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The Keckley Report

The Spotlight is on our Business Practices and Competitive Strategies

By February 10, 2014March 1st, 2023No Comments

The prominence of health care in the public marketplace is no longer limited to the vigorous debate about the Affordable Care Act. Notwithstanding the tragedy of drug addiction woven into reporting about Phillip Seymour Hoffman’s death, and the prospect of a breakthrough in replacing the Sustainable Growth Rate formula used by Medicare to set payments to doctors since 1997, these stood out in last week’s reporting:

CVS exits tobacco sales: Through eye-catching full page ads (“CVS Quits for Good”) and a well-orchestrated PR effort (, the nation’s largest retail pharmacy chain announced it would stop selling tobacco products in its 7600 stores taking a $2 billion (1.5%) hit to its revenues to focus on its “expanding role through our 26,000 pharmacists and nurse practitioners”.

Drug companies collaborate to find new therapies: Last Tuesday, the NIH and 10 drug companies committed $230 million to funding the “Accelerating Medicines Partnership”—a data-sharing collaborative focused on accelerating therapeutic discoveries in diabetes, rheumatoid arthritis, Alzheimer’s, and lupus.  In separate announcements, Johnson and Johnson announced it was making its clinical trials open to the public and Merck announced a collaborative venture with Pfizer and others to find combination immunotherapies to treat cancers.

Lab results to be accessible to consumers: HHS announced its plan to amend existing laws (Clinical Laboratory Improvement Amendments of 1988 (CLIA) and Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy Rule) to allow individuals or their surrogates access to full reports of their test results directly from the lab. Current laws under HIPAA allow access under limited circumstances, and in day-to-day practice, most consumers relied on a physician to share their results.  In 7 states, it is already law; in 23, there is no policy. Under the policy change, requests must be filled within 30 days by the lab, which can charge for the service.

And on the health reform front, coverage continued last week focused primarily around two stories…

CBO Report: ACA will result in job losses: An 11 page Congressional Budget Office Report concluded the Affordable Care Act would reduce the workforce by 1.5-2.0% by 2024–a net loss of 2.5 million workers based on a key assumption: large numbers of subsidy-eligible workers might choose to work fewer hours to maintain subsidy-eligibility. And the report also included an update to 2014 year-end enrollment projections: the CBO now believes the number enrolled through exchanges will be 6 million, not 7 million as HHS had affirmed as late as last month. It also forecasts Medicaid enrollment at year-end will be 42 million versus 43 million as earlier reported, and the numbers of uninsured increase to 44 million from 43 million. enrollment disappoints insurers; WellPoint positioning as contrarian: Cigna, Aetna, Humana, and Health Care Service Corp. told investors/lenders that profits in their health exchange businesses would be lower than estimated earlier due to glitches in the rollout and smaller than expected enrollment of young invincibles among the 3 million who’ve enrolled to date. But a somewhat contrarian tone was set by WellPoint CEO Joe Swedish (“One Time Critic of Health Law May Profit” New York Times February 5, 2014 pg. 1) who expressed optimism about the future of the ACA and his company’s the opportunities to expand its government business.

These are my takeaways from the busy week:

1-Ours is a heavily regulated industry: At the state and federal levels, it is tightly controlled, though not evenly. Some sectors—hospitals, drug manufacturing et al—are more heavily regulated at the federal level; others—health plans, retail pharmacy, medical practices et al—more heavily at the state level. And, more than 110 million of our 313 million citizens get insurance through a government plan (Medicare, Medicaid, CHIP, military health, federal employee health plan) so the government plays a dual huge role as regulator, purchaser and provider (clinics, hospitals, et al). Though built on a foundation of a private system, it is a more accurately public-private system, where co-dependence with regulators is necessary. Understanding how health policies evolve and change in each sector, and how laws are made and why, is essential to a company’s success in this environment. The government’s role in health care is likely to be bigger in coming years as our society grapples with the health system’s issues of costs, uneven access and variable quality. And for its innovators, the government’s role as business accelerator is a critical success factor not to be discounted.


2-Though complex, our business practices and competitive strategies are increasingly transparent: Each of these stories touches a sector in healthcare in which business practices and growth strategies are changing due to market forces or new regulatory constraints. Traditionally, our modes of operating–how we hire and compensate, how we operate, how we access capital, how we relate to our supply chain, and how we compete–have been the basis for differentiation between players within a sector. That’s how we compete. But increasingly, competition is crossing sectarian boundaries prompting regulator and media scrutiny of our strategies and tactics. It’s no longer good enough to focus on a single sector, its products/services and operating realities.  We must operate outside our traditional sectors in the spotlight of public scrutiny.


3- Coverage of health care is led national media that are sophisticated and informed:  In a few of the major markets, local reporters assigned to health industry news gathering are impactful, but the majority of coverage about the issues and challenges in the healthcare industry originates with national media—cable and broadcast TV news, national daily newspapers, and a handful of well-circulated electronic newsletters. The journalists contributing to these are well informed and their work gets prominent placement by their editors who suspect our industry has undeserved enjoyed freedom from public scrutiny.  The Wall Street Journal’s “Secrets of the System” series and similar efforts have contributed to increased public demand for industry transparency. Organizations in health care must be media savvy: to garner positive attention, our leaders must respect that the small cadre of national health industry journalists are not paid to publish news releases. They are paid to find stories that expand the public’s understanding whether comfortable for us or not.


The health care industry impacts everyone. We should not be surprised it is now as prominent on Main Street as it is on Wall Street and in our boardrooms. And we need to recognize that our business practices and competitive strategies are open game across a broadening array of constituencies, non-traditional and non-traditional competitors and special interests.