The healthcare industry in 2021 and beyond is permanently changed as a result of the global pandemic. For the U.S. health system, 2020 saw six major shifts that set the stage for a fundamental reset for its programs, services, and funding next year:
1. Increased Attention to Public Health
Public health programs are coordinated and funded by local, state, and federal governments and account for 3% ($114 billion) of what’s spent on healthcare in the U.S. But our failure to respond effectively to the Covid-19 virus in the U.S. has cost 332,000 lives, closed 4 million businesses, added $3 trillion to the federal debt, and paralyzed the global economy.
Public health issues are both domestic and global: their surveillance and abatement are costly. They’re sometimes unexpected and almost always hurt poor and vulnerable populations hardest at home and abroad. In the U.S., the Centers for Disease Control and Prevention (CDC) is the agency under which the labyrinth of local, state, and federal programs are coordinated. Since 2008, its budget has been flat. Likewise, funding for state and local public health programs have shrunk and special appropriations like the Prevention and Public Health Fund in the Affordable Care Act have been cut.
Likely impact in 2021 and Beyond: Chronic underfunding, lack of effective coordination of public health programs and disparities in access will be a significant focus in 2021. In the U.S., they’ll include obesity, food insecurity, air quality and social determinants of health and likely require closer cooperation between not-for-profit health systems and local public health agencies. And the U.S. will likely re-engage with the World Health Organization and multi-national coalitions like GAVI to expedite access to vaccines in needy countries wrestling funds from a fiercely divided Congress.
2-Increased Attention to Science
In March 2020, UT Southwestern researchers reported there were “there is no evidence from randomized clinical trials (RCTs) that any potential therapy improves outcomes in patients with either suspected or confirmed COVID-19.” Nonetheless, more than 300 clinical trials are now underway. That’s how science works.
Operation Warp Speed, for which federal taxpayers invested $10 billion in 8 companies to accelerate their Covid-19 vaccine discovery, is another example. To date, 10 million Pfizer and Moderna doses have been delivered, 1.9 million frontline caregivers and seniors have been vaccinated and three other vaccines in stage 3 clinical trials are promising.
But the pandemic also exposed rogue science: questionable claims for hydroxychloroquine, the frivolous suggestion that a disinfectant administered topically might work, musings by Monday morning “scientists” that masking and social distancing don’t work and many more.
Likely impact in 2021 and Beyond: In 2021, science will continue to be in the spotlight in three areas: how the FDA evaluates drugs and devices, how the 34 major drug manufacturers that dominate the $1.2 trillion global drug market commercialize and protect their products from copycats, and how consumers ultimately benefit. The Patient Centered Outcome Research Institute authorized in Section 6301 of the Affordable Care Act “to help patients and those who care for them make better-informed healthcare choices.” should play a bigger role. Since 2012, it has funded 1700 studies about treatments and approaches to major problems like opioid addiction, obesity, and others but its orientation is to physicians and caregivers primarily. What we’ve learned in the pandemic is that consumers play a key role and should be treated not as active participants in their care. Maybe PCORI should be re-positioned as the Consumer Centered Outcome Research Institute to reflect the significance of consumers in healthcare.
In addition, 2021 will bring a policy debate about how federal funding for basic research (i.e. NIH) upon which drug manufacturers’ build their products benefits taxpayers directly vs. the shareholders of drug manufacturers, distributors, pharmacy benefits managers and retail chains.
3-Decreased Confidence in Government
While confidence and trust in medical professions and the health system has peaked during the pandemic, confidence in Congress and the political system has tanked to an all-time low. (Gallup, Kaiser Family Foundation, Pew). That’s problematic for U.S. healthcare which derives 51% of its funds directly from state/federal programs (Medicaid, Medicare, Others) and operates under the regulation it enforces. In a Pew Research Center study of voter confidence in their government’s handling of the virus in 14 industrialized countries last month, the U.S. finished last. That suspicion bleeds into public reluctance to wear masks or get vaccinated and threatens full recovery from Covid-19 in the first half of next year.
Partisan brinksmanship has eroded public confidence in federal, state, and local government on which the U.S. healthcare industry is dependent. Campaign 2020 contributed to erosion of trust in government. And the government’s inept messaging about the pandemic has further deepened distrust: just two weeks ago, HHS Secretary Alex Azar announced 20 million would be vaccinated by this Thursday. It’s not going to happen.
Likely impact in 2021 and Beyond: In 2021, the effectiveness of the vaccination campaign and the economic recovery are priorities for lawmakers. Neither is simple and both depend on an increased role for the federal government. Health policy in the U.S. is built on federalism: states play an equal role with the central government exercising enormous power over public health, provider access, insurance coverage and pandemic response. Lawmakers in DC and state legislatures fight fiercely to maintain their power and control: might state’s role in public health be revisited in light of the pandemic and growing disparities in our system? That delicate discussion is inevitable next year. It will not solve the erosion of trust in government, but it will prepare us better for the next pandemic. That takes employers, community leaders and voters to punish self-serving politicians and policies and reward statesmanship and principled leadership.
4-Growing Social Despair
The compound impact of the pandemic, economic slowdown and social isolation has exacted a toll on the American’s psyche. Life expectancy has declined. More than 13% of the population (27 million) reported they “didn’t have enough to eat” in the last 7 days. The U.S. poverty rate increased 2.4% to 11.7% in November and 12 million owe $5,850 for rent that’s past due. Personal income fell in November for the second straight month, the Commerce Department said Wednesday, and consumer spending declined for the first time since April.
Applications for unemployment benefits remained high last week (803,000 week of December 19) and have risen since early November, and the Conference Board’s Consumer Confidence Index dipped to 88.6%. And about last night’s midnight signing of the $900B COVID-19 relief and $1.4 trillion omnibus packages by President Trump temporarily slowed the emotional roller coaster for 12 million workers who’ve been pawns in the political chess game. Not surprising, drug dependence, depression and suicides are up, and conditions are dire in a third of our households.
Likely impact in 2021 and Beyond: In 2021, restoring a sense of security and hope will be the major challenge for businesses, government, communities, and healthcare organizations. The wellbeing of populations hardest hit by the pandemic will require statesmanship by lawmakers and action by the private sector. Unkept promises and good intentions lacking willful action will deepen pandemic despair. And attention to behavioral health and social determinants in care management will be necessary for hospitals, medical groups, and post-acute providers to compete.
5-Increased Consumption of Disinformation
The difference between disinformation and misinformation is intent. Disinformation is organized to take down institutions, companies and ideas based on false facts. It is now a staple in U.S. business and politics.
For the major issues facing Americans, like healthcare access, climate change and others, an informed debate based on verifiable facts is necessary but increasingly not the norm. Trust in news media is negligible and plummeting (Gallup). In its place, disinformation campaigns through social media has served to reinforce strong beliefs not supported by facts. Researchers at the Oxford Internet Institute suggest that the “infosphere” should be considered a social determinant of health, alongside factors such as education, income, and housing “recognizing the direct correlation between exposure to poor information quality and poor health outcomes”.
Addressing disinformation about the coronavirus pandemic is especially important: the Vaccine Confidence Project at the London School of Hygiene and Tropical Medicine asked 8,000 people in the UK and US if they would “definitely” have a Covid-19 vaccine: 54%in the UK, and 41 % in the US, said yes. But when shown tweets asserting that Covid-19 vaccines cause infertility, willingness dropped 6 % in the UK and 2% in the US. France and Russia also score poorly on vaccine confidence. Similar results were found in surveys in France and Russia prompting its characterization as a global “infodemic” by the World Health Organization: “an overabundance of both online and offline information which includes deliberate attempts to disseminate wrong information to undermine the public health response and advance alternative agendas of groups and individuals”.
Likely impact in 2021 and Beyond: Growing recognition of the infodemic will prompt U.S. regulators to revisit policies about social media postings channeled through Twitter, Facebook, and popular tech giants. It’s inevitable that Section 230 protections for tech companies and free speech will be hot topics in DC in 2021.
6-Increased Private Investor Opportunism
Healthcare is capital intense. Accessing capital through performance (operating income) and loans have been staples but the capital landscape is changing. More capital is accessible through private equity (i.e. Goldman Sachs, Apollo), large health insurers (i.e. United, Humana) and strategic investors (Amazon, Apple). And they’re deploying their capital in healthcare niches where profits are strong and competitors vulnerable.
Thus far this year, 33 healthcare focused SPACs (Special Purpose Acquisition Corporations) have gone public raising $6.3 trillion and 8 more are in the que. For the first time, 9 of the Fortune 10 companies (based on 2019 revenues) have healthcare business units: Walmart, Amazon, Apple, CVS, Berkshire Hathaway, UnitedHealth Group, McKesson, AT&T, AmeriSource Bergen). And as of Friday, the equity markets continued their strong run: the NASDAQ is 41% above its January 2020 start, the S&P 500 is up 69% and the Dow is up 6%. That bodes well for investors but problematic for hospitals, nursing homes and medical practices that lack access to capital.
Government is the source of 51% of total industry revenues in the U.S.; private payers—employers, consumers—are 49% but account for 80% of its profits. Private capital seizes those opportunities in both.
Likely impact on 2021 and Beyond: Access to capital to expand the scale and scope of capabilities and services is vital: strategic and financial investments in healthcare will fund innovations and be major threats to incumbents that lack scale. How the Federal Trade Commission and Department of Justice define ‘fair competition’ will be key determinants of where and how private investments in healthcare evolve.
MY TAKE
Each of these six is complicated deserving a deeper dive. Each has implication for the management teams and boards of every organization in U.S. healthcare. They’re not surprises to industry watchers but perhaps more impactful than imagined.
When the World Health Organization declared Covid-19 a global pandemic March 11 and news reports of COVID-19 deaths from the Life Care Center in Seattle began, the U.S. healthcare system’s future was fundamentally altered.
Bill Gates is reported to have said “banking is necessary; banks are not.” The same might be said for healthcare based on the changes likely in 2021. It’s a necessary industry, but its old rules no longer apply.
Paul
RESOURCES
“The Impact of Chronic Underfunding on America’s Public Health System: Trends, Risks, and Recommendations, 2020”; Trust for America’s Health
Patient Centered Outcome Research Institute
“How Do OECD Forum Attendees Compare with Citizens Around the World on Views About the Pandemic, the Economy, and Multilateralism?”; December 15, 2020; Pew Research Center
Sanders et al “Pharmacologic Treatments for Coronavirus Disease 2019 (COVID-19) A Review”; April 13, 2020; JAMA Network
“Health misinformation pollutes the web with consequences for all”; November 25, 2020; Financial Times
“Household Pulse Survey” United States Census Bureau
Jane Sarasohn-Kahn “U.S. Health Consumers’ Growing Financial Pressures, From COVID to Cancer”; December 9, 2020; Health Populi
“Wider Divide: Serving Consumers as the Middle-Class Fades”; November 6, 2020; Bain
CORONAVIRUS NEWS
Pew: Public Assessment of Government Pandemic Performance Low Compared to Other Developed Systems
Pew asked:
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“Our country has done a good job dealing with the coronavirus pandemic”: US: 47% agree vs. 14 country average of 73%; Highest Denmark: 95% and Lowest UK 46%
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“This country is now more united than before the coronavirus outbreak” US 18% vs. 14 country median of 46%; Highest-Denmark 72% and Lowest U.S.
“How Do OECD Forum Attendees Compare with Citizens Around the World on Views About the Pandemic, the Economy, and Multilateralism?”; December 15, 2020; Pew Research Center
CDC Says 75-Year-Old Seniors should be Vaccinated Ahead of Essential Workers
Last Sunday, a federal advisory committee voted to put adults 75 and over and frontline essential workers next in line for COVID-19 vaccines following frontline health care workers and nursing home residents who began receiving vaccines December 14 (Phase 1a). According to Sunday’s vote, adults aged 75 and older, along with frontline workers key to societal functioning such as teachers, police officers, fire fighters, prison officers and grocery store workers should be prioritized in Phase 1b. In Phase 1c, access to COVID-19 vaccines would expand to include adults 65 and older, along with people with underlying medical conditions that put them at higher risk of getting severely ill from COVID-19, and other essential non-frontline workers including those who work in construction, waste, trucking, and food service.
In Phase 2 of vaccine distribution, supply is expected to expand to the point where a COVID-19 vaccine is available to anyone in the U.S. who wants one. Government officials anticipate this could begin as early as the spring
The U.S. Centers for Disease Control and Prevention
Report: Pandemic Windfall to Billionaires
According a report released last week by the Institute for Policy Studies and Americans for Tax Fairness:
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Since the coronavirus shutdowns began, in March, six hundred and fifty-one members of this exclusive club have seen their collective wealth increase 36% from $2.95 trillion March 18 to $4.01 trillion December 7.
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At $4 trillion the total wealth of all U.S. billionaires today is nearly double the $2.1 trillion in total wealth held by the bottom half of the population, or165 million Americans.
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There are now at least 4 centa-billionaires: Elon Musk (Tesla), Mark Zuckerberg (Facebook), Jeff Bezos (Amazon) and Bill Gates (Microsoft).
“Net worth of U.S. Billionaires has Soared by $1 Trillion- To Total of $4 Trillion- Since Pandemic Began”; December 9, 2020; Institute for Policy Studies
John Cassidy “The Billionaires Who Profited from the Pandemic Should Help Pay for Our Recovery”; December 10, 2020; The New Yorker
INDUSTRY NEWS
CMS Issues Final Rule for Value-Based Contracting for Drugs
Last Monday, CMS issued a final rule to make it easier for states, payers, and drug manufacturers to enter into value-based purchasing arrangements for prescription drugs. The final rule updates the 30-year-old Medicare Drug Rebate Program law and revising average manufacturer price and “best price” reporting requirements saving $288 million annually through 2025 per CMS. The changes will be effective in January 2022.
“Establishing Minimum Standards in Medicaid State Drug Utilization Review (DUR) and Supporting Value-Based Purchasing (VBP) for Drugs Covered in Medicaid, Revising Medicaid Drug Rebate and Third-Party Liability (TPL) Requirements (CMS 2482-F) Final Reg”; December 21, 2020; CMS
Gallup: Nurses, Physicians Stay Most Respected Occupations, Members of Congress Last
In Gallup’s 19th Annual survey about the public’s assessment of the honesty and ethics of 15 occupations conducted Dec. 1-17, 2020:
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Nurses earn a record 89% very high/high score for their honesty and ethics this year—up 4% points greater than their prior high in 2019. Note: nurses have topped the list every year since 1999.
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Medical doctors increased 12% to 77% and exceeding the previous high of 70% found in 2011 and 2012.
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After nurses and doctors, grade-school teachers (the only category of teachers measured) are the next-highest-rated profession, with 75% rating their ethics very high or high—up 9% since 2017.
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Pharmacists increased 7%points to 71%. —their highest since 2012.
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Members of Congress and Automobile Salespeople tied for last at 8%.
“U.S. Ethics Ratings Rise for Medical Workers and Teachers”; December 22, 2020; Gallup
Conference Board: Consumer Confidence Dropped in December, Consumers Cautious
Per the Conference Board’s Consumer Confidence Index released last Tuesday, consumer confidence dropped to 88.6 in the first two weeks of December, from revised 92.9 in November. The Index now stands at 88.6 (1985=100), down from 92.9 in November. The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – decreased sharply from 105.9 to 90.3. However, the Expectations Index – based on consumers’ short-term outlook for income, business, and labor market conditions – increased from 84.3 in November to 87.5 this month.
“The Conference Board Consumer Confidence Survey: December 2020” (1985=100); December 22, 2020; The Conference Board
Moody’s Economic Conditions: 2021 Corporate Profits Forecast 12% Increase
Per Moody’s Analytics: “As inferred from consensus forecasts of roughly a 6% annual rise by 2021’s nominal GDP, the recurring pretax profits of U.S. corporations may rise by 12%…. Evidence to this effect is shown by how during the four quarters following the end of the seven previous recessions since 1969, nominal GDP’s average year-to-year increase of 6.8% was accompanied by a 20.1% average yearly advance for core pretax profits.”
Lonski, John; Chief Capital Markets Economist; “Credit Markets Review and Outlook”; December 17, 2020, Moody’s Capital Markets Research
Deloitte Forecast: Inpatient Demand to Shrink 44% by 2030
In 2014, Deloitte Consulting LLP released an analysis on hospital M&A trends where it estimated “only 50% of health systems would remain and independent hospitals would no longer exist” by 2024. In its updated report, updated predictions through 2030 include:
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Inpatient hospital revenue will be 35% lower.
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Hospital bed demand will be, on average, 44% lower leading to smaller and fewer hospitals.
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Of the 390 metropolitan statistical areas (MSA) across the country, 61 are most likely to see consolidation. This is based on Deloitte’s predicted 66% lower demand for hospitals beds in their MSA.
Prevost et al “The potential for rapid consolidation of health systems”; December 10, 2020; Deloitte
