This week, all eyes will be on Ukraine, Europe’s poorest country. Since becoming an independent state in 1991 after separating from the Soviet Union, Ukraine has failed to invest in its people, its economy and its health system. As the potential for conflict rises, the preparedness of the Ukrainian health system will garner global attention, especially if armed combat results in civilian casualties.
The newly formed Parliament of the Ukraine declared itself a neutral state after leaving the Soviet Union. It adopted the Russian health system as its framework which featured publicly-paid health services for citizens supplemented by out-of-pocket payments.
The Ukrainian health system, like most in eastern Europe, is three tiered: primary care provided through clinics and employed physicians, secondary care provided in city hospitals (284), maternity hospitals (69) and children’s hospitals (47) and tertiary care in regional hospitals (25), specialized hospitals (96), regional children’s hospitals (27), psychiatric hospitals (53) and ‘monoprofile’ facilities that treat certain populations i.e. tuberculosis, et al.
In 2018, the National Health Service of Ukraine (NHSU) was created to facilitate contracting and payment arrangements with health care providers and modernize the system. It adopted the Programme of Medical Guarantees (PMG), which specifies basic benefits package and disallows any cost-sharing arrangements outside funding by the government. It approved digital health programs and modest improvements in its primary care programs but results have been negligible due to three systemic issues:
An unhealthy population: Ukrainians eat poorly, exercise rarely and drink and smoke heavily. The escalating prevalence of mental health, heart disease, alcoholism and diabetes coupled with poverty, aging and negative population growth contribute to a decline in overall life expectancy that’s likely to continue. Ukraine has the 2nd highest death rate in world (15.2/1000) behind Bulgaria (13.1/1000) and leads the world in deaths from heart disease (693/100k). The population’s unhealthy with few indications it’s inclined to change.
Under-funding: Total health spending for healthcare in the Ukraine is 7% of GDP vs. 11.9% for most Euro countries. Notably, 51% of its funding comes from out-of-pocket payments exacerbating disparity and access issues for the country’s poor. Facilities are old, the workforce is under-trained and under-paid, and citizens with means are seeking healthcare elsewhere.
Political corruption: Complicating matters, the Ukrainian health system is rife with corruption. Illegal private payments to doctors are widely accepted as a necessary means of keeping physicians in the country (where physician comp is 75% under U.S. income). In the Ukraine system, anything goes.
Lack of leadership: Since its independence 31 years ago, Ukraine has had 22 Ministers of Health and six Presidents. A coherent strategy to modernize the health system has not been a priority nor a focus of elected leaders.
The tension building in the Ukraine is untimely especially for the U.S. health industry. Our economy is delicate: in January, annualized inflation hit a 40-year high of 7.5% driving prices up across the board. Prices for health services will catch up driving unpaid bills by consumers higher.
Wage growth has increased 5.7% adding pressure to employer operating costs including hospitals and health facilities. Fear that Russia will invade Ukraine has sent oil prices to over $96 a barrel—the highest since 2014– and spiked gas prices at the pump. In tandem, food prices have soared. So, at home, the economy is our focus and prices our worry: Ukraine is not for most unless it results in higher prices at home. And most will not pay attention to the Ukrainian health system’s response if a war begins.
Yesterday, the White House confirmed that President Biden agreed “in principle” to hold a summit with Russian leader Vladimir Putin to preclude an armed conflict in the Ukraine. Selfishly, I hope the effort is successful. Setting aside the geopolitical consequence, the toll on the Ukrainian health system would be devastating in human lives at a time when their system needs a fresh start.
This week, those of us inside US health system baseball will be watching for news from CMMI about the future of the Direct Contracting model and thinking about our transitions to endemic from pandemic. Some of us will study the opinion of the Rhode Island AG disbanding the Lifespan-Care New England merger to see how regulators are defining parameters for competition and others will be closing deals.
Our system has its flaws, but none that come close to the Ukrainian system. Sometimes, it’s good to be reminded.
Fact file: Ukraine
· Population: 41.3 million
· GDP per capita, PPP US$ (2019): Ukraine $13 341 vs. WHO Euro $36,813 and EU $46, 699
· Public/Private healthcare funding sources: 49% government, 51% out of pocket
· Health spending as % of GDP: 7.7%–up from 5.3% in 2000 inclusive of government and OOP payments
· Resources: 4.4 physicians/1000; beds 8.8 hospital beds/1000
· Life Expectancy: 73.3 vs. 78.3 for WHO Euro Region (53 countries) and 81.2 for EU (28 countries). Note: Gender disparities are greater than EU and the WHO averages: European Region. In 2000 Ukrainian females lived 11.3 years longer than Ukrainian males (versus 6.6 years in the EU and 7.7 years in the WHO European Region), a gap that had slightly narrowed to 10 years by 2019.
· Population health status: 58.4% of all adults had a BMI higher than 25 kg/m2 up from 52.2% in 2000. This corresponds to an increase in the number of overweight people in the EU from 52.1% in 2000 to 59.4%.
· Maternal mortality/ 100 000 live births: Ukraine 19, WHO Euro 13, EU 6.1
· Infant mortality/1000 live births: Ukraine 7.2, WHO Euro 7.5, EU 3.5
European Observatory on Health Systems and Policies, World Health Organization Health systems in action: Ukraine (who.int)
USAID from the American People www.roadmaps.usaid.gov/country/ukraine
CMS announcement about future of Direct Contracting model widely anticipated: The National Association of ACOs (NAACOS) circulated a letter February 14 with 222 co-signers urging HHS Secretary Xavier Becerra, not to terminate the model in the near future after coming under fire in a Senate hearing earlier in the month. The issue: certain members of Congress see the DC-Geo model as a profit-grab by Medicare Advantage insurers. Stay tuned.
“Medicare’s much-hyped Direct Contracting model faces an uncertain future”
Healthcare M&A activity in 2021 robust: Per Bain’s M&A Report for 2021, healthcare M&A volume was up 16% in 2021, and value rose by 44% after last year’s steep decline. Across the five sectors, deal value totaled $440 billion in 2021, with multiples at an all-time high (20 times forward-looking enterprise value (EV)/EBITDA in 2021– five turns higher than in 2019, the last time volumes were as high). Key observations in report:
· More companies are underwriting the revenue synergies that are becoming increasingly critical to justify high valuations. They are pursuing more cross-border deals, buying new capabilities, and continuing to acquire both carve-outs and full companies.
· While deal volume dropped 30% among payers, the deals that did occur added scale and platforms or diversified offerings—and in a growing trend, payers bought providers to better control members’ costs. Notables: Centene’s $2.2 billion purchase of Magellan Health to add behavioral health, Cigna’s Evernorth division purchase of MDLive to add telehealth, Humana $5.7 billion purchase of Kindred at Home and One Homecare Solutions.
· Provider M&A transaction volumes and values both recovered in 2021, exceeding pre-pandemic levels. Likewise, transactions with financial sponsors in the sector increased as well, with a 43% increase vs. 2020.As it was pre-pandemic, one of the main catalysts for transaction volume in this sector in 2021 was the consolidation of healthcare systems to build scale and cost efficiencies.
Bain M & A Report February 8, 2022 www.bain.com/insights/healthcare-m-and-a-report-2022
Private equity activity in travel nursing significant of late: Since the beginning of 2021, at least eight private equity firms have bought at least staffing agencies joining long-time sector investor Leonard Green. Periscope Equity, Cornell Capital, Trilantic North America, Centerbridge Partners, Littlejohn & Co., MidOcean Partners deals are among the estimated 30 dealmakers The biggest PE-owned staffing firms are Medical Solutions #2 and Favorite Healthcare #5 per Staffing Industry Analysts..
Per STAT, A travel nurse working in an intensive care unit earned make an average $3,508 in a week in January, up from $1,733 a week before the pandemic, according to Vivian Health, a health care hiring marketplace.
“Private equity firms are cashing in on the travel nursing business that has boomed during the pandemic” Rachel Cohrs STAT Feb. 15, 2022 www.statnews.com/2022/02/15/private-equity-firms-are-cashing-in-on-the-travel-nursing-business
VMG analysis: ASC Growth slows: The number of Medicare-licensed ambulatory surgery centers (ASCs) increased 5.3% compounded annually from 3,134 in 2000 to 5,241 in 2010 then slowed to 1.3% CAGR to 6,028 as of September 2021.. Consolidation of management companies, physician employment by hospitals, and volume pressure resulting from the proliferation of high-deductible health plans (“HDHPs”) have contributed to the slowed growth in the number facilities since 2010. However, the overall revenue growth for the ASC market is expected to outpace growth in the number of facilities driven by the expected migration of cardiac, spine and orthopedic cases from hospital-based settings to ASCs.
VMG Health https://intellimarker.com
Study: unreimbursed Medicaid hospital costs similar in FP, NFP settings: In 2019, the 3446 US private hospitals in our data set incurred $20.59 billion in unreimbursed Medicaid costs, representing 2.52% of their total expenses. In 23 of the 45 states (51.1%) in which both nonprofit and for-profit hospitals operated, for-profit hospitals had higher unreimbursed Medicaid cost to expense ratios than nonprofit hospitals. “Thus, our results suggest that the largest component of community benefit supposedly provided by nonprofit hospitals (i.e., unreimbursed Medicaid costs, net of supplemental payments) is poorly aligned with the (effectively automatic) tax subsidy that these institutions receive. Prior research suggested similar results for the provision of charity care by nonprofit vs for-profit hospitals.”
Bai et al “Evaluation of Unreimbursed Medicaid Costs Among Nonprofit and For-Profit US Hospitals”JAMA Netw Open February 14, 2022;5(2):e2148232. doi:10.1001/jamanetworkopen.2021.48232
AHIP study: hospital markup for Part B drugs: America’s Health Insurance Plan Center for Policy and Research analyzed the 10 drugs that amounted to the highest Medicare Part B spend from 2018-2020—and were purchased, stored and administered in a healthcare setting. They found that drug treatments given in hospitals were marked up an average of $7,000, when compared to those purchased through specialty pharmacies. Findings:
· While the 10 drugs, on average, cost 108% more in hospitals than in specialty pharmacies
· Physician offices usually charged 22% higher prices—an average markup of $1,400—for the same drugs as specialty pharmacies.
Critics of the study noted that in addition to the limited population of drugs being evaluated in the report, the data is missing the complexities of running a pharmacy inside of a hospital, including the overhead costs, staffing costs, union contracts and other elements that contribute to a different cost structure and drug pricing model, said Rick Kes, senior healthcare analyst at RSM.
Hospital Price Hikes: Markups for Drugs Cost Patients Thousands of Dollars AHIP February 16, 2022 www.ahip.org
McKinsey: hospital margins will shrink up to 3%: A typical health system could see a 1.2 to 2.8% decline in profit margin, assuming that its ability to raise prices is typically limited to about 3%, according to McKinsey analysis. Furthermore, extrapolating inflationary impacts on healthcare profit pools suggests significant pressures on stakeholders. For example, if 2022 healthcare inflation catches up to inflation for overall services—implying a 1.5 % increase on top of current levels—healthcare profit pools could decline by about $70 billion. A three percentage point rise could result in a $140 billion decline in profit pools. That would mean about a 12 to 24% drop in profit pools in 2022 for the overall healthcare industry.
“Consumer prices are rising fast, and healthcare isn’t far behind” McKinsey February 11, 2022 www.mckinsey.com/industries/healthcare-systems-and-services/our-insights/consumer-prices-are-rising-fast-and-healthcare-isnt-far-behind
Walgreens, VillageMD on track to open 200 co-branded clinics this year: Last week, Walgreens announced plans to open more than 200 co-branded primary care practices by the end of the year. Concurrently, VillageMD announced it had acquired chronic care patient education platform Healthy Interactions. Other notable primary care partnerships by retailers:
· Walmart-Oak Street Health to bring Care Clinics to Walmart supercenters in the Dallas-Fort Worth area and integrating Epic HCIT capabilities in its solutions.
· CVS Health is revamping its stores, including the opening of new primary care locations that include on-site doctors and enhanced health-focused HealthHUB and Minute Clinics.
“Walmart May Soon Become The Largest Primary Care Provider In The Country” Forbes February 16, 2022 www.forbes.com/sites/saibala/2022/02/16/walmart-may-soon-become-the-largest-primary-care-provider-in-the-country
· About 3 in 10 health care workers said their work hours have increased over the past six months.
· 43% of health care workers said getting a raise had helped keep them happy at work during the pandemic, while 38% said as much about more frequent praise from their bosses.
· About half of health care workers said their mental health has worsened during the pandemic, a similar level since fall and winter 2021.
“With Health Care Workforce Feeling ‘Defeated’ by Pandemic’s Demands, Staffing Woes Could Slow Recovery”Morning Consult February 17, 2022www.morningconsult.com/2022/02/17/health-care-workers-pandemic-burnout-mental-health-polling
Study: cost sharing for Covid hospitalizations range from $1638 to $3998: Researchers analyzed hospitalizations with a primary diagnosis of COVID-19 that began and ended between March 1, 2020, and March 30, 2021.
· For privately insured patients, the proportion of hospitalizations with cost sharing for facility services ranged from 2.2% to 8.8% between March 2020 and January 2021, then increased to 82.1% to 84.4% in February to March 2021.
· For Medicare Advantage patients, this proportion ranged from 0.3% to 2.7% between March 2020 and February 2021, then increased to 66.1% in March 2021
· Of 4926 hospitalizations for privately insured patients, 753 (15.3%) had cost sharing for facility services. Among these 753 hospitalizations, the mean total out-of-pocket spending was $3998 ($2698). Length of stay and non-Northeast residence were positively associated with this spending.
· Of 11 524 hospitalizations for Medicare Advantage patients, 406 (3.5%) had cost sharing for facility services. Among these 406 hospitalizations, the mean total out-of-pocket spending was $1638 ($1062).
Chua et al “Trends in and Factors Associated With Out-of-Pocket Spending for COVID-19 Hospitalizations From March 2020 to March 2021”JAMA Netw Open. February 14, 2022;5(2):e2148237. doi:10.1001/jamanetworkopen.2021.48237
In 2019, the 3446 US private hospitals in our data set incurred $20.59 billion in unreimbursed Medicaid costs, representing 2.52% of their total expenses. “In half of the 45 states in which both nonprofit and for-profit hospitals operate, nonprofit hospitals had a lower weighted mean unreimbursed Medicaid cost to expense ratio than for-profit hospitals—but only nonprofit hospitals receive a sizeable tax subsidy. Thus, our results suggest that the largest component of community benefit supposedly provided by nonprofit hospitals (i.e., unreimbursed Medicaid costs, net of supplemental payments) is poorly aligned with the (effectively automatic) tax subsidy that these institutions receive. “
Bai et al “Evaluation of Unreimbursed Medicaid Costs Among Nonprofit and For-Profit US Hospitals” JAMA Netw Open. February 14, 2022;5(2):e2148232. doi:10.1001/jamanetworkopen.2021.48232
Overuse more prevalent in bigger investor-owned non-teaching hospital settings: In this cross-sectional study of 676 US health care systems, those that were overusing health care had more beds, had fewer primary care physicians, had more physician practice groups, were more likely to be 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. January 14, 2022;3(1):e214543. doi:10.1001/jamahealthforum.2021.4543
Private debt is third major asset class under management: Private debt fundraising finished 2021 in near-record fashion. Globally, managers raised $191.2 billion, a 12.1% YoY gain and the second-highest annual tally on record. Investors continued piling into these funds despite the puzzling macroeconomic environment due to a confluence of factors including negative real yields on government bonds, lower-than-expected default rates, accommodative monetary and fiscal policy, and positive recent performance by private debt as an asset class. In terms of AUM, private debt is now the third-largest private market strategy, trailing only private equity (PE) and venture capital (VC). The prospect of rising rates will have varied knock-on effects across asset classes and has already taken its toll on growth stocks in 2022. While the S&P 500 has shed 7.6% and high-yield bonds 2.8% year-to- date, leveraged loans are more or less flat, at +0.21% (although negative in real terms). 3 This reflects the much lower interest rate sensitivity of floating rate loans, which
applies to most private debt portfolios as well.
“Proskauer Releases Q4 Private Credit Default Index, Reports an Overall Default Rate of 1.04%,” Proskauer, January 27, 2022.
Food as medicine gaining investor attention: While the meal-kits sector is struggling aka Blue Apron, Plated et al, a new platform Season Health, that works with dietitians to develop meal plans and coordinates food delivery to patients with diabetes and chronic kidney disease working with notable health systems like Geisinger, Common Spirit Health, and kidney-focused telehealth provider Cricket Health.
Season is not the only player using nutrition to coax better health outcomes. Virta Health, launched in 2014, also prescribes food plans to patients to reverse diabetes. Faeth Therapeutics, which recently closed a $20 million funding round, is using precision nutrition to starve tumors, with the goal of stopping cancer metastasis.
Prices for groceries spiked during 2021 amid supply chain disruptions; the consumer price index for food consumed at home was up 6.5% annually in December.
“A veteran of the meal-kit wars is back to fight a $327 billion health problem” Fast Company February 15, 2022 www.fastcompany.com/90720832/seasons-meals-diabetes
Survey: public supports greater FDA transparency: Researchers surveyed a cross-section of 4002 US adults from June 14 to July 2, 2021, in English and Spanish. Findings:
· 86.2% of participants supported the disclosure of the reasons medications are not approved
· 66.7% supported the release of basic information about medications in development
· 77.6% supported the disclosure of the reasons clinical studies are placed on hold
· 77.2% supported the disclosure of the reasons studies are permitted to resume.
· There was strong support for the FDA disclosing basic information on pending applications for generic drugs (71.6%), explaining the reasons medications receive expedited review (80.5%), and sharing whether safety programs are working (83.2%).
· When asked whether the FDA should list medications that drug manufacturers have stopped developing, 67.6% of participants said yes, with 65.9% supporting the release of relevant FDA analyses. In addition, 90.7% of participants supported the FDA correcting the misleading information spread by drug manufacturers.
Azad “Assessment of Public Opinion on Transparency at the US Food and Drug Administration “JAMA Netw Open February 18, 2022;5(2):e220026. doi:10.1001/jamanetworkopen.2022.0026
NIH Report: Oral health is in dire need of attention: In 2019, dental expenditures in the U.S. totaled $143.2 billion in 2020 representing 3.7% of total health care spending in the nation down from 4.5% in 2000. More than 40% of all dental care spending during this period was out of pocket and dental costs have increased 30% over the past 20 years. The 2016 Global Burden of Disease Study reported that among the 328 health-related conditions assessed, 4 among the top 30 prevalent diseases are related to oral health: untreated dental caries in adult teeth (#1), severe periodontitis (#11), untreated dental caries in baby teeth (#17), and severe or complete tooth loss (#29) (GBD 2016 Disease and Injury Incidence and Prevalence Collaborators 2017).
Oral Health in America – January 2022 Bulletin NIH www.nidcr.nih.gov/oralhealthinamerica
Study: masking results in lower Covid incidence: In this observational study of matched cohorts from 394 US counties between March 21 and October 20, 2020, we estimated the association between county-level public masking mandates and daily COVID-19 case incidence. On average, the daily case incidence per 100,000 people in masked counties compared with unmasked counties declined by 23% at four weeks, 33%at six weeks, and 16% across six weeks post intervention.
Huang et al “The Effectiveness Of Government Masking Mandates On COVID-19 County-Level Case Incidence Across The United States, 2020”Health Affairs February 16, 2022 https://doi.org/10.1377/hlthaff.2021.01072
Regulators: Lifespan-Care New England deal off: Federal and state regulators will sue to block Lifespan and Care New England Health System’s proposed merger, which officials said Thursday would increase prices, reduce quality and stifle wages.
The two largest providers in the Rhode Island would control at least 70% of the inpatient general acute care and inpatient behavioral health markets, the Rhode Island Attorney General’s Office and Federal Trade Commission said. The two regulators will file a complaint in federal court seeking a temporary restraining order and preliminary injunction to stop the deal, which the Providence-based not-for-profit systems initially proposed in September 2020.
“Neronha denies proposed merger of Lifespan, Care New England” MSN February 17, 2022 www.msn.com/en-us/money/companies/neronha-to-announce-decision-on-proposed-lifespan-care-new-england-merger
Workforce mental health bill passed: Last Thursday, Congress passed the Dr. Lorna Breen Health Care Provider Protection Act which authorizes HHS to award grants for training health profession students, residents and healthcare professionals to reduce and prevent suicide, burnout, mental health conditions and substance use disorders. The Dr. Lorna Breen Health Care Provider Protection Act is named for Lorna Breen, MD, who was chair of the emergency department at New York-Presbyterian Allen Hospital in New York City. Dr. Breen died by suicide April 26, 2020, toward the beginning of the pandemic.
“H.R. 1667: Dr. Lorna Breen Health Care Provider Protection Act” Gov Trak February 19, 2022 www.govtrack.us/congress/bills
Study: 340B program flawed: Researchers analyzed differences in Medicare Part B drug spending between 340B hospitals and non-340B hospitals. The results show that the differences in patient population and hospital-level characteristics may explain drug spending differences between 340B and non-340B hospitals, which raises doubt about the financial incentive theory of the 340B program drug discount and the justification for the Centers for Medicare & Medicaid Services’ 340B payment policy.
Yufei“Association of Beneficiary-Level Risk Factors and Hospital-Level Characteristics With Medicare Part B Drug Spending Differences Between 340B and Non-340B Hospitals”JAMA Netw Open February 18, 2022;5(2):e220045. doi:10.1001/jamanetworkopen.2022.0045