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The Keckley Report

SOTU 2023 Takeaways for Healthcare: Surprises, Implications

By February 13, 2023March 1st, 2023No Comments

Last Tuesday in the President’s 73-minute State of the Union (SOTU) Address, the sustainability of Medicare was elevated to the evening’s highlight reel as a result of this exchange:

“Instead of making the wealthy pay their fair share, some Republicans — some Republicans want Medicare and Social Security to sunset.  I’m not saying it’s a majority —folks — (boo’s) — so, folks, as we all apparently agree, Social Security and Medicare is off the — off the books now, right?  (Applause.)  They’re not to be touched?  (Applause.)

All right.  All right.  We got unanimity!  (Applause.)
Social Security and Medicare are a lifeline for millions of seniors.  Americans have to pay into them from the very first paycheck they’ve started.

So, tonight, let’s all agree — and we apparently are — let’s stand up for seniors.  (Applause.)  Stand up and show them we will not cut Social Security.  We will not cut Medicare.

Those benefits belong to the American people.  They earned it.  And if anyone tries to cut Social Security — which apparently no one is going to do — (laughter and applause) — and if anyone tries to cut Medicare, I’ll stop them.  I’ll veto it.  (Applause.)

And, look, I’m not going to allow them to take away — be taken away.  Not today.  Not tomorrow.  Not ever.”

Speechwriters for the White House dutifully covered both global and domestic affairs in the 9300-word script. There were few surprises.

The first third of the speech focused on foreign affairs: The Ukraine conflict with Russia, escalating tension with China (including the spy-balloon incident), humanitarian support for earthquake victims in Turkey and Syria and others.

Next, domestic policy and populist themes took center stage: Fairness in the tax system requiring the rich to pay more; junk fees by hotels, Ticketmaster and airlines; waste and fraud in government programs and others. Encouraging trends in the job market and lower prices for gas and food were called out as evidence the administration’s economic policies were working but unfinished.

And, in the context of domestic policies, the administration showcased its healthcare bucket list: per Pew, the economy is Issue #1 to all voters but healthcare affordability is Issue 2 and significantly more important to Democrats. Thus, the bucket list referenced…

  • Protecting abortion rights.
  • Continuing CDC Covid protections with masking, testing, vaccinations and treatments.
  • Adding drug pricing limits extending Medicare’s $35 cap and pharma profits.
  • Addressing the opioid crisis, particularly fentanyl overdoses.
  • Reducing suicide among military veterans.
  • Protecting Affordable Care Act insurance subsidies to low-income families
  • Improved quality standards in nursing homes.
  • Expanding the cancer “moonshot via funding for the new Advanced Research Projects Agency for Health (ARPA-H).
  • Improving mental healthcare for children.

But what wasn’t referenced in SOTU is also notable: no mention of hospitals, physicians, medical devices, and health insurers. Nothing about price transparency, oligopolistic consolidation, interoperability and value-based care. Little mention of Medicaid. Thus, while SOTU showcased the White House’ healthcare bucket list, sweeping Congressional action is unlikely. Rather, executive orders and state actions will be the administration’s primary levers and the federal appropriations process in Congress the limiting factor in what actually gets done.

My take:

The spontaneous reaction to the President’s commentary on Medicare was the biggest surprise of the night! It’s especially significant as 2024 Presidential campaigns launch in the next 90 days (Haley this week) and Congress grapples with the debt ceiling and appropriations to Medicare, Veterans Health, Medicaid, pandemic preparedness and public health to name a few

More problematic, most weren’t paying attention. The President’s State of the Union Address was viewed by 27.3 million viewers–the second smallest SOTU audience in at least 30 years per Nielsen and 11 million fewer than his SOTU address in 2022. 73% of the audience were 55 and older; only 5% were under 35. And the networks shared the audience and their echo-chambers: Fox News, (4.69M), ABC (4.41 M), NBC (3.78[pk1] M), CBS (3.64M), MSNBC (3.55M) CNN (2.4M) and Fox broadcast stations: (1.66M)).

By contrast, the Super Bowl audience exceeded 100,000 million in the U.S. alone cutting across every sex, age income and partisan cohort.

So, three implications may be drawn from SOTU circa 2023 by every U.S. healthcare company/organization/trade association/think tank:

  • Healthcare issues will play a major role in Campaign 2024 politics.
  • The public’s interest in healthcare issues is high: populist issues like affordability, price transparency, junk fees and monopolies are vulnerabilities.
  • Sweeping change in U.S. healthcare is unlikely in the near-term: it’s a complex, capital-dependent, public-private collection of co-dependent sectors that resists change unless forced by circumstances.

But long-term, the jury’s out. And fresh solutions to Medicare’s sustainability might be the impetus.



Gerhard Peters. “Length of State of the Union Addresses in Minutes (from 1966).” The American Presidency Project. Ed. John T. Woolley and Gerhard Peters. Santa Barbara, CA: University of California. 1999-2023. Available from the World Wide Web:

Joe Biden State of the Union Address February 7, 2023


Pew Polling January 18-24, 2023:

  • Issue #1: Strengthening the economy (75%)
  • Issue #2: Reducing healthcare costs (60%, 48% R vs. 71% D), defending against terrorism (60%)
  • Issue #3: Reducing influence of money in politics (59%)
  • Issue #4: Making Medicare financially sound (58%, 48% R vs. 68% D)

Pew Research Center


Re: physician wellbeing: “Doctors have long diagnosed many of our sickest patients with “demoralization syndrome,” a condition commonly associated with terminal illness that’s characterized by a sense of helplessness and loss of purpose. American physicians are now increasingly suffering from a similar condition, except our demoralization is not a reaction to a medical condition, but rather to the diseased systems for which we work….

Although deaths from Covid have slowed, the ‌disillusionment among health workers has ‌only increased. Recent exposés have further laid bare the structural perversity of our institutions‌‌. For instance, according to an investigation in The New York Times, ostensibly nonprofit‌ charity hospitals have illegally saddled poor patients with debt for receiving‌‌ care to which they were entitled without cost and have turned large profits by exploiting tax incentives meant to promote care for poor communities. Hospitals are deliberately understaffing themselves and undercutting patient care while sitting on billions of dollars in cash reserves. Little of this is new, but doctors’ sense of our complicity in putting profits over people has ‌grown more difficult to ignore.”

Eric Reinhart, Northwestern University Guest Essay Doctors Aren’t Burned Out from Overwork. We’re Demoralized by Our Health System New York Times. February 5, 2023

Re: physician compensation: “The passage of the $1.7 trillion omnibus spending bill for this year will cut physicians Medicare payments by 2%. Thankfully, intense physician advocacy window was able to prevent the originally slated 8.4% in cuts…

Yet, physicians did not reap any benefits of the growing bloat of healthcare costs. In fact average physician pay  has not kept up with inflation, and Medicare compensation has only increased by about 10% opens in a new tab or window since 2001. Therefore, doctors actually have had their pay cut — according to some estimates by around 21%opens in a new tab or window. In the setting of compensation increasing for all other services, such as hospital and nursing costs, this is not just anomalous but unfair.

William Zhuopens ithird-year medical student, Greg Jasani, MD We must reward physicians treating higher-need patients MedPage February 10, 2023

Re: hospital at home: “In 1946, George Orwell wrote in How the Poor Die that the hospital is a sort of “antechamber to the tomb.” While we have been well aware of the escalating costs of hospitalization, along with nosocomial infections (acquired in hospital), the unnecessary procedures performed, and the medical errors that are frequently made, it took the pandemic to awaken the fledgling hospital-at-home strategy in the United States…The United States is poorly positioned to be a leader for HaH. More than a third of the $4.3 billion health expenditures in 2021 went to hospitals and the American Hospital Association (AHA) is one of the country’s (5th) leading lobbying groups for the government. To put it mildly, the AHA has zero interest in HaH’s success. Unless there is a dramatic change in reimbursement, such as has been incentivized short-term by the CMS pandemic waiver, there is no financial reason why health systems will make up front investments to pursue HaH..”

Eric Topol The Hospital at Home Movement February 11, 2023 Ground Truths

Re: innovation: “Winston Churchill (and many others) famously said that we should never let a good crisis go to waste. We are in danger of doing exactly that: we may be wasting the benefits of a good crisis. Many heroes rose to the occasion during the COVID-19 pandemic, and the innovation model of relaxed and supportive government policy and a motivated private sector achieved several outstanding successes. But sustaining these innovations will be challenging absent data that can assess what actually happened….

The pandemic unleashed decades-worth of pent-up innovation concepts that were largely blocked by competing status quo business models across the health care ecosystem. Evaluating and perhaps extending the record of successful innovation arising from the pandemic will require advocacy, courage, and data-driven leadership from across the health care ecosystem.”

Regina Herzlinger, DBA1; Barak D. Richman, JD, PhD2,3; Kevin A. Schulman, MD3,4 “Maintaining Health Care Innovations After the Pandemic ”JAMA Health Forum February 10, 2023;4(2):e225404. doi:10.1001/jamahealthforum.2022.5404

Re: pharma competition: “Policy makers have been introducing legislation to address competition in the prescription drug market for years, often reintroducing the same bills. The gridlock in Congress has prevented—and likely will continue to hinder—efforts to support biologic competition through legislation… Until congressional lawmakers find agreement on the path forward, decision-making power lies in the courts. Policy reform and legal initiatives may help reduce anticompetitive behaviors by pharmaceutical manufacturers and increase access to competitive therapeutic options such as biosimilars.”

Gibbons, Laber Humira: The First $20 Billion Drug The American Journal of Managed Care February 8, 2023

Re: healthcare private equity: “An estimated 863 healthcare services private equity deals were announced or closed last year. down 15% from 2021 but up18% from 2020. There were an estimated 158 deals in the fourth quarter, down from 214 transactions during the third quarter. The number of deals is expected to decline further in the first half of 2023, and macroeconomic conditions will largely determine what happens in the second half of this year.

Private equity investors continue to see big potential in primary care, particularly for older patients and for Medicare Advantage-focused platforms. But the number of primary care transactions fell to an estimated 14 last year, compared with 25 in 2021 and 17 in 2020. “

Pitchbook Q4 2022 Healthcare Services Report

Systemness, Reform

Council recommends spending control strategies: The 21-person Council on Healthcare Spending and Value led by veteran healthcare notables Bill Frist and Peggy Hamburg deliberated over 4-years in developing recommendations “to achieve higher-value health care spending and growth in the US. The mechanism for achieving this goal involves four levers

  • price, or paying the most efficient price for care;
  • volume, or ensuring the appropriate quantity of care;
  • mix, or ensuring the appropriate types of services for given patients and populations;
  • growth, or growing the price and volume sustainably and maintaining an appropriate mix over time.

On the basis of these criteria, the council offers recommendations “ designed to be compatible with various political environments and views” about the role of government” in four priority areas:

  • administrative streamlining,
  • price regulation and supports for competition,
  • spending growth targets,
  • value-based payment

Health Affairs Council on Health Care Spending and Value. A road map for action: recommendations of the Health Affairs Council on Health Care Spending and Value.February 2023

Disruptors, Retail Health

CVS to buy Oak Street Health for $10.6B::  Wednesday, CVS Health announced it has entered into a definitive agreement to acquire primary care provider Oak Street Health adding 600 clinicians and 169 locations in 21 states to its Health Delivery business unit. It follows CVS’ $100M investment  in primary and urgent care provider Carbon Health and $8B acquisition of in-home evaluation company Signify in addition to its HealthHubs. CEO and co-founder Mike Pykosz could receive more than $300 million cash in the acquisition. Other retail primary care deals of note:

  • Humana announced a five-year network partnership with Oak Street competitor ChenMed, a primary-care network that’s also focused on senior care and Medicare Advantage.
  • Walgreens-based primary care group VillageMD announced a $9 billion acquisition of specialty care provider Berkeley Heights, New Jersey-based Summit Health in November.
  • Amazon’s acquisition of San Francisco-based primary care company One Medical in July.

CVS Health to acquire Oak Street Health CVS February 8, 2023

Generative AI competition heating up: Google’s parent company, Alphabet, lost $100 billion in market value on Wednesday after its new artificial intelligence technology, Bard, which it intended as a competitor to Microsoft’s ChatGPT, produced a factual error in its first demo. Shares for Microsoft rose by 3%. Microsoft announced this week that it would incorporate ChatGPT into products like its Bing search engine. The company has invested $10 billion into OpenAI, the start-up that created ChatGPT. “The flurry of AI innovation comes amidst widespread job cuts in the tech sector. Alphabet cut about 6% of its global workforce — or 12,000 jobs — last month.”

Google shares drop $100 billion after its new AI chatbot makes a mistake February 9, 2023

Hospitals, Health Systems

Study: Hospital price increases associated with margin improvement: “This cross-sectional study using standardized audited financial data from 156 health systems and a multivariate regression approach found that a 1-unit increase in the relative inpatient price ratio was associated with a 21.3% increase in days cash on hand and a 2.7 percentage point increase in average operating margins.”

Blavin et al Association of Commercial-to-Medicare Relative Prices with Health System Financial Performance JAMA Health Forum. 2023;4(2):e225444. doi:10.1001/jamahealthforum.2022.5444

Orlando market is hospital duopoly: for hospital care:” Google and Facebook. Coca-Cola and Pepsi. Those tech and pop conglomerates are considered to be duopolies in their fields. But even they can’t hold a candle to hospitals’ market power. A recent financial filing from a large, tax-exempt hospital system in Orlando provides a glimpse, and serves as a reminder, of just how concentrated America’s hospital markets are.

In Orlando, just two giants run the show. Orlando Health and Advent Health together control 77% of the entire inpatient hospital market in the four-county Orlando metro area… and closer to 90% of inpatient services in a narrower three-county slice of Orlando… For-profit hospital chain HCA Healthcare places third, with a meager 10% of the inpatient market.

Research has repeatedly shown hospital consolidation leads to higher prices and no better quality for patients and workers. That’s because in places like Orlando, hospitals hold more negotiating leverage with health insurance companies.

In Orlando, the power has paid off for the big players’ bottom lines. Despite the broader trends around higher staffing and supply costs, Orlando Health ended its 2022 fiscal year with an 8.2% operating margin — well above industry norms. Advent Health is usually among the most profitable systems in the country, but it had a lower 3.5% operating margin in 2022 due to health technology upgrades as well as pandemic staffing costs, executives said at this year’s J.P. Morgan Healthcare Conference. However, Advent Health plans to build even more hospital beds to fortify its market share.”

Bob Herman What a hospital oligopoly looks like StatNews February 10, 2023

Notable Modern Healthcare Headlines Picked up Last Week

Modern Healthcare

Chartis: Rural hospitals financial hardships mount: The number of rural hospitals discontinuing obstetrics services increased 9% from 2019 to 2020, leaving nearly 220 communities without access to maternity care, according to data the Chartis Center for Rural Health published Tuesday.

  • More than 350 rural communities did not have access to related oncology care as of 2021, up 13% from 2020.
  • 43% of rural hospitals were operating in the red as of the end of 2022.
  • The median rural hospital operating margin was 1.8% last year, and facilities in states that expanded Medicaid under the Affordable Care Act outperformed those in non-expansion states.

Chartis Rural Health Safety Net Under Renewed Pressure as Pandemic Fades February 7, 2023


Study: Physicians with prior malpractice claim likely to repeat: “In this retrospective, case-control study including all 881 876 physicians licensed to practice in the US at the time of the study, physicians with 1 paid claim (regardless of specialty) were almost 4 times more likely to have 1 or more paid claims in the next 5 years compared with physicians with no prior paid claims. The likelihood of future claims rose monotonically with the number of prior claims and was unaffected by whether paid claims were publicly disclosed.”

Hyman et al Association of Past and Future Paid Medical Malpractice Claims JAMA Health Forum. 2023;4(2):e225436. doi:10.1001/jamahealthforum.2022.5436

Age, Race and Gender of Active U.S. Physicians in 2021:

 •  37.1% female
•  46.7% age 55 or older.
•  63.9% identified as White, 20.6% Asian, 6.9% Hispanic, and 5.7% Black/African American.

AAMC, January 2023

Study: Researchers evaluated mental health services in primary care settings: “We found that the proportion of visits that addressed mental health concerns increased from 10.7% of visits in 2006–07 to 15.9% by 2016 and 2018. Black patients were 40% less likely than White patients to have a mental health concern addressed during a primary care visit, and Hispanic patients were 40% less likely than non-Hispanic patients to have a mental health concern addressed during a primary care visit. These findings emphasize the need for payment and billing approaches (that is, value-based care models and billing codes for integrated behavioral health) as well as organizational designs and supports (that is, collocated therapy or psychiatry providers, availability of e-consultation, and longer visits) that enable primary care physicians to adequately address mental health needs.”

Rotenstein et al Adult Primary Care Physician Visits Increasingly Address Mental Health Concerns Health Affairs February 2023No Access

Study: Physician death rate spiked in 2020: Using data from the American Medical Association (AMA), researchers calculated excess deaths from March 2020 through December 2021 among US physicians.

  • From March 2020 through December 2021, there were 4511 deaths (representing 622 more deaths than expected) among a monthly mean of 785, 631 (8293.5) physicians. These physicians consisted of 34.7% females and 65.3% males aged 45 to 84 years. There were 43 excess deaths per 100 000 person-years.
  • There was a strong age gradient among active physicians providing direct patient care, with excess deaths per 100 000 person-years of 10 in the youngest group and 182 in the oldest group.
  • Among all active physicians, excess deaths peaked to over 70 in December 2020 and then had a rapid monotonic decrease in 2021.

Kiang et al Excess Mortality Among US Physicians During the COVID-19 Pandemic JAMA Intern Med. Published online February 6, 2023. doi:10.1001/jamainternmed.2022.6308

Prescription Drugs

Study: DTC ads highest for drugs with lower therapeutic benefit:  In this study of 150 prescription drugs with the highest US sales in 2020, a higher proportion of promotional spending allocated to direct-to-consumer advertising was associated with drugs rated as having lower added clinical benefit than for those having higher added clinical benefit (absolute 14.3% increase in proportion) and with total drug sales (absolute 1.5% increase in proportion for every 10% increase in sales). The 2020 median proportion of promotional spending allocated to direct-to-consumer advertising was 13.5%, median promotional spending, $20.9 million and median total sales, $1.51 billion.

DiStefano et al Association Between Drug Characteristics and Manufacturer Spending on Direct-to-Consumer Advertising JAMA. February 7, 2023 2023;329(5):386-392. doi:10.1001/jama.2022.23968

Study: Prices highest for drugs used in commercial coverage: Prices for physician-administered drugs among people with employer-sponsored insurance (ESI) have risen substantially over time. In this study, researchers compared unit prices and price growth in ESI and Medicare over 2016 through 2020 for physician-administered drugs with the highest use and those with the highest spending. Findings:

“Unit prices were substantially lower for nearly all of the top 10 drugs by use compared with the top spend drugs; however, ESI markups were higher. The ESI plans paid more than 30 times as much as Medicare per unit of midazolam and more than 20 times as much for ondansetron in 2020. Five other top use drugs had ESI prices more than 200% higher than Medicare prices (fentanyl citrate, propofol, saline solution, ketorolac tromethamine, dexamethasone). The ESI markups were not clearly associated with the presence of biosimilars or approval year.”

Comparison of Prices for Commonly Administered Drugs in Employer-Sponsored Insurance Relative to Medicare JAMA Health Forum. 2023;4(2): e225422. doi:10.1001/jamahealthforum.2022.5422