The Supreme Court ended its 2021-2022 term issuing 58 rulings including 2 last week with immediate consequence to the healthcare industry:
· Xiulu Ruan v. United States (20-1410) June 27, 2022: Per SCOTUS: “For the crime of prescribing controlled substances outside the usual course of professional practice in violation of 21 U. S. C. §841, the mens rea “knowingly or intentionally” applies to the statute’s “except as authorized” clause.”
Immediate implication: This case involved two physicians accused of running opioid “pill mills. The court essentially gave prescribers of opioid/painkillers a level of protection against lawsuits based on a ‘good faith’ defense that protects a physician from prosecution under the federal Controlled Substances Act. Xiulu Ruan and Shakeel Kahn had been sentenced to 21 and 25 years in prison, respectively, in lower court ruling. SCOTUS did not throw out their convictions. Instead, it told appeals courts to review the jury instructions from the original criminal cases to see if they comported with the new ruling.
· West Virginia v. EPA (20-1530) June 30, 2022: Per SCOTUS “Congress did not grant the Environmental Protection Agency in Section 111(d) of the Clean Air Act the authority to devise emissions caps based on the generation shifting approach the Agency took in the Clean Power Plan.”
Immediate implication: Federal agencies like HHS, CMS, FDA, FTC and others now have limited power to issue sweeping rules outside the expressed scope of Congressional authorization or specific laws passed by Congress. In essence, this ruling could narrow/limit future regulations from federal agencies deemed too broad, open the door to new court challenges to existing laws/rules/regulations by federal agencies and lend to wide-variation in how healthcare providers and insurers are regulated by states.
These two rulings, in addition to four others in June (see June 27 Keckley Report Four Supreme Court Rulings in 10-days Reset US Healthcare for Decades) effectively reset the regulatory framework for every sector in U.S. healthcare. And SCOTUS’ fall term starting in October promises more: though its 2022-2023 docket is not yet set, SCOTUS has already accepted cases involving voting rights, affirmative action in college admissions, gay rights and others that will have notable impact on our industry.
My take:
Notwithstanding SCOTUS’ unprecedented diversity (4 female justices, 2 African American) and youthfulness (4 Associate Justices in their 50’s), it is the high court’s 6-3 conservative leaning and bent toward originalism, individual rights and federalism that portend the greatest challenges to the U.S. healthcare industry. The larger role played by states, constraints on federal agency rulemaking and lingering complications of the economic downturn and toxic political environment in DC point toward three immediate changes:
States will establish unique regulatory boundaries for abortion, reproductive rights, abortion pills and women’s health and engage providers more intrusively. Already, 8 states have outlawed abortion. Each state is updating its guidance. And state and local health officials and media attention will spotlight stipulations involving medication abortion pills, telehealth consults, gender affirming care changes, the definition of fetal personhood, employer coverage and more.
Court challenges to federal mandates, regulations and executive orders in healthcare will increase. Given SCOTUS conservative majority, federal regulation of healthcare is fair game beginning in district and circuit court challenges.
· Drug companies may challenge infringement on their patents and pricing, anticipated disclosures of their contractual agreements with wholesalers and distributors, and relationships with prescribers.
· Insurers may challenge their price Transparency in Coverage mandate, provider contracting obligations and network requirements set by states.
· Hospitals may challenge the Hospital Price Transparency EO, methodologies used to define competition as adjudicated by the FTC and DOJ and revisit their interoperability and patient privacy mandates.
· Physicians may challenge limits on their ownership of hospitals and disclosures of information about their performance.
· Nurses and pharmacists may challenge limits on their scope of practice.
· Pharmacy benefits managers may challenge threats to maintaining the confidentiality of their contracts with plans and manufacturers.
· Employers may challenge limits on their discretion in structuring employee health benefits.
· States may challenge CMS’ funding formula for Medicaid and seek broader control of public health agencies.
· Consumer advocacy groups may challenge for ownership of medical records by individuals and constraints against healthcare organizations’ ability to sell/monetize their data without permission.
· And others.
Investments in healthcare will shift from growth to sustainability: large private equity funds and large-cap disruptors will gain market advantage. The capital market for healthcare operators is foreboding: higher interest rates on debt, shrinking operating margins and sinking market valuations ranging from start-ups to IPOs mean established large-scale operators and large private equity funds can use their scale to gain market leverage at the expense of less stable players. If the U.S. economy enters its 13th recession since 1945 as many expect, the biggest players in the hospital and insurance sectors will benefit if they successfully leverage their scale in M&A, access capital cost-effectively and stay focused on manageable growth.
A Reuters/Ipsos survey last week found that 57% of Americans disapprove of the Supreme Court, up from 48% in early June before release of these six decisions. Notwithstanding public opinion, the actions of the Supreme Court have profound significance to the U.S. health industry and urgent reconsideration of its future. It’s a new day.
Paul
PS: Last Tuesday, Insider reporters Shelby Livingston and Blake Dodge released investigative report on the operational challenges that have led to mounting legal woes for telemental health start-up Cerebral. Their 8000-word reporting was based on a review of “Cerebral’s company policies, internal communications, meeting agendas, memos, and about 2,060 incident reports filed by employees from seven months in 2021, many flagging serious concerns with patient care.“ It’s a must read for industry watchers akin to reporting that led to the demise of Theranos and others.
Also, it’s notable that in the past two weeks, ‘hospital report cards’ have gotten heightened attention: Lown Institute announced the 66 hospitals it considers the most socially responsible, CMS and US News and World Report announced methodology changes to their Hospital Compare and Top Hospitals rankings and Merative (formerly IBM Watson) announced its Top 100 along with its methodology modifications. While Merative’s offers more depth about a hospital’s financial performance than the others, report card methodologies like these fail to address price transparency compliance, DEI efforts, executive compensation, community benefits, workforce wellbeing and intramural distinctions among safety net providers, vertically integrated systems and academic medical centers. They’re all interesting but none provides a complete picture.
Resources:
Supreme Court of the United States www.supremecourt.gov
Four Supreme Court Rulings in 10-days Reset US Healthcare for Decades The Keckley Report June 27, 2022 https://paul-keckley.squarespace.com/the-keckley-report/2022/6/27/four-supreme-court-rulings-in-10-days-reset-us-healthcare-for-decades
Adam Liptak A Transformative Term at the Most Conservative Supreme Court in Nearly a Centurywww.nytimes.com/2022/07/01/us/supreme-court-term-roe-guns-epa-decisions
Wolfe et al Supreme Court Climate Ruling Adds Obstacles to SEC Policies July 1, 2022
Jan Wolfe Supreme Court Limits Power of EPA, Other Regulatory Agencies Wall Street Journal June 30, 2022
WEST VIRGINIA ET AL. v. ENVIRONMENTAL PROTECTION AGENCY ET AL. Supreme Court of the United States June 30, 2022
Trust in Supreme Court falters after Roe decision Washington Post July 3, 2022 www.washingtonpost.com/politics/2022/07/03/supreme-court-trust
Shelby Livingston and Blake Dodge 2,000 leaked documents and employees say Silicon Valley healthcare startup Cerebral harmed hundreds of patients and prescribed serious medication with abandon Insider June 28, 2022 www.businessinsider.com/cerebral-leaked-documents-suggest-patient-harm-2022
Covid
Studies: Single payer coverage would have saved lives: Two recent studies concluded that access to universal health insurance coverage in the U.S. would have saved lives and reduced unnecessary spending:
Yale School of Public Health, June 2022: “The United States has been disproportionately affected by COVID-19. With only 4% of the world’s population, the cumulative mortality attributable to COVID-19 in the US through early 2021 is 15% of that of the global total… If the US had the per capita COVID-19 mortality through February 2021 of Canada or Germany, there would have been 200,000 fewer deaths. If the US had Australia or Japan’s death rate, 400,000 lives would have been saved…. we estimate that had there been full health insurance coverage of the (US) population, there would have been 60,000 fewer deaths, 26% of the total death toll in the period of this analysis.”
Southern OR U, Yale et al, May 2022: Researchers calculated the elevated mortality attributable to the loss of employer-sponsored insurance and to background rates of uninsurance, summing with the increased COVID-19 mortality due to low insurance coverage. “Incorporating the demography of the uninsured with age-specific COVID-19 and nonpandemic mortality, we estimated that a single-payer universal healthcare system would have saved about 212,000 lives in 2020 alone. We also calculated that US$105.6 billion of medical expenses associated with COVID-19 hospitalization could have been averted by a single-payer universal healthcare system over the course of the pandemic.”
Galvani et al Universal healthcare as pandemic preparedness: The lives and costs that could have been saved during the COVID-19 pandemic PNAS June 13, 2022 https://www.pnas.org/doi/full/10.1073/pnas.2200536119
Campbell et al Exacerbation of COVID-19 mortality by the fragmented United States healthcare system: A retrospective observational study Lancet May 12, 2022 https://www.thelancet.com/journals/lanam/article/PIIS2667-193X(22)00081-3/fulltext
Hospitals
Study: hospital compliance with price transparency rule correlates to relative positioning in markets: Findings of the study of 4,484 hospitals in 306 HRRs by Harvard researchers published June 24 in JAMA Health Forum:
· Mean compliance was 68%.
· “We found a negative association between compliance and market competitiveness; compliance was higher in less competitive HRRs and for hospital systems with greater market shares. Both associations remained significant when controlling for number of beds.
· Multihospital systems, for-profit hospitals and teaching hospitals had higher compliance. Government hospitals had lower compliance but the association did not remain after controlling for integration into multihospital systems.
· Hospital systems with more beds had higher compliance whereas critical access hospitals and those lacking intensive care units had lower compliance.”
Ji, Kong US Hospital Characteristics Associated With Price Transparency Regulation Compliance JAMA Health Forum June 24, 2022;3(6):e221702. doi:10.1001/jamahealthforum.2022.1702
Study: system affiliation associated with rural hospital financial stability: Researchers analyzed rural US hospitals that faced financial distress. Findings:
· Among 2237 rural hospitals operating in 2007, 140 (6.3%) had closed by 2019. The proportion of rural hospitals that were independent decreased from 68.9% in 2007 to 47.0% in 2019; the proportion that were affiliated increased from 31.1% to 46.7%.
· Among financially distressed hospitals in 2007, affiliation was associated with lower risk of closure compared with being independent. Conversely, among hospitals that were financially stable in 2007, affiliation was associated with higher risk of closure compared with being independent.
· For-profit ownership was also strongly associated with closure for hospitals that were financially stable in 2007.
Jiang et al Risk of Closure Among Independent and Multihospital-Affiliated Rural Hospitals JAMA Health Forum July 1, 2022;3(7):e221835. doi:10.1001/jamahealthforum.2022.1835
Kaufman Hall: Hospital margins improving but still below 2021:
· YTD operating margin index was -0.33%, for a fifth straight month of cumulative negative operating margins. The median change in operating margin in May was up 18.9% compared to April, but down 45.6% from May 2021.
· Gross operating revenue was up 3.4% from April and 7.6% from May 2021. Outpatient revenue rose 2.2% from April and 9.4% from May 2021. Inpatient revenue increased 3.5% from April and 2.6% from May 2021.
· Total expenses increased 1.1% from April and 10.7% from May 2021.
· Patient volumes rose in May, with length of stay up 2.3% from April and 5.5% compared to May 2021, while patient days increased by 4.8% over April figures and were down slightly (0.5%) compared to May 2021.
· Adjusted patient days grew 3.5% from April to May and 4% from May 2021. Emergency department visits increased 9.5% from April to May and 4.5% from May 2021.
National Hospital Flash Report Kaufman Hall www.kaufmanhall.com
Sg2-Vizient hospital forecast: Inpatient patients sicker, outpatient volume growth significant: Per Sg2’s 10-year growth forecast:
· Hospital inpatient volume +2%, Inpatient days +8%.
· Outpatient volumes +16%.
· ASC growth +25% by 2032, physician office and HOPD at +18% each.
· Emergency department volume -2%.
2022 Impact of Change® Forecast Highlights June 7, 2022 www.sg2.com
Mexico cancer hospital promotes unproven remedies through social media: “The ad reads like an offer of salvation: Cancer kills many people. But there is hope in Apatone, a proprietary vitamin C–based mixture, that is “KILLING cancer.” The substance, an unproven treatment that is not approved by the FDA, is not available in the United States. If you want Apatone, the ad suggests, you need to travel to a clinic in Mexico.”
Facebook is bombarding cancer patients with ads for unproven treatments MIT Technology Review June 27, 2022 www.technologyreview.com/2022/06/27/1054784/facebook-meta-cancer-treatment-ads-misinformation
HFMA: Cost reduction is high priority but results suboptimal: Per the HFMA-Strata survey of 185 hospital accounting and revenue cycle executives:
· 89% of healthcare organizations have some type of cost reduction program in place; however, only 6% say their program is extremely effective.
· 8% set a margin improvement target of over $100 million. The majority (86%) set a target of less than $50 million
· Smaller hospitals and health systems are less likely to have formal and successful cost
reduction programs.
HFMA: Healthcare Organization Cost Reduction Program Survey HFMA-Strata, June 1, 2022
Hospital Reputation, Report Cards
Merative releases Top 100 Hospitals: Last Thursday, Merative, formerly IBM Watson Health, released its 2022 rankings of the Top 100 U.S. hospitals and health systems based on inpatient and extended care quality, operational efficiency, financial health, and customer experience.“ This year’s study also incorporated a community health measure, which is equally weighted with other ranked measures. Key insights: Characteristics of Merative’s highest-performing hospitals:
· Had lower inpatient mortality, considering patient severity.
· Had fewer patient complications.
· Delivered care that resulted in fewer HAIs.
· Had lower 30-day mortality and 30-day hospital-wide readmission rates.
· Sent patients home sooner.
· Kept inpatient expenses low while still maintaining a healthy financial environment.
· Scored higher on patient ratings of their overall hospital experience
Merative projects that if the benchmarks of performance established by its Top 100 were achieved by all hospitals in the US…
· More than 104,000 additional lives could be saved in-hospital.
· Over 55,000 additional patients could be complication-free.
· Over $12.5 billion in inpatient costs could be saved.
· The typical patient could be released from the hospital almost a half-day sooner.
· Over 18,600 fewer discharged patients would be readmitted within 30 days.
Top 100 Hospitals 2022 Merative June 30, 2022 www.ibm.com
U.S. News & World Report announces Best Hospital methodology changes: The 2022-2023 Best Hospitals report to be released July 26 will use a revised methodology:
· The effectiveness of COVID-19 on care delivery will be a factor.
· 3 new ratings for eligible hospitals: ovarian cancer surgery, prostate cancer surgery and uterine cancer surgery, a new outcome measure–“home time” for certain procedures and conditions rating, transparency measures for obstetrics services and transcatheter aortic valve replacement and measures of low-value care in the knee replacement and stroke ratings.
What’s New in This Year’s Best Hospitals Methodology US News & World Report June 29, 2022 https://health.usnews.com/health-news/blogs/second-opinion/articles
Hospital Care Compare changes spark pushback from consumer groups citing need for safety: The issue: Medicare proposes to withhold release of a composite score made of 10 metrics of patient safety and adverse events, including pressure ulcers, hip fractures, and sepsis after surgery until 2023 with the backing of hospitals. Critics including The Leapfrog Group and others say Medicare is making concessions unnecessarily to hospitals that compromise patient safety
Background: CMS’ plan to withhold the data was included in the 600-page proposed regulation for hospital payment rates in 2023 noting that compared with pre-pandemic 2019, central-line associated bloodstream infections were up 45% in the first half of 2021. Rates of the superbug MRSA were up 39% in that time. In the five years before the pandemic, the rate of central-line associated bloodstream infections in U.S. hospitals had decreased 31%; in 2Q 2020, those infections were up 28%. “Medicare’s proposal does not seek to change reporting on hospital-acquired infections like those two conditions, although it would prevent hospitals from being penalized financially if they score poorly.”
Tara Bannow Medicare wants to stop publishing some hospital safety data next year Stat July 1, 2022www.statnews.com/2022/07/01/medicare-wants-to-stop-publishing-some-hospital-safety-data-next-year
Socially responsible hospitals make the Lown list: 66 U.S. hospitals have been declared “most socially responsible” by the Lown Institute, a health care think tank whose index measures health equity, value, and outcomes. “The list does not mirror the U.S. News ranking of elite hospitals, whose top 20 earned C’s on the Lown list of such metrics as racial inclusivity of patients, employee pay equity, and avoidance of unnecessary procedures.”
In its third year, the Lown analysis also recognizes 15 hospitals that earned A’s while weathering an especially high burden during the pandemic’s first year: 26 or more weeks with at least 10% of inpatient beds filled by Covid patients.
THE MOST SOCIALLY RESPONSIBLE HOSPITALS IN THE U.S. Lown Institute June 28, 2022 Lown Institute Hospital Index (lownhospitalsindex.org)
CMS Alternative Payment Models
CMS proposes new rural emergency hospital (REH) model: Last Thursday, CMS announced its new Rural Emergency Hospital model starting January 1, 2023 requiring participants to accept Medicare, have average lengths of stay of 24 hours or shorter, eliminate acute care inpatient services, have transfer agreements with Level I or Level II trauma centers, meet federal employee training and certification requirements and have medical doctors/ osteopaths, physician assistants, nurse practitioners, or clinical nurse specialists with training in emergency medicine on call. Under the new policy, current Critical Access Hospitals and rural Prospective Payment System hospitals with fewer than 50 beds can convert to the new Rural Emergency Hospital (REH) status. Hospitals adopting the REH model will receive a Medicare outpatient rate that is 5% higher than what full-service hospitals receive, and receive monthly facility payments.
Conditions of Participation for Rural Emergency Hospitals and Critical Access Hospital COP Updates (CMS-3419-P) CMS June 30, 2022 www.cms.gov/newsroom/fact-sheets/conditions-participation-rural-emergency-hospitals-and-critical-access-hospital
Study: ESRD ACO produces Medicare savings: The Comprehensive End-Stage Renal Disease (ESRD) Care (CEC) Model was the first Medicare specialty-oriented accountable care organization (ACO) model. Researchers examined whether this model provided better results with ESRD than primary care–based ACO models. Finding: Researchers found significant decreases in Medicare payments ($126 per beneficiary per month), hospitalizations (5%), and likelihood of readmissions (8%) among beneficiaries with ESRD during the first year of alignment with the CEC Model and no impacts on these measures among beneficiaries with ESRD who were aligned with primary care–based ACOs, relative to fee-for-service Medicare beneficiaries.
Ullman et al Medicare’s Specialty-Oriented Accountable Care Organization: First-Year Results for People with End-Stage Renal Disease June 2022 https://doi.org/10.1377/hlthaff.2021.01856
CMS announces new cancer model: Last Monday, the Centers for Medicare and Medicaid Services announced details about the Enhancing Oncology Model (EOM), a voluntary 5-year program starting July 1, 2023 replacing CMS’ Oncology Care Model that ends Thursday after six years.
“Under EOM, participating oncology practices will take on financial and performance accountability for episodes of care surrounding systemic chemotherapy administration to patients with common cancer types. EOM is a 5-year voluntary model, beginning on July 1, 2023… Two risk arrangements will be available in the new model, but both requiring participants to take on some downside risk…Similar to OCM, EOM will focus on value-based, patient-centered care for cancer patients undergoing chemotherapy based on 6-month episodes of care, with a specific focus on health equity…”
The application period ends Sept. 30. Private payers, Medicare Advantage plans and Medicaid agencies can also apply to participate and enter into a memorandum of understanding with CMS. The model will have one track for traditional Medicare enrollees, and another run by payers for their own eligible enrollees.
Enhancing Oncology Model | CMS Innovation Center
Prescription Drugs
Moderate Dems propose drug pricing plan: The drug pricing plan negotiated by moderate Democrats last week requires HHS to negotiate prices within certain limits for up to 20 of the highest-cost drugs — plus insulin — in the Part B outpatient program and the Part D drug program.
The plan imposes penalties for drug companies that hike prices faster than inflation, implements a $2,000 annual out-of-pocket cap for Part D patients, caps insulin at $35 a month, limits Medicare premium increases, prevents brand-name drugmakers from blocking generic products from coming to market makes vaccines free to Medicare patients and increases full subsidies for low-income enrollees from 135% of the federal poverty level up to 150%.
Senate drafts last-ditch drug pricing plan ahead of midterms The Hill June 30, 2022 https://rollcall.com/2022/06/30/senate-drafts-last-ditch-drug-pricing-plan-ahead-of-midterms
Study: influential oncologists receive significant fees from drugmakers: Background: Revenue from pharmaceutical oncology drugs has increased by 70% over the past decade. Researchers used the Open Payments dataset from CMS to identify all U.S. oncologists and hematologists who received more than $100,000 from pharmaceutical companies in 2018 focused on oncology-based drugs specifically used for cancer treatment. They excluded any payments made for devices or medical supplies, or any payments related to research, business ownership, or investment interests. Findings:
· 52,441 physicians received modest payments (median $109) related to oncology drugs from 2016 to 2018
· In 2018, 139 medical oncologists — representing 1% of all U.S. oncologists — received over $100,000 in general payments, with a median payment of $154,613 (interquartile range $117,436-$207,046) and a total payment of $24.2 million, which included consulting fees, speaking fees, honoraria, and travel expenses Among these, 132 (95%) were active in clinical work, and 78 (56%) worked in an academic setting.
· 43 (31%) of those physicians worked at National Cancer Institute-designated cancer centers, 32 (23%) worked in National Comprehensive Cancer Network centers, 84 (60%) currently hold or previously held leadership positions in their hospitals, 33 (24%) had served on journal editorial boards, and 29 (21%) had held leadership positions in specialty associations over the last 5 years.
Over $20 Million Paid to a Select Group of Top U.S. Oncologists, Michael DePeau-Wilson, Enterprise & Investigative Writer, MedPage Today June 27, 2022
Wright et al Industry Relationships with Medical Oncologists: Who Are the High-Payment Physicians? JCO Oncology Practice 2022 by American Society of Clinical Oncology June 13, 2022 https://ascopubs.org/doi/abs/10.1200/OP.21.00756
Insurance
Transparency in Coverage rule: Friday, July 1, was the deadline for Insurers and employers to post the prices they pay free-standing surgery centers, clinics, private doctor practices, labs and other types of medical-service providers in machine-readable digital files for their commercial plans (not Medicare Advantage and other government plans). In addition to insurers, employers are required to post prices under the rule (though many of them are expected to outsource the responsibility to insurers and health-plan administrators). The files must also include the prices the insurer has negotiated with healthcare providers for in-network and out-of-network services, listing the amounts that the provider billed and what the health plan paid. The insurer data does not Include prescription drug prices.
Companies that don’t publish their data face a fine of $100 per day, per covered person, based on regulatory language created under the Affordable Care Act—considerably higher than the hospital transparency law wherein the maximum annual penalty is $2 million/hospital.
My take: the biggest national plans will comply putting pressure on smaller plans while juxtaposing insurer compliance vs. early non-compliance by hospitals to their price transparency rule that took effect January 1, 2021. As noted by Maverick Health Policy “these machine-readable files are for computer systems, not humans. If you are struggling with insomnia, read the Department of Labor’s explanation of which data elements need to go into the health plan allowed amount machine readable files. Someday, this information may be useful to mere mortals — but not today.”
Anna Wilde Mathews, Melanie Evans Health-Insurance Providers Begin Publishing Prices for Medical Care July 1, 2022 www.wsj.com/articles/health-insurance-providers-begin-publishing-prices-for-medical-care
Maverick Health Policy July 1, 2022 www.maverickhealthpolicy.com
KFF: individual premiums likely to increase if tax credits not extended: Unless Congress takes action to extend tax credits to the 14.5 million people who get their health insurance through the federal exchange or their state’s marketplace, premiums for most will increase.
“Assuming Congress does not extend the expanded tax credits, only people with household income from 100% to 400% of the federal poverty level will once again qualify for subsidies.”
Per Value Penguin data, the average cost for an individual policy for a 40-year-old on a silver plan nationally was $541—up .067% from 2021. Range: WV highest $831 to GA -$42.84 to $309.
Average Cost of Health Insurance 2022 Value Penguin www.valuepenguin.com/average-cost-of-health-insurance
Population
Census Bureau update: US getting older, more diverse: Per the latest Census Bureau report:
· Since 2000, the national median age — the point at which half the population is older and half younger — has grown by 3.4 years, to 38.8 years. Only one state, Maine, became slightly younger.
· Every non-Caucasian race and origin group grew from July 2020 to July 2021: Native Hawaiian and other Pacific Islander was the fastest-growing category, increasing 1.54%. Hispanic was the largest category in numerical gain (800,000) — and second-fastest-growing, up 1.24% while the white population decreased 0.03%.
Population and Housing Unit Estimates U.S. Census Bureau June 30, 2022 www.census.gov/programs-surveys
Economy, Investing, M&A
Economic indicators from leading sources:
· Economists surveyed by in June said they saw a 44% probability of a recession in the U.S. in the next 12 months, compared with 18% in January(Wall Street Journal)
· The S&P 500 fell 21% through June 30– worst first half of a year since 1970. Investment-grade bonds, as measured by the iShares Core U.S. Aggregate Bond exchange-traded fund, lost 11%—the worst start to a year in history. When the S&P 500 has fallen at least 15% the first six months of the year, as it did in 1932, 1939, 1940, 1962 and 1970, it has risen an average of 24% in the second half” Per Dow Jones Market Data.
· Personal income increased $113.4 billion (0.5%) in May, according to the Bureau of Economic Analysis. Disposable personal income (DPI) increased $96.5 billion (0.5%) and personal consumption expenditures (PCE) increased $32.7 billion (0.2%). Real DPI decreased 0.1% in May and Real PCE decreased 0.4%; goods decreased 1.6% and services increased 0.3%. The PCE price index increased 0.6%. Excluding food and energy, the PCE price index increased 0.3%.
· The consumer-confidence index, dropped to 98.7 in June, down 4.5 points from 103.2 in May, (Conference Board). The board’s expectations index, which measures consumers’ short-term outlook about the labor market, business and income, reached a low of 66.4 in June from 73.7 the prior month–the lowest reading since March 2013.
· inflation-adjusted per capita disposable income fell to $45,490 in May, down 3.6% from the previous year. In fact, since March 2021 — when the last round of stimulus checks artificially puffed personal disposable income to a record high level of nearly $57,000 — real incomes are down 20%. (Department of Commerce)
Morning Consult: Household finances lose ground in Q2 2022: Latest findings:
· The share of adults who said they had money left over after paying monthly expenses declined last month to its lowest level since tracking began in September 2020. -8% May 21 to May 22 to 52%
· The share of single parents (+14%) failing to pay their credit card bills in full has climbed steadily over the past year and is well above the national average, despite added support from the expanded child tax credit in late 2021.
· U.S. adults’ monthly spending increased 7% from May ’21 to May ‘22 but fell 8% for households with income less than $50,000.
U.S. Household Finances & Spending Report – June 2022 Morning Consult https://go.morningconsult.com/2022
Markets Post Worst First Half of a Year in Decades WSJ June 30, 2022 www.wsj.com/articles/markets-head-toward-worst-start-to-a-year-in-decades
The Economist: venture capital valuations down 30%: “Over $600bn of venture funds were invested worldwide last year, nearly 10 times the level a decade ago…Public markets were the first to be hit. The Nasdaq index, which is weighted towards technology companies, has fallen by nearly 30% so far this year in a gruesome reckoning. The amount of capital raised through initial public offerings so far in 2022 is down by about 50% globally and by more than 70% in America compared with the same period last year…Already, 68% of vc funds are reporting markdowns of valuations in their portfolios.”
Venture capital’s reckoning: Why there won’t be a rerun of the dotcom crash Economist June 30, 2022www.economist.com/leaders/2022/06/30/venture-capitals-reckoning
CB Insights, Pitchbook: VC deals down in Q2, near term outlook challenging: “Global deal activity is down 23% from Q1 to Q2 as of June 23 this year, after staying mostly flat in the previous quarter. Americans have a lot of cash on hand. At the end of Q1’20, US households held $13.7T in cash and cash equivalents. By the end of Q1’22, that number was up to $17.9T.”
Per Pitchbook “…M&A activity appears to be on a decline so far in 2022. In Q2, 230 acquisitions of VC-backed companies were announced or closed, which is the lowest deal count in over a year…While some VC-backed companies are starting to have conversations with strategic buyers, very few startups are desperate to sell at a depressed valuation now.”
CB Insights www.cbinsights.com
‘Put up the for-sale sign,’ more VCs tell founders as market sours Pitchbook June 29, 2022https://pitchbook.com/news/articles/mergers-acquisitions-vc-startups-sale-falling-valuations
PWC: Healthcare deals declined in 2022 across all sectors: In its report published June 22, PWC observed…
· Deal volumes decreased 9% from the fourth quarter of 2021 to the first quarter of 2022, but the long-term trend is above average.
· By sector, long-term care led with 498 deals in the year ending May 15 vs. 446 deals during the same period last year; physician medical group deals doubled to 482 deals with a total value of $5.7 billion, 142 home health and hospice deals—up 19% increase in value compared to 2021 (led by UnitedHealthcare’s expected $5.4 billion acquisition of Lafayette, La.-based home health firm LHC Group).
PWC www.pwc.com/us/en/services/consulting/deals/outlook
Walgreens Boots alliance spinout deal suspended due to instability in public debt market: The multibillion-dollar sale of Britain’s biggest pharmacy chain was set to be among the UK’s largest PE-backed take-privates of 2022. The deal for Boots had Apollo Global Management and Indian conglomerate Reliance Industries named as potential buyers. “In a statement, the parent company, Walgreens Boots Alliance, blamed the buyers’ inability to raise financing amid volatile market conditions created by the war in Ukraine and monetary tightening from central banks”….Pitchbook data shows that private debt funds raised $191.2 billion in aggregate last year, the most since 2017, leaving these lenders with a lot of firepower to deploy in ever-larger deals.
With the end of cheap money, can private debt pick up the slack? Pitchbook July 1, 2022 www.pitchbook.com/news/articles/private-debt-leveraged-loans-boots
Litera: telemedicine deals ripe for value: “Telemedicine experienced a similar boost with $31.1 billion in combined VC exits in 2021. For context, the segment had never seen more than $10 billion in a single year before. The 120 sellside transactions notched a clear record, though deal count picked up substantially in 2020…In 2020, 44 telemedicine companies were acquired, worth a combined $4.5 billion. 2021 saw similar figures: 42 telemedicine transactions closed, worth a combined $4.4 billion… Over the past decade, 84.0% of telemedicine M&A value has occurred since 2018, alongside 63.7% of telemedicine deal count. Telemedicine is a natural field for VCs, who have been pouring money into the space for years. More than 85% of the past decade’s VC exit value in the space has been achieved since 2018, while more than 75% of all telemedicine exits (by count) have been achieved in the same timeframe.”
Spotlight on Fintech, Software and Telemedicine Litera www.litera.com
Disease Prevalence
KFF Study: adolescent substance abuse, mental health issues spike during pandemic: Researchers analyzed data from the 2020 National Survey of Children’s Health (NSCH), which asks parents or guardians questions on behalf of their children and adolescents. Findings:
· Deaths due to drug overdose among adolescents nearly doubled from 2019 (282 deaths) to 2020 (546 deaths); the largest increases in these deaths were among adolescent males (deaths more than doubled), Blacks (deaths more than tripled) and Hispanics (deaths more than doubled).
· In 2020, across racial and ethnic groups, suicide death rates were highest among American Indian and Alaska Native adolescents (22.7 per 100,000) followed by White adolescents (4.5 per 100,000).
· Adolescent males had higher rates of suicide compared to their female peers (8.7 vs. 3.9 per 100,000); however, rates of self-harm were higher (and increasing faster) for females.
Panchal et al Recent Trends in Mental Health and Substance Use Concerns Among Adolescents Jun 28, 2022https://www.kff.org/other/issue-brief/recent-trends-in-mental-health-and-substance-use-concerns-among-adolescents
News Consumption, Media
Study: Trust in media lower in US: Reuters and You Gov conducted 93,000 online surveys in 45 countries including 2046 respondents in the US in January-February 2022. Findings:
· “Trust in the news has fallen in almost half the countries in our survey, and risen in just seven, partly reversing the gains made at the height of the Coronavirus pandemic. On average, around four in ten of our total sample (42%) say they trust most news most of the time. Finland remains the country with the highest levels of overall trust (69%), while news trust in the USA has fallen by a further 3% and remains the lowest (26%) in our survey.”
· Interest in news has fallen sharply across all markets from 63% in 2017 to 51% in 2022.
· In the United States, politics is particularly central, and those who self-identify on the right are more than twice as likely to distrust the news compared with those on the left.
· 42% actively avoid news coverage in the U.S., up from 37% in 2017.
Digital News Report 2022 June 15,2022 https://reutersinstitute.politics.ox.ac.uk/digital-news-report/2022
Northwestern Study: local newspapers disappearing: “Between the pre-pandemic months of late 2019 and the end of May 2022, more than 360 newspapers closed… Since 2005, the country has lost more than one-fourth of its newspapers and is on track to lose a third by 2025.
Most of the communities that have lost newspapers do not get a print or digital replacement, leaving 70 million residents – or a fifth of the country’s population – either living in an area with no local news organizations, or one at risk, with only one local news outlet and very limited access to critical news and information that can inform their everyday decisions and sustain grassroots democracy. About 7%of the nation’s counties, or 211, now have no local newspaper.
In 2005, newspaper revenues topped $50 billion — compared to roughly $20 billion today. Newspaper employment has fallen by around 70% since 2006, with the most significant cuts (82%) in production and distribution. The number of editorial staffers in local newsrooms dropped 58%.
Struggling Communities Hardest Hit by Decline in Local Journalism Northwestern June 29, 2022 https://news.northwestern.edu/stories/2022/06/new-deserts
