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ERP Implementations and Failures-Case Studies

ERP implementations are often two to 10 times bigger than previous projects. Second, they are transformational, which means there are winners and losers in the organization as a result of the digital transformation enabled by the implementation. Third, they are generational, which means an organization might not have done anything comparable in 10 to 15 years.

Here are a few examples of actual cases and their takeaways.

1-Waste Management's failure to verify vendor claims

Waste Management ran into some major snags when it attempted a massive SAP installation in 2005. After numerous problems and delays, the company ended up in a $500 million lawsuit against SAP that was eventually settled out of court. SAP had suggested Waste Management could achieve $106 million to $220 million in annual benefits from a consolidated ERP system that could be implemented in 18 months. One big problem was Waste Management's failure to verify SAP's claims before making an executive decision. The company quickly discovered there were significant gaps between what was promised and what was delivered in the software.

The Takeaway-Verify vendor claims with internal business and technical teams. Performing a proof of concept on critical functionality can reduce significant risk.

2-Nike's unrealistic goals

Nike thought it could Just Do It when it embarked on a $400 million  upgrade of its ERP system in 2000. But the new system resulted in $100 million in lost sales and a 20% drop in stock price when it couldn't fulfill orders for Air Jordan footwear. Nike was overly optimistic in their goals, and they failed to verify business process met operational needs before deploying the system.

The Takeaway-It's important to set realistic goals in the implementation plan, especially with regard to ERP functionality and project schedules. Also defining operational and business requirements early on and keeping them in mind when developing systems. Ensure you take enough time to test the system for any kinks that need to be ironed out before putting your system into production.

3-MillerCoors' hiring the wrong people for the job

MillerCoors embarked on an ambitious plan to consolidate all of its financials on a single ERP system to reduce costs and improve operational efficiency. In 2014, it hired HCL Technologies to implement the project, which was stalled by numerous defects. MillerCoors ended up suing HCL for $100 million, which was finally resolved in 2018.The problem arose because the planning and architectural phases were not given adequate consideration. In addition, many critical defects and other additional problems were identified but not fixed.

HCL's core competency was generally regarded as implementation, not planning and architecture.

The Takeaway-  Ensure you have the right expertise for the particular project. IT is often the toughest and the most expensive part of integrating multiple companies, and they rushed through the planning and architecture phase only to get hurt by it later.

4-Revlon's underestimation of operational impact

Revlon attempted to integrate all of its ERP processes across business units after a merger with Elizabeth Arden in 2016. The new system failed spectacularly after it went live in 2018, resulting in a loss of $64 million in sales, a 6.4% loss in stock price and  an investor lawsuit.

A key issue was that Revlon had attempted to consolidate Microsoft and Oracle systems on a new SAP implementation but lacked hands-on experience with SAP. It also decided to go live without making sure the ERP business processes would work as intended.

Rolling out a system that does not meet operational needs and requirements often leads to adverse business impacts. Mind both the operational and business sides of an ERP implementation.

5- Invacare's ERP solution gets Expensive

Medical device manufacturer Invacare's ERP project faced a key setback in rolling out a major SAP upgrade in 2021. Unfortunately, the company had to pay a monthly maintenance fee to the system integrator as the project dragged on into 2022, and the fed-up board went shopping for a new CEO in August 2022.

ERP implementations are one of the most resource-intensive projects a company can pursue; budget and timeline mismanagement can derail an ERP project or stop it altogether.

The software and support vendors a company chooses can make all the difference. It is important to  conduct an RFP process that includes a comparative bid analysis, vendor demos and a scorecard filled in by key stakeholders.

Final takeaway: It is important to accurately estimate the total cost of ownership, have a timeline that considers all services and partners, and develop a plan to avoid cost overruns due to change orders or delays.

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CRNA (Certified Registered Nurse Anesthetists) Updates & Trends for 2024

A leading trend in the CRNA field is a move to allow them to work without physician supervision. Currently over 30 states allow CRNAs to practice at the full scope of their education and training without physician supervision. CMS gave state governors the authority to opt-out of a hospital or ambulatory surgery center reimbursement requirement for physician supervision of nurse anesthetists in 2001. The Centers for Medicaid and Medicare Services (CMS) recognized a CRNA's ability to perform pre-anesthetic assessments in ambulatory surgical centers. It also recognized Medicare Part B payments to CRNAs for evaluation and management services as part of their Physician Fee Schedule. In states like Wyoming, Montana, or Oregon, which are mostly rural, Certified Nurse Anesthetists work with the highest levels of autonomy, which translates to significantly higher wages. Preparation for practicing as a CRNA is changing and starting in 2025, all newly minted CRNAs will need a doctoral degree. The move is consistent with the educational preparation of other healthcare professionals, such as pharmacists and physical therapists.  Access to quality educational programs is often limited, especially in rural areas, making it challenging for aspiring CRNAs to pursue this career path depending on where they live. Opioid alternatives are becoming a trend in the field. The State of Florida is one of a few states requiring an anesthesiology provider to discuss nonopioid options with the patient prior to a procedure. Those options may include nerve blocks or the use of gabapentin, acetaminophen, lidocaine, ketorolac, or other medications given intravenously for general anesthesia. Patients can refuse opioids and anesthesia providers can give alternatives during the procedure. Patients go home more alert, with no nausea and vomiting. At the same time, patients come out with better outcomes from anesthesia. As the demand for anesthesia care has grown, so has the need for CRNAs to fill temporary assignments as locum tenens. These jobs can be full-time traveling jobs with supplied housing or part-time assignments in your own backyard. Although the majority of CRNA jobs are with hospitals, there is also the opportunity to work within an ASC (Ambulatory Surgery Center). Locum CRNAs can choose when and where they work, and enjoy a number of career and lifestyle benefits.

Best wishes for a great year!

Ed Cardon

EPC Search International LLC

470-345-0846

ed@epcsearchinternational.com

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Making Career Changes-A Blue Print

Being a recruiter and offering advice on career change may seem like an oxymoron pursuit. Last year was a difficult year for many and I hear people tell me that they are tired of what they are doing and wish they had a Plan B as we used to call it when I was in the military. I feel their pain but unfortunately my job description does not include career change.

Having thought about this for some time and asking advice from people who have successfully made their career transition a reality, I offer a few suggestions for those whom I cannot help professionally but may be able to help with this article.

When Amazon founder Jeff Bezos was deciding when to quit his well-paying hedge fund job, he went to his boss and told him that he was thinking of selling books online. He had already been talking to him about the power of the internet, but for the first time, he was seriously considering quitting to become an entrepreneur. Bezos asked himself what he would regret more when he was 80 years old: Trying to build something he had strong conviction in and failing, or failing to give it a try? He realized that not trying would haunt him every day.

Whether or not you are pursuing a passion or side hustle, confused about quitting your job for a new one, or just looking for a change, know that it’s not a straightforward decision. It requires careful planning and thinking.

Transitions aren’t just about doing something different. A career transition is a lifestyle redesign that often entails rethinking how you want to feel at the end of the day, how you want to spend your time, and how this relates to your longer term goals. When you feel this need for change, it isn’t necessarily related to a fancier title or more money, but your inner voice whispering that you could do more, be more, experience and achieve more.

Start by asking why you want to quit your current job.

Is it the culture of the organization, is it the people you work with, or is there something else bogging you down?  You might also discover that you love your job, but you want to build something new or experiment with a different sector. It is critical to be radically honest with yourself and think things through.

Keep the end in mind.

It is challenging to plan for the long-term, but it helps to have a mental image of the kind of life you want to build.

Work and life are not separate entities. Work is part of life. Try to visualize where you want to live, the kind of person you want to partner with (or if you even want a partner), and how you want to spend your time on a daily basis.

Assess yourself.

While some may know already they want to work in another industry or go back to school to learn something new, many don’t know what their next step should be. But it is impossible to know where you are going if you don’t know where you are. The simplest way to conduct this self-assessment is to ask yourself these questions:

What’s my end goal?

If I keep doing what I am doing today, will I get closer my ultimate goal?

Will my 80-year-old-self have more or less regrets because of my current choices?

Be realistic.

Some transitions are unlikely in the short-term. Don’t set yourself up for failure by setting unrealistic goals in unrealistic timeframes. We overestimate what we can do in one year and underestimate what we can do in 10. You can change your industry, your function, and your geographical location but all three are unlikely to change immediately. Gradual change is often much more sustainable.

Have a backup plan.

Create an alternative you can live with when things aren’t going as envisioned or planned. It might be somewhere in between your ultimate aspiration and your current state. This can bridge the skill and network gap you might be facing during career transitions.

Set a time frame

Suppose you want to transition from law to social impact consulting and making that switch is proving to be difficult, perhaps because of lack of relevant experience. Here your backup plan could be time-bound. You could give yourself one year to make the switch from law to social impact consulting by acquiring the right set of skills, building a tribe of mentors, and networking with industry professionals. If it still doesn’t work out, you can rethink your goal or look at accomplishing it in the longer term if it still interests you.

If you aren’t thinking about a career transition today, some day you will. As and when that day comes, my hope is that you approach it with curiosity, conviction, and commitment. Career transitions are messy, but they can also turn out to be catalysts in shaping a future self you will be proud of. There is no way of guaranteeing success, but not trying might just leave you wondering what if?

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Independent and Rural Hospitals Facing Financial Crisis

t’s no secret that small rural and independent hospitals have been facing financial hardships for years. Tales of rural hospitals closing and leaving communities with few healthcare choices are commonplace.

These facilities tend to serve an aging patient population that is more reliant on Medicare and Medicaid. Unfortunately, federal insurance programs often entail prolonged payment cycles for hospitals. The reimbursement rates from Medicare and Medicaid also are lower compared with other private health insurance companies. A challenging payer mix exacerbates the financial difficulties faced by these hospitals.

It’s not uncommon for an independent hospital to operate with less than 30 days’ cash on hand, and some, such as critical access hospitals, might even operate with less than 20 days’ cash on hand. In any other industry, that would be considered dangerous and disastrous for the business.

Protecting patient data and maintaining a modern IT infrastructure in the current environment can be a challenge. However, there are strategies independent hospitals can adopt to achieve cost containment while maintaining a strong  cybersecurity posture. Here are three suggestions:

 

1. Independent Hospitals Need Efficient IT Infrastructure 

Before implementing any new technologies, rural, independent and community hospitals should assess their existing IT assets to find areas where costs can be reduced or optimized. For example, the IT team can conduct telecom expense audits or electronic health record license audits to ensure they’re not overspending their IT budget and help organizations identify opportunities to consolidate IT systems and applications. App audits involve identifying which applications should be kept, replaced, retired, consolidated or moved to the cloud.

In addition to IT infrastructure efficiencies, finding efficiencies through vendor consolidation can also help independent hospitals achieve cost containment. If a hospital leverages its spending with one provider, it is better able to negotiate volume discounts and rebates or participate in other enhanced customer programs.

2. Using Managed Services to Combat Staff Shortages

While cybersecurity is critically important for independent hospitals, it can be difficult for their health IT teams to invest heavily in the staff, tools and strategies needed to protect the organization. That’s where managed services come in. With a managed services partner an independent hospital can monitor its network traffic 24/7 without the hospital having to employ staff with the skills to perform the task.

Any investment in cybersecurity also can help to reduce the cost of cybersecurity insurance, which is a growing necessity in the industry due to an increase in attacks targeting healthcare.

Another benefit of managed services and a managed network monitoring system is that they free up an independent hospital’s IT staff to focus on other strategic tasks. It can be hard for rural, independent and community hospitals to find CISOs or skilled security engineers. By empowering a partner to manage security through a virtual CISO or other managed cybersecurity service, an independent hospital can take advantage of a great skill set that they might not have been able to find locally amid a shortage in IT and security experts.

It’s possible for independent hospitals to recruit from outside of their areas, but they are competing with large hospital systems who can likely offer in-house security experts larger salaries.

3. Independent Hospitals Should Take Advantage of Federal Funding

Independent hospitals can leverage federal dollars to help pay for cybersecurity and IT infrastructure investments. During the pandemic, several one-time grants were made available to help offset costs associated with treating patients with COVID-19. Many of those dollars were set aside for IT investments, particularly telemedicine. While those grants are no longer available, there are still annual grants available to rural, independent and community hospitals.

Becoming knowledgeable about those programs can help diversify the hospital’s revenue stream on an ongoing basis.

Many smaller hospitals that need federal funding and that are the intended recipients of these dollars don’t have grant writers on staff like larger hospital systems might. It can be helpful for independent hospitals to hire consultants to navigate the grant application process for them.

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Epic Implementation Tips and Tricks

Most of the ideas I am suggesting came from consultants (Epic and others) that I have worked with over 10+ years of placing them in contract and full time positions.

Prioritization-implementing hospitals should have a list of items that are critical for a successful Go Live. Decide which programs/modules are essential to have before implementing them. You can always go back and add or tweak products that you didn’t have time or budget to add at some later date

Form a committee for each Epic vertical and staff it with clinical leaders. Make sure that the clinical leaders feel supported by project management; get their input and listen to their concerns. In other words keep communication open and constant. Implementations are never easy and it makes sense to have everyone on the same page from day one. It will also complement any change management strategy you have in place.

Have integrated groups where analysts from different applications can discuss upcoming build changes. With such a large project, it can become easy to work in silos, but it is pivotal to ensure a collaborative approach is maintained to build an integrated system.

Staffing: while many hospitals implementing Epic staffs a great proportion of the project with internal clinical staff, there could be a significant value in hiring Epic certified consultants with prior Epic experience though they could be more expensive. As there’s no guarantee that Epic’s implementation services team (i.e. Application Coordinator/Manager) provides adequate support to the newly certified project staff, it’s a smart move for the Epic Project Managers to have their experienced Consultants mentor the rest of the team, as needed, and guide them when Epic staff is not immediately reachable for support. 

The project planning phase (scope of the project) is one of the most important decisions prior to beginning the project. During the implementation phase, information gathering is very important to be able to gather all of the necessary information from the legacy systems/processes needed to customize the EMR to a hospital’s needs.

When a legacy EHR system is retired or replaced by Epic, hospitals and providers are still responsible for maintaining the historical medical and financial records. Many states require this to be maintained for 6 to 10 years for release of information. Many hospitals and providers who move to Epic EHR, assume that all history records will be moved into Epic. This is not true most of the time. By the time they realize this, all budget is burnt out for Epic implementation. So, they end up continuing to pay annual support fees to the legacy EHR to retain access to historic information. So, they end up running two systems! Archival of the historic medical and financial information in the old system is the right solution for these situations.

The history records need to be extracted from the legacy EHR and put in a safe, secure place and the information should be made available to those who need it. Some vendors specialize in extracting all data from multiple old EHR systems, migrating the minimal relevant data into the new EHR and archiving the rest. This data management service helps hospitals and clinics to move to new EHR without losing historical data, and keep them compliant. Vendor neutral EHR archives cost only a fraction of maintaining the legacy EHR systems.

To insure a smooth rollout, staff should be thoroughly trained on their specific job function within the system. Additionally, feedback sessions post implementation for each user/department is essential to ensure that any issues that come up after implementation are handled ASAP. Otherwise users may blame the system.

Allow adequate time for your workflow experts to spend time with the vendor to customize the EMR and create solid data entry practices, templates, workflows etc. before you go live. Trying to backtrack and customize later is a messy endeavor, and causes a lot of stress and change fatigue for your staff.  If you create all the customization beforehand and make it easy for people to enter discrete data and do things the right way, you will have a running start, and you will excel much more rapidly than a rollout without this structure. Minimize the opportunity for free text as much as possible.

Finalize the decisions about work flow changes before the training and Go-live.  Make sure there is no missing build and have the complete build migrated to the training environments. Have the super users engaged in training and support of their colleagues.  Give high priority to the EHR implementation in terms of resources and logistics. Minimize the changes to the training environment once training starts.  Plan for the cutover activities and data validation in terms of time and resources.  Make use of the lessons learned from other sites.

Sticking to the project timeline is critical in order to meet the deadline. Many new requirements will always come up during the implementation, and if you push back the go live date each time, you would never have launched. There will always be things that are never fully complete or correct, and will need to be corrected after launch.  Keeping operations engaged is very important to help keep excitement levels high, and to reinforce that this is not just an IT project but a clinical transformation that affects all groups.

Have fun: it’s easy to get stressed out with an expensive and large scale EMR implementation, don’t forget to have fun! It’s important for the project leadership to recognize and celebrate small wins and continuously motivate your project team.

Ed Cardon

EPC Search International LLC

470-345-0846

ed@epcsearchinternational.com

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Is the Ukraine War Becoming the Laboratory for the Next Development in Warfare-Artificial Intelligence (AI)

The next form of warfare is being created in Ukraine. It is not a laboratory on the margins, but a center-stage, relentless and unprecedented effort to fine-tune, adapt and improve AI-enabled or AI-enhanced systems for immediate deployment. That effort is paving the way for AI warfare in the future. Think about the opening of Terminator 2-Judgment Day with armies of robotic soldiers fighting other robots and humans using some form of weapons of mass destruction being fired from the ground and the sky. Hollywood science fiction? Maybe not

Some have called it ‘hyper warfare” or “algorithmic warfare,” in which autonomous systems and weapons independently start selecting their course of action based on the situation in which they find themselves; others have coined the term “software defined warfare” as part of a vision in which software will be the crucial part of the defense architecture needed for next-generation warfighting systems.

What all these concepts have in common is the vision of a truly networked battlefield in which data moves at the speed of light to connect not only sensors to shooters, but also the totality of deployed forces and platforms. It is a future scenario that is envisioned partly because of fast-paced technological developments, but also because of fears related to geopolitical competition and what near-peer competitors might be able to deploy in the near future.

In general, AI is heavily used in systems that integrate target and object recognition with satellite imagery. In fact, AI’s most widespread use in the Ukraine war is in geospatial intelligence. AI is used to analyze satellite images, but also to geolocate and analyze open-source data such as social media photos in geopolitically sensitive locations. Neural networks are used, for example, to combine ground-level photos, drone video footage and satellite imagery to enhance intelligence in unique ways to produce strategic and tactical intelligence advantages.

In addition, AI itself has undergone dramatic technical improvements, with the growing accuracy of machine learning models and systems, as well as the increased capability of AI systems to integrate and cross-reference data from various sources.

The Russia-Ukraine war can also be considered the first conflict where AI-enhanced facial recognition software has been used on a substantial scale. In March 2022, Ukraine’s defense ministry started using facial recognition software produced by the U.S. company Clearview AI. This allows Ukraine to identify dead soldiers and to uncover Russian assailants and combat misinformation.

AI is playing an important role in electronic warfare and encryption. For example, the U.S. company Primer has deployed its AI tools to analyze unencrypted Russian radio communications.  

The flip side to this is the more visible use of AI surrounding the conflict: the spread of misinformation and the use of deep fakes as part of information warfare. AI has, for example, been used to create face images for fake social media accounts used in propaganda campaigns. While the spread of disinformation is not new, AI offers unprecedented opportunities for scaling and targeting such campaigns, especially in combination with the broad range of social media platforms.

The longevity of the conflict allows companies to fine-tune, adapt and improve their AI systems on the go. This is where AI-enhanced weapons and systems are markedly different from conventional ones: the longer they are deployed, the more data can be collected to improve them directly. As such, this conflict is a major stepping stone toward the networked battlefield and the AI wars of the future.

While the character of the war may not yet be determined by AI, the Russia-Ukraine war is akin to a laboratory setting in which many companies and governments are able to constantly train and test AI systems for a wide range of capabilities, functionalities and applications. This is the tragic paradox. Each day that the conflict continues, and human beings are losing their lives in horrible ways, AI systems are being trained with real data from a real battleground — not to stop the suffering and end the war, but to become more effective in fighting the next one: the AI war.

Ed Cardon

EPC Search International LLC

470-345-0846

ed@epcsearchinternational.com

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How to Make More Doctors-Shorter and Cheaper Medical Education

It is no secret that the U.S. lags behind other advanced countries in various healthcare criteria:

-a 2021 Commonwealth Fund report found that among some of the world’s leading healthcare providers, seven of them European nations, the U.S. consistently ranked last in all but one of the five categories assessed

-compiling data from 2015 found that among the world’s most developed nations, eight of them European, the U.S. had a significantly higher mortality rate per 100,000, especially in regard to circulatory disease, which accounts for about a third of all deaths in the United States.

-The United States also ranked second worst in respiratory disease mortality rates, by far the worst in nervous system mortality rate and external causes of mortality (overdose, suicide and assaults), second worst in endocrine disease mortality rate and had five times the maternal mortality rate per 100,000 live births. Among equally-developed nations, the U.S. also has the highest percentage of obesity prevalence, a staggering 41.9% in 2017.

As a result of all of these disastrous deficiencies, the U.S. had twice the average of years lost to premature death. While a solution to all of these issues will require years of activism and significant legislative action, one aspect in which the U.S. is lagging behind most seems relatively straightforward. Physician numbers per 10,000 in the United States average at some of the lowest in the developed world, 26.1, while most European nations average around 40. We are in dire need of more physicians.

If you want to become a physician in the United States, there are a number of challenging hurdles that you must clear. Firstly, you’ll spend four years earning an undergraduate degree, then four more years at medical school and, lastly, three to seven years of residency depending on the kind of specialty, upon which an aspiring physician can finally become certified. Some may also choose to complete a one to three year fellowship for even more specialized training, meaning that many physicians don’t start practicing until their early 30s. While this ensures that U.S. physicians are among the most highly trained in the world, only about 25000 were certified in 2021, nowhere near enough to meet the current demand.

Two major factors in why this demand hasn’t been reached are rates of medical school acceptance and graduates being matched into residency programs. During the 2021 application cycle,62443 U.S. applicants competed for 22,666 spots, filling out a total of 1,099,486 applications — an average of 18 schools per student and a 3% acceptance rate. According to some experts, applying to just 15 schools can cost a student up to $10,000. For low-income students, such costs create a significant risk in applying to medical school, possibly discouraging some who would be well-qualified.

Meanwhile, the situation in Europe is much different. Costs are far lower, and acceptance rates tend to be much higher. For the class of 2020, with an average yearly tuition up to $63370, the average U.S. medical student incurred up to $337,000 in debt over their time in medical school. Conversely, medical school in Europe is significantly less expensive. For example, public universities in Spain charge a maximum of 3500 euros for European students, with some programs upcharging international students up to two to three times the regular rate, which still entails far less debt after receiving a degree. Rather than receiving a medical degree after eight years of both undergraduate and graduate education, most European medical schools offer an integrated program, which means one can receive your medical degree in only six years.

Contrary to popular belief, shorter, cheaper medical education doesn’t lead to worse doctors. In fact, an NIH study determined that internationally-educated physicians in the United States, actually had very slightly lower mortality rates of their patients when compared to U.S. educated physicians.

Given the enormous higher-education costs they take on, it isn’t surprising that 67% of doctors choose specialty medical careers over primary care medicine. Comparable countries devote a far higher share of their medical manpower to making primary care widely accessible. And over the past couple of decades, this trend toward specialty medicine has accelerated. Medical students back this up in surveys, with a significant portion viewing medical debt as a deterrent to choosing primary care medicine. If health care is to become more accessible for Americans, the U.S. will need more primary care doctors.

Countries around the world prove that educating competent medical professionals need not take so long nor cost so much. Medical education in other developed countries is typically structured as a six-year undergraduate education, and even less in countries like Austria and Sweden. Offering a consolidated medical degree not only saves students time and money, but also the hassle of applying to a second program.

Countries such as Ireland and Australia offer potential physicians a choice between two medical education tracks. A two-track medical education system has a lot going for it. One downside of the six-year medical education model is that it locks students onto a long-term trajectory at a relatively young age. Upon graduating from high school, many may lack the certainty necessary to commit to a six-year medical degree, but they may decide during or after a bachelor’s degree that medicine was the right path for them after all. By combining flexibility with cost savings, the two-track medical education system practiced by Australia and Ireland provides a model that the United States ought to emulate.

Medical education in the United States can and should be both streamlined and made more affordable, as demonstrated by other developed countries. Demanding that aspiring physicians take on large amounts of debt in order to receive education of dubious relevance amounts to policy malpractice. Policymakers at the state level should facilitate the creation of six-year, consolidated medical degree programs that may be entered upon graduation from high school. State governments can establish these programs directly by exercising their authority over public university systems. These six-year medical degrees should be structured as a consolidated program conferring both a bachelor’s and a medical degree upon completion.  

On top of making medical school a more attractive investment, this would increase the number of practicing physicians in a mechanical fashion by allowing physicians to begin working as much as two years earlier than they otherwise would be. This would help lessen the burden on currently overworked medical residents and physicians. It also would make it easier for physicians to choose primary care, which is vastly undersupplied in this country.

Ed Cardon

EPC Search International LLC

470-345-0846

ed@epcsearchinternational.com

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50 posts!

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Where is the Next Stock Market Bubble Coming From

Every so often, a sector, theme or region suddenly grabs investors’ collective attention. A sector moves, people make money, and the media picks up on the gains and goes on — and on — about the theme. This causes more investors to take notice, get greedy and start buying. This sparks more media frenzy, and even more investors pour in.

Stocks within the bubble theme go up, and up and up — until they don’t. Then everyone wants out at the same time. Lots of money can be made (by a few) on the way up, but it sure can be ugly for investors on the way down. Let’s look at three prior stock market bubbles, and one that might become one.

3D-Printing-This was a massive bubble several years ago. Everyone was going to have a 3D printer at home, maybe even one in every room. Trucking and delivery companies were going to go out of business as consumers just printed what they needed at home. The stocks of 3D companies soared and soared, and then crashed. What happened?  Demand just never materialized as expected. The technology was emerging, but stocks got ahead of themselves. The bubble popped, but, unlike some others, there is still a real industry here left in the ashes.

Dot Com Stocks-The internet was going to change the world (I guess it did) and companies were hopping on the bandwagon. Investors got greedy, which is a necessity for any bubble.

Dot-com IPOs could soar 400 per cent on the day of their listing. No one cared about profits, only growth. If your company didn’t have dot.com after its name, it was going to be a dinosaur. It was, truly, a stupid time in the market. Fortunes were made by investors and companies that had no idea what they were doing. And then, as usual, the party just ended.

Profitability became important again, and the money pipeline investors were pumping to startups closed. Some stocks lost 90 per cent of their value in a matter of months, if they even survived at all. Amazon.com Inc. traded for less than 30 cents a share, though it was one of the survivors.

Electric Vehicles (EV)

Tesla Inc. started this bubble off. That tends to happen when a stock soars to US$410 per share from US$1.05 in less than 10 years. The interesting thing with the EV bubble is that it spawned other bubbles. EV manufacturers soared in value, and so did battery, lithium and copper companies and anything else that went into the manufacture of EVs. Some of these bubbles are still ongoing.

There have been big successes and big failures in the sector, but the growth potential is intact. The market share of EVs is still low, but is expected to grow for the next 20 years at least. Governments are mandating EVs, and price points are coming down. This bubble may turn out to have some legs.

AND THE WINNER IS: ARTIFICIAL INTELLIGENCE (AI) FOR NEXT BUBBLE SECTOR

This theme gets our vote for the next most likely bubble. Investors are scrambling for new ideas, so the mere mention of AI in a press release moves stock prices, and large tech companies are mentioning AI hundreds of times in their conference calls. Investors see AI as the next greatest thing, one that will lower costs, boost productivity, boost margins and accelerate growth for hundreds of companies. Frankly, it probably will. But that, of course, doesn’t mean all AI companies are going to be winners.

But I am tossing onto the field a ton of caveats for investors who should be careful getting into a stock (or even considering getting into it) that just gained $200 billion plus in market cap in a single trading session.

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For perspective, McDonald's ENTIRE market cap is $209 billion! I’m speaking about chip manufacturer Nvidia stock-the Big Dog in the AI sector.

 A stock price bubble could be loosely defined as a situation when the price of a stock completely detaches from reality to the upside. This is often when a sexy investment thesis captivates Wall Street trading desks, sending the stock higher. Then retail investors get excited and buy without doing their fundamental homework.

The bullishness feeds on itself. Until it doesn't.

 C3ai  said this week that it will lose $68M this year and expects to lose another $60M at the end of its next fiscal year. The company has never made a profit yet its stock is up 160% this year. That’s too bubbly for my britches.

 Nvidia is proving it will be on the leading edge of a real life growth AI movement. Many CFOs I know say they are allocating mega money to AI development.... and a lot of that money is being spent on powerful Nvidia chips.

 Bubble characteristics on Nvidia? Sure. Will the stock come back to Earth? Sure. But to say Nvidia is another long-term stock bust is probably missing the point.

The AI Revolution is not hype as there will be massive winners such as Microsoft, Nvidia, and Google and also clear losers on the AI roadkill list. As always the trick is to separate the winners from the losers before you get burned  as your sure winner stock plummets to earth.

 Have a safe Memorial Day weekend and please remember those to whom that day is dedicated.

 Ed Cardon

EPC Search International LLC

470-345-0846

ed@epcsearchinternational.com

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AI and Healthcare-Machine Learning Case Studies

The following examples of Machine Learning apps for healthcare uses demonstrate the current use of AI in the healthcare industry.

1-SmokeBeat is an innovative application that passively gathers data on the user’s smoking behavior. The application uses an accelerometer on a smartwatch or a smart band to detect hand-to-mouth gestures. Additionally, SmokeBeat compares users' smoking data with their peers of choice, creating a sort of supportive social network.

 2-Virtual Nursing-Virtual nurses are computer-generated avatars that can interact with patients like humans. They are designed to be social, empathic, and informative, Virtual nurses can interact with patients more regularly than human nurses and answer questions in-between doctor visits. They offer quick answers (faster than waiting for a nurse) and they are available 24/7. One example of a virtual nurse is Molly. This is a female avatar able to remotely monitor medical conditions, which would be challenging to monitor on the spot. Molly receives data such as blood pressure and weight from monitoring devices connected via Bluetooth. These devices are positioned in patients' homes, which makes it convenient to take measurements as often as needed.

 3-Medical Imaging-Even with all the advancements in technology, medical image analysis is a tedious task prone to human error since it requires great attention to detail. With the help of machine learning, it's possible to detect even the subtlest changes in medical scans. Furthermore, traditional scan analyses (such as CAT scans and MRI) are time-consuming. SubtleMR developed by Subtle Medical is a machine learning-based software solution that improves the quality of MRI protocols. With the help of denoising and resolution enhancement, SubtleMR can improve image quality and sharpness with any MRI scanner and field strength. For example, RadNet, a US leader in outpatient imaging with 335 centers across the country, accelerated its protocols by 33-45% after adopting SubtleMR technology.

 4-Robot Assisted Surgery-robotic assistance in surgery increases precision, allows access to different areas of the human body with minimal penetration and alleviates pressure from human surgeons as robots can take over some parts of the work. Senhance Surgical system is a console-based, multiarmed surgical system that allows surgeons to remotely control it. The system heavily relies on machine learning and deep learning models to bring the most challenging healthcare ideas to reality. For example, during the preoperative stage, a machine learning-driven database allows surgeons to go through simulation training. During surgeries, based on data from the eye-tracking camera, the system's Intelligent Surgical Unit can automatically adjust the camera view and predict when a surgeon needs to zoom in or enhance images in real-time.  

 5-Disease Outbreak Prediction-a huge amount of data can be collected from satellites. This includes real-time data from social media and other historical web data. Machine learning algorithms help aggregate this data and make predictions about potential disease outbreaks. ProMED (the Program for Monitoring Emerging Diseases) offers an online real-time reporting system showing outbreaks of infectious diseases worldwide and any exposure to toxins affecting human or animal health. ProMED aggregates data from sources such as official reports, media reports, local observers, and reports contributed by its subscribers. An expert team reviews these reports before they are accepted into the system.

 6-Medical Diagnostics-In healthcare, inaccurate or incomplete diagnosis of diseases can be detrimental to patient outcomes, and, in the worst-case scenarios, lead to death. To address one of the most apparent healthcare challenges, many companies are tapping into machine learning to make medical diagnostics more accurate. A great example is the Face2Gene app, a machine learning-enabled facial recognition software that helps clinicians to more accurately diagnose rare diseases. With the help of machine learning, Face2Gene can detect phenotypes, reveal relevant facial features, and evaluate the probability of a patient having a particular syndrome.

 Other Companies using Machine Learning in healthcare applications are:

1-Deep Genomics-The Deep Genomics’ artificial intelligence-powered platform accelerates research by helping healthcare professionals quickly find candidates for the development of drugs for specific disorders.

2-Intuitive Surgical-Intuitive Surgical are the developers of the most widely used machine learning-powered surgical system called Da Vinci. Da Vinci Surgical System allows surgeons to perform robotic-assisted, minimally invasive surgeries that significantly improve surgery outcomes.

3-PathAI-PathAI uses machine learning to help pathologists to make more informed diagnostic decisions. PathAI works with renowned drug developers and healthcare organizations to extend the reach of artificial intelligence and machine learning in healthcare.

AI applications offer great potential for healthcare optimization, however, they can become less effective for the following reasons:

1-Lack of Data-Given that datasets from one organization rarely suffice for model training, engineers typically resort to obtaining patient data from other healthcare organizations. The problem is that the majority of these datasets are incompatible with each other.

2-Bias-Since it's humans who train machine learning algorithms, our existing biases inevitably creep in. What’s even more daunting is that ML models do not only sustain these prejudices but often amplify them. 

3-Lack of Strategy-Given that machine learning has a much more drastic impact on conventional healthcare workflows than the majority of other technologies, companies should make an effort to redefine team roles, invest in change management, and launch workforce reskilling programs. 

4-Lack of In-house Expertise-On the one hand, many ambitious AI startups fail to incorporate clinical expertise during the early phases of development, while, on the other hand, many credible and experienced clinicians have insufficient understanding of machine learning to provide tangible input.  

Ed Cardon

EPC Search International LLC

470-345-0846

ed@epcsearchinternational.com

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The Maryland Experiment-A Possible Way to Lower Medicare Costs

As of 2021 the two largest categories of spending are hospitals, at 31 percent of national health expenditures, and physician and clinical services, at 20 percent. No other category — prescription drugs, nursing care, medical equipment, home health care, insurance costs — accounts for more than 9 percent. For Medicare, the numbers are even starker: almost 39 percent of spending on hospitals and almost 25 percent on physician and clinical services. Medicaid is similar, albeit with lower spending on physicians, at 13.5 percent.

Put quite simply, more than half of health spending, and more than two-thirds of Medicare spending, is accounted for by the nation’s providers: hospitals, doctors and other medical professionals.

Medicare and Medicaid already pay providers less than commercial insurers do. Cutting rates further will push financially troubled hospitals into insolvency while incentivizing physician practices to sell out to large health systems — increasing the market power of those systems and pushing commercial insurance prices even higher.

Maryland’s global budget experiment offers a possible way out. It has shown promise of reducing Medicare’s rate of cost growth without devastating the health care industry.

Maryland was one of about 30 states that established hospital rate setting systems in the 1970s, but it alone retained its system when other states dropped theirs due to performance issues and a wave of enthusiasm for managed care and deregulation during the 1990s and 2000s.

Overseen by an independent state agency, the Health Services Cost Review Commission (HSCRC), Maryland’s system set uniform payment rates for each hospital based on historical costs and patient mix. All payers, including commercial insurers, self-insured employers, self-paying patients and, crucially, Medicare and Medicaid, reimbursed hospitals at those specified rates. This approach achieved considerable success in lowering the cost of an average hospital admission, but it had a crucial weakness: hospitals could grow their total revenues by increasing the number of patients admitted and services delivered, driving overall costs higher.

In 2014, Maryland negotiated a new federal waiver that added “global budgets” to the HSCRC’s all-payer system. This means that every hospital in the state receives a predetermined amount of revenue for the year, with payment rates adjusting as needed so that actual revenues reach the promised budget figure. With this constraint in place, hospitals no longer have an incentive to increase the volume of services, because revenues will not increase. Additional incentive structures reward hospitals with extra funds if they reduce readmissions and complications or meet other quality-of-care measures.

Early results for the global budget system are promising. Between 2014 and 2018, this approach saved $1.4 billion in Medicare hospital spending in Maryland, with a growth rate 8.74 percent below the national average. Overall hospital revenues grew by just 1.92 percent, well below the 3.58 percent target.

By paying hospitals based on the population they serve and the quality of the care they deliver, rather than on the number and price of the services they perform, global hospital budgeting creates potentially transformative changes in American health care. Congress could incentivize the expansion of Maryland-style global budget programs to other states, and with it, the promise of lower health care costs in coming decades.

Adopted widely, the global budgeting strategy provides an out for both Democrats and Republicans from the dilemmas of Medicare politics. More importantly, it could make the U.S. health care system cheaper and more effective for all Americans.

Ed Cardon

EPC Search International LLC

470-345-0846

ed@epcsearchinternational.com

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What Happens After Envision Files for Bankruptcy

Envision, a private equity-backed clinician staffing firm that also manages ambulatory surgical centers and care after hospitalization, is expected to file Chapter 11 bankruptcy if reports from the Wall Street Journal prove true.

If Envision goes bankrupt, it could impact emergency departments, hospitalist services, anesthesia, radiology, and services for women and children.

While Envision did not make perfect decisions over the past few years -- it has received criticism for its out-of-network billing practices, for example -- it will not be the only healthcare provider who could suffer this fate. In fact, if the growth and power of private payers like UnitedHealthcare, Cigna, and Aetna is unchecked by new government regulations, we could see a slew of care providers go bankrupt in the coming months.

While organizations may use bankruptcy to restructure their financial obligations, and can continue operations while they do so, the uncertainty of Chapter 11 could harm employees and clients as they wait to hear about potential layoffs, renegotiated contracts, services, and altered benefits.

Additionally, of the 46 healthcare bankruptcies filled in 2022, only five were over $500 million. Envision's financial collapse would likely be more significant-and it could be one of the first canary in the provider services and hospital-based coal mine.

 We can blame COVID and its lingering effects for rising provider expenses and declining revenues. We also can blame the gumming up of the arbitration system, which is difficult to access and often costly for providers.

But providers were in trouble long before COVID, inflation, and the No Surprises Act.

There has been a steady decline in reimbursement from both government and non-government payers over the last several years. For example, the Medicare Physician Fee Schedule and PAYGO ties increases and decreases to provider reimbursement to sustainable funding for the program -- even though funding is not keeping up with inflation. Moreover, the Emergency Medical Treatment & Labor Act (EMTALA) -- the unfunded mandate -- compels emergency doctors to treat patients regardless of insurance coverage. Though crucial, this law burdens physicians with hefty costs.  For uninsured patients, doctors' groups receive minimal or no compensation from Medicare, despite shouldering the expenses of patient care. For a company like Envision, which has heavy penetration in hospital-based services and emergency services specifically, these cuts and mandates are likely especially challenging.

 However, one of the biggest drivers of Envision's allegedly came from one of the nation's largest health insurers: UnitedHealthcare.

 UnitedHealthcare's first quarter revenues grew 13% to $70.5 billion and its operating earnings grew 14% to $4.3 billion. Most of the revenue was derived from their Optum provider services, Medicare Advantage plan participation, and pharmacy benefits managers. However, in late April 2023, United Healthcare lost a legal battle with Envision, which had sued the insurance giant in 2018 over billing practices. While this may not change Envision's reportedly impending bankruptcy, it emphasizes the role of private payers in the declining revenues of care providers.

 CVS Health's revenue topped $300B in 2022 -- even before news broke that the company will snap up more primary care clinics. Aetna, CVS Health's insurance wing, brought in $91.4 billion in revenue in 2022, an increase of almost $10 billion from 2021. By the end of 2022, both UnitedHealthcare and CVS had revenues of $330 billion and the three companies combined made nearly $1 trillion in revenue in 2022, an amount more than the GDPs of more than 160 countries.

 These companies also have amassed power by creating vertically integrated conglomerates in the market, which are going unchecked. Despite concerns, the Federal Trade Commission (FTC) has continued to approve mergers. We are now seeing the results.

Since these models encourage patients to remain within tight networks, patients generally have fewer choices. Additionally, other businesses that interface with these giants have reduced ability to negotiate.

As a country, we cannot watch private payers-provider conglomerates amass power while hospitals close, healthcare outcomes worsen, provider groups shutter, and physicians burn out.

Ed Cardon

EPC Search International LLC

470-345-0846

ed@epcsearchinternationl.com

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Artificial Intelligence (AI) Applications in Healthcare

AI is being used in healthcare and other industries for the same reasons: streamline tasks, improve operational efficiencies and simplify complex procedures.  Here are some AI applications being developed and deployed in the healthcare sector

1-Providing Real Time Data

With AI, doctors and other medical professionals can leverage immediate and precise data to expedite and optimize critical clinical decision-making. Generating more rapid and realistic results can lead to improved preventative steps, cost-savings and patient wait times.

Real time analytics can help improve physician-patient relationships. Making vital patient data available through mobile devices can engage patients in their treatments. Mobile alerts can inform doctors and nurses of urgent changes in patient statuses and emergencies.

2-Streamline Tasks

AI in medicine has already changed healthcare practices everywhere. Innovations include appointment-scheduling, translating clinical details and tracking patient histories. AI is enabling healthcare facilities to streamline more tedious and meticulous tasks. For example, intelligent radiology technology is able to identify significant visual markers, saving hours of intense analysis. Other automated systems exist to automate appointment scheduling, patient tracking and care recommendations.

3-Saving Time and Resources

It’s estimated around $200 billion is wasted in the healthcare industry annually. A good portion of these unnecessary costs are attributed to administrative strains, such as filing, reviewing and resolving accounts. Another area for improvement is in medical necessity determination. Hours of reviewing patient history and information are traditionally needed to properly assess medical necessity. New Natural language processing  algorithms can assist physicians in reviewing hospital cases and avoiding denials.

4-Assists Research

AI enables researchers to amass large swaths of data from various sources. The ability to draw upon a rich and growing information body allows for more effective analysis of deadly diseases. Related to real-time data, research can benefit from the wide body of information available, as long as it’s easily translated. AI has also been used to assess and detect symptoms earlier in an illness’s progression. Telehealth solutions are being implemented to track patient progress, recover vital diagnosis data and contribute population information to shared networks.

The other side of AI usage is its limitations.

1-Needs Human Surveillance

AI has been around for a few decades and continues to mature. As this area advances, there is more interaction between healthcare professionals and tech experts. AI requires human input and review to be leveraged effectively. For example, surgery robots operate logically, as opposed to empathetically. Health practitioners may notice vital behavioral observations that can help diagnose or prevent medical complications.

2-Inaccuracies Are Still Possible

Medical AI depends heavily on diagnosis data available from millions of catalogued cases. In cases where little data exists on particular illnesses, demographics, or environmental factors, a misdiagnosis is entirely possible. This factor becomes especially important when prescribing particular medicine.

3-Susceptible to Security Risks

As AI is generally dependent on data networks, AI systems are susceptible to security risks. As AI uses data to make systems smarter and more accurate, cyberattacks will incorporate AI to become smarter with each success and failure, making them more difficult to predict and prevent. Once damaging threats out-maneuver security defenses, the attacks will be much more challenging to address.

Despite some of the challenges and limits AI faces, this innovative technology promises extraordinary benefits to the medical sector. Whether a patient or physician, lives everywhere are improving thanks to AI.

Ed Cardon

EPC Search International LLC

470-345-0846

ed@epcsearchinternational.com

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Hospital at Home-An Idea Whose time has Come

Long before fears of infection from the coronavirus made people wary, hospitals were often not the best place to be treated and recover. Awareness of the risks of infections and the debilitating impacts of hospital stays, particularly on patients who are frail, have cognitive impairments, or other vulnerabilities, prompted Johns Hopkins University, to establish the first hospital-at-home program in the United States 20 years ago.

The model, which offers people who would typically require hospitalization to treat problems such as acute pneumonia, dehydration, or exacerbations of conditions like heart failure or chronic obstructive pulmonary disease (COPD) the option of receiving acute-level care in their homes, has been one of the most studied health care delivery reforms.

In recent years, a handful of U.S. health systems have launched similar programs, either because their hospitals are operating at capacity and/or they’ve taken on financial risk for the total costs of patients’ care and thus benefit from delivering services in a lower-cost setting. The Veterans Health Administration, which controls both payment and care delivery, has funded its own hospital at home program as have some health systems that have their own health plans and/or substantial numbers of patients in accountable care organizations or managed care plans.  

Several startup companies now offer logistical support and technology to facilitate hospital-at-home programs, as well as help contracting with commercial payers. Broader spread, however, has been stymied by the fact that Medicare does not pay for acute services provided outside of hospitals for fee-for-service beneficiaries.

As in so many parts of health care, the COVID-19 pandemic has catalyzed change: not only has it created a clear rationale for avoiding hospitals when possible, it has prompted Medicare to allow providers to bill for acute treatments delivered in surgery centers, hotels, or other non-hospital facilities. Some are hoping waivers tied to the Hospital Without Walls initiative will open the door for Medicare to pay for acute care in homes, too.

Several large hospital systems have begun their own hospital at home programs:

Mount Sinai Health System (NY)- Mount Sinai Health System launched a hospital-at-home demonstration in 2014, funded by a $9.6 million grant from the Center for Medicare and Medicaid Innovation. Leaders were drawn to the model as a way to relieve pressure on their inpatient wards, which even before the pandemic were routinely filled beyond capacity.

After the three year Medicare funded project ended Mount Sinai in 2017 set up a joint venture with Contessa Health, a Nashville-based startup launched in 2015 whose founders sought to make home hospitalizations financially sustainable by contracting with health plans willing to pay for them, namely Medicare Advantage plans, Medicaid managed care plans, and commercial health plans.

Tufts Medical Center (MA)- Like Mount Sinai, Tufts Medical Center in Boston was bursting at the seams, pre-COVID-19; it routinely had to turn down requests to accept patients from other hospitals because no beds were free. To help expand access, leaders had begun partnership discussions with Medically Home, another hospital-at-home company founded in 2017 after eight years of research and development. 

Medically Home partners with its clients’ clinicians and also hires physicians and nurse practitioners, who work from a central hub from which they use remote monitoring, video, and other telehealth tools to oversee patients’ care. They confer with Tufts Medical Center’s attending physicians to make sure patients are good candidates for the program. Advanced practice providers, paramedics, nurses, phlebotomists, technicians, therapists, and other staff visit acutely ill patients in their homes, providing infusion, lab tests, imaging, nutrition, translation, and other services. 

Medically Home draws on its health system partners and community resources, including local paramedics and equipment suppliers, to build a virtual hospital. 

Home-based models that offer coordinated episodes of care — including for emergent, acute, and post-acute needs — could be of particular benefit to patients who have frequent emergency department visits or hospitalizations.

CMS’s Hospital Without Walls initiative could provide a means by which hospitals can provide some care in homes, but it’s unclear how long the waiver will remain in place. To qualify as acute care, hospital providers need to deliver home services themselves and must deliver a certain level of services (e.g., oxygen, durable medical equipment, radiology, and meals).

In the short term, spread of the model may depend on the course of the coronavirus and hospitals’ desires to prepare for potential surges. In the longer term, it may find broader interest if value-based payments gain broader traction.

Ed Cardon

EPC Search International LLC

470-345-0846

ed@epcsearchinternational.com

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Bubbles in Your New Year’s Champagne

While you are celebrating a New Year here are several bubbles that may come back to haunt us next year.

Since 2008, we have been in an era of unprecedented money printing and interest rate suppression. Now the cost of all that easy money is coming due. The pandemic gave the Fed cover to double cut rates again and double down on quantitative easing (QE). In less than two years, the central bank expanded its balance sheet by nearly $5 trillion and flooded the economy with more money created out of thin air.

What the Fed giveth it taketh away.

The unraveling is easiest to see in the real estate market since it is one of the most interest rate-sensitive segments of the economy. In some markets during the Fed-induced boom, home prices spiked by 50% and 60%. That was on top of a huge price surge before the pandemic. But now the air is coming out of the bubble. Existing home sales have dropped for 10 straight months. Year-on-year, existing home sales have plummeted by 35.4%.

Home prices are beginning to fall as well, especially in the biggest bubble markets. In November, the median price of a house in San Francisco was down by 21% compared to a year ago, and down by 27% from May’s peak.

A year ago, market capitalization in the crypto sector reached $3 trillion. But since then, the sector has been in  freefall. When the Fed started raising rates and shrinking its balance sheet, the whole thing just blew up.

The price of bitcoin has plunged by around 73%. Many of the hundreds of cryptocurrencies created during the mania have gone to zero and have been left for dead. Big companies built around crypto are going under.

The most visible bubble blew up in the stock market. Over the last decade-plus, we’ve seen a rash of crazy IPOs. Stocks for money-losing companies shot to the moon. All of the major stock market indices surged to record levels. The “fundamentals” in this stock market boom were easy money and speculative mania.

Now that the Fed has gone to a tighter monetary policy, the air is coming out of the stock market. Some of the most speculative stocks have collapsed by 70, 80, or even 90 percent. The tech-heavy NASDAQ has dropped over 34% from its highs. Now we have quantitative tightening (QT) and surging interest rates, and the whole circus is coming apart. Lots of these startups that became highfliers will end up in bankruptcy. Some already have. But it will drag out for a few years because there is still so much money floating around. The only way to pump the bubbles back up is to go back to easy money. But that means more price inflation.

That puts the Federal Reserve in a no-win situation. It can stand firm in its inflation fights and let all of the bubbles deflate – which means a deep, painful recession. Or it can reverse course and try to rescue the bubble economy with more inflation.

Enjoy your champagne and have a happy New Year.

 Ed Cardon

EPC Search International LLC

470-345-0846

ed@epcsearchinternational.com

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Trends that Will Shape Work in 2022 and Beyond

A recent Harvard Business Review study outlines 11 major trends that will affect employers today and in the coming future. We have been living through the greatest workplace disruption in generations and the level of volatility will not slow down in 2022. New Covid variants will continue to emerge and may cause workplaces to temporarily go remote again. New variants will continue to emerge and may cause workplaces to temporarily go remote again. Hybrid work will create more unevenness around where, when, and how much different employees are working. Many employees will be greeted with real wage cuts as annual compensation increases fall behind inflation. These realities will be layered on top of longer-term technological transformation, continued DE&I (Diversity, Equity and Inclusion) journeys, and ongoing political disruption and uncertainty.

These are some of the main trends the HBR study describes as being critical to work in the future:

1. Fairness and equity will be the defining issues for organizations.

These are some questions companies will have to address in the present and near future:

Who has access to flexible work? What happens when employees move to locations with a lower cost of living? Should employers lower their compensation even though the impact of their work hasn’t changed? Is it fair to pay new employees much more than established employees?

2. Despite a strong push from the Biden administration, a significant number of employers will not adopt a vaccine mandate, instead relying on testing to keep their workplaces safe.

In January 2021, less than 2% of companies were planning to implement a Covid vaccine mandate. That number steadily increased across the year before plateauing at the end of 2021 at less than 50%. Even with the rise of the Omicron variant, 2022 will not see a significant increase in the number of companies putting a mandate in place.

3. To compete in the war for knowledge worker talent, some companies will shorten the work week rather than increase pay.

Employers are offering significant compensation increases to attract and retain talent.  Research has shown that in the U.S., year-to-date salary increases have been more than 4%, compared to a historical norm of 2%.

But when we also consider inflation, real wages have declined. And if inflation continues to rise, employers will find the compensation they offer will be worth less and less in terms of purchasing power for employees. Ultimately, we’re likely to see a handful of organizations adopt 32-hour work weeks with the same compensation as a new way to compete for knowledge workers.

4. Employee turnover will continue to increase as hybrid and remote work become the norm for knowledge workers.

Flexibility around how, where, and when people work is no longer a differentiator, it’s now table stakes. In the U.S., employees expect flexibility within their job as much as they expect a 401(k). Employers that don’t offer flexibility will see increased turnover as employees move to roles that offer a value proposition that better aligns with their desires. increasing flexibility will not slow turnover in today's tight labor market; in fact, turnover will increase, for two reasons. First, there will be weaker forces keeping employees in seats. Employees that work hybrid or remotely have fewer friends at work and thus weaker social and emotional connections with their coworkers.

Second, there will be stronger forces enticing employees away as the pool of potential employers increases. Employees are much more willing to take on a longer commute when they must do so less frequently; the pool of potential employers expands alongside employees’ commute tolerance.

5. Managerial tasks will be automated away, creating space for managers to build more human relationships with their employees.

The manager-employee relationship has become more important than ever; for hybrid and remote employees, their managers are the primary connection through which they experience their employer. Managers are also the first line in surfacing and elevating fairness concerns and can make the difference between a highly public walkout or a co-created solution to employee concerns. Research shows that up to 65% of the tasks that a manager currently does has the potential to be automated by 2025.

With this growth in automation, companies will be faced with a choice: decrease the number of managers or change the expectations of what it means to be a manager.

6. The tools that we use to work remotely will become the tools that help measure and improve performance.

When work becomes more geographically dispersed, managers have less insight into what work their employees are doing. This leads to inaccurate and potentially biased performance ratings based upon where employees work rather than the impact they are having. A Gartner survey in the fall of 2020 of nearly 3,000 managers revealed that 64% of managers and executives believe in-office employees are higher performers than remote employees, and 76% believe in-office workers are more likely to be promoted.

7. The complexity of managing a hybrid workforce will drive some employers to require a return to the office.

More than 90% of employers are planning to adopt a hybrid working model for their knowledge workers in 2022. While that will define the start of the year, there will be numerous high-profile companies that change course and demand that employees return, full time, to the office. However, organizations that implement a hard return to the office will quickly find that the challenges that they were facing were due to other underlying factors. Demanding employees return to the office will only further exacerbate turnover rates.

8. Wellness will become the newest metric that companies use to understand their employees.

Many companies expanded the wellness support they provided to their employees in the wake of the pandemic. A Gartner 2020 survey of 52 HR executives found that:

94% of companies made significant investments in their well-being programs

85% increased support for mental health benefits

50% increased support for physical well-being

38% increased support for financial well-being

9. The chief purpose officer will be the next major C-level role.

Employees have been asked to bring their whole self to work as organizations try to create a more inclusive and productive work environment. This is fundamentally different than a decade ago when employees were expected to leave their personal perspectives “at the door.” The shifting nature of organizations — how they relate to their employees, communities, and their role in society — is creating the next, new major C-suite role that will emerge in 2022: the chief purpose officer. Currently, these responsibilities are widely diffused across HR, legal, communications, and other roles in the organization. In 2022, these will be consolidated into this new role  as ESG becomes even more important to corporate strategies.

10. Sitting is the new smoking.

The discrepancy in physical movement across segments of the workforce will increase the health risks faced by some remote workers.

In response, organizations will adopt new communication plans, benefits, and technologies to support the physical movement of their remote employees to improve their health. These physical wellness programs also carry DE&I risks, as they could harm the engagement of employees with disabilities.

11. DE&I outcomes will worsen in a hybrid world without intervention.

Gartner analysis has identified that employees who work remotely or on a hybrid schedule perform at equal levels compared to employees who work in the office. However, managers believe that people who work from the office are higher performing and more likely to be promoted than people who work from home. Data also shows that in a hybrid world, women and people of color compared to white men prefer to work from home. Given that, without intervention, gender wage gaps will widen and the degree of diversity within leadership benches will weaken.

Ed Cardon

EPC Search International LLC

470-345-0846

ed@epcsearchinternational.com

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The Future of Work After Covid-19

A recent Mckinsey & Company survey concluded that the pandemic accelerated existing trends in remote work, ecommerce and automation, with up to 25% more workers than previously estimated potentially needing to switch occupations.

The pandemic disrupted labor markets globally during 2020-21 and beyond. The short-term consequences were sudden and often severe: Millions of people were furloughed or lost jobs, and others rapidly adjusted to working from home as offices closed. Many other workers were deemed essential and continued to work in hospitals and grocery stores, on garbage trucks and in warehouses, yet under new protocols to reduce the spread of the novel coronavirus. Before COVID-19, the largest disruptions to work involved new technologies and growing trade links. COVID-19 has, for the first time, elevated the importance of the physical dimension of work. Perhaps the most obvious impact of COVID-19 on the labor force is the dramatic increase in employees working remotely.

Considering only remote work that can be done without a loss of productivity, the study found that about 20 to 25 percent of the workforces in advanced economies could work from home between three and five days a week. This represents four to five times more remote work than before the pandemic and could prompt a large change in the geography of work, as individuals and companies shift out of large cities into suburbs and small cities. A survey of 278 executives by McKinsey in August 2020 found that on average, they planned to reduce office space by 30 percent. Demand for restaurants and retail in downtown areas and for public transportation may decline as a result. Remote work may also put a dent in business travel as its extensive use of videoconferencing during the pandemic has ushered in a new acceptance of virtual meetings and other aspects of work. This would have significant effects on employment in commercial aerospace, airports, hospitality, and food service. E-commerce and other virtual transactions are booming.

Two ways businesses historically have controlled cost and mitigated uncertainty during recessions are by adopting automation and redesigning work processes, which reduce the share of jobs involving mainly routine tasks. Many companies deployed automation and AI in warehouses, grocery stores, call centers, and manufacturing plants to reduce workplace density and cope with surges in demand. The common feature of these automation use cases is their correlation with high scores on physical proximity indicating the work arenas with highest levels of human interaction are likely to see the greatest acceleration in adoption of automation and AI.

The largest negative impact of the pandemic has fallen on workers in food service and customer sales and service roles, as well as less-skilled office support roles. Jobs in warehousing and transportation may increase as a result of the growth in e-commerce and the delivery economy, but those increases are unlikely to offset the disruption of many low-wage jobs. Demand for workers in the healthcare and STEM (science, technology, engineering and mathematics) occupations may grow more than before the pandemic, reflecting increased attention to health as populations age and incomes rise as well as the growing need for people who can create, deploy, and maintain new technologies.

Before the pandemic, it was estimated that just 6 percent of workers would need to find jobs in higher wage occupations. In post-COVID-19 research, the report finds not only that a larger share of workers will likely need to transition out of the bottom two wage brackets but also that roughly half of them overall will need new, more advanced skills to move to occupations one or even two wage brackets higher. In Europe and the United States, workers with less than a college degree, members of ethnic minority groups, and women are more likely to need to change occupations after COVID-19 than before. In the United States, people without a college degree are 1.3 times more likely to need to make transitions compared to those with a college degree,

The scale of workforce transitions set off by COVID-19’s influence on labor trends increases the urgency for businesses and policymakers to take steps to support additional training and education programs for workers. Businesses can start with a granular analysis of what work can be done remotely by focusing on the tasks involved rather than whole jobs. They can also play a larger role in retraining workers, as Walmart, Amazon, and IBM have done. Companies and governments exhibited extraordinary flexibility and adaptability in responding to the pandemic with purpose and innovation that they might also harness to retool the workforce in ways that point to a brighter future of work.

Ed Cardon

EPC Search International LLC

470-345-0846

ed@epcsearchinternational.com