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The Keckley Report

JPM 40th Annual Healthcare Conference: Familiar Themes with a Confident Tone

By January 26, 2022March 1st, 2023No Comments

The 40th Annual JP Morgan Healthcare Conference the second week of January was a virtual event for the second year in a row. It’s the perennial Woodstock where healthcare investors hear company exec’s tout their plans under the watchful eye of JP Morgan Chase, one of the Big Four healthcare investment bankers along with Goldman Sachs, Morgan Stanley and Citibank.

The backdrop this year was different than last: the newness of the Biden administration and the omicron pandemic prefaced each presenter’s commentary. And like last year, healthcare investor sentiment was upbeat and understandably so: 2020 and 2021 have produced stellar returns for private equity and venture capital investors in healthcare.

In presentations by health systems (21 health systems participated including Ascension, Intermountain, et al), physician organizations and other providers, these themes were prominent:

·        The omicron variant has derailed 2020-2021 recovery but providers are optimistic it has plateaued so they can pivot to their growth strategies i.e., digital solutions, targeted care management programs for at-risk populations, et al. However, its destabilizing impact on the healthcare workforce will likely be its most disruptive long-term effect.

·        Value-based contracting arrangements with health insurers and employers remains “true north” though there’s strong resistance to unnecessary risk-taking. Changes to CMS’ alternative payment models are being closely watched.

·        Primary care physician-centric contractual models (Oak Street, Chen Med, Iora, Village MD, et al) are proliferating as investors are comparing the scalability of the business models and alignment with value-creation for their shareholders. Hospital partnerships with private equity-backed groups (Privia et al) may be useful responses if structured right. Primary care is the new frontline.

Health insurer like Humana, Cigna, CVS Aetna, Centene and others advanced these themes:

·        The administration’s directive (January 10) that health insurers pay the cost of 8 in-home Covid tests is problematic: the policy’s implementation will create significant operational issues for insurers and frustration for consumers.

·        Insurers are concerned about pending (2023) federal policy changes around benefits design, network adequacy, medical loss ratio, use of brokers, profits and more,

·        Increased competition in the Medicare Advantage (MA) market from new entrants (Clover, Alignment, SCAN, Bright et al) has created a volatile environment for enrollment growth. For investors, CMS adjustments in MA benchmarking and risk-scoring methodologies are less concerning than the avalanche of new plans that de-stabilize enrollment continuity and benefits design. Supplemental benefits loom large in differentiation looking ahead.

·        For most, contracting with an exclusive narrow network of primary-care centric medical groups is key to lowering costs and competitive premiums. It’s an active focus of investment by private equity and strategics (Walgreens, Optum, CVS-Aetna) anticipating gatekeeping opportunities with insurers and employers.

·        The most significant opportunities to lower costs in the health system are 3: 1-lowering administrative costs through process re-design and new technologies, 2-reducing unnecessary hospital utilization through early detection (data), mitigation and care coordination changes and 3-more effective management of chronic populations using AI enabled technologies that enable scalable customization. A clinically integrated physician strategy and data-driven operating model is central to the three.

And life science (drug manufacturers) presentations focused on familiar topics…

·        The federal government’s oversight of drug discovery and public policies that target drug prices threaten the pharmaceutical-industry’s willingness to fund drug discovery. Reasonable policies require recognition of the roles played by manufacturers, PBMs, distributors, retailers, prescribers and consumers.

·        Omicron is the latest in what is likely to be a consistent steam of public health challenges (aka Public Health Emergency/PHE) requiring a coordinated global response. It’s lacking.

·        Profits from Covid vaccines (Moderna, Pfizer) will be significant for investors: the potential for application of their mRNA as the future for infectious disease treatment is exponential.

My take:

JPM is a showcase for a subset of the industry’s big names. Understandably, the bank favors companies/organizations with whom they have a business relationship through their lending, investment banking and advisory services activities, but it’s no less a cross section of the industries’ bigger players. And there are always breakout companies that grab the spotlight: arguably, this year it’s Glen Tullman whose Midus touch with Livongo has repeated with his Transcarent start-up.

At JPM, presenter commentary is usually peppered with familiar phrases : ‘land and expand’ is code for market growth strategery by new players/solutions, ‘whole person care’ is about social determinants and consumer preferences that require data and non-conventional treatments, ‘value-based care’ and ‘affordability’ are laudable destinations being pursued by all and so on. And the buzz in the lobby of the Westin St. Francis (San Fran) can’t be matched anywhere else nor the embarrassing price gauging by nearby hotels, bars and event venues that feed on this event.

Investors are there to hear from company exec’s and decipher their company’s blind spots and sweet spots. And the exec’s are there to meet their investors and cast their net for partnerships or deals. It’s simply the healthcare marketplace wherein investment capital is its currency and deals the common language.

The 40th version of JPM is in the books. For healthcare investors, the combination of strong profits from market gains, political dysfunction in DC and growing discontent with the health system’s performance is a basis for confidence. The system is unlikely to change dramatically in the near-term unless a black-swan event prompts a new direction.



Industry Insights

Economist’ analysis: most industries consolidating: According to The Economist’s calculations, two-thirds of 900 sectors covered by America’s economic census became more concentrated between 1997 and 2012. In the two decades to 2017 the weighted average market share of the top four firms in each industry increased from 26% to 32%. Note: “trustbusting” appointees Lina Khan, a 32-year-old academic, chairs the Federal Trade Commission (FTC). Jonathan Kanter, a long-time Google-basher, heads the Department of Justice (DoJ)’s antitrust division. Tim Wu, a law professor whose books include “The Curse of Bigness”, is the White House adviser on technology and competition.

The growing demand for more vigorous antitrust action The Economist January 15, 2022


JPM Recap: Ascension at 97% FFS bullish on value-based incentives; Intermountain at 61% FFS bearish

“Reporter’s notebook: J.P. Morgan’s 2022 health conference” Modern Healthcare January 10,


Medical liability underwriter concentration: the 10 largest U.S. medical liability companies control 63.3% of the premium market led by Berkshire Hathaway (16.7%); the top 10 in workers compensation insurers control 41.8% of premiums led by Travelers (6.9%).

Business Insurance January 2022


Rock Health: Digital Funding in 2021 robust: 2021’s total funding for US-based digital health startups amounted to $29.1B across 729 deals, with an average deal size of $39.9M– nearly double 2020 funding  ($14.9B) former record haul. The biggest: Noom ($540M), Ro ($500M), Mindbody ($500M), and Commure ($500M). Startups offering mental healthcare raised $5.1B, $3.3B more than any other clinical indication in 2021, and nearly double 2020’s funding total ($2.7B) followed by diabetes care and musculoskeletal (MSK) care.

“2021 year-end digital health funding: Seismic shifts beneath the surface” RockHealth January 10, 2022


Pitchbook: Venture investing outperforms other capital strategies for investors: In 2021, US VCs raised $128.3 billion and exit values hit $774 billion—most of it through public offerings.  Outperforming the S&P 500 (71.66% pooled IRR vs. 30.82%) and the Russell 2000 (71.66% pooled IRR vs. 40.37%). U.S. VCs’ returns for 2020 rank second only to 1999 and are the 8th-best rolling one-year basis in the last 40 years. VCs have raised $12.8 billion across 15 funds in the first week of 2022 including Andreessen Horowitz new $9 billion fund in 3 vehicles.

US VC firms raise nearly $13B in the first week of 2022 Pitchbook January 7, 2022


Occupational trust: The pandemic bump in the public’s rating of the honesty and ethics of health professions for health professions has disappeared per Gallup’s annual Honesty and Ethics survey conducted Dec. 1-16: changes from 2019 to 2021 are nursing (-8% to 81%), medical doctors (-10% to 67%) and pharmacists (-8% to 63%). Comparing the 22 occupations in the survey, nursing is highest followed by medical doctors, grade school teachers and pharmacists. Three professions received scores lower than 10%: car salesmen, members of congress, and lobbyists.

“Military Brass, Judges Among Professions at New Image Lows” Gallup January 12, 2022


Policy Insights

Insurers directive to cover at-home tests: On January 10, 2022, the Departments HHS, Labor, and Treasury announced insurers and group health plans will be required to cover and reimburse enrollees for up to 8 at-home tests for COVID-19 per enrollee per 30-day period. This policy applies to tests purchased beginning on January 15, 2022 through the end of the declared public health emergency (PHE). Those that offer direct coverage will be allowed to limit reimbursement to $12 per test or the actual price of the test (whichever is lower) when a member purchases a test from a non-network pharmacy or retailer.

“Insurers And Plans Must Cover At-Home Tests For COVID-19”, Health Affairs Forefront, January 11, 2022


HHS orders Medicare to reconsider premium hike following price drop for Biogen’s Aduhelm: Last week, HHS Secretary Becerra ordered Medicare to reconsider its 15% hike in Part B premiums after Biogen dropped the price for its Alzheimer’s drug Aduhelm 50% to $28,200 January 1.

Related: January 11, Medicare announced plans to limit access to Biogen’s Alzheimer’s drug Aduhelm those who have mild forms of cognitive impairment or mild dementia, and who have amyloid plaques, the proteins Aduhelm is designed to target, in their brain.

Medicare plans to restrict access to controversial, pricey Alzheimer’s drug Aduhelm to patients in clinical trials STAT News January 11,


Poll re: Surprise Medical Bills Act:61% of U.S. adults say they are concerned about getting a surprise medical bill from the emergency room, 36% say they hesitated to seek care at the ER or skipped it altogether because of surprise billing concerns and 19% say they had seen, read or heard “a lot” or “some” about the No Surprises Act.

“Surprise Medical Billing Is Now Banned. The Public Is Still Concerned About Unexpected ER Charges” Morning Consult January 13, 2022


SCOTUS ruling on vaccine mandates: The Supreme Court on Thursday blocked the Biden administration’s OSHA COVID-19 vaccine-or-test requirement for large employers impacting 84 million workers, but it will allow an HHS mandate to continue for workers at federally funded health care facilities impacting 10 million.



Child Tax Credit associated with nutrition: Food insufficiency in households with children peaked at 18% in December 2020 and remained at 14% through June 2021, compared with 3% among all households during 2019. It is associated with harm to child development and health, higher health care costs, and $170 billion annually in lost productivity, educational performance, and food aid. Extension of the CTC is a key point of negotiation in Congress.

Shafer et al “Association of the Implementation of Child Tax Credit Advance Payments With Food Insufficiency in US Households ”JAMA Network Open January 13, 2022;5(1):e2143296. doi:10.1001/jamanetworkopen.2021.43296


Celebrity promotion of unhealthy food in social media widespread: In this cross-sectional study of 5180 foods and beverages in social media posts between May 2019 and March 2020 from 181 highly followed celebrities, more than 87% of the celebrity social media accounts had posts of foods and beverages with less healthy Nutrient Profile Index (NPI) ratings (0 to 100 score based on sugar, sodium, energy, saturated fat, fiber, protein, and fruit and/or vegetable content per 100-g sample). Only 4.8% of food- and beverage-containing posts were sponsored by food or beverage companies.

Turnwald et al “Nutritional Analysis of Foods and Beverages Posted in Social Media Accounts of Highly Followed Celebrities”JAMA Network Open January 12, 2022;5(1):e2143087. doi:10.1001/jamanetworkopen.2021.43087


CDC update: as of January 14

·        Cases: As of Jan. 12, the nation’s 7-day case average was 782,766, a 33.2% increase from the previous week’s average. 98.3% of all new U.S. COVID-19 cases are the omicron variant; delta variant accounts for the remaining 1.7%. 

·        Hospitalizations: the current 7-day hospitalization average for Jan. 5-11 is 20,637, a 24.5% increase from the previous week’s average by less than but less than the 60.2% jump in hospitalizations reported Jan. 7.

·        Deaths: The current 7-day death average is 1,729, up 36.8% from the previous week’s average vs. a 14.4 % jump in deaths January 7 compared to the week prior. 

·        Vaccinations: As of Jan. 13, about 248 million people (74.7% of the total U.S. population) have received at least one dose of the COVID-19 vaccine, and more than 208.6 million (62.8%) have received both doses.  About 78.1 million booster doses in fully vaccinated people have been reported, up from 72.3 million the week prior. The 7-day average number of vaccines administered daily was nearly 1.3 million as of Jan. 13, a 20.4 % increase from the previous week.

·        Testing: the 7-day average for percent positivity from tests is 28.6%–up .75% the previous week.  The nation’s 7-day average test volume for the week of Dec. 31 to Jan. 6 was about 2.1 million, up 25.6 % from the prior week’s average.


Mental health advisory: On December 7, US surgeon general Vivek Murthy issued a public health advisory to address the “youth mental health crisis” exacerbated by the COVID-19 pandemic: 25% of Gen Z report feeling more emotionally distressed vs. millennials (13%) and Gen X (8%).

Addressing the unprecedented behavioral-health challenges facing Generation Z McKinsey January 14, 2022


MedPAC votes to increase hospital pay 2% for 2023: At its meeting last Thursday, MedPAC unanimously approved a recommendation to update hospital payment by 2% for fiscal 2023, and keep the physician fee schedule payment stagnant consistent with the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) that dictates a 0% raise for physician pay through the fee schedule, opting instead to offer raises through quality payment programs.

January 13-14 Public Meeting