January is almost in the books. It closes as Covid-19 hospitalizations slow in the U.S and the rolling 7-day average of daily deaths, a lag indicator, continues to rise. The S&P 500 pulled back 7% as investors adjusted their forecasts to the Fed’s belt tightening and near-term impact on consumer demand. And the world is in a watchful waiting mode as Russia amasses troops on the Ukraine border.
In the healthcare world—aside from the impact of Covid-19—January marks annual price increases by drug makers (+4.9% per GoodRx, +6.6% per RxSavings) and health insurance premium adjustments for those with government or private insurance. It’s the flu season and it’s earnings season: 4th quarter and 2021 announcements by the industry’s big-name operators are closely watched to see how market conditions impact bottom lines.
The healthcare industry is resilient–“the capacity to recover quickly from difficulties; toughness.” It responds well to immediate problems like the pandemic and health emergencies. It enjoys well-deserved accolades for its selfless workforce and acts of heroism. But long-term solutions to the widely recognized systemic flaws in our system escape its attention: variable quality and outcomes, inequity in access among poor and disadvantaged populations, high unit costs for hospitals and prescription drugs, lack of price transparency and affordability, inattention to its carbon footprint responsible for 8.5% of U.S. greenhouse emissions, lack of adequate investment in and organization of preventive and public health services, low wages in its hourly workforce, lack of local resources for unpaid care at home workforce and others.
The system’s rewards are based on short-term results. Leaders in hospitals, drug and device manufacturers, health insurers, medical groups and even their advisors (consultants, lawyers) are paid for annual results primary linked to revenue growth. The annual churn of participation in CMS’ alternative payment programs, Medicare Advantage and marketplace plans reflect the short-term addiction of our industry to short-term results and explain our aversion to cost transparency. That’s where we are.
February is American Heart Month, Age-Related Macular Degeneration (AMD) / Low Vision Awareness Month, International Prenatal Infection Prevention Month, National Cancer Prevention Month, National Children’s Dental Health Month and Teen Dating Violence Awareness Month. All six have two things in common: long-term demand for expensive therapies and procedures is substantially reduced if mitigated early through evidence-based self-care and diagnostics. And there’s substantially more profit (money) today in treatments rather than long-term mitigation.
So, the moral imperative for the U.S. health industry is to complement its resilience based on short-term results with a fundamental transformational shift to long-term results—outcomes, savings, self-care confidence, prevention. Resilience alone is not enough.
Paul
PS: I just finished Fred Kiel’s Return on Character: The Real Reason Leaders and their Companies Win in which integrity, responsibility, compassion and forgiveness are empirically correlated to the effectiveness of leaders and their organizations. Kiel describes two kinds of leaders: virtuoso CEOs whose bent is servant leadership and self-serving CEOs for whom personal ambition and accolades matter most. Last Sunday, the industry lost a virtuoso CEO: John Ferguson, the former CEO of the Northeast Georgia Health System. John came to the hospital at the age of 28 and 4 years later was named its Administrator. What followed was a 40-year career as its leader. He passed at the age of 82 but his youthful energy, intellectual curiosity, infectious smile and genuine warmth are hard-wired into the organization he loved and led well.
Resources:
“Consumer Attitudes Inform Post-COVID Recovery,” Kaufman Hall eBook. https://www.kaufmanhall.com/insights/ebook/consumer-attitudes-inform-post-covid-recovery
Drug companies boosted list prices on cancer, diabetes and other prescription medicines. Wall Street Journal January 30, 2022
Industry Insights
22% of Americans unable to pay household bills: Per Morning Consult’s January 2022 Economic Outlook report, the share of Americans who lack savings to cover their basic expenses for a full month rose to 22.3% in December as inflation continued to drive up costs for food, gas and other staple goods.
The State of Consumer Banking – Q1 2022 Report, Morning Consult January 25, 2022 www.morning consult.com
UBS encourages healthcare sector investment as hedge during market volatility: The Swiss bank is maintaining its year-end S&P 500 price target of 5,100, which implies 17% upside from current levels. It says investors should stay in stocks in economically sensitive sectors like Energy, Financials, Consumer Discretionary and defensive sectors, Healthcare:
“Healthcare stocks bring an interesting combination of defensiveness and growth — at least in theory. The sector hasn’t lived up the hype this year and is down 9%. But demand for life-saving and life-improving products will remain steady no matter how the economy fares, and healthcare is generally viewed as having promising growth prospects as the US population ages.”
“Buy the dip in stocks in these 4 sectors despite a brutal market selloff that’s crushed investor sentiment, UBS says” Insider January 26, 2022 www.businessinsider.com/stock-market-buy-the-dip-investing-advice-strategy-sectors-ubs-2022
HCA revenue, profit up in 2021: In its earnings call last week, HCA Healthcare announced it will build five new full-service hospitals in Texas adding to its 45 hospitals and 632 affiliated care sites in the state. Financial results:
· For the quarter, the 183-hospital chain announced quarterly revenues totaling nearly $15.1 billion, below the consensus estimate of about $15.4 billion. Revenues were higher than the $14.3 billion during the same quarter in 2020. Net income for the quarter was $1.8 billion ($5.75 per diluted share), up year over year from $1.4 billion ($4.13 per diluted share).
· For the full year, revenues were $58.75 billion, up from $51.5 billion in 2021. Net income was $6.96 billion ($21.16 per diluted share), nearly double last year’s $3.75 billion ($10.93 per diluted share).
HCA Healthcare Reports Fourth Quarter 2021 Results and Provides 2022 Guidance” HCA Healthcare January 27, 2022 https://investor.hcahealthcare.com/news
IMF: pandemic will cost $13.8 trillion by 2024: The pandemic will reduce global economy by $13.8 trillion by the end of 2024, according to the International Monetary Fund. The global economy will expand a predicted 4.4% this year, the IMF said Tuesday in its World Economic Outlook– down from an estimated 5.9% in 2021 and is a downgrade of one-half of a percentage point from its last projection in October. The group said the world’s two largest economies, the United States and China, would grow more slowly than it predicted in October: U.S. increasing 4% this year after rising by 5.6% in 2021 vs. 5.2% in its previous forecast, and China increasing 4.8%, 0.8 percentage points lower than previously expected and a marked slowdown from the 8.1% growth achieved in 2021.
Inflation, Supply Chain, Omicron Expected to Take a Bigger Toll on Global Growth Wall Street Journal January 26, 2022 www.wsj.com/articles/inflation-supply-chain-omicron-expected-to-take-a-bigger-toll-on-global-growth
Study: volume dominates physician compensation: This cross-sectional mixed-methods study of 31 physician organizations affiliated with 22 US health systems found that volume was the component of primary care (84%) and specialist (93%) compensation. While most primary care (83.9%) and specialist (56.7%) compensation arrangements included performance-based incentives, they averaged less than 10% of compensation (9% for PCPs, 5.3% for specialists).
Reid et al “Physician Compensation Arrangements and Financial Performance Incentives in US Health Systems” JAMA Health Forum January 28, 2022;3(1):e214634. doi:10.1001/jamahealthforum.2021.4634
Study: Practice variation from evidence-based guidelines significant: In this cross-sectional study of practice patterns for 8788 physicians across 7 specialties in 5 US metropolitan areas between 2016 and 2019, sizeable physician-level practice pattern variations were evident across 14 common clinical scenarios where practice guidelines and clinical evidence can help discern, on average, the appropriateness or quality of clinical decisions. Variations were robust to adjustment for patient and area-level characteristics, and measure reliability was generally high.
Song et al “Physician Practice Pattern Variations in Common Clinical Scenarios Within 5 US Metropolitan Areas” JAMA Health Forum January 28, 2022;3(1):e214698. doi:10.1001/jamahealthforum.2021.4698
State of Digital Health 2021 report: record investments:
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$57.2 billion in global digital health investment, up 79% from that in 2020.
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154 mega deals (funding of $100 million and more) –doubling from 2020.
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U.S funding record– $37.9 billion, 75% above 2020 levels.
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Median late-stage deal valuation has jumped 3 times that in 2020 to $73 million.
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Time between Series C and D rounds–15 months vs. 22 months per pandemic.
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574 M&A deals in the market created a new record.
State Of Digital Health Global 2021 CB Insights www.cbinsights.com
Policy Insights
4th quarter GDP growth strong: The U.S. economy expanded by 1.7% in the final three months of 2021, the Commerce Department announced Thursday. On an annualized basis, the increase for the quarter was 6.9% and 5.7% for the full year– the biggest since 1984.
Fourth-quarter growth was driven in part by consumer spending, which “primarily reflected an increase in services, led by health care, recreation and transportation,” the Commerce Department said. Private investment and an increase in inventories were also major factors.
The country added 6.4 million payrolls through 2021, the largest one-year gain in history and the Consumer Price Index soared 7% year-over-year in December, marking the strongest price growth since 1982.
“U.S. Economy Grew 1.7% in 4th Quarter, Capping a Strong Year” New York Times January 27, 2022www.nytimes.com/2022/01/27/business/us-gdp-4q-2021.
“The US economy grew way more than expected in the fourth quarter as Omicron fueled the biggest virus surge yet” Business Insider January 28, 2022 www.businessinsider.com/us-gdp-q4-omicron-wave-economic-recovery-coronavirus-recession
Wages, benefits cost up 4% for employers, consumer spending slows: Employers spent 4% more on wages and benefits last year as workers received larger pay raises in a tight labor market, rebounding economy and period of accelerating inflation, marking an increase not seen since 2001.
Separate economic figures showed that the Federal Reserve’s preferred measure of inflation, the core personal-consumption expenditures price index, accelerated to 4.9% in December 2021 over the prior year. And household spending fell 0.6% last month, the Commerce Department said Friday, as consumers pulled back on shopping for goods during the last month of the holiday season.
Rising pay and benefits are putting more money in workers’ pockets—average hourly wages rose 4.7% in December from a year earlier—but not enough to keep pace with rising prices. Inflation recently hit its fastest pace in nearly four decades amid supply and demand imbalances for both goods and labor related to the Covid-19 pandemic.
The University of Michigan’s Consumer Sentiment Index sank to 67.2 from 70.6 in January, according to data published Friday–the lowest since November 2011 and 11.8 points below levels seen one year ago.
“U.S. Consumer Spending Fell 0.6% in December Amid Inflation, Omicron” Wall Street Journal January 28, 2022www.wsj.com/articles/consumer-spending-december-2021
Surveys of Consumers, University of Michigan January 12, 2022 http://www.sca.isr.umich.edu/
200 House members pursue action against travel nurse price gauging: In their January 24 letter to Jeffrey Zients, White House COVID-19 Response Team Coordinator, 195 members assert that travel nursing companies have jacked up rates during the pandemic solely to enhance their profits while violating consumer protection laws. Previously, AHA sent a letter to the FTC in February 2021 requesting an investigation but did not receive a reply, according to the trade group.
“White House Urged to Look into Price Gouging by Nurse Staffing Agencies” Revenue Intelligence January 27, 2022 White House Urged to Look into Price Gouging by Nurse Staffing Agencies (revcycleintelligence.com)
MedPage investigation shows hospital workforce vaccination database inaccurate: Two weeks ago, the U.S. Supreme Court upheld a Nov. 5 federal mandate that all people who work in certain healthcare organizations such as hospitals that receive federal Medicaid or Medicare reimbursement must be fully vaccinated. A federal database that tracks hospital COVID vaccinations for personnel in each healthcare system is “extremely erroneous” according to five hospital systems that appear to have the highest numbers of unvaccinated workers in the country including Advent Health Orlando, Illinois Hospital, Chicago, and others for whom the database accounting is inaccurate.
“Accuracy of Federal Stats on Most-Unvaxxed Hospitals in Question” MedPage January 25, 2022www.medpagetoday.com/special-reports/exclusives
CDC update: Covid-19 hospitalizations down, deaths up: according to data from Johns Hopkins University, the 7-day average of hospital patients with confirmed or suspected infections dropped to 146,769 on Saturday, about 8% down from a peak on Jan. 20.The rolling seven-day average of daily deaths, a lagging indicator, continues to rise, reaching 2,379 on Friday, according to data from Johns Hopkins University. Covid-19 deaths in the U.S. are running at their highest level since February last year.
CDC www.cdc.gov
Study: omicron hospital utilization less intense, more prevalent than Delta wave: From Dec. 19, 2021 to Jan. 15, 2022, COVID patients used a maximum of 21% of “staffed inpatient beds,” — 7% higher than the Delta period and 3% higher than the 2020-2021 winter surge. However, staffed intensive care unit (ICU) bed use for COVID patients during Omicron (30.4%) was slightly lower than either Delta or the previous winter, and the Omicron period had lower peak emergency department (ED) visits, hospital admission, and death-to-case ratios than the prior two high transmission periods.
“Trends in Disease Severity and Health Care Utilization During the Early Omicron Variant Period Compared with Previous SARS-CoV-2 High Transmission Periods — United States, December 2020” CDC January 2022 www.cdc.gov/mmwr/volumes
Provider Relief Funding to states for uninsured uneven: As of September 2021, $2.5 billion had been paid by HRSA for COVID-19 treatment of uninsured patients with COVID-19. The formula was allocated on a state-by-state basis based on a formula:
The variance in the distribution of treatment funds to clinicians and facilities treating uninsured patients with COVID-19 suggests that some states received greater PRF shares than their share of uninsured patients. Among the states not expanding Medicaid, 4 of 12 states (33%) had reimbursement ratios above 1.00 (Texas, 1.78; Georgia, 1.33; Tennessee, 1.12; and North Carolina, 1.07). Among the Medicaid expansion states, only 3 of 38 states (8%) had reimbursement ratios above 1.00 (New Jersey, 2.63; Maryland, 1.55; and Nevada, 1.01). In addition, the District of Columbia had a ratio of 4.25.
“The results suggest that states with greater than the national share of uninsured patients received greater shares of COVID-19 uninsured treatment funding.”
Parente et al “Assessment of the Provider Relief Fund Distribution for Treatment of Uninsured Patients With COVID-19”JAMA Health Forum January 28, 2022;3(1):e214695. doi:10.1001/jamahealthforum.2021.4695
KFF: only 1 in 5 elementary school age kids, 2 in 5 adults fully vaccinated, Covid fatigue significant: According to the latest Kaiser Family Foundation Vaccine Tracker, only 18.8% of children in the 5-to-11 age group are now fully vaccinated and only 28.1% have received one dose. The disparity among states is stark. In Vermont, 52% of young children are fully vaccinated; in Mississippi, it is 6%.
42% of all adults nationwide have received a COVID-19 booster and more than three quarters (77%) have received at least one dose of a COVID-19 vaccine, up slightly since November (73%) before the omicron variant triggered a surge in cases, hospitalizations and deaths
And the public’s mood is dominated by fatigue and frustration. About three in four adults including majorities across age, gender, race and ethnicity, and income groups say that “tired” and “frustrated” describe how they feel about the current state of the pandemic in the U.S., while about four in ten each say they are “optimistic” or “angry” and three in ten say they feel “confused.”
KFF COVID-19 Vaccine Monitor: January 28, 2022 www.kff.org/coronavirus-covid-19/poll-finding/kff-covid-19
CMS Report: ACO enrollment growth continuing: Nearly one in five (11 million) Medicare enrollees will be treated by Shared Savings Program ACO providers this year, a slight increase from 10.7 million in 2021 but lower than during 2020 (11.2 million), the Centers for Medicare and Medicaid Services disclosed in projections published Wednesday. In 2022, these ACOs will cover 11 million people compared to 10.7 million in 2021 and 11.2 million in 2020.
CMS announced that 66 new ACOs joined the program as of Jan. 1, although this includes 20 in their second or third agreement periods. According to the National Association of ACOs, another 40 of those listed as new have been in ACOs previously or are part of existing multi-ACOs. An additional 140 ACOs signed on for another agreement period this year, bringing the total to 483. Last year, 477 ACOs participated, down from 517 in 2020. More ACOs are also taking on risk this year, with 59% in two-sided risk tracks compared to 41% in 2021. Shared Savings Program participation hasn’t rebounded from the Pathways to Success policy introduced in 2018, which pushed more ACOs into risk-bearing arrangements.
“Medicare Shared Savings Program Continues to Grow and Deliver High-Quality, Person-Centered Care Through Accountable Care Organizations” CMS January 26, 2022 www.cms.gov/newsroom/press-releases/medicare-shared-savings-program-continues-grow-and-deliver-high-quality-person-centered-care
Study: PHI sharing dependent on use: In this survey study of 3543 US adults conducted in July 2020, consumer willingness to share digital data was primarily associated with importantly the source and type of data. Certain data (e.g., financial, social media, public cameras) is viewed as more sensitive than electronic health record data, but underlying views on digital health privacy were strongly associated with consumer views on sharing any digital information.
Grande et al “Consumer Willingness to Share Personal Digital Information for Health-Related Uses” JAMA Network Open January 24, 2022;5(1):e2144787. doi:10.1001/jamanetworkopen.2021.44787
GAO: HHS is underperforming in public health: In its report issued last Thursday, the Government Accountability Office “found persistent deficiencies” citing continued problems coordinating among public health agencies, collecting infectious-disease surveillance data and securing appropriate testing and medical supplies. The watchdog has made 246 recommendations to HHS about its coordination of public health emergencies since fiscal 2007 but that only 33 have been fully implemented. In this report, the GAO put HHS on the “high risk list” and added 5 new recommendations including 2 that address nutritional sufficiency in public health emergencies.
“COVID-19: Significant Improvements Are Needed for Overseeing Relief Funds and Leading Responses to Public Health Emergencies” GAO January 27, 2022 www.gao.gov/products/gao-22-105291
