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The Keckley Report

The Markets & Healthcare: What’s Next?

By May 26, 2020March 1st, 2023One Comment

I’m sure many of you- like me- have spent some extra time over the long weekend digesting the latest headlines and industry news, trying to make sense of what it all means and what’s next.

One thing is clear straight away: It didn’t feel like a weekend at all, but rather just another series of days in limbo. But I guess that’s nothing new, right?

Another thing I noticed is that Joe Rogan is apparently smarter than all of us. Wouldn’t it be nice to host a podcast where you talk about anything and everything you want, then sell the rights to Spotify for $100M? I think so.

Or how about the Tiger/ Phil Match on Sunday- it’s good to finally see that Tom Brady isn’t great at everything. Okay okay, I’ll give him credit for the hole out on the front 9, but that’s about it.

But on a more serious note, I’m still baffled by how we- as a country- plan on digging ourselves out of this mess when our unemployment rate is currently 14.7% and our national debt has reached historic levels. At what point does Fed spending stop working, especially when they’ve ventured into the corporate bond / ETF markets? I understand the intent, but are some of those investments bound to fail anyway? Is this “cycle” of stimulus spending really the right approach long term? Can a money manager really justify current market valuations with the all too popular default response “don’t fight the Fed”? Market appreciation from the March lows seems artificial to me even with reopenings occurring, but only time will tell.

Given the current economic outlook, I’m also not surprised by recent healthcare headlines where investors are placing big bets in Health IT. It’s old news quite frankly. We’ve all seen exponential growth in names like Teladoc. And there will be more names people recognize in the future- think AmWell, MDLive, Doctors on Demand etc., many of which include health insurers as major shareholders. Coincidence? I think not. However, I’m not so sure I buy into the idea that consumer behavior will fully embrace telehealth given the inherent diagnostic limitations of said platforms, at least right now.

And where to even begin with Biotech- it seems like endless names are coming out of the woodwork to announce their “solution” to the pandemic, when really it just feels like a market share grab. Don’t get me wrong, I think we as a country need to recognize their hard work and contribution in these unprecedented times. And I know there are some players in the space with promising treatments and solid track records. But I am concerned by how quickly markets grab onto these headlines, any positive COVID treatment headline, when in reality, it may be smoke and mirrors. So far it’s hard to tell what’s real.

Lest we forget the hospital operators- we shouldn’t be surprised by recent headlines questioning the distribution of Provider Relief Funds to recipients that appear more financially sound than others. As with the PPP and other fund programs, those too will be subjected to further review. Let’s not pass judgment until we have a better handle on the facts. Within the same context, I’ll be interested to see how physician practice management groups (PPMs), especially those that are private equity backed, weather the storm. As many insiders know, PPM valuations have reached record levels in recent years. Many of these specialty groups are taking a beating and another pause in elective procedures could prove devastating to the industry. The long-term sustainability of this model, especially among groups that shy away from risk sharing, remains unclear.

And despite all of this, health insurers, especially large for-profit players, continue to stick to FY 2020 guidance announced earlier this year. As the data suggests, COVID claims on average have benefited the insurers, so expect more refund announcements to come.  

Obviously, there’s a lot happening in healthcare right now, and these events certainly shed light on how quickly the industry was forced to pivot, at least in the interim. However, the question remains whether or not our reaction to the pandemic will foster permanent change in healthcare delivery.

Stay tuned.


Coronavirus News

Experts are Concerned over CDC Pandemic Reporting in US

It emerged this week that several states—including Georgia, Texas, Pennsylvania, Vermont, and Virginia—have been combining statistics on polymerase chain reaction (PCR) tests, used to diagnose current infection, with antibody blood tests, used to detect past infection. More troublingly, The Atlantic reported on Wednesday that the Centers for Disease Control and Prevention (CDC) has been doing the same thing, which artificially inflates the number of tests conducted, and makes the numbers difficult to interpret.  
“How Could the CDC Make that Mistake”; The Atantic;

Insurers to Refund Enrollees

Blue Cross Blue Shield of Michigan became the latest health insurer to announce plans to refund money to its enrollees, as reimbursement for healthcare services dropped in the wake of the coronavirus pandemic, with many hospitals and physicians curtailing operations. The company will return $100M to enrollees, in the form of premium discounts and refunds, and said it might increase that amount later in the year depending on how quickly health spending picks up again. UnitedHealthcare (UHC), Cigna, and Humana are among the other insurers who have recently announced similar plans, with UHC alone slated to give back $1.5B to purchasers. Under the Affordable Care Act, plans must spend between 80 and 85 percent of the premiums they collect on medical care, depending on the segment of the market they cover, and must return excess profits to purchasers if they do not. Insurers are getting ahead of this requirement by returning money now to their employer and individual-market customers.
“Blue Cross Blue Shield to issue Customers $100M in refunds because of Coronavirus”;

COVID-19 Adversely Impacting Hospital Margins

It is estimated that physicians have lost about 55% of revenue and hospitals are experiencing negative operating margins, significantly affecting cash flow and leading to layoffs and the threat of closure. Hospitals in Maryland and Pennsylvania and health systems and clinical practices in Vermont’s single accountable care organization (ACO) have had greater flexibility to shift care to alternate settings, without the financial instability experienced by their peers.

Hospitals Weighing Cost Benefit of Provider Relief Funds Given Impending Audits

Disbursement data from the provider relief fund shows names like HCA, Tenet, Providence Health are among largest beneficiaries thus far. Approximately $103B of the $175B of the provider relief fund has not yet been allocated. Several reports are suggesting some of the larger beneficiaries are weighing the costs of keeping the money given the bad publicity it might create from keeping the money. Some organizations, like Providence Health, have a healthy cash balance, but are much more highly diversified than traditional operators. They generate revenue from investments with hedge funds and private equity; and they make direct investments through their venture capital arm. Again, it sounds like the adage “You only know who is swimming naked when the tide goes out.”

Castlight: Half of U.S. Counties don’t have a Single Coronavirus Testing Site
According to the Castlight analysis:

  • 54% of all counties don’t have a testing site.

  • Among counties with 50,000 or more people, 38% don’t have any testing sites.

  • Among rural counties with fewer than 10,000 residents, 68% don’t have any.

  • And even among counties that do have testing sites, 58% don’t have the capacity to meet minimum recommended testing levels, which Castlight defined as 1% of their population every week.

Biotech Investors Active in Covid-19 Exploration

Moderna released data from its in-development coronavirus vaccine in which 8 patients developed neutralizing antibodies to the virus at levels similar to people who had recovered from infection. The results drove Moderna’s share price up more than 300% since March and added $7 billion to the company’s market value. Hours after releasing the data, Moderna announced a plan to raise more than $1.2 billion in a stock sale.

Note: At least 7 other biotech companies mounted stock offerings last week including Bluebird Bio, Krystal Biotech, Gossamer Bio, Gamida Cell, Bellerophon Therapeutics, Turning Point Therapeutics, and Clovis Oncology. Notably, biotech stocks are up 60% since crashing March 16 and up 21% last month due to positive headlines from Gilead Sciences, Moderna, and other companies working on medicines for Covid-19. US venture funding for the sector reached a peak of $5.5 billion in the first three months of 2020, according to PitchBook. And in the first third of this year, 9 biotech funds raised $10.2 billion.
“Stock Offerings by Biotech Companies on May 18th, 2020”
“Investor hope pushes biotech stocks to best monthly gain in two decades” CNBC May 1,2020

Nursing Home Visitation Policy Released

Last Monday, CMS released its guideline to enable nursing homes to safely reopen to residents’ family and friends. To date, a third of Covid-19 deaths have been residents of nursing homes. The 3-phase plan:

  • In Phase 1, all residents and staff should receive baseline COVID-19 tests to detect any cases in the facility. Nursing homes also should screen all staff daily and test them weekly.

  • A facility can move to Phase 2 when the surrounding community has had no rebound after 14 days in Phase 1 and the nursing home has had no new cases for 14 days. In Phase 2, some visitation is allowed for compassionate care situations and some non-essential healthcare personnel provided those individuals are screened.

  • Phase 3, or reopening, can begin when the community has had no rebound in cases during Phase 2; the nursing home has had no new-onset COVID cases for 28 days, no shortage of staff or PPE, and continued ability to test for COVID-19; and referral hospitals have bed capacity.

CMS also announced that facility-level COVID-19 case reports will be available on showing the number of COVID-19 infections and deaths in their patients and employees. Currently, nursing homes are supposed to report their infection rates and deaths to their state health departments, but only 33 states require reporting of death rates in those facilities.

There are 1.5 million people living in nursing homes, another 800,000 in assisted living facilities, 75,000 in intermediate-care facilities, and 3 million people who are employed in the sector.
“Nursing Home Reopening Recommendations for State and Local Officials” May 18, 2020

Primary Care Collaborative: Primary Care Physicians Concerned about Long-Term Viability of their Practices

Per a survey of 736  primary care clinicians conducted between May 15-18 by the Primary Care Collaborative:

  • Preparation for pandemic:55% fear they are unprepared for the next wave of the pandemic: 76% of these say they are under “severe” or “near-severe” stress; 51% say they continue to have no or severely limited access to testing; 59% say they continue to have no PPE.

  • Payment models: 30% favor the “predictable payments to support care in exchange for level of professional care determined by minimal set of essential measures.” second only “payment of any kind at this point” surpassed it with 34% of clinicians marking “yes!”

  • Chronic care visits: A majority report that follow-up for lung disease, hypertension, or diabetes is happening “very little” (58%) or “not at all” (2%). Instead, the most common care being performed as usual is the evaluation of new symptoms or acute injuries/accidents.

  • Preventive health: Only 5% say that routine cancer screenings are happening as usual; 28% say they’re not happening at all. Adult (13%) and (child 10%) immunizations were down. Screening for PTSD, depression, or anxiety is happening “very little” (50%) or “not at all” (8%).

  • Telehealth:29% reported using video for the majority of their visits as compared to telephone. 84% report “patients who struggle with virtual health (internet or computer trouble)” is a stress on their practice: 18% point to denied billing for virtual/telehealth as a stress and57% say that half or more of the care they provide is reimbursable.

“Primary Care & COVID-19: Week 10 Survey” Primary Care Collaborative May 21, 2020;

Deaths of Despair Might Range up to 154,000

75,000 will die from drug or alcohol misuse and suicide as a direct result of the coronavirus pandemic, according to  research released by Well Being Trust (WBT) and the Robert Graham Center for Policy Studies in Family Medicine and Primary Care.

Three factors, already at work, are exacerbating deaths of despair: unprecedented economic failure paired with massive unemployment, mandated social isolation for months and possible residual isolation for years, and uncertainty caused by the sudden emergence of a novel, previously unknown microbe. Across nine different scenarios, the additional deaths of despair range from 27,644 (quick recovery, smallest impact of unemployment on deaths of despair) to 154,037 (slow recovery, greatest impact of unemployment on deaths of despair), with 75,000 being the most likely. 

“Projected Deaths of Despair from Covid-19” Well Being Trust & The Robert Graham Center Suicide” May 18, 2020

Supply Chain: Administration Awards Generic Manufacturing Contract to Phlow, a Public Benefit Corporation

Last week, the Trump administration signed a $354 million four-year contract with a new company, Phlow, to manufacture generic medicines and pharmaceutical ingredients that are needed to treat Covid-19 now made overseas, mostly in India and China. It may be extended for a total of $812 million over 10 years, making it one of the largest awards in the authority’s history.  Phlow will lead a consortium of private sector entities including Civica Rx, a nonprofit created in 2018 by American hospitals to alleviate drug shortages; Ampac Fine Chemicals, a custom manufacturer of pharmaceutical ingredients; and the Medicines for All Institute, a nonprofit arm of the Virginia Commonwealth University’s College of Engineering that also receives funding from the Bill and Melinda Gates Foundation.

Sheryl Gay Stolberg and Katie Thomas “Trump to Tap New Company to Make Covid-19 Drugs in the U.S.” New York Times May 18, 2020

UnitedHealth, Microsoft Partnership Offers Free Screening Program for Employers

Health insurance giant UnitedHealth Group and Microsoft are partnering on a protocol to help companies “safely return employees to work” amid the Covid-19 pandemic.

The effort uses the clinical and data analytics of UnitedHealth, which operates the nation’s largest health insurer UnitedHealthcare, and the artificial intelligence and analytics capabilities of Microsoft to create a smart phone app that screens workers for symptoms of the coronavirus strain Covid-19 and helps clear them to work. The “ProtectWell” app is free to employers who are able to add questions as part of the screening process in addition to standardized items. Per Mercer, 35% of employer respondents planning for “return to work say they will conduct Covid-19 screening and assessments on-site.”

“UnitedHealth, Microsoft’s New Mobile App to Help Trace Coronavirus” Zachs Equity Research May 19, 2020

Industry News

CMS Expands Medicare Advantage Coverage

Friday, the Centers for Medicare & Medicaid Services today finalized requirements that increase access to telehealth for seniors in Medicare Advantage (MA) plans, expand the types of supplemental benefits available for beneficiaries with an MA plan who have chronic diseases, provide support for more MA options for beneficiaries in rural communities, and expand access to MA for patients with End Stage Renal Disease (ESRD). Due to the upcoming June 1, 2020, MA and Part D bid deadlines for the 2021 plan year, CMS is finalizing a subset of the proposed policies before the MA and Part D plans’ bids are due. Highlights:

CMS is giving MA plans more flexibility to count telehealth providers in certain specialty areas (such as Dermatology, Psychiatry, Cardiology, Ophthalmology, Nephrology, Primary Care, Gynecology, Endocrinology, and Infectious Diseases) towards meeting CMS network adequacy standards. A special focus is End State Renal Disease (ESRD):ESRD beneficiaries will have more coverage choices in the Medicare program including extra health and wellness programs, transportation, or home-delivered meals that are not available in Medicare Fee-For-Service.

CMS is also announced it is finalizing proposals to enhance the MA and Part D Star Ratings system to further increase the impact that patient experience and access measures have on a plan’s overall Star Rating. The Star Ratings system helps people with Medicare, their families, and their caregivers compare the quality of health and drug plans being offered.

“Trump Administration Announces Changes to Medicare Advantage and Part D to Provide Better Coverage and Increase Access for Medicare Beneficiaries”  CMS May 22, 2020

CMS Star Ratings for Nursing Homes Provide an Incomplete Picture

The UC Irvine researchers analyzed 10,676 nursing homes including 70% with CMS Five-Star ratings comparing these to actual with patient ratings for the last quarter of 2016 and first three quarters of 2017. Key finding: the agreement between patient reviews and the CMS Star Ratings occur about half the time. “These findings suggest patients should have access to both expert and consumer reviews for different nursing homes” the researchers said.

Mukamal et al ”Comparison of Consumer Rankings With Centers for Medicare & Medicaid Services Five-Star Rankings of Nursing Homes”JAMA Netw Open. 2020;3(5):e204798. doi:10.1001/jamanetworkopen.2020.4798

Optum Acquires naviHealth

Last week, OptumHealth acquired naviHealth, a startup developing a software platform to help manage post-acute care. Founded in 2012 by former Centers for Medicare and Medicaid Services Administrator Tom Scully, naviHealth developed a platform to help health plans and health systems ensure patients are receiving appropriate care after they are discharged from the hospital. The company also acquired a decision-support tool to flag patients at risk of readmission. NaviHealth currently manages post-acute services for 4.5 million Medicare Advantage members and nine of the top 10 health systems. NaviHealth is also the largest Centers for Medicare and Medicaid Services (CMS) bundled payment convener, working with more than 140 hospitals in the Bundled Payments for Care Improvement Advanced program

Livingston “Optum buys post-acute care company naviHealth” Modern Healthcare May 21, 2020

Premera Blue Cross Launches Virtual Primary Care Health Plan

Premera Blue Cross launched a virtual care health plan for member access to primary care providers starting October 1. The plan is available at a lower premium than standard PPO plans.

Members access a virtual primary care provider at any time, for a zero copay, through an app operating on 98point6– an on-demand, text-based primary care service platform from independent company 98point6.

Telehealth has become the standard of care during the coronavirus pandemic as the Centers for Medicare and Medicaid Services in March allowed for more than 80 additional services to be furnished via telehealth. Providers were able to bill at the same rate as an in-person visit during the duration of the public health emergency. Insurers are integrating telehealth into a widening set of plan designs for 2021.

Morse “Premera Blue Cross launches virtual primary care health plan” Healthcare Finance May 14, 2020

Omada Health gets $57 million investment

Omada Health, which provides digital tools for people with chronic health conditions to change their behavior, raised $57 million from Perceptive Advisors and spent $30 million of it acquiring Physera, a virtual physical therapy start-up. Omada has raised more than $250 million company competing with Livongo in the digital chronic care management space projected to be  worth $500 billion by 2025.
“Omada Health Scores $57M as Coronavirus Sparks Investor Interest in Health Tech”;

One Comment

  • Leon Harris says:

    Interesting weekend, but much needed 3 day rest. Wish it didn’t end so fast. I read an article from cnbc that discussed how digital health platforms are really doing well during this time of chaos. It will be interesting see what the next 5 years will unravel.