Skip to main content
The Keckley Report

Four Major Reasons why 2023 is a Make or Break Year for U.S. Healthcare

By January 2, 2023March 1st, 2023No Comments

2022 was an unanticipated tsunami for every sector in the U.S. health system. The economy stalled. Inflation raged. Demand recovered. Hourly wages went up but household financial liquidity went down. The political environment became more toxic and November election results assured more of the same. All impacted healthcare.

Some enter 2023 stronger: Generally, bigger organizations fared better than smaller, consolidators (horizontal and vertical) benefitted from lower valuations and economic uncertainty. Large-cap health insurers (i.e. United Optum, Humana, CVS-Aetna et al), retail disruptors (i.e. Amazon, Walmart, CVS) and big Private Equity funds (Goldman Sachs, General Catalyst, et al) gained momentum.

And 2022 headwinds in some sectors will blow stronger in 2023: Biotech and device manufacturers experienced market volatility and regulatory approvals more burdensome.  Rural and safety net hospitals and public health programs endured unprecedented demand, supply-chain cost increases and declining appropriations. Insurtechs (Bright Health, Oscar et al) were forced to re-focus their strategies to stay afloat and relevant. Physicians lost ground against inflationary practice expenses and those acquired by special purpose acquisition corporations (SPACS) lost up to 70% of their value. Medicare Advantage plans drew unprecedented regulator scrutiny (CMS et al) for up-coding and overpayments and national media (Wall Street Journal, New York Times, Washington Post, CNN, CBS et al) produced a steady stream of unflattering coverage about the business practices by hospitals, drug companies and insurers.

In 2023, market conditions for healthcare will be more challenging as a result of 4 major factors:

  • The U.S. Economy will Struggle: Per economists, there’s a 65% chance of recession in 2023. Most expect inflation to drop to 3-4% while interest rates remain at/near current rates elevated 6 times in 2022. That means employers will cut employee benefits costs (including health coverage) and household discretionary spending for healthcare will slow.
  • The Federal Political Landscape will be Paralyzed: The split control of Congress will negate meaningful healthcare legislation. Partisan rhetoric about ‘U.S. health system transformation’ will be prominent in 2024 Presidential campaigning alongside immigration, jobs, climate change et al long on platitudes and short on specifics. And pandemic preparedness will fade until the fall flu season. That means price transparency (for hospitals, drugs), monopolistic consolidation (hospitals, medical practices, suppliers, PBMs, drug distributors), and affordability will get added attention. And it assures tension between insurers, hospitals and prescription drug manufacturers will intensify.
  • Growing Employers activism in Managing Their Health Costs: Employers health costs are expected to increase at least 8% in 2023 prompting many to restructure their benefits. Already, employer-sponsored coverage costs 224% of Medicare coverage for the same services from the same providers. In the pandemic era, virtualization was the focus; post-pandemic, it’s employee wellbeing and cost-reduction. Whole person and technology-enabled self-care will displace traditional models of delivery jeopardizing local hospitals and physicians. Employers will use shared risk contracts with providers to achieve short and long-term cost reduction and primary care capitation to channel referrals to high value providers and reduce their spending for healthcare. Employers have lost patient with the healthcare system and will take matters into their own hands in 2023.
  • The Increased influence of Private Capital: Pressures on federal and state funding and competition for public dollars vs. education, defense and other public concerns assure private investment in healthcare will be its catalyst in 2023. Challenging economic conditions during the pandemic have handicapped early-stage ventures and expanded opportunities for Private Equity funds armed with $62 billion to invest this year in healthcare services. Private investment in healthcare is fast becoming the industry’s primary source of capital for growth and innovation.

Thus, 2023 is a make or break year in healthcare: these conditions assure old ways of doing business will no longer work.



Quotable: Economic Conditions entering 2023

“America has no problem with speech. It has a problem with listening. Does the distinction seem specious? Speaking and listening do not mean much without each other. But emphasis matters. Focusing on the right to speak rather than the obligation to listen substitutes the easy question for the hard one, and a freedom secured by law for a discipline that must be instilled by culture. It also ensures that the debate—too grand a word, really—remains futile. “

“Free Speech is not in Peril in America: The Problem is bigger than that” The Economist December 26, 2022

“The S&P 500 is down 19% for the year, while the Dow Jones Industrial Average has dropped 8.6%, and the tech-heavy Nasdaq Composite has fallen 33%. All three indexes saw their biggest declines since 2008, the year Lehman Brothers collapsed…In short, investors and policy makers were burned by bets that 2021’s inflation surge would prove to be transitory, but it remained stickier than many expected.”

Wall Street Journal December 31, 2022

“Neither the S&P 500 nor Tesla has since reached the heights they achieved on Jan. 3. The S&P 500, which finished lower on Friday, declined 19.4% for the year — its worst annual performance since 2008. Cryptocurrency giants like FTX have fallen, and debt is no longer cheap.”

The Year the Long Stock Market Rally Ended New York Times December 30,

“Capital was not just cheap in the last years of the bull market; it was seemingly everywhere…This pushed investors in search of returns into more speculative corners of the market. In turn, these assets boomed. In the decade to 2007, American firms issued $100bn of the riskiest high-yield (or “junk”) debt a year. In the 2010s they averaged $270bn. In 2021 they hit $486bn…. This year it has fallen by three-quarters. Initial-public offerings (IPOs) smashed all records in 2021, raising $655bn globally…The end of cheap money shortens investors’ horizons, forcing them to prefer profits to those in the distant future. Growth stocks are out. Value is back in vogue.”

Five Financial Trends that 2022 killed

“With few prospects for deals soon and a surprise tax bill looming next year, special-purpose acquisition companies are closing at a rate of about four a day this month, nearly the same pace they were being launched when the sector peaked early last year. “

Amrith Ramkumar SPAC Boom Ends in Frenzy of Liquidation: Surprise tax bill, deal drought cause a rush to unwind before year-end WSJ December 25, 2022

Value-based Programs, Insurance

Study: Commercial ACO savings minimal: The prevalence of accountable care organizations (ACOs) Researchers analyzed the effect of Elevance Health’s commercial ACO program on costs in the commercial population from 2016 to 2021. Findings:

“The program was associated with incremental savings during this period. Incremental savings were greater in the fully insured population relative to the administrative services only population and were due to outpatient and pharmacy savings. ACO providers had superior quality performance measures relative to contracted providers not participating in ACOs. Payers should be aware of the potential for diminishing marginal returns of ACO contracting on containing health care costs.”

Girdish et al The Longitudinal Impact of a Multistate Commercial Accountable Care Program on Cost, Use, And Quality Health Affairs December 2022

Study: Switching to Medicare Advantage continues until enrollee in last stage of life: Researchers analyzed switching behavior from Traditional Medicare ™ to Medicare Advantage (MA) and vice versa from 2016-2020. Findings:

  • While switching rates from MA to TM exceeded those for TM to MA in 2016, this pattern was reversed from 2017 through 2020. In 2020, TM-to-MA switching rates were almost 4 and 2.5 times higher than switching rates from MA to TM for Medicare only and Medicare-Medicaid enrollees, respectively. As a result, switching accounted for a growing share of new MA enrollment growth, increasing from 49% in 2016 to 67% in 2020.
  • While switching rates were not substantively different by sex, they generally declined with age Switching patterns by mortality status also changed materially. In 2016, beneficiaries in their last year of life were more than twice as likely to disenroll from MA than from TM (5.4% vs 2.6%). By 2020, the trend had reversed (3.1% vs 5.1%).

Unuigbe et al. Beneficiary Switching Between Traditional Medicare and Medicare Advantage Between 2016 and 2020 JAMA Health Forum December 29, 2022;3(12):e224896. doi:10.1001/jamahealthforum.2022.4896

Consumers, Workforce

Study: healthcare workforce unionization unchanged from 2009: In this cross-sectional study of 14 298 US health care workers, the prevalence of reported labor unionization was 13.2%, with no significant change from 2009 through 2021. Reported membership or coverage by a labor union was significantly associated with higher weekly earnings and better noncash benefits but greater number of weekly work hours.

Ahmad et al Trends in Labor Unionization Among US Health Care Workers, 2009-2021JAMA December 27. 2022;328(24):2404-2411. doi:10.1001/jama.2022.22790

Unionization getting more attention: “Employers in the dominant sectors of retail, health care, and hospitality have rejiggered their budgets to pay anti-union consultants rather than increase wages and benefits for employees. A new generation of unionizing workers, such as those at Starbucks and Amazon, know what they are up against.”

Tammy Kim As Pro-Union Sentiment Reaches a Fifty-Year High, U.S. Law Remains Pro-Management New Yorker December 27, 2022

Prescription Drugs, Therapeutics

WSJ: specialty drugs driving drug price spiral: Per Peter Loftus who covers the drug and device sectors for the WSJ: Several new drugs, most of them gene therapies, promise to cure or treat diseases in one course, but their price tags will test the health-insurance system…The most recent gene therapy approved in the U.S. set a price record: $3.5 million for CSL’s Hemgenix, a treatment for hemophilia B.

“It’s an innovation freight train headed toward an inflexible insurance wall,” said Steven Pearson, president of the Institute for Clinical and Economic Review, a nonprofit drug-pricing watchdog group. “The payers are not in a position to say no because there will be no other alternatives” for patients, he added.

Peter Loftus “Drug Prices Reach New High—in the Millions “Wall Street Journal December 26, 2022

House Report: FDA at fault on approval of Biogen’s Alzheimer’s drug approval: The 45-page Committee Report found that Biogen, Aduhelm’s manufacturer, initially priced the drug at $56,000 a year because it wanted a “blockbuster” that would “establish Aduhelm as one of the top pharmaceutical launches of all time.”

The Report found the FDA’s accelerated approval process for Alzheimer’s drug Aduhelm “rife with irregularities,” concluding “The agency’s actions raise serious concerns about F.D.A.’s lapses in protocol.” the report concluded.

Representative Frank Pallone, a Democrat and chair of the House Energy and Commerce Committee, said in a statement that the report “documents the atypical F.D.A. review process and corporate greed that preceded F.D.A.’s controversial decision to grant accelerated approval to Aduhelm.”

Pam Bulluck Congressional Inquiry into Alzheimer’s Drug Faults Its Maker and F.D.A. New York Times December 29, 2022

The High Price of Aduhelm’s Approval: An Investigation into FDA’s Atypical Review Process and Biogen’s Aggressive Launch Plans House Committees on Oversight and Reform, Energy and Commerce December 2022

Capital Markets

WSJ: SPACs face market meltdown in 2023: “Roughly 70 special-purpose acquisition companies have liquidated and returned money to investors since the start of December– more than the total number of SPAC liquidations in the market’s history, according to data provider SPAC Research. SPAC creators have lost more than $600 million on liquidations this month and more than $1.1 billion this year, the data show.

Amrith Ramkumar SPAC Boom Ends in Frenzy of Liquidation: Surprise tax bill, deal drought cause a rush to unwind before year-end WSJ December 25, 2022

Pitchbook Report: Debt coverage will be more burdensome for PE acquired companies in 2023:” Amid the prospect of slowing economic growth and the Fed’s aggressive interest rate increases, the probability that the US economy will go into recession in late 2023 or early 2024 stands at 65%, according to the quantitative recession model in the report.” Highlights:

  • In the six months from May through October, the total issuance of leveraged loans funding buyouts dropped to just $22.3 billion, the lowest since 2020.
  • Deal volume in the four quarters through September 2023 will be around 10% lower than the previous four quarters. However, there will likely be a slight bounce back in exit activity, with secondary buyouts continuing to grow proportionally across all PE exits.

“As Medicare and other insurance products shift risk to providers, these acquisition models based on FFS revenues will no longer be profitable. The shift in the payment model will be driven by the private sector or employer-sponsored plans who will shift risk to providers. PE’s successful increase in revenue will be driven by cost of care reductions and not an increase in charges per visit (E/M up charging).”

Looking ahead at PE landscape with quantitative data from 2022 Pitchbook December 20, 2022

Hospitals, Health Systems

Wall Street Journal investigation: Based on its analysis of 470 hospital transactions, the Journal specifically examined 11 largest health systems by their number of hospitals as of November. Findings:

  • “Many of the nation’s largest nonprofit hospital systems, which give aid to poorer communities to earn tax breaks, have been leaving those areas and moving into wealthier ones as they have added and shed hospitals in the last two decades. As nonprofits, these regional and national giants reap $8.8 billion from tax breaks annually… Among their obligations, they are expected to provide free medical care to those least able to afford it.”

Big Nonprofit Hospitals Expand in Wealthier Areas, Shun Poorer Ones WSJ December 26, 2022

PWC prediction: Biopharma dealmaking strong in 23: In all, next year could bring M&A deal value in the pharma and life-sciences space to somewhere in the range of $225 billion to $275 billion. Achieving scale to deliver shareholder value is imperative. “We continue to expect that deals in the $5 billion to $15 billion range will be the market sweet spot”  PricewaterhouseCoopers wrote in its report.

Pharmaceutical & life sciences: US Deals 2023 outlook PWC

Care Management

 Study: one third of US [population impacted by anxiety disorders: “anxiety disorders have a lifetime prevalence of 34% in the US and significantly impair quality of life and functioning. Generalized anxiety disorder (6.2% lifetime prevalence), social anxiety disorder (13% lifetime prevalence), and panic disorder (5.2% lifetime prevalence) with or without agoraphobia are common anxiety disorders seen in primary care. Anxiety disorders are associated with physical symptoms, such as palpitations, shortness of breath, and dizziness.

Anxiety Disorders: A Review JAMA. December 27 2022;328(24):2431-2445. doi:10.1001/jama.2022.22744

Case study: Maternal health inequity: “Black women in America are more than twice as likely as white women to have a stillbirth. Getting physicians to take their concerns seriously is one reason for this disparity, they say: “If you’re a Black woman, you get dismissed.”

Duaa Eldeib “She Says Doctors Ignored Her Concerns About Her Pregnancy. For Many Black Women, It’s a Familiar Story” ProPublica December 27, 2022

Study: Home births increased during Covid: The rate of home births in the US reached the highest level in 30 years in 2021, according to a National Vital Statistics report. Birth certificate data showed that home births rose steadily from 1990 to 2019, by an average of about 2% a year. But dramatic increases occurred during the first 2 years of the COVID-19 pandemic. The home birth rate rose 22%, from 1.03% to 1.26%, between 2019 and 2020, and another 12%, to 1.41%, in 2021.

Highest Rate of US Home Births in 3 Decades JAMA December 27, 2022;328(24):2389. doi:10.1001/jama.2022.20057

Public Health

Study: tobacco product use among teens: The survey of 28,291 middle and high school students conducted between mid-January and May of this year at 341 schools across the country suggests the tobacco product use remains high among US youth despite the health risks. Findings:

  • 16.5% of high school students and 4.5% of middle school students reported using a tobacco product in the past 30 days.
  • 14% of high school students and 3% of middle school students used electronic cigarettes.
  • 4% of all those surveyed reported using any combustible tobacco product.

Tobacco Use Remains High in Middle and High Schools JAMA December 27, 2022;328(24):2389-2390. doi:10.1001/jama.2022.20058

Office of the US Attorney General December 27, 2022


Study: physician groups deliver higher savings in surgical bundled payments programs but less than in medical bundles vs. hospitals: This study analysis used 2011- 2018 Medicare claims data to compare the association of BPCI participation with episode outcomes for physician group practices PGPs vs hospitals providing medical and surgical care to Medicare beneficiaries. Findings:

  • BPCI participation was associated with greater reductions in episode spending for surgical (difference –$1368); but not for medical episodes (difference –$101).
  • Hospital participation in BPCI was associated with greater reductions in episode spending for both surgical (–$1010) and medical (–$763) episodes.

Liao et al Performance of Physician Groups and Hospitals Participating in Bundled Payments Among Medicare Beneficiaries JAMA Health Forum December 29,2022;3(12):e224889. doi:10.1001/jamahealthforum.2022.4889


NYU Study: ESI coverage less affordable for women: In 2019, 61% of all nonelderly adults in the US obtained their health insurance coverage through an employer-sponsored insurance (ESI) plan. NYU researchers analyzed data from the National Health Interview Survey collected between 2000 and 2020 representing 238,000 adults aged 19 to 64 who obtained their health insurance through an employer or union. Findings:

  • 6% of women found medical care unaffordable in 2020 vs. 3% in 2000; 3% of men in 2020 vs. 2% in 2000.
  • 3.9%. of women and 2.7% of men reported that medical care was unaffordable.
  • 8.9% of women and 5.4% of men said dental care was unaffordable.
  • 2.1% of women and 0.8% of men reported that mental healthcare was unaffordable.

Trends in Reported Health Care Affordability for Men and Women With Employer-Sponsored Health Insurance Coverage in the US, 2000 to 2020 JAMA December 27, 2022

Health Care is Increasingly Unaffordable for People with Employer-Sponsored Health Insurance—Especially Women December 27, 2022

Regulatory Agency Activity

HHS: marketplace enrollment up: The Department of Health and Human Services (HHS) released its latest report on enrollment through, the federal exchange. 11.5 million people had selected a health plan nationwide as of Dec. 15 –1.8 million more sign-ups compared to this time last year, or an 18% increase. Sign-Ups Outpace Previous Years at Key Milestone HHS December 27, 2022

BEA: household liquidity shrinking: “Spending, adjusted for inflation, remained above 2021 levels, landing at 2% as of November… Consumer spending remained resilient throughout much of 2022. However, stubbornly high inflation has taken its toll and knocked the stuffing out of the financial cushion. With interest rates poised to go higher in 2023 and economic uncertainty sure to grow, consumers could be starting to run dry at the worst time. “Highlights:

  • Household financial obligations (i.e., debt) as a percentage of disposable personal income hit an all-time low of 12.57% in the first quarter of 2021 is up to 14.49%, well below average rates of the past 40 years, as consumers lean more on credit cards and other borrowing.
  • As of September 30, credit card delinquencies remained near historic lows with a 2.07% rate higher than the previous quarter and was reached at the fastest pace on record, according to Fed data going back to 1991.
  • Household savings are shrinking: between 2020 and through the summer of 2021, US households accumulated $2.3 trillion in savings but now total $1.8.  excess

Bureau of Economic Analysis

HHS proposal would expand safeguards against discrimination by providers: Last Thursday, the Health and Human Services Department (HHS)will publish a draft regulation to revise federal standards for conscience- and religious-based objections to providing some types of healthcare.

The proposed rule would create additional safeguards to protect providers against religious discrimination.

Consumers kept the economy hot in 2022. Now they’re losing steam CNN December 28, 2022

BLS: Wages up but inflation up more: Per the latest BLS’ Consumer Price Index:

  • Wages have been going up this year, but so have prices — and prices are growing faster.
  • Skyrocketing inflation has meant that a pay raise of 7.1% or below is essentially a pay cut.
  • While wages have grown by about 5% year-over-year, real hourly earnings have fallen over the last year.

“Even as tech layoffs at companies like Facebook and Amazon dominate headlines, most Americans aren’t in danger. That’s because workers are still in demand, as companies try to make up for the labor shortage caused by restrictive immigration policies and early retirement among older workers. That’s especially true for fields like healthcare, teaching, and social services, vocations which are suffering especially from the labor shortage.”

Juliana Kaplan, Jason Lalljee “If your raise this year was less than 7.1%, it didn’t keep up with inflation — and you effectively got a pay cut” Wall Street Journal   Dec 29, 202”

CMS: No Surprises Act crates backlog of unresolved disputed claims: That’s according to the Biden administration’s progress report on the No Surprises Act’s independent dispute resolution (IDR) process. So far, the government is fielding a much higher volume of requests than expected, mostly related to emergency services. Health care providers, air ambulance providers, and companies working for them submitted about 90,000 out-of-network payment disputes between April 15 and Sept. 30, far more than the roughly 17,000 anticipated in a full year. Of the roughly 23,000 cases closed so far, mediators made payment determinations in about 3,600 — 4% of the 90,000 submissions.

Initial Report on the Independent Dispute Resolution (IDR) Process April 15 – September 30, 2022 CMS /

FDA to evaluate cannabis use in food: The Food and Drug Administration is studying whether legal cannabis is safe in food or supplements and plans to make recommendations for how to regulate the growing number of cannabis-derived products in the coming months. A 2021 report by the FDA said the $4.6 billion market was expected to quadruple by 2026.

FDA, Concerned About Safety, Explores Regulating CBD in Foods, Supplements December 27, 2022

Surgeon General report on workforce wellbeing: US Surgeon General Vivek Murthy, MD, MBA, released a framework for increasing mental health and well-being in the workplace based on 2021 data that showed 84%% of respondents reported at least 1 workplace factor negatively affecting their mental health.

Murthy’s framework includes prioritizing physical and psychological safety, providing time for adequate rest, normalization of workplace mental health programs, cultivating trusted workplace relationships and fostering a culture of belonging and teamwork.

Surgeon General Tackles Workplace Well-being JAMA December 27, 2022:328(24):2386. doi:10.1001/jama.2022.20050