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The Keckley Report

It’s Time for Hospitals to Implement Plan B

By July 11, 2022March 1st, 2023No Comments

This weekend, hospital leaders will gather in San Diego for the American Hospital Association’s Annual Leadership Summit. The 3-day meeting features sessions about hospital governance, leadership, Covid, health equity, systemness, physician and payer relationships et al plus mingling with the Summit’s 75 sponsors.

“Transformation” will be a frequent theme: most hospitals recognize their future is not a repeat of their past. Labor and drug costs are soaring and operating margins are shrinking. Insurers are commanding deeper discounts and hiring doctors. Hospital report cards with disparaging findings proliferate. Private equity is cherry-picking low hanging fruit with $1 trillion of dry powder. Employers are cutting employee health benefits or organizing against health costs. Congress and state legislatures are paralyzed by partisan brinksmanship preventing long-term solutions. Physicians and hospital staff are burnt out. And the public’s trust in the health system is eroding. That’s where we are.  

In her 1983 book Sudden Death, Rita Mae Brown wroteThe definition of insanity is doing the same things over and over and expecting different results’. That exactly how many hospitals are addressing these storm clouds. Plan A is the formula that’s worked in the past—cut operating costs, add ancillary services, raise prices and keep them hidden, merge, outsource, blame insurers, blame the government, blame private equity and play the victim card.  Historically, hospitals implemented Plan A balancing their obligations to their lenders, investors, trustees, medical staffs and communities. But Plan A is a short-term solution; Plan B is a decidedly different future state for hospitals.  Some will successfully pursue it; others will elect to watch and wait.

Plan B design features reflect three major changes:

·        The integration of public health with health delivery….regional systems of health.

·        The integration of financing and delivery of care….competing on prices and value.

·        The integration of self-care in care management…. accountability for consumer behaviors.

These presume a shift of care from facilities to homes and self-care devices. These presume an orientation shift from patients to consumers. These presume interoperability and data-driven decision-making by individuals in collaboration with their coaches. These presume a bigger role of the federal government regulation and heightened transparency.

To pursue Plan B, boards and C suites in hospitals need answers to three questions:

What is the long-term demand and opportunity for health and social services in the region? Is the forecast inclusive of all factors necessary to define long-term strategies? Is the status quo (Plan A) sustainable?

Should our hospital transition to system of health or focus on executing Plan A more aggressively? Do market conditions warrant change? Are partners needed? Are competencies in the C suite adequate? Are capital resources accessible? Is the culture change-averse or welcoming?

How should our capital and human resources investments be modified to execute Plan B? Can the hospital fund Plan A and B simultaneously? If not, which Plan A investments are misaligned with Plan B opportunities?

For academic medical centers, safety net, rural, veterans, children’s and specialty hospitals, these questions are equally relevant: they’re not confined to community hospitals and health systems.

My take:

Most hospitals are ill-prepared to consider Plan B. Planning processes, lack of data and Board education are major hurdles. Plan A is a death spiral long-term: a facility maximization strategy chasing marginal opportunities. It’s time to stop the insanity and seriously pursue Plan B.


P.S. Today is World Population Day. Per the United Nations, the global population reached 7 billion in 2011 and will hit the 8 billion mark on or about November 15, 2022. The annual global growth rate is 1.05%–down from the 2.0% high in 1970, and global birth rate is 2.47, down from 5.02 in 1965. Between now and 2050, the world’s annual growth rate will drop to .53%, the median age will increase from 31 to 36 and the urban population will increase from 56% to 69% worldwide.

The U.S. accounts for 4% (335 million) of the world’s population but 40% of the global health economy. Navigating changes in the world’s 235 countries and dependent territories and defining opportunities for hospitals, physicians and collaborators is timely.


·        AHA Leadership Summit – Homepage | AHA Leadership Summit

·        World Population Clock


Study: RPM reduces post-acute utilization: In this cohort study of 9378 patients in the Froedtert health system, participation in a remote monitoring program was associated with lower hospitalization, intensive care use, and length of stay. 2 to 14 days after a positive COVID-19 test.

Crotty et al Hospitalization Outcomes Among Patients With COVID-19 Undergoing Remote Monitoring JAMA Netw Open July 7,2022;5(7): e2221050. doi:10.1001/jamanetworkopen.2022.21050

Study: availability of nurse practitioners associated with hospital readmission rates: Researchers analyzed whether the supply of post-discharge care options in hospitals’ catchment areas in 2019 was associated with readmission rates for Medicare patients after hospitalizations for acute myocardial infarction, heart failure, or pneumonia. Findings:

Readmission rates were negatively associated with per capita supply of primary care physicians and licensed nursing home beds and positively associated with per capita supply of nurse practitioners. “Our results suggest potential modifications to the Hospital Readmissions Reduction Program to account for local health system characteristics when assigning penalties to hospitals.”

Griffith et al Local Supply Of Post discharge Care Options Tied To Hospital Readmission Rates July 8, 2022

Study: Safety net hospital performance in the Hospital Value-based Purchasing Program:  “In this cohort study of 2266 US hospitals, safety-net hospitals had lower performance than non–safety-net hospitals across all measures of patient experience and satisfaction from 2008 through 2019. The VBP program implementation was not associated with improvement in measures of patient experience in safety-net vs non–safety-net hospitals.”

Chiu et al Association of the Medicare Value-Based Purchasing Program With Changes in Patient Care Experience at Safety-net vs Non–Safety-net Hospitals JAMA Health Forum July 8,  2022;3(7):e221956. doi:10.1001/jamahealthforum.2022.1956

Study: social determinants correlate to hospitalization: “In this cross-sectional study of 56,155 older adults enrolled in Medicare Advantage, HRSNs were associated with statistically significantly higher rates of acute care utilization, with the largest association observed for avoidable hospital stays (53.3% increase). Unreliable transportation had the largest association with hospital stays and emergency department visits.”

Canterberry et al Association Between Self-reported Health-Related Social Needs and Acute Care Utilization Among Older Adults Enrolled in Medicare Advantage JAMA Health Forum July 8, 2022;3(7):e221874. doi:10.1001/jamahealthforum.2022.1874

Health Insurance

Study: 18% of claims denied in 2020: Key findings:

·        Of the 213 major medical issuers in states that reported for the 2020 plan year, 230.9 million in-network claims were received, of which 42.3 (18.3%) million were denied.

·        72% of denials were out of network/all other non-specified, 16% were for an excluded service, 10% due to lack of preauthorization or referral, and 2% based on medical necessity. Among 2% of claims identified as medical necessity denials, 1 in 5 were for behavioral health services.

Claims Denials and Appeals in ACA Marketplace Plans in 2020 KFF July 5, 2022

Study: uninsured rate for children declined during pandemic: Per the Urban Institute analysis:

·        The uninsurance rate among children ages 0-17 decreased from 5.1% in 2019 to 4.1 % in 2021 representing 700,000 children.

·        Administrative data show that 4 million more children were enrolled in Medicaid/CHIP in March 2021 than in March 2019.

·        Between early 2019 and early 2021, there was a 4.9 percent increase in coverage from public plans and a nearly equal corresponding decline in private coverage.

Urban Institute June 29, 2022

Regulation, Politics

Biden issues Executive Order to protect abortions: Friday, President Biden signed an executive order directing HHS to expand access to abortion pills, beef up enforcement of Obamacare’s birth control coverage mandate and stand up an army of pro bono lawyers to help defend people criminally charged for seeking or providing the procedure.

The order also instructs the administration to “consider” several additional actions to shore up privacy rights for patients using digital apps and strengthening of protections for doctors performing abortions in medical emergencies.

Tracking Abortion in the U.S. Is About to Get Murkier: Supreme Court decision overturning Roe v. Wade makes possible a rise in ‘self-managed’ abortions, for which data are harder to collect Wall Street Journal July 8, 2022

FDA authorizes pharmacists to prescribe Pfizer’s Paxlovid: Last Wednesday, the FDA authorized state-licensed pharmacists to fill the two-drug regimen. Limitations include reviewing all prescribed and over-the-counter drugs the patient takes, as well as referring the patient to a physician if they have recent kidney or liver problems. The American Medical Association objected:

“While the majority of COVID-19 positive patients will benefit from Paxlovid, it is not for everyone and prescribing it requires knowledge of a patient’s medical history, as well as clinical monitoring for side effects and follow-up care to determine whether a patient is improving — requirements far beyond a pharmacist’s scope and training,” AMA President Jack Resneck Jr., MD, said in a July 6 statement. 

US Food and Drug Administration

Senate report targets off-shore earnings by drug manufacturers: Per the Senate Democratic Staff Finance Committee report, Illinois-based AbbVie Inc. makes the bulk of its profits from arthritis drug Humira on sales in the U.S., but the company reports the majority of its taxable income in foreign subsidiaries.

From 2019 through the 2021 tax return that isn’t final yet, the AbbVie parent company recorded $28.8 billion in taxable income, according to the report. Per the Democratic staff report, more than 75% of Illinois-based AbbVie’s sales were made in the United States, while just 1% of its income was reported in its home country for tax purposes. This structure enables AbbVie’s Humira profits are taxed at the 10.5% minimum tax on foreign earnings rather the 21% domestic tax rate or at the proposed 15% global tax rate being considered in Congress.

Senate Finance Report Says AbbVie Shifted Profit Overseas to Cut Taxes US News & World Report July 7, 2022

CMS to enforce staffing levels in nursing homes: The Centers for Medicare and Medicaid Services’ announcement last week that it plans to start using payroll data to ensure nursing homes comply with staffing requirements set in 2016.

Beginning Oct. 24, surveyors will use the Payroll Based Journal staffing data for inspections to ensure staffing requirements are met, such as having a registered nurse on site for eight hours per day or having licensed nurses on staff 24 hours a day.

Note: 155,000 nursing home residents died from the Covid virus.


Ballotpedia: Republicans control more state legislative bodies than Dems: At the end of June 2022, 54.27% of all state legislators in the United States are Republicans while 44.41% are Democrats. Republicans control 62 chambers, while Democrats hold 36. The Alaska House of Representatives is the only chamber organized under a multi-partisan, power-sharing coalition. There are 7,383 state legislative seats in the country.


Prescription Drugs

Study: catastrophic costs for insulin impact one in 7 users: Researchers analyzed out-of-pocket spending on insulin and risk factors that could contribute to the likelihood of a person experiencing catastrophic spending (spending more than 40% of their post-subsistence family income on insulin alone). Findings:

 “Among Americans who use insulin, 14.1% reached catastrophic spending over the course of one year, representing almost 1.2 million people. Nearly two-thirds of patients who experienced catastrophic spending on insulin were Medicare beneficiaries. Catastrophic spending was 61% less likely among Medicaid beneficiaries than among Medicare beneficiaries, suggesting that factors other than income, such as different types of insurance coverage, may influence catastrophic insulin spending. “

Bakkila et al Catastrophic Spending On Insulin In The United States, 2017–18  Health Affairs July 2022 No Access

Population Health, Social Determinants

Study: proximity to grocery store associated with lower weight in children: In this cohort study of the association between the Food Retail Expansion to Support Health (FRESH) program and the weight status of children, decreases in both body mass index and the likelihood of obesity were significant among students who resided within 0.50 miles of a subsidized supermarket compared with students who resided further away but still in eligible areas.

Background: In 2015-2016, obesity prevalence in the United States was 18.5% among youth aged 2 to 19 years, with a higher prevalence among youth living in neighborhoods with higher (vs lower) socioeconomic disadvantage.

Rummo et al Association Between a Policy to Subsidize Supermarkets in Underserved Areas and Childhood Obesity Risk JAMA Pediatrics May 9, 2022;176(7):646-653. doi:10.1001/jamapediatrics.2022.1153

Census: median age up since 2000: Since 2000, the national median age has increased 3.4 years– the largest single-year gain of 0.3 years coming in 2021 to 38.8 years. Median age for most states also increased from 2020 to 2021: Utah remained the youngest state (31.8), the District of Columbia had the second-lowest median age but saw the largest increase of 0.5 years from 34.4 to 34.9.

US Census Bureau

Public Opinion

APA: inflation top concern to consumers: Per the American Psychiatric Association (APA)’s Healthy Minds Monthly Poll conducted by Morning Consult June 18-20, 2022, among a sample of 2,210 adults:

·        87% are anxious or very anxious about inflation, up 8% from May Americans are also more worried about a potential loss of income (51%) than gun violence (35%) or a natural disaster (29%) personally happening to them.

·        Hispanic adults (66%), mothers (65%), Millennials (63%) and GenZers (62%) were among the groups most likely to be concerned about a loss of income. Anxiety around future reproductive rights was at about 50%, but this poll was conducted before the Dodd ruling. Nearly half of GenZers (46%) were concerned about gun violence happening to them. Anxiety about COVID-19 continued to drop, down 2% among all Americans since May (47%-49%), and down 16% among Black Americans during the same period (63-47%).

Americans Anxious Over Inflation; Almost Twice More Likely to Lean on Family and Friends Than Speak Openly About Feelings After a Traumatic Event American Psychiatric Association July 7, 2022

Pew: Post-Covid student health not getting needed attention: Per Pew Research Center survey of 10,282 U.S. adults conducted from May 2 to 8, 2022:

·        62% of Americans say the country has given too little priority to meeting the educational needs of K-12 students during its response to the coronavirus outbreak; far fewer (31%) say this has received about the right amount of priority since the outbreak first began in February of 2020 (just 6% say it’s received too much priority).

·        A narrow majority (55%) says vaccination has been effective.

·        About half say wearing masks around people indoors (48%) and limiting interactions (47%) have been effective.

·        A majority (59%) of adults ages 18 to 29 say they have tested positive, compared to 26% of adults ages 65 and older.

Americans Reflect on Nation’s COVID-19 Response Pew Research July 7, 2022

Gallup: trust in institutions at historic low: Gallup first measured confidence in institutions in 1973 and has done so annually since 1993. This year’s survey focused on trust in 16 US institutions was conducted June 1-20. Findings:

·        In the last year, there were significant declines for 11 of the 16 institutions tested and no improvements for any: the biggest drops: 11%for the Supreme Court and 15% for the presidency.

·        Confidence range: High 68% for small business to 7% for Congress. The military is the only institution besides small business for which a majority of Americans express confidence (64%). Confidence in the police, at 45%, has fallen below the majority level for only the second time, with the other instance occurring in 2020 in the weeks after the death of George Floyd at the hands of Minneapolis police.”

·        The poll marks new lows in confidence for all three branches of the federal government — the Supreme Court (25%), the presidency (23%) and Congress. Five other institutions are at their lowest points in at least three decades of measurement, including the church or organized religion (31%), newspapers (16%), the criminal justice system (14%), big business (14%) and the police. Confidence in large technology companies is also at a low point (26%) but has only been measured the past three years.

·        Confidence in the medical system down 6% from 44 to 38 “great deal/quite a lot”; still #4 overall behind small business 68, the military 64% and police 45%.

“Confidence in U.S. Institutions Down; Average at New Low” Gallup June 5, 2022

Study: consumers anticipate healthier habits in 2022: Per Actium’s online survey of 1230 US adults conducted in February:

·        50% reported feeling less healthy than in 2019 and 83% said they are likely/extremely likely to take steps to improve their health this year.

·        92% believe preventive healthcare, such as screenings, is important to their overall health and wellness and 24% of those who followed recommendations for preventive screenings were diagnosed with something following the appointment.

·        61% report that they would like to hear more from their doctor in 2022 but 44% said they don’t see their doctor enough and 38% said their doctor doesn’t listen to their concerns..

Tracking American Sentiment: Managing Healthcare is Hard Actium June 2022



Study: income and life expectancy changes during pandemic: Researchers analyzed the relationship between income and life expectancy intensified during the pandemic in California. Findings:

The gap in life expectancy between the richest and poorest percentiles increased from 11.52 years in 2019 to 14.67 years in 2020 and 15.51 years in 2021. Among Hispanic and non-Hispanic Asian, Black, and White populations, life expectancy declined 5.74 years among the Hispanic population, 3.04 years among the non-Hispanic Asian population, 3.84 years among the non-Hispanic Black population, and 1.90 years among the non-Hispanic White population between 2019 and 2021.

Schwandt et al Changes in the Relationship Between Income and Life Expectancy Before and During the COVID-19 Pandemic, California, 2015-2021 JAMA. Published online July 7, 2022. doi:10.1001/jama.2022.10952

CDC: BA 5 variant accounts for more than half of Covid cases: This week, the CDC reported that BA.5 became the dominant variant in the U.S., accounting for nearly 54% of total COVID cases. Studies show extra mutations in the spike protein make the strain three or four times more resistant to antibodies, though it doesn’t appear to cause more serious illness. CDC also reported that hospital admissions are starting to trend upward again though still well below what was seen during the initial spread of Omicron.

Centers for Disease Control and Prevention

Schools addressing student mental health in summer programs: At least 28 of the largest U.S. school districts are using a the $122 pandemic relief funds to expand summer school programs targeted to student mental health:

87% of public schools reported that the Covid-19 pandemic hindered students’ socio-emotional development during the 2021-22 school year, according to data released Wednesday by the National Center for Education Statistics. 83%ercent reported that students’ behavioral development was stunted.

Schools Are Tackling Mental Health This Summer Wall Street Journal July 7,

Economic Indicators

·        Consumer credit: In May, consumer credit increased at a seasonally adjusted annual rate of 5.9%. Revolving credit increased at an annual rate of 8.1%, while nonrevolving credit increased at an annual rate of 5.2%. (Federal Reserve)

·        Housing: The housing-affordability index fell to 102.5 in May– the lowest level since the index fell to 100.5 in July 2006. The typical monthly mortgage payment rose to $1,842 in May, NAR said, up from $1,297 in January and $1,220 in May 2021, assuming a 30-year fixed-rate mortgage and a 20% down payment. (National Association of Realtors)

·        Employment: The U.S. economy added 372,000 jobs in June: Healthcare employers added 57,000 jobs but 176,000 fewer on payrolls than in February 2020, or 1.1%. That shortfall remains particularly acute in nursing care facilities, where the job count is down 14.4% from its prepandemic level, though it has been growing since January. U.S.-based employers announced 32,517 cuts in June, a 58.8% increase from the 20,476 cuts announced in the same month last year and 57% higher than the 20,712 (Bureau of Labor, Challenger, Gray & Christmas)

·       Recession: probability of a recession in the next 12 months at 38%, up from zero just months ago (Bloomberg Economics).

·        IPOs: Only 21 companies completed U.S. IPOs in Q2, raising a total of $2.1b, per Renaissance Capital– the weakest second quarter since the Great Recession year of 2009 (slower than during the pandemic panic of 2020).

Moody’s: job migration significant, red states gaining: Since February 2020, the month before the pandemic began, the share of all U.S. jobs located in red states has grown by more than half a percentage point: red states have added 341,000 jobs over that time while blue states lost 1.3 million jobs as of May. Related findings:

·        46 million people relocated to a different ZIP Code in the year through February 2022, the most in any 12-month period in records going back to 2010. States that gained the most, led by Florida, Texas and North Carolina and the states that lost the most residents are almost all blue, led by California, New York and Illinois.

·        Small and medium-size cities, suburbs and rural areas—all of which tended to have less expensive housing than large urban areas—all gained residents.

·        In the 10 states that gained the most people from moves between April 2020 and June 2021, the typical home cost 23% less than the typical home in the 10 that lost the most residents to moves.

·        The states that gained the most migrants levied an average maximum income-tax rate of 3.8% on individuals. Four—Florida, Texas, Tennessee and Nevada—charged no income tax at all. The 10 states that lost the most residents to moves have an average tax rate of 8.0%.

Red States Are Winning the Post-Pandemic Economy Wall Street Journal July 5, 2022


CMS Proposes Physician Pay Cuts, ACO Changes: Last Thursday, CMS released its 2023 Physician Fee Schedule proposed rule recommending lower payments (4.42%) for physicians under fee-for-service Medicare plans, as well as expansions related to behavioral health, cancer screenings, dental care, and patient access to accountable care organizations (ACOs).

·        Re: behavioral health, CMS proposes to allow a range of mental health practitioners, including licensed professional counselors, marriage and family therapists, and others to provide behavioral health services under general, instead of direct, supervision.

·        Re: The proposed physician fee schedule conversion factor for 2023 is $33.08, down from $34.61 in 2022. The proposal considers a statutory requirement that the conversion factor for 2023 remain flat as well, due to the expiration of the 3% increase in physician fee schedule reimbursement payments in 2022 that was required in the Protecting Medicare and American Farmers from Sequester Cuts Act.

CMS also proposed changes to the Medicare Shared Savings Program (aka accountable care organizations) intended to help smaller ACOs and those that disproportionately serve rural and underserved communities to manage their downside risk obligations more effectively.

·        Re: expansion of ACO participation: CMS proposes to incorporate advance shared savings payments to certain new Medicare shared savings program ACOs. For smaller ACOs and those new to MSSP, a one-time payment of $250,000 and quarterly payments for the first two years of a five-year period if offered. The advance payments would be recouped once an ACO starts to generate shared savings in their current and next agreement periods. However, if an ACO does not generate savings then CMS will not move to recoup the money, but the ACO must stay in the program for the full five years.

·        Re: benchmarking methodology: The agency also proposes to adjust the ACO benchmarking methodology since the annual reset is based on past performance making it harder for ACOs to increase savings. CMS is proposing incorporating a prospective, external factor into ACO benchmarks, along with a prior savings adjustment. CMS would also reduce the cap on negative regional adjustments of national per capita spending for Medicare Part A and Part B services for assignable beneficiaries from -5% to -1.5%.

The rule also proposes to pay for dental services, such as dental examination and treatment, preceding an organ transplant, cancer treatment or joint replacement surgeries.

The 60-day comment period closes on Sept. 6.

Calendar Year (CY) 2023 Medicare Physician Fee Schedule Proposed Rule CMS July 7, 2023

Medicare Shared Savings Program

CHG Healthcare physician survey: job changes significant, lifestyle factors important: CHG surveyed 534 physicians about their career changes from the start of the Covid-19 pandemic through April 2022. Among the respondents, 40% were in the early stage of their careers, 26% were mid-career, and 34% were in their late careers. Highlights:

·        43% of physicians changed jobs during the pandemic, 8% retired, and 3% left medicine for non-clinical careers. Overall, the primary motivation was a desire for better work-life balance.

·        For physicians who changed careers, 42% said the pandemic was either very influential or extremely influential in their decision to change careers vs. 36% who said the pandemic was not at all or only slightly influential. Among physicians who retired, 31% said the pandemic was very influential or extremely influential in their decision to retire.

·        When changing jobs, 39% of physicians accepted positions in a different practice setting, 31% worked locum tenens assignments, 25% accepted positions in practice settings that were similar to their current one, and 10% transitioned to a telehealth position.

·        Among the physicians who did not make a career change during the past two years, 73% said they are extremely or somewhat likely to remain in their current position through the end of 2022. However, that commitment declined to 59% through the end of 2023 and 46% beyond 2023.

·        Still, while most physicians indicated they may be searching for new positions in the coming years, fewer expressed a desire to leave medicine altogether—with 13% of physicians saying they plan on leaving the industry by 2023.

Survey: Nearly half of physicians changed jobs during the pandemic Change Healthcare June 27, 2022

Walmart Survey: rural disparities in provider access significant: Medscape surveyed 10,045 U.S. health care professionals from December 29, 2021 to March 9, 2022 on behalf of WalMart. Key findings:

 • 25% of rural health care professionals think their patients have reasonable access to mental or behavioral healthcare, compared to 43% of non-rural professionals.
 • 33% of rural health care professionals think their patients have reasonable access to specialty care compared to 66% of non-rural professional.
 • <40% of rural health care professionals rate the quality of specialty, urgent and chronic care as high, compared to >50% non-rural professionals.

Health Care Professionals’ Perspectives on Healthcare in Rural America Walmart, June 2022

Study: PT preferred vs. surgery for meniscal tear: Researchers analyzed whether exercise-based physical therapy noninferior to arthroscopic partial meniscectomy during a 5-year follow-up period in patients aged 45 to 70 years with a degenerative meniscal tear. Finding:

“In this noninferiority randomized clinical trial, no significant or clinically relevant between-group difference in patient-reported knee function was noted…at the 5-year follow-up. Physical therapy was not inferior to arthroscopic partial meniscectomy. The findings support the recommendation that exercise-based physical therapy should be the preferred treatment over surgery for degenerative meniscal tears.”

Noorduryn ey al Effect of Physical Therapy vs Arthroscopic Partial Meniscectomy in People With Degenerative Meniscal Tears Five-Year Follow-up of the ESCAPE Randomized Clinical Trial JAMA Network Open. July 8,2022 2022;5(7):e2220394. doi:10.1001/jamanetworkopen.2022.20394