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The Keckley Report

The 38th JP Morgan Healthcare Conference: My Take

By January 20, 2020March 1st, 2023One Comment

The 38th version of the JP Morgan Healthcare Conference is in the books and there were few surprises.

  • All of the 482 presenting companies affirmed confidence in their growth strategies and little concern about a potential economic downturn.

  • All express recognition that health spending and underlying costs are problematic, especially in the U.S. market. Most blame Congress for inadequate or misplaced oversight and the wastefulness in other sectors as culprits.

  • Most expressed commitment to maintaining a healthy corporate culture and enhancing social responsibility in their organizations.

  • Most, including the 27 not-for-profit health systems, expect to be profitable through a combination of organic growth and acquisitions. They’re bullish on opportunities for deals.

JPM is Woodstock for healthcare lenders and investors and the companies that desire their money. It’s a zoo. Four observations:

  • No one knows for sure how many attend but it’s big. That’s because the scope of activity extends well-beyond official registrants and the venue, the Westin St. Francis. It includes armies of accounting, law, consulting firms, venture funds, investment banks and private equity funds that host their invitation-only events late into the evening. Hotels require minimum 4-day stay at $1500/night or more. For one on one encounters, hotel lobby tables rent for $25-50/hour. Drive-by encounters (if you are officially registered and can get through security) in crowded hallways and the Westin lobby are standard fare. Five-star restaurants close for “private events” and limo drivers are booked full. And everyone agrees that navigating JPM in San Francisco is a royal pain.

  • JPM is an industry-wide platform for comparing healthcare sectors and company strategies. The majority (60%) of the presenting companies are life science and device companies but other sectors are also prominent: health insurers, retail drug chains, not-for-profit and investor-owned hospital management companies, physician organizations, health and social determinant solution providers, information technology and analytics and others. Debuts by recent IPOs like Livongo, Health Catalyst, Smile Direct and Alphabet’s life science spinout Verily get special attention. What all have in common is an appetite for capital and desire for investor/lender confidence: that’s why they’re there.

  • Reducing health costs was a common theme in sectors other than drug manufacturing: how companies address it varies widely. Niche players and solution providers that offer a clear path and a scalable operating model to lower costs are prime for investor interest. References to outsourcing, supply chain improvement, digital connectivity, artificial intelligence, robotics, analytics, process improvements, consumer experience management and the pursuit of value are frequent. For drug makers, the storyline was different: defense of drug pricing, attacks on state and federal regulators who exceed their statutory authority, the costs for their R&D investments and the societal value that results from their innovations figure prominently in their pitches.

  • JPM is a showcase for CEO style-points and messaging. JPM encourages CEOs to represent their companies on the dais. Some do it better than others. Some use the event to reinforce major announcements—like Novartis $10 billion deal to provide its cholesterol drug in the UK, Advocate Aurora’s plan to double its revenue to $25 billion by 2025, Cigna’s hook-up with insurance-start-up Oscar Health and Ascension’s data sharing venture with Google. All affirm confidence in their financial plans and offer their view about market conditions. Some use their platforms to spin their take on deals gone awry, like Otsuka’s breakup with Proteus, Sandoz’ breakup with Peer Therapeutics and others. And each gets style-points that signal how they lead their organizations: there are show-horses and work-horses and everything in between and financial audiences pick-up those signals intuitively. Make no mistake: the way CEO’s comport themselves in settings like JPM have a profound impact on how lenders and investors assess a company: some do it much better than others.

JPM symbolizes the enormity of the business of healthcare. It’s about money: getting it, growing it, investing it wisely. Market entry and sustainable execution are tough for big names that appeared on the Ballroom stage and the companies relegated to the smaller meeting rooms. Market changes and regulatory uncertainty are givens: how companies managed them or not is key.

That’s the key takeaway from JPM version 38.


Medscape: Physician Survey about Work-Life Balance:
Medscape surveyed 15,000 physicians finding Millennials (52%), Generation Xers (48%) and baby boomers (49%) all said they would take a salary cut in exchange for more personal time. Half said they would take a salary reduction of up to $20,000 per year in exchange for working less hours and achieving a better work-life balance. The survey found that while overall burnout rates have declined slightly from 46% in 2015 to 42% in 2019–48% for Gen X, compared to 38% for millennials and 39% for boomers. Medscape National Physician Burnout & Suicide

Health Spending:
Labor Department Last week, the Labor Department reported that health costs in 2019 saw their largest gain in 12 years, rising 4.6%. In December alone, health costs jumped 0.6% after rising 0.3% in the previous month, boosted by a 2.1% acceleration in prices for prescription drugs as well as consumers paying more for hospital services and doctor visits. A retrospective view of U.S. health spending is instructive: hospitals, post-acute providers and physicians have lost ground to drug company and insurers. And spending by Medicare and Medicaid out of pocket have increased faster than out-of-pocket spending by consumers while private coverage spending is essentially unchanged: See table below:

1.20.20 chart 11b.png

GAO: 340B Oversight by HRSA Falls Short:
The Government Accounting Office (GAO) Report released last Friday found oversight by the Health Resource and Services Administration (HRSA) falls short in assuring that hospitals comply with eligibility requirements. Nongovernmental hospitals are eligible for the 340B program based in part on having contracts with state or local governments to provide healthcare services to specified low-income populations who are not eligible for Medicaid or Medicare. The GAO analysis found that required documentation of hospital services provided to low-income individuals was inadequate.

HCCI Analysis: CMS-specified shoppable services account for 12% of 2017 commercial insurance spending:
January 1, 2021, hospitals will be required to display, in a consumer-friendly manner, standard charges for at least 300 shoppable services (a service package that can be scheduled by a healthcare consumer in advance). In the implementing regulation, CMS specifies 70 services for which hospitals must make price information available for if they provide them (the remaining 230 will be selected by hospitals). The HCCI analysis found that the 70 CMS-specified shoppable services totaled 12% of 2017 medical spending (excluding prescription drug spending from the denominator) among individuals with employer-sponsored insurance. These services made up 16% of out-of-pocket medical spending. For the entire compliment of 300 likely shoppable services, HCCI estimates these will represent 36% of 2017 total spending.

ACO Participation Up but Savings to Medicare Modest: CMS Update: The Medicare Shared Savings Program (MSSP)’ Pathways to Success:
The number of ACOs taking on downside risk reached 192 in 2020, up from 93 in 2019. For the first two years of the Next Generation ACO (NGACO): actuarial evaluation found modest net savings to CMS but a retrospective evaluation using a comparison group of non-participants found no significant savings from the program, and even found losses to CMS in the second year.

Readmissions interventions for frequently hospitalized patients have limited impact:
Researchers tested whether pairing frequently hospitalized patients in Camden, New Jersey, with nurses and social workers could stop that costly readmissions. The study found no effect: Patients receiving extra support were just as likely to return to the hospital within 180 days as those not receiving that help.

Report 2020: The Generational Divide Medscape January 15, 2020;
Source: CMS December 2019
340B Drug Discount Program: Increased Oversight Needed to Ensure Nongovernmental Hospitals Meet Eligibility Requirements January 10, 2020;
Health Care Cost Institute January 16, 2020
ACO Participation and Performance Data CMS January 10, 2020
Health Care Hotspotting — A Randomized, Controlled Trial New England Journal of Medicine January 15, 2020;

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