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The Keckley Report

The Stimulus Bill Offers No Lifeline to Healthcare Providers

By March 1, 2021March 1st, 2023No Comments

Saturday, the U.S. House of Representatives passed President Biden’s $1.9 trillion stimulus package by a 219 to 212 vote along party lines. The American Rescue Plan now goes to the Senate where supporters hope it will be passed and sent to President Biden on or before the March 14 extension of unemployment benefits from previous relief funds.

The 591-page House version provides funding for a range of programs, including:

  • $422 billion to provide $1,400 stimulus payments for Americans making less than $75,000. Individuals who make between $75,000 and $100,000 would receive less, with a cap for those earning more than $100,000.

  • $350 billion in state and local aid.

  • $246 billion in unemployment benefits would be extended until August 29 with supplemental benefits increasing from $300 to $400. (11.4 million eligible)

  • $160 billion for COVID programs including $46 billion for testing and tracing; $7.6 billion for pandemic response at community health centers; $14 billion to educate consumers; $50 billion to the Federal Emergency Management Agency; $5.2 billion to support research, development and manufacturing of vaccines, therapeutics, and other medical products; $7.7 billion to expand the public health care workforce and more.

  • $128.6 billion to help K-12 schools reopen.

  • And a phased-in increase in the national minimum wage to $15, despite the Senate Parliamentarian Elizabeth MacDonough’s determination it could not be included in the final bill because it violates Senate rules of reconciliation.

Polls indicate the public’s supportive of this package: according to Morning Consult, it’s favored by 76% of all voters including 89% of Democrats, 71% of Independents and 60% of Republicans. Its fate is less certain in the Senate which is bitterly divided: Republicans think it’s too expensive and a pork feast for Democrats and Dem’s think it vital to the working classes left behind in the K-economy and states, schools and others overwhelmed by the pandemic. Odds are it will pass.


Adding $1.9 trillion more to the federal deficit on top of $4 trillion already appropriated from 4 prior relief funds in the last 12 months is problematic but necessary: it will help 26 million households needing immediate assistance but make life tougher for traditional providers (hospitals, physicians, post-acute providers) who are dependent on Medicare reimbursement because it triggers 4% cuts for the next 10 years totaling $381 billion due to the PAYGO law.

And noticeably absent in this package are additional Provider Relief Funds (PRF) for hospitals and other providers hardest hit despite appeals from the American Hospital Association and allies that losses of $320 billion last year and up to $122 billion in 2021 will jeopardize hospital care. Democratic sponsors counter that additional monies for providers aren’t needed since only $110 billion of the original $178 billion CARES Act PRF has been disbursed and $24 billion remains unappropriated. And they call out big-name providers like Mayo Clinic, HCA and others who have returned their appropriations ending 2020 in good financial shape.

As Covid-19 transitions to the rear-view mirror in coming months and relief funds are spent, the lasting impact of the pandemic will be the soaring federal debt it piled up prompting Medicare cuts to providers. It will quickly become HHS Secretary Becerra’s biggest challenge. And it will spark opportunistic investing in healthcare by private equity whose fortunes have soared in the pandemic and open the door to disruption heretofore not experienced in our system’s history. At $11,072 per capita annual spending, the U.S. health system remains attractive to outsiders who see its flaws as opportunity.

The stimulus package is not a lifeline to struggling elements of the health system nor directionally a step toward a transformed health system. It’s a big bet that economic recovery requires broad-based emergency funding for households, states and school systems and a hope that the health system can somehow survive. Stay tuned.


PS Correction: The good folks at Michigan Medicine correctly called attention to an error in my February 15 report “The Old Hospital Playbook should be Thrown Out” Here’s what I wrote: “In 2015, consumer out of pocket payments represented 29.7% of hospital payments; last year, they contributed 35.9%—that’s a 21% increase that hits low- and middle-income households hardest.” What I should have written, based on Table 7 in CMS National Health Expenditures is “In 2015, consumer out of pocket payments were 29.7 billion; last year, they were 35.9 billion—that’s a 21% increase that hits low- and middle-income households hardest.” Direct payments to hospitals by consumers represent only 3% of total spending–a small but growing percentage. My bad! I try to use valid and reliable data in my analyses and objectivity in my viewpoint. And I value readers who pay attention!!


“House Passes $1.9 Trillion Covid-Aid Bill; Democrats Debate Minimum-Wage Path”; February 27, 2021; Wall Street Journal

“Potential Statutory Pay-As-You-Go Effects of the American Rescue Plan Act of 2021”; February 25, 2021; Congressional Budget Office

“Effects of January 2021 Stimulus Payments on Consumer Spending”; February 5, 2021; Opportunity Insights

“January Results Reflect Rocky Start to 2021 for U.S. Hospitals and Health Systems”; February 22,2021; Kaufman Hall

“Hospital Lobbying Groups Working Overtime to Not Be Left Out in the Cold on Additional Provider Relief”; February 23, 2021; Morning Consult

“Joe Biden’s $1.9trn stimulus package is one of the most popular bills in decades”; February 26, 2021; The Economist


FDA Authorizes Johnson & Johnson Single Dose Vaccine

Saturday, the Food and Drug Administration issued an emergency authorization for a Covid-19 vaccine developed by Johnson & Johnson, the third vaccine to be cleared for use by adults 18 and older in the United States and the first that requires only one dose. The federal government has purchased 100 million doses of the J&J vaccine, but supplies are expected to be scarce until at least April.

The vaccine developed by J&J’s vaccine division Janssen Pharmaceuticals was found to reduce cases of moderate to severe COVID-19 infection by 66.1%, starting 28 days after the single shot. Results from a multi-country study, released in late January, suggested the vaccine worked better in some regions of the world than others. In the U.S., the vaccine was 72% protective.

Helen Branswell, Rachel Cohrs “FDA authorizes Johnson & Johnson’s single-dose Covid-19 vaccine”; February 27,2021; STAT

Walgreens Partners with Labcorp to Offer Home Testing

Last Wednesday, Walgreens announced that it has entered into an agreement with Laboratory Corporation of America to sell Pixel by Labcorp COVID-19 PCR Test Home Collection Kits over the counter in its 6000 U.S. stores.

“Walgreens to Make Pixel by Labcorp™ COVID-19 PCR Test Home Collection Kit Available Over-The-Counter at Stores Nationwide”; February 24, 2021; Walgreens

FTC Report: Covid Scams Increasing

New data from the Federal Trade Commission — which oversees consumer fraud and deception cases — finds that in 2020, the FTC received more than 4.7 million reports around scams from consumers, up from 3.2 million in 2019. The agency received more than 2.2 million reports about fraud specifically, totaling $3.3 billion in consumer losses with the overwhelming number involving online e-commerce scams targeting seniors 60-69 years of age.

“Scammers cash in on COVID-19 vaccination confusion”; January 27, 2021; Federal Trade Commission


CMS Medicaid 2020 Report: Managed Care Playing Bigger Role

Medicaid medical care expenditures for the 77 million covered exceeded $649.4billion in FY2020 with over half flowing through Medicaid managed care programs. Additional administrative costs were $29.7billion bringing total program expenditures to $679.1 billion. Highlights:

  • Medicaid managed care spending (including the federal and state share) in FFY 2020 was $359.6 billion, up 14.7% from $313.5 billion in FFY 2019.

  • Medicaid managed care spending has increased at a rate of 14.7% compounded annual growth rate (CAGR) since FFY 2007, compared to a 5.8% growth in total Medicaid spending.

  • Compared to FFY 2019, Medicaid managed care spending increased by 2.6% to 55.4%.

  • 67.6% of FFY 2020 spending came from federal sources– 10.2% higher than the pre-Medicaid expansion share in FFY 2013, and 3.0% higher than FFY 2019.

  • The % breakdown of non-MCO spending: (home and community-based services (23.7%) inpatient hospital services (22.6%), nursing facility (13.7%), other (13.5%), Medicare – Part A&B (6.8%), outpatient Hospital Services (4.7%) FQHC & clinic services (9%), personal care services (3.8%), intermediate care (3.1%), physician and surgical Services (3.0%), dental services (1.3%)

Related: AHIP Issue Brief: Medicaid Managed Care Orgs Deserve Greater SDOH Flexibility

  • According to an Issue Brief by America’s Health Insurance Plans (AHIP) “Medicaid has a unique opportunity to address the social risk factors that disproportionately impact these vulnerable populations.” AHIP recommendations include changes in Medicaid managed care coverage provisions to encourage increased attention to social determinants.Currently, 27 state Medicaid programs screen for social determinants, 37 programs coordinate social services, and 35 programs refer beneficiaries to social services.

“State Expenditure Reporting for Medicaid & CHIP”; Medicaid

“Policy Recommendations to Achieve Greater Impact on Reducing Disparities & Advancing Health Equity”; February 17, 2021; America’s Health Insurance Plans

SCOTUS to Hear Challenge to Trump Restrictions on Abortion

Last Monday, the U.S. Supreme Court announced it will hear American Medical Association v. Cochran in its next term that starts Oct. 4, 2021. The case involves a 2019 rule made by the U.S. Department of Health and Human Services (HHS) that placed more abortion-related restrictions on healthcare providers receiving federal funds under Title X of the Public Health Service Act. The American Medical Association (AMA), other Title X providers, and several states sued, arguing that HHS violated the APA by issuing the rule and that the rule is arbitrary and capricious. Previously, the 9th Circuit Court of Appeals upheld the HHS rule (February 24, 2020) and the 4th Circuit Court of Appeals held that the HHS rule was invalid (September 3, 2020).

“American Medical Association v. Cochran”; SCOTUSblog

Appeals Court Ruling Opens Can of Worms for Specialty Drug Makers

A federal appeals court decision issued last week may disrupt patent protections for monoclonal antibody treatments made by biologics manufacturers. The case involves a dispute between Amgen (AMGN) and Sanofi (SNY) over the market for injectable cholesterol-lowering medicines called PCSK9 inhibitors. For the past several years, the companies have been locked in patent disputes, but earlier this month the appeals court decided that two Amgen patents for its Repatha cholesterol medication were invalid.

The issue is the defensibility of the functional claim made by Amgen’s patent for Repatha: Amgen referred to all monoclonal antibodies that bind to a particular protein, but litigants challenged that the claim could have referred to hundreds or more antibodies.

Ed Silverman “A U.S. court ruling may force biologics makers to review patent protections”; February 25, 2021: STAT

OIG report: Hospital Upcoding to get Higher Reimbursement Increased Prior to COVID-19

In its review, the government watchdog found:

  • Medicare paid hospitals approximately $14.5 billion for stays that lasted a relatively short amount of time– $4.9 billion more than it would have paid if these cases had been billed at the next lower severity level.

  • Nearly half of the $109.8 billion Medicare spent for inpatient hospital stays in fiscal 2019 was for stays billed at the highest severity level.

OIG statement: “There are indications that these stays are vulnerable to inappropriate billing practices, such as upcoding. We recommend that CMS conduct targeted reviews of MS-DRGs and stays that are vulnerable to upcoding, as well as the hospitals that frequently bill for them. “

“Trend Toward More Expensive Inpatient Hospital Stays in Medicare Emerged Pre-Pandemic”; February 2021; U.S. Department of Health and Human Services Office of Inspector General

Update: M&A Activity in Healthcare in 2020 Slower but Significant

Per Bain’s 2021 M&A Report:

  • After reaching an all-time high of roughly $540 billion in strategic deal value in 2019, healthcare experienced a 37% drop in deal value in 2020. Deal value fell significantly in pharmaceuticals/biotech and medtech, but it rose in payers and providers.

  • Payer transaction value increased by 79% in 2020, largely the result of the $14.7 billion merger between Teladoc and Livongo. Excluding that deal, transaction value fell by 4% in 2020, continuing the downward trend from 2017.

  • Provider M&A saw a pickup in activity leading to an overall increase of 28% in transaction value in 2020 primarily focused on the consolidation of physician practice management and alternative care sites.

  • Private equity (PE) will play a key role in provider M&A.

  • Financial sponsors’ share of deal value rose from 27% to 61% over the past five years.

  • Per Health Capital Consultants:

  • “The number of M&A transactions peaked at 117 in 2017, then dropped to 90 in 2018 before rising slightly to 92 in 2019. It may have realistically been expected that 2020 would follow this same trend, and first quarter 2020 M&A activity indicated a strong start to the year. During this quarter, 29 transactions were announced, the second highest amount in the first quarters of the previous five years.”

Per BDO 2021 survey of healthcare chief financial officers (CFOs):

  • 44% predict that the pandemic will drive an increase in partnerships and 42% believe it will drive increased consolidation across the healthcare industry.

  • Half of CFOs are also focused on digital transformation, with 47% and 41% focused on product or service expansion and geographic expansion, respectively.

  • 31% indicated that they plan to acquire physician practices, 28% plan to merge with another organization, 24% plan to enter a joint venture, 20% plan to sell to another organization, and 17% plan to acquire another organization.

“Getting Ready for the Recovery in Healthcare M&A”; February 16, 2021; Bain

“2021 BDO Healthcare CFO Outlook Survey”; 2021; BDO

JD Power: Retail Clinic Use Increasing

According to the J.D. Power U.S. Pharmacy Study released last week, pharmacy expansion into primary care is driving significant increases in both customer satisfaction and consumer spending. Highlights:

  • 48% of retail pharmacy customers used at least one health and wellness service in 2020, up significantly from 2019 (43%)

  • One in five (20%) customers spoke to a pharmacist during their visit, up from 16% in both 2018 and 2019.

  • When customers use two or more health and wellness services, overall satisfaction moves above 900 points (on a 1,000-point scale), and the likelihood the customer will be an advocate for the pharmacy increases as much as 27%. Customers that use two or more services spend, on average, twice as much at that pharmacy. ($24/visit for customers who do not use any health service to $58/visit).

“Retail Health Clinic Engagement Rising; May Be Key to Supercharging COVID-19 Vaccine Rollout”; February 23, 2021; J.D. Power