased-4132-nationally-from-june-2019-to-june-2020

[iii] Sample includes companies belonging to the medical facilities subindustry, and part of Sustainalytics comprehensive framework.

[iv] Holland, Taylor. “5 benefits of telehealth: What’s in it for the hospital?” https://insights.samsung.com/2018/11/05/5-benefits-of-telehealth-whats-in-it-for-the-hospital-2

[v] Cohen, Jessica. “New telemedicine strategies help hospitals address COVID-19” https://www.modernhealthcare.com/patients/new-telemedicine-strategies-help-hospitals-address-covid-19

[vi] Oleg Bestsennyy, Greg Gilbert, Alex Harris, and Jennifer Rost. “Telehealth: A quarter-trillion-dollar post-COVID-19 reality?” https://www.mckinsey.com/industries/healthcare-systems-and-services/our-insights/telehealth-a-quarter-trillion-dollar-post-covid-19-reality#

[vii] IBM Report: Compromised Employee Accounts Led to Most Expensive Data Breaches Over Past Year https://newsroom.ibm.com/2020-07-29-IBM-Report-Compromised-Employee-Accounts-Led-to-Most-Expensive-Data-Breaches-Over-Past-Year