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The Keckley Report

The U.S. Economy at the 2022 Mid-point: Three Immediate Implications for HealtHcare

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

The labor market is tight. Inflation is at a 40-year high. Consumers are worried but still spending. And this week, 5 key indicators of the economy’s strength/vulnerability will be reported:

·        Tuesday, the S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas, will show how home prices fared in May as mortgage rates were increasing. Also Tuesday, the Conference Board’s Index of Consumer Confidence, which measures American attitudes toward jobs and the economy, will be released with expectations of a decline.

·        Wednesday, the Federal Reserve will meet to raise the central bank’s benchmark interest rate by 0.75 % in an effort to tame inflation running at a four-decade high.

·        Thursday, the Commerce Department will report the 2Q 2022 GDP: the headline GDP figure, which is adjusted for inflation, will likely reflect surging prices and slower inventory growth prompting many to declare the economy in recession before official verification by the National Bureau of Economic Research.

·        Friday, the Labor Department will report its employment cost index which includes key data about household spending.

Collectively, these indicators are likely to show an economy in stress. The President’s health, Uvalde, Ukraine, the January 6 investigation and heat wave will take a back seat to inflation and prices in social media and national news coverage for weeks to come. So, what’s that mean for healthcare?

1.       The business of healthcare will get more attention. The corporatization of healthcare in every sector has been a result of opportunism and regulatory protection. Four of the 10 biggest US companies are in healthcare; 3 or fewer competitors control at least 60% of revenues in at least 8 of the industries key sectors. Since 2017, with passage of the Tax Cuts and Jobs Act, private equity and venture capital has been readily accessible, debt has been affordable and accessible. Investing in healthcare was safe until this year when the IPO market has soured and untested/non-scalable business models faltered. In the first 6 months of this year, bigger private equity funds and disruptors like Amazon, CVS and Optum have gained advantage at the expense of the weaker players. And, as a result of supply chain and workforce cost spirals, tensions between hospitals and insurers will intensify to levels not seen in recent history: both seek unprecedented concessions from the other and more money from the government. Media coverage about the business of healthcare is likely to be tepid and its reluctance toward price transparency indicting. What’s certain is the business of medicine will get more attention.

2.       The value agenda in healthcare will be temporarily delayed. For most hospitals, medical groups, and insurers, the concept of transitioning incentives from volume to value is widely accepted as a useful structural change. For many employers, it’s plausible if savings result. And for regulators in CMS, CMMI and HHS, it’s necessary though efforts to date have produced improvements in care without significant cost savings. The pandemic forced a temporary suspension of the value agenda; the near-term economic environment will heighten anxiety and prompt re-thinking of each organization’s value strategy.

3.       Consumer healthcare spending and affordability will take center stage. With 4 in 10 households unable to handle a $500 emergency medical bill, and anxiety about financial security mounting, justification for prices will be a universal challenge for insurers, drug companies, hospitals, medical practices and ancillary providers. As the Fed raises rates, interest on medical debt will increase and along with it, unpaid medical bills. It’s a vicious cycle where underserved and middle-income households are directly harmed. In a rare bipartisan consensus, Congress is firmly behind across the board transparency and proactive attention to affordability. It’s no longer optional.

My take:

I am an optimist about the future of the U.S. health system: its foundational to our society and every community. But I am a realist: its future is not a repeat of its past. Economic reality is a catalyst for re-visioning that future. Some Boards and C suites are ready; many aren’t.


PS: Every week, I try to compile studies/reports on trends and issues pertinent to the primary theme of my report. Understanding the business of healthcare beyond the perspective of a single sector is the necessary first step toward building a system of health for the future. It’s about money and much more.

PS: The Memphis Commercial Appeal investigation of Tennessee’s workers compensation management paints a seedy picture of how cases are handled to the benefit of employers and harm to employees injured on the job. Worthwhile reading: Daniel Connelly “7 takeaways from our investigation of Tennessee’s workers’ compensation system” July 16, 2022

The Business of Healthcare

The business of healthcare: 4 of the 10 largest corporations in the U.S. are healthcare businesses, according to the 2022 Fortune 500 list based on 2021 revenues: CVS Health, UnitedHealth Group, McKesson, and AmerisourceBergen.

The revenue threshold for this year’s list was $6.4 billion, up 19% from the previous year. Companies ranked on this year’s list make up two-thirds of the total U.S. gross domestic product (GDP), at approximately $16.1 trillion in revenues. Included in the Fortune 500 are these healthcare companies:

Insurance and Managed Care:

  • UnitedHealth Group (#5): $287,597 million

  • Elevance Health (#20): $138,639 million

  • Centene (#26): $125,982 million

  • Humana (#40): $83,064 million

  • Molina Healthcare (#125): $27,771 million

Medical Facilities

  • HCA Healthcare (#62): $58,752 million

  • Tenet Healthcare (#181): $19,485 million

  • Universal Health Services (#297): $12,642.1 million

  • Community Health Systems (#304): $12,368 million

  • DaVita (#323): $11,618.8 million

Pharmacy and Other Services

  • CVS Health (#4): $292,111 million

  • Cigna (#12): $174,078 million

  • Laboratory Corp. of America (#230): $16,120.9 million

  • IQVIA Holdings (#269): $13,874 million

  • Quest Diagnostics (#342): $10,788 million

Pharmaceutical Companies

  • Johnson & Johnson (#37): $93,775 million

  • Pfizer (#43): $81, 288 million

  • AbbVie (#63): $56,197 million

  • Merck (#71): $51,216 million

  • Bristol-Meyers Squibb (#82): $46,385 million

Healthcare Wholesalers

  • McKesson (#9): $238,228 million

  • AmerisourceBergen (#10): $213,988.8 million

  • Cardinal Health (#15): $162,467 million

  • Henry Schein (#299): $12,401 million

  • Owens & Minor (#361): $9,785.3 million

Executive Comp: Bio CEOs enjoy huge paydays in 2021 in 2021, CEO’s of biotech companies occupied 3 of the top 10 and 11 of the top 25 slots led by Regeneron CEO Len Schliefer, who took home an $453 million. In the top 10, Oak Street CEO Mike Pykosz was #3 at $ 92 million and #4 Cigna CEO David Cordani at $91 million.” Some of the main findings from Stat’s analysis of 300 publicly traded healthcare companies:

·        CEOs made an average of $15.3 million last year, while the median was around $7 million.

·        More than 80% of the overall group’s compensation came from the actual realized gains of stock awards and options.

·        Median CEO pay among 11 providers and insurance companies was $30 million, the highest of any sector.

·        Medical device executives generally made less in 2021 than in 2020: 22 CEOs from this cohort took home at least $10 million last year.

Related: Stat also analyzed median employee pay in 217 of the 300 companies included in its Exec Comp analysis. Findings:

·        The median employee at half of the 217 companies took home at least $100,000 annually — well above the U.S. median household income, which has hovered around $67,000 the past few years and declined at the outset of the pandemic. Roughly 70% of the companies paid a median employee at least that median household income.

·        A quarter of health care companies — all of which were biotechs or offered life sciences tools — paid their median worker at least $200,000. The average worker at 39 of those companies took home $250,000.

·        Last year’s median annual pay for employees at the country’s largest acute-care hospital chains were all close to each other, as hospitals faced strikes and worker burnout during the second year of the pandemic. Many hospitals also increasingly relied on nurse staffing agencies.

·        Community Health Systems’ median worker made $61,000, HCA Healthcare’s was $56,000, and Tenet Healthcare’s was a little more than $55,000. Median pay at Universal Health Services, the country’s largest psychiatric hospital chain with a history of problems, was noticeably lower at roughly $45,000. The Brookdale Senior Living median was $24,000.

Biotech executives pull in some of health care’s biggest paydays, with Regeneron’s CEO sitting atop the pack Stat July 18, 2022

Merritt Hawkins: physician recruiting, compensation back to pre-pandemic levels: Per MH’ 2022 analysis:

·        Orthopedic surgeons are offered the highest starting salary of physicians tracked in the 2022 Review, at $565,000.  

·        Pediatricians are offered the lowest starting salary of physicians tracked in the 2022 Review, at $232,000.  

·        The average signing bonus for physicians was $31,000, up from $29,656 last year and the average signing bonus for NPs and PAs was $9,000, up from $7,233 last year.

·        11% of physician bonuses were based on quality.

2022 Review of Physician and Advanced Practitioner Recruiting Incentives Merritt Hawkins

Investing, Private Equity

Pitchbook: PE deals fewer but opportunities remain strong: “US private equity (PE) deal activity remains weak in the face of a complex macroeconomic and geopolitical backdrop. Rising interest rates and falling public market indexes are having a direct impact on the pricing environment: In many cases, with the cost of debt rising, the proportion of equity has also risen. Multiples are coming down, and, until a more stable environment has been established, deal activity will likely remain tepid. One area of opportunity for deals is in take-privates. Public marks have fallen much more quickly than privates, and many sponsors are seeing attractive deployment prospects with so many public companies off 50% or more from their 52-week highs. A fragile funding situation in the venture capital (VC) market may also lead to more opportunities, as firms are either unable or unwilling to raise capital in down rounds and instead turn to PE funds for capital. Overall, deal activity will likely pick up as GPs feel pressure to deploy capital, but this eventuality may be several quarters out… This surfeit of demand far exceeds the funding capacity for traditional institutional allocators, thus creating a backdrop that favors the largest PE firms with the deepest connections and most strategies. Nascent and middle-market managers will find it more difficult to source capital in this environment. However, a land grab is underway in retail, which is a huge opportunity for the firms that can triumph in this space. Additionally, there is healthy PE demand from non-US-based institutions, many family offices, insurance companies, and more. Moreover, we expect an uptick in managers using warehousing facilities, offering co-investments, and selling stakes to gain an edge in this competitive environment.

·        Through the first half of 2022, US PE firms completed approximately 4,337 deals, with a cumulative value of just over $529.2 vs.9171 deals worth $1.232 trillion in 2021.

·        US public equity indexes are in bear market territory, with the S&P 500 off 20.6% through the first six months of 2022, while the more tech- and growthheavy Nasdaq has plunged 29.5%.

·        The University of Michigan Consumer Sentiment Index recently hit near global financial crisis (GFC) lows—even lower than at any time during the pandemic-induced recession. Similarly, business sentiment is turning more bearish. According to the Conference Board, a survey of CEOs and c-suite executives, conducted in May, indicates that more than 60% of respondents anticipate a recession in their region in the coming 12 to 18 months.2

·        SPAC issuance peaked in the first quarter of last year, with 317 blank check companies going public and raising $112 billion globally, per Pitchbook. Merger activity hit its high in the third quarter, with 90 deals with a total value of about $103 billion. Since then, we’ve seen an uptick in redemptions, a flurry of merger cancellations, and listing registrations getting withdrawn.

US PE Breakdown Pitchbook July 11, 2022

Study: Health system investing: “Of all companies in which health systems invested between 2011 and 2019, only 2.2% failed. Further, between 2011 and 2017, there was a 6-fold and greater increase in investment deals per year by health systems, and the top 10 health system investors accounted for 55.4%, but these deals are rarely with the physician-innovators who work within those systems. “

Safavi  KC, Cohen  AB, Ting  DY, Chaguturu  S, Rowe  JS.  Health systems as venture capital investors in digital health: 2011-2019.   NPJ Digit Med. 2020;3:103. doi:10.1038/s41746-020-00311-5


Study: Nurse burnout significant, increasing: Per Trusted Health’s third annual report on the mental health and well-being of frontline nurses:

·        When asked to measure their current mental health and well-being using a scale of 1-10, nurses averaged a 5.8 in 2022 vs. 7.8 prior to the COVID-19 crisis– a decline of 26% over the past two years.

·        The majority of nurses surveyed in 2022 reported feelings of burnout (75%), compassion fatigue (66%), depression (64%), declines in their physical health (64%) and extreme feelings of trauma, extreme stress and/or PTSD (50%).

·        59%% said that they were either “very unlikely” or “somewhat unlikely” to share feelings of acute depression, suicidal thoughts or mental health issues with their manager or another individual at their facility due to concerns about confidentiality (72%), job security (69%) and a lack of effort to address the issue (64%).

The State of Mental Health in Nursing in 2022 | Trusted Health July 21, 2022

The health care industry’s lax approach to nurses’ mental health needs to change Stat News July 21, 2022

Prescription drugs

PhRMA Ad Campaign aims to dissauge price controls: The campaign running on various online news sites says: “Today, there are: 90 medicines in development for Alzheimer’s disease, 26 for childhood diabetes, 119 for breast cancer.And the list goes on — but which diseases could go untreated if Congress passes government price setting? There is a better way to lower costs without risking new medicines.”

To Lower Costs without Risking New Medicines PhRMA July 25, 2022


U.S. data security effectiveness concern to Euro trading partners: The May 2022 meetings of the U.S.-E.U. Trade and Technology Council paved the way for a successor agreement to the now-defunct Privacy Shield framework governing trans-Atlantic data transfers. A forthcoming executive order will guide U.S. implementation of the proposed framework. If the framework enters into and remains in force, it will substantially decrease compliance costs for trans-Atlantic businesses and yield especially large cost savings for small and medium-sized enterprises, while imparting greater regularity and legal stability to trans-Atlantic data transfer practices. But multinationals and European consumers remain skeptical about the U.S. ability to protect data.

Europeans’ Mistrust of U.S. Data Handling Bodes Ill for New Trans-Atlantic Data Privacy Framework July 19, 2022


Apple: ‘all your data in one place’: Apple Inc. published a nearly 59-page report Wednesday outlining its health features and partnerships with medical institutions:

“Our work primarily falls into two categories, described in two corresponding sections of this report: personal health and fitness features on Apple Watch and iPhone, and the work we are doing with the medical community to support research and care. With iOS 16 and watchOS 9 available this fall, Apple Watch and iPhone will offer features that focus on 17 areas of health and fitness, available in nearly 200 countries and territories around the world.

The Health app is available on every iPhone, and acts as a central and secure place for users to view all of their health information. Users can now store over 150 different types of health data from Apple Watch, iPhone, and connected third-party apps and devices, in addition to available health records data from connected institutions in the US, UK, and Canada. They can also choose to share certain types of this health data with loved ones”

Empowering people to live a healthier day Apple July 20, 2022

Amazon to acquire One Med: Thursday, Amazon announced plans to acquire primary care company One Medical in a cash deal valued at $3.9 billion.The goal of the $18 per share deal is to offer more convenient and affordable health care both in-person and virtually.One Medical, which went public in January 2020, offers telehealth visits and also provides in-person care in more than a dozen locations across the country. The news comes just a few months after Amazon announced plans to grow its network of brick-and-mortar clinics in 20 U.S. cities, following the expansion of its virtual care services through Amazon Care.

Amazon July 21, 2022

Pew: Half think businesses taking advantage of economic conditions to generate profit: Per Pew Researcher Center’s survey of US adults conducted between June 27 and July 4, 2022, 49% say that “businesses taking advantage of economic conditions to increase their profits” has contributed a lot to rising prices. One-third also say that this has contributed some, while about two in-ten say it has contributed either not much (13%) or nothing at all (5%)

Pew Research Center July 13, 2022

Social determinants

Rental assistance associated with reduced uncontrolled diabetes: Researchers analyzed the impact of rental assistance programs on HbA1c levels for adults 45+ between 1999 and 2016. Findings:

“Participants in project-based housing had lower HbA1c levels compared with individuals in the waitlist group, but the difference was not significant. No significant differences in HbA1c levels were found between those receiving housing vouchers and those in the waitlist group. Receiving project-based housing was associated with a reduced likelihood of uncontrolled diabetes compared with being in the waitlist group.”

Fenelon et al Association Between Rental Assistance Programs and Hemoglobin A1c Levels Among US Adults JAMA Netw Open. 2022;5(7):e2222385. doi:10.1001/jamanetworkopen.2022.22385

Insurance Coverage

Virginia Medicaid expansion associated with reduced enrollee financial concerns: Researchers examined the association of Virginia’s 2019 Medicaid expansion and changes in health care–related and non-health-care-related financial needs among newly eligible Medicaid enrollees via a survey of new enrollees. Findings:

·        Medicaid enrollment was associated with decreases in concern about all financial needs assessed: housing, food, monthly bills, credit card and loan payments, and health care costs. These reductions were broadly similar across demographic subgroups and across the months of the pandemic that overlapped with the follow-up period.

·        Comparing enrollee concerns after twelve months of enrollment compared with the year before enrollment, concerns decreased for housing costs (5.0%), food costs (7.7%), normal healthcare (33.7%) and catostrophic healthcare (23.8%).

Virginia Medicaid Expansion: New Members Report Reduced Financial Concerns During The COVID-19 Pandemic  Health Affairs July 20, 2022 No Access

Variation in spending by insurer and market: Researchers analyzed market specific  variations in health care spending and utilization across the 3 major funders of health care in the US: (Medicare, Medicaid, and private insurers) in 241 of the 306 HRRs between 2016-2017. Findings:

 “These findings suggest that payer-specific factors are correlated with health spending variation among Medicare beneficiaries, Medicaid beneficiaries, and the commercially insured and that payer-specific policies will be necessary to improve efficiency in the US health sector.”

Cooper et al Geographical Variation in Health Spending Across the US Among Privately Insured Individuals and Enrollees in Medicaid and Medicare JAMA July 20, 2022 doi:10.1001/jamanetworkopen.2022.22138

Federal Budgeting

House appropriations health spending proposals for FY23:  In the 12 proposed federal appropriations bills, healthcare is prominent:

$224 billion for the Labor, HHS, and Education including

·        Repeal of Hyde, Weldon amendments.

·        $48 billion for the National Institutes of Health including $216 million for the Cancer Moonshot and $25 million for firearm injury prevention research.

·        $34 billion for the Administration for Children and Families, including $12 billion for Head Start and $4 billion for the Low Income Home Energy Assistance Program

·        $11B For the CDC, including $2.8 billion to improve public health infrastructure

$151 billion for the Military Construction-VA funding:

·        $119 billion for veterans’ medical care including $14B For homeless assistance programs, $3B for homeless assistance programs, $911 million for gender-specific care for women. and $183 million for substance-use disorder programs.

$111 billion for SNAP program (mandatory)

$28.6 billion for child nutrition programs (mandatory)

$6 billion for WIC

$8 billion for Indian Health Service (in Interior Dept $44.8 billion)

House appropriators finish markups on all 12 funding bills Politico July 5, 2022

Academic Medicine

USNWR Med school report card changes, prominent brands get dinged: U.S. News & World Report moved some medical schools to the “unranked” category of its Best Graduate Schools rankings after discrepancies in data were identified. Since 2019…

·        4 misreported medical school data and were delisted from a U.S. News ranking: East Tennessee State University (Johnson City), University of Virginia (Charlottesville), Washington University (St. Louis), Eastern Virginia Medical School (Norfolk),

·        7 misreported data for nursing schools or programs:University of Colorado Anschutz Medical Campus (Aurora), University of Pittsburgh, University of Alabama—Huntsville University of Nebraska Medical Center (Omaha), Alverno College (Milwaukee), Widener University (Chester, Pa.), University of Illinois—Chicago

PK note: ‘misreporting’ is not the same as misinformation. Often, reporting requirements, deadlines, definitions et al result in misreporting. Nonetheless, it’s notable that some of the country’s most respected brands are included in these lists.

U.S. News Rankings Updates usnwr July 7, 2022


Audience interest in major cultural events low: Tuesday night’s Major League Baseball All-Star Game from L.A. averaged 7.51 million viewers on Fox, peaking at 8.24 million — a record low for the Midsummer Classic. It’s the largest audience among Big Four All-Star Games, all of which have seen their audiences shrink over the past two decades: 

·        NHL All-Star Game: Down 57.1% since 2002. 

·        NBA All-Star Game: Down 48.9% since 2002.

·        MLB All-Star Game: Down 48.7% since 2002.

·        NFL Pro Bowl: Down 4.2% since 2002 (but down ~50% from the early 2010s peak).

Thursday January 6 hearings: Nielsen says 17.7 million viewers watched Thursday’s hearing — down from the 20 million who watched the other prime-time hearing, on June 9. An estimated 13.6 million of Thursday’s hearing viewers — 77% — were age 55+; Only 705,000 viewers were 18 to 34.The six daytime hearings averaged 11.2 million viewers, with a peak audience of 13.2 million on June 28, when Cassidy Hutchinson testified.

Axios Sports July 22, 2022