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The Keckley Report

The Uncertainty Agenda for Hospitals in 2022

By January 25, 2022March 1st, 2023No Comments

The plight of hospitals during the omicron pandemic is prominent in news coverage. Workforce shortages and bed capacity issues grab headlines, especially in regions where the omicron wave is surging.

Public health officials predict this wave will pass in the next 1-2 months while cautioning about future variant possibilities. This adds to unprecedented uncertainties facing hospitals…

·        Market volatility: The S&P 500 and Nasdaq Composite Index wrapped up their worst weeks since March 2020; the Nasdaq has fallen for four weeks in a row. The Dow Jones Industrial Average finished its worst weekly performance since October 2020. The Fed plans to raise interest rates to slow inflation which hit a 40-year high in December. How investors fare is important to hospitals that fund many of their capital projects thru earnings in the stock market which have been impressive historically: the S&P 500 +27% in 2021, +16% in 2020 and +29% in 2019.

·        Build Back Better 2.0: Prospects for extending subsidies for insurance premiums and empowering the government to negotiate the price of some prescription drugs in the Democrats’ new Build Back Better plan.

·        Pandemic pivot to endemic: The long-term impact of the pandemic on hospital workforce availability and telehealth utilization especially in mental health and chronic condition management is a pressing pivot for hospitals.

·        Alternative Payment Model Changes: CMS’ policy changes to its alternative payment models will likely require greater financial risk and increased accountability for support of underserved populations. Hospital relationships with payers and physicians are integral to participation in APMs.

·        Medicare Advantage Overhaul: Tighter oversight of Medicare Advantage (MA) plans’ business practices around marketing, risk-coding et al is inevitable, but specifics are unknown. Notably, enrollment grew 8.8% in the last cycle benefiting national sponsors like United, Humana over smaller players.

·        Consolidation Policy Refresh: Policies that dictate approvals for horizontal and vertical consolidation by the FTC and DOJ are 12 years old. Administration officials have vowed to update policies to add consideration of worker wages to price and competition based on evidence concentrated markets limit employee wage growth compared to un-concentrated markets. (Hospital consolidation, along with Big Tech, is a priority target).

·        Drug Prices: Policymaker, politician and public concern about drug prices is mounting. Manufacturers blame retailers, distributors, and PBMs while prices for specialty and generics are bumped up twice/year with impunity. Drug prices used in clinical settings, the fate of the 340B drug discount program, value-based purchasing agreements with manufacturers and the drug approval process by the FDA are C suite issues in hospitals.

·        Relief Funding: The potential availability of additional federal Provider Relief funding is on the table but not assured. Presumably, it would be targeted to those hardest hit (AHA is asking for $25 billion).

·        Physician Incentives: Pending changes to the Open Payments Program requiring physicians to disclose the specifics about all their financial relationships with device and drug makers, hospitals and others to consumers is a highly sensitive matter for hospitals.

·        Hospital Price Transparency: How the Hospital Price Transparency mandated disclosures (Executive Order effective January 1, 2021) impact local competitive strategies, health insurer negotiations and public perceptions is yet to be determined. Notably, the Trump EO was not rescinded by the Biden administration.

·        Primary Care Gatekeeper Impact: The common denominator for private-equity backed primary care start-ups is gatekeeping: limiting unnecessary hospital and specialist’ utilization using data-driven, technology dependent operating models. Notably, hospital-controlled primary care programs lag upstarts in managed health and cost reduction.

·        Medicare Reimbursement: The Hospital Trust Fund is projected to be insolvent in 2026. Cuts to hospitals and physician payments are inevitable prompting resistance from insurers and employers to pay a hidden tax to fund operating shortfalls. Site neutral payments and total cost of care methodologies will extend to a wider set of services…but which ones and how fast?

·        Insurer Care Delivery Competition: United (Optum) is the nation’s biggest employer of physicians (60,000). Humana, CVS Aetna, Anthem, Cigna, Centene and peers are strategically deploying capital to care delivery. In tandem, they’re growing enrollment in targeted populations to optimize the scalability of their investments and negotiation leverage with hospitals.

·        Physician Discontent: Most physicians feel they’re under-represented, underappreciated, underpaid and overworked—whether among the 49% employed by hospitals, 20% employed by insurers or private equity groups or independent.  At the beginning of the year, all faced scheduled Medicare pay cuts of up to 10% prompting loud pushback by the profession. And for hospitals, the aggressive pace of private equity physician practice acquisitions—400 last year, up 32% since 2016—portends more tension in hospital-physician relationships.

My take:

Certainty is a luxury for hospitals. The uncertainty punch list above is getting longer. Addressing each item requires partnerships with physicians, scenario planning with boards and market vigilance. Responses will vary by market, financial resources and institutional mission but legacy assumptions about the future for hospitals are largely obsolete—regardless of reputation.

Last Friday, Jeffrey Zients, who heads President Biden’s coronavirus response team, said “the nation is moving toward a time when Covid won’t disrupt our daily lives, where Covid won’t be a constant crisis but something we protect against and treat.” Hopefully he’s right. What’s clear is that hospitals will play an increasingly prominent role in the post-pandemic new normal that’s fundamentally changed as these uncertainties are resolved.



AI does what insurers ask. Providers say that’s the problem. January 18,

Revisions to Payment Policies under the Medicare Physician Fee Schedule Quality Payment Program and Other Revisions to Part B for CY 2022

Can Oracle make Cerner’s EHR sing? CIOs and analysts chime in Healthcare IT News January 21, 2022

COVID-19’s Impact On Acquisitions of Physician Practices and Physician Employment 2019-2020
June 2021 Avalere Health

Adashi et al “Transparency and the Doctor–Patient Relationship — Rethinking Conflict-of-Interest Disclosures”

Whaley et al “Physician Compensation In Physician-Owned And Hospital-Owned Practices” Health Affairs December 2021

Established Private Equity Healthcare Provider Plays Pitchbook

“What America’s largest technology firms are investing in: Their focus is on the metaverse, cars and health care” The Economist January 22,  2022

“Antitrust regulators aim to revamp merger guidelines, signaling threat to health sector deals” Healthcare Dive January 19,

Industry Insights

11% of the nation’s health systems are over-utilizers of low-value services: In this cross-sectional study of frequency of use for 17 low value services in 3745 hospitals, overuse was highest in hospitals with more beds, fewer primary care physicians, more specialty groups, investor owned, and were less likely to include a major teaching hospital.

Segal et al “Factors Associated With Overuse of Health Care Within US Health Systems A Cross-sectional Analysis of Medicare Beneficiaries From 2016 to 2018”JAMA Health Forum. 2022;3(1):e214543. doi:10.1001/jamahealthforum.2021.4543

CB Insights:  2021 digital health funding up 79% over 2020 to $57.2 billion: Breakdown of the 574 deals: telehealth ($17.6 billion), health IT ($8.6 billion), mental wellness and health ($5.5 billion), digital therapeutics ($3.4 billion) and clinical trial technology ($2.7 billion). 

“2021 State of Digital Health Report Data Book” CB Insights January 20, 2022

Disease reversal focus of new biotech fund: A team of biotech veterans have raised $3 billion to create a company, Altos Labs, aiming to battle disease by reprogramming the fundamental machinery of living cells.

Matthew Herper “With $3 billion, biotech veterans launch a global company aimed at disease ‘reversal’” STAT News January 19,

Fitch neutral on hospital sector in 2022: Fitch Ratings upgraded the ratings of 17 nonprofit hospitals and downgraded 12 in 2021; 87.3 %of the sector had stable rating outlooks, 8.8% nonprofit hospitals had positive rating and 3.1% had negative rating outlooks. Fitch predicts said it will be difficult for nonprofit hospitals to maintain strong margins with expense inflation outpacing revenue growth for most facilities though pressure from COVID-19 will slowly decrease over time.

“Nonprofit hospital rating upgrades outpaced downgrades in 2021: Fitch”

Study: Mental health apps fall short on therapeutic outcome improvement: The meta-review, published on Tuesday, examined 14 meta-analyses that focused specifically on randomized control trials for mental health interventions, including treatments for depression, anxiety, and smoking cessation. In total, the review included 145 trials that enrolled nearly 50,000 patients. The review found universal shortcomings in study design, leading the researchers to write that they “failed to find convincing evidence in support of any mobile phone-based intervention on any outcome.”

“Mobile phone-based interventions for mental health: A systematic meta-review of 14 meta-analyses of randomized controlled trials” PLOS Digital Health January 18, 2022

Competition driving Medicare Advantage (MA) plan to plans to offer more supplemental benefits in 2022: Per the ATI Advisory study, a fourth of MA plans now offer chronically ill beneficiaries healthy food, transportation and other special supplemental benefits in 2022– a 40% increase in carrier uptake of these unconventional services since 2020.

“New, Non-Medical Supplemental Benefits in Medicare Advantage in 2022” ATI Advisory January 19, 2022

Pitchbook: PE-backed exits saw record value in 2021: Per Pitchbook’s Quantitative Perspectives Report, there were 42 PE-backed US public listings in Q3 2021, contributing to the fifth consecutive quarter with increased listing totals at the fastest pace in 20 years. Total PE-backed IPOs, which amassed $90.9 billion, accounted for more than 42% of PE exit value in the third quarter. Findings:

·        Of the largest 100 PE-backed IPOs through Q3 2021, 26 of those companies were in the tech sector.

·        The average value of a company taken public by a PE firm reached record high: 31X EBITDA vs. 14X for sponsor exits.

Quantitative Perspectives Report” Pitchbook January 2022

Humana expands primary care in venture with private equity partner: Humana plans to operate up to 240-260 primary care centers expanding from 9 to 12 states by the end of 2022 via its CenterWell and Conviva brands funded, in part, through a three-year, $600 million deal with private equity firm Welsh, Carson, Anderson & Stowe. A key target is Humana’s 4.3 million Medicare Advantage members.

“Humana To Expand Welsh Carson-Backed Primary Care Senior Clinics To 12 States” Forbes January 20,

Study: utilization of ambulatory services returns to pre-Covid level: In this retrospective cohort study of ambulatory care service patterns between January 2019 and February 2021 that included 14.5 million patients, there was an overall increase in the return to expected rates between March 2020 and February 2021. This increase was significantly lower for patients with Medicaid or those with Medicaid-Medicare dual eligibility than for those with commercial, Medicare Advantage, or Medicare fee-for-service.

Mafi et al “Trends in US Ambulatory Care Patterns During the COVID-19 Pandemic, 2019-2021” JAMA January 18, 2022;327(3):237-247. doi:10.1001/jama.2021.24294

Commonwealth Fund: 21% of seniors have a diagnosed mental health condition (depression, anxiety, other):  In the U.S., 32% of Hispanic, 21% white and 12% of Black beneficiaries. Also,26% say they have trouble paying for the care they need vs. 13% in New Zealand, 10% in the U.K., France, Sweden and 5% in Germany.

“Comparing Older Adults’ Mental Health Needs and Access to Treatment in the U.S. and Other High-Income Countries” Commonwealth Fund January 21, 2022

Depression associated with receptivity to covid misinformation: In this survey study including 15 464 US adults, people with moderate or greater major depressive symptoms on an initial survey were more likely to endorse at least 1 of 4 false statements about COVID-19 vaccines on a subsequent survey, and those who endorsed these statements were half as likely to be vaccinated.

Perlis et al “Association of Major Depressive Symptoms With Endorsement of COVID-19 Vaccine Misinformation Among US Adults”JAMA Network Open January 21. 2022;5(1):e2145697. doi:10.1001/jamanetworkopen.2021.45697

National insurers dominate Medicare Advantage (MA) enrollment growth: More than 28.5 million seniors and people with disabilities were enrolled in a private Medicare Advantage plan as of Jan. 1–an 8.8% increase from the same time in 2021. Large insurers produced three-quarters of total enrollment growth: UnitedHealth Group: +11% to 7.9 million, Humana: +7% to 5.1 million, CVS: +12% to 3.1 million, Anthem: +24% to 1.9 million, Kaiser Permanente: +4% to 1.8 million, Centene: +29% to 1.4 million, and Cigna: -0.3% to 553,000.

“Medicare Advantage sees strong enrollment growth” Business Insurance January 18, 2022


Policy Insights

Per CDC’s COVID data tracker Jan. 21:

·        Reported cases: As of Jan. 19, the nation’s 7-day case average was 744,616, a 5% decrease from the previous week’s average.

·        Hospitalizations: The current 7-day hospitalization average for Jan. 12-18 is 20,990, a 1.1% increase from the previous week’s average and down from the 24.5% jump in hospitalizations reported Jan. 14.

·        Deaths: The current 7-day death average is 1,749, down 0.3% from the previous week’s average. vs. a 36.8% jump in deaths Jan. 14.

·        Vaccinations: As of Jan. 20, 250 million people (75.3% of the total U.S. population) have received at least one dose of the COVID-19 vaccine, and 209.8 million people, or (63.2% of population) have received both doses. About 82.5 million have received booster doses– up from 78.1 million the week prior. 

“CDC Covid Data Tracker”

Study: vaccine mandate effectiveness: On January 13th the Supreme Court blocked a vaccine-or-test mandate impacting 80 million workers. Canadian researchers analyzed the vaccine requirement to enter bars, gyms and restaurants in Canadian provinces. Findings: the researchers found that first-dose vaccinations increased by 42% over the previous week and by 71% over two weeks. They estimated that 287,000 more people were vaccinated within six weeks as a result. They also found rises in vaccination rates once mandates were announced in France, Germany and Italy in the summer of 2021.

“Do vaccine mandates actually work? The Canadian and European experiences suggest they do” The Economist January 22, 2022

Insurer compliance with Covid testing policy: The Biden Administration announced on December 2, 2021 that private insurers would be required to cover the cost of 8 rapid at-home COVID-19 tests/month/household purchased over-the-counter starting January 15, 2022. KFF analyzed insurer compliance by examining 13 private insurers with at least 1 million fully-insured members across their U.S. subsidiaries between Jan. 18, 2022 and Jan. 20, 2022. Findings:

  • 7 insurers (Anthem, Blue Cross Blue Shield of Michigan, Blue Shield of California, Care First, Cigna, CVS Group/Aetna, and Kaiser Permanente) are currently relying on reimbursement practices.

  • 6 of the 13 top insurers have a direct coverage option at this time.

“How Are Private Insurers Covering At-Home Rapid COVID Tests?” Kaiser Family Foundation Jan 20, 2022

Study: racial bias in medical records: Researchers analyzed electronic health records (EHRs) from an urban academic medical center to investigate providers’ use of negative patient descriptors related to patient race or ethnicity. Finding: Compared with White patients, Black patients had 2.54 times the odds of having at least one negative descriptor in the history and physical notes. “Our findings raise concerns about stigmatizing language in the EHR and its potential to exacerbate racial and ethnic health care disparities.”

Sun et al “Negative Patient Descriptors: Documenting Racial Bias In The Electronic Health Record” Health Affairs January 19, 2022

CBO: Drug spending down but utilization up due to generics: The Congressional Budget Office report covered trends in prescription drug spending over the 1980–2018 period. Findings:

·        Per capita spending on prescription drugs began to levelled off in the mid-2000s as a result growing availability of generic drugs.

·        Use of Prescription Drugs: overall use of prescription drugs has increased due to increased availability of generic drugs.

·        Prices: The average net price of a prescription after discounts and rebates fell from $57 in 2009 to $50 in 2018 in the Medicare Part D program and from $63 to $48 in the Medicaid program. However, the average net price of brand-name prescription drugs increased from $149 to $353 in Medicare Part D and from $147 to $218 in Medicaid.

Prescription Drugs: Spending, Use, and Prices CBO January 2022

Unapproved drug use shrinking: Harvard researchers studied use and spending on drugs marketed in the US without FDA approval among Medicaid patients in 2020. Findings: In 2020, unapproved drugs accounted for 0.2% of Medicaid prescriptions and 0.2% of estimated net prescription drug spending. By comparison, in 2006, when the FDA launched the Unapproved Drug Initiative, unapproved drugs represented 2% of US prescriptions.

Gunter et al “Medicaid Spending on Drugs Marketed Without US Food and Drug Administration Approval in 2020”JAMA Internal Medicine January 18, 2022. doi:10.1001/jamainternmed.2021.7614

KFF: Medicaid coverage in limbo after expiration of temporary expansion: Since the start of the coronavirus pandemic, enrollment in Medicaid and the Children’s Health Insurance Program (CHIP) grew to 83.2 million in June 2021, an increase of 12.0 million (16.8%) from February 2020 due to provisions of the Families First Act which provided temporary funding for expansion.

Rudowitz et al “Medicaid: What to Watch in 2022” Kaiser Family Foundation January 10,

States’ in strong fiscal position but funding for health programs not targeted: State revenues between April and November increased 24% from 2020 to 2021 producing reaching a record $113 billion for the 2021 fiscal year. States are using funds for one-time uses rather than programs with long-term commitments or permanent tax cuts fearing because pandemic-related federal aid is ending and revenue growth could shrink if the economic growth slows.

The Markets Tremble as the Fed’s Lifeline Fades New York Times January 21, 2022