Last week, 35,000 gathered in Chicago to hear about the future of health information technologies at the HIMSS Global Health Conference & Exhibition where generative AI, smart devices and cybersecurity were prominent themes.
Yesterday, the Annual Meeting of the American Hospital Association convened. Its line-up includes some big names in federal health policy and politics along with some surprising notaries like Chris Wray, Head of the FBI and others. In tandem, a new TV ad campaign launched yesterday by the Coalition to Protect America’s Health Care, of which the AHA is a founding member to pressure Congress to avoid budget cuts to hospitals to “protect care for seniors”.
These events bracket what has been a whip-lash week for the U.S. healthcare industry…
- Throughout the week, the fate of medication-abortion mifepristone was in suspense ending with a Supreme Court emergency-stay decision late Friday night that defers prohibitions against its use until court challenges are resolved.
- At HIMSS last Monday, EHR juggernaut EPIC and Microsoft announced they are expanding their partnership and integrating Microsoft’s Azure Open AI Service into Epic’s EHR software. Epic’s EHR system will be able to run generative AI solutions through Microsoft’s Open AI Azure Service. Microsoft uses Open Ai’s language model GPT-4 capabilities in its Azure cloud solution.
- Thursday HHS posted data online showing who owns 6,000 hospices and 11,000 home health agencies that are reimbursed by Medicare.
- Bell-weather companies HCA (investor-owned hospitals), Johnson and Johnson (prescription drugs) and Elevance (health insurers) reported strong 1Q profits and raised their guidance to shareholders for year-end performance.
- And Monday, House Speaker Kevin McCarthy told an audience at the New York Stock Exchange that Republicans will agree to increase the $31.4 trillion debt-limit if it is accompanied by spending cuts i.e. a requirement that all “able bodied Americans without children” work to receive benefits like Medicaid, re-setting federal spending to 2022 levels and others.
Each of these is newsworthy. The partisan brinksmanship about the debt ceiling is perhaps the most immediately consequential for healthcare because it will draw attention to 2 themes:
Healthcare is profitable for some. Big companies and others with access to capital are advantaged in the current environment. Healthcare is fast-becoming a land of giants: it’s almost there in health insurance (the Big 7 in the US), prescription drugs (36 major players globally), retail drugstores (the Big 5), PBMs (the Big 4) and even the accountancies who monitor their results (the Big 4). By contrast, the hospital and long-term care sectors sectors remain fragmented though investor-owned systems now own a quarter of operations in both. Physicians and other clinical service provider sectors (physical therapy, dentistry, et al) are transitioning toward two options—corporatization via private equity roll-ups or hospital employment.
The 1Q earnings reported by HCA, J&J and Elevance last week give credence to beliefs among budget hawks that healthcare is a business that can be lucrative for some and expensive for all. That view aka “Survival of the Fittest” will figure prominently into the debt ceiling debate.
The regulatory environment in which U.S. healthcare operates is hostile because the public thinks it needs more scrutiny. 82% of U.S. adults think the health system puts its profits above all else. The public’s antipathy toward the system feeds regulatory activism toward healthcare.
At a federal level, the debt ceiling debate in Congress will be intense and healthcare cuts a likely by-product of negotiations between hawks and doves. In addition, government accountants and lawmakers will increase penalties for fraud and compliance suspecting healthcare’s ripe for ill-gotten gain and/or excess. Federal advocacy in each sector will be strained by increasingly significant structural fault-lines between non-profit and for profits, and public health programs that operate on shoestrings below the radar. Two committees of the House (Ways and Means and Energy and Commerce) and two Senate Committee’s) will hold public hearings on issues including not-for-profit hospitals consolidation, price transparency and others with unprecedented Bipartisan support for changes likely “uncomfortable” for industry insiders.
At a state level, matters are even more complicated: states are the gatekeeper for the healthcare system’s future. States will increasingly control the supply and performance criteria for providers and payers. Ballot referenda will address issues reflective of the state’s cultural and political values—abortion rights, public health funding, gun control, provider and prescription drug price controls, and many more.
My take
The upcoming debt ceiling debate comes at a pivotal time for healthcare because it does not enjoy the good will it has in decades past. The pandemic, dysfunctional political system and the struggling economy have taken a toll on public confidence. Long-term planning for the system’s future is subordinated to the near term imperative to control costs in the context of the debt ceiling debate.
The federal debt will hit its ceiling in June. Speaker McCarthy’s ‘Limit, Save, Grow Act’ would return the government’s discretionary spending to fiscal year 2022 levels, cap annual spending growth at 1% for a decade and raise the debt ceiling until March 31, 2024, or until the national debt increases by $1.5 trillion, whichever comes first. That means healthcare program cuts. That’s why this debt ceiling expansion is more than perfunctory: it’s an important barometer about the system’s future in the U.S. and how it MIGHT evolve:
In 8-10 years, it MIGHT be dominated by fewer players with heightened regulatory constraints. It MIGHT be funded by higher taxes in exchange for better performance. It MIGHT be restructured with acute services as a public utility. It might be a B2C industry in which employers play a lesser role and a national platform powered by generative AI and GPT4 enables self-care and interoperability. It MIGHT be an industry wherein public health and social services programs are seamlessly integrated with non-profit health systems. It MIGHT be built on the convergence of financing and delivery into regional systems of health. It MIGHT bifurcate into two systems—one public for the majority and one private for some who can afford it. It MIGHT replace the trade-off between community benefits and tax exemption. It MIGHT re-define distinctions between non-profit hospitals and plans with their predicate investor-owned operators, and so on.
No one knows for sure, but everyone accepts the future will NOT be a repeat of the past. And the resolution of the debt ceiling in the next 60 days will set the stage for healthcare for the next decade.
Paul
Resources
Coalition https://youtu.be/dhSeym0cPYo
Supreme Court Preserves Access to Mifepristone MedPage April 21, 2023
Kevin McCarthy Says House GOP Plans to Vote on Debt Limit, Spending Cuts Wall Street Journal April 17, 2023 www. www.wsj.com/articles/mccarthy-says-house-gop-plans-to-vote-on-debt-limit-spending-cuts
Republican states could be hit hardest by McCarthy’s proposed spending cuts Reuters April 17, 2023 www.reuters.com/world/us/republican-states-could-be-hit-hardest-by-mccarthys-proposed-spending-cuts
Quotable from Last Week
Re: nurse shortage, hospital staffing apps: “Hospitals are joining the gig economy. Some of the nation’s largest hospital systems including Providence and Advocate Health are using apps similar to ride-hailing technology to attract scarce nurses. An app from ShiftKey lets workers bid for shifts. Another, CareRev, helps hospitals adjust pay to match supply, lowering rates for popular shifts and raising them to entice nurses to work overnight or holidays.
The embrace of gig work puts hospitals in more direct competition with the temporary-staffing agencies that siphoned away nurses during the pandemic. The apps help extend hospitals’ labor pool beyond their employees to other local nurses who value the highly flexible schedules of gig work.
The shift is among many ways hospitals are revamping hiring, schedules and pay to give nurses more control and to fill staffing gaps created by persistent labor shortages. Vacancies are straining many hospitals’ operations despite recent hiring gains at hospitals and reports of softer demand from some temporary-staffing companies.”
Melanie Evans “Nurse Shortage Pushes Hospitals into the Gig Economy” Wall Street Journal April 18, 2023 https://www.wsj.com/articles/nurse-shortage-hospitals-hiring-gig-economy
Re: lack of systemness in healthcare: “I think the challenge we have is the U.S. healthcare system is not really a system. We’re a collection of solutions that are in the moment and we leave consumers to figure out what they need when they need it. So, there’s no true navigation…I think part of the quest and part of this conversation around disruptive innovation is, how do we break apart the current system and put it back together in a way that assures that as healthcare consumers look to stay healthy, or take care of themselves when they’re sick, they know what the front door looks like and how to access the front door.”
Andrea Walsh, president and CEO of HealthPartners, at HIMSS April 19, 2023 insurance company https://medcitynews.com/2023/04/the-healthcare-system-isnt-a-system-health-exec-says.
Re: greed embedded in U.S. healthcare: “At the heart of US health care lies a paradox: Thanks to high and rising costs, this enterprise, the fundamental purpose of which is to improve well-being, has become an important cause of suffering. Health professionals are now part of a system that increasingly prioritizes financial interests—some would say greed—over the public good. To protect our patients and to preserve our legitimacy, we need to acknowledge the harms and act to address them. The question is how.”
Elliott S. Fisher George Isham “Addressing Greed in Health Care: If Not Us, Who? And How?” Health Affairs April 18, 2023 www.healthaffairs.org/content/forefront/addressing-greed-health-care-if-not-us-
Re: workforce demographics: “Only 8% of federal-government employees are under the age of 30, compared with about a third who are 55 or older… The lack of interest in these jobs is adding to a widespread talent shortage that extends beyond the federal level, affecting government operations at the state level.
What might keep Gen Z from getting on the federal government’s payroll? Maybe it has to do with a general mistrust of government officials, or maybe they want their work to have an impact on the world but think either a private-sector or not-for-profit job helps them do that better than a government job wrapped in bureaucratic red tape. Maybe they just lack awareness that government jobs exist…Or maybe it just comes down to the salary. Government budgets are limited, making it difficult to increase public-sector wages so that they are competitive with the private sector. “
Bridging the talent gap in state government post pandemic March 16, 2023 McKinsey www.mckinsey.com/industries/public-and-social-sector/our-insights/bridging-the-talent-gap-in-state-government-postpandemic
Re: AI in healthcare: “Vertical applications in AI & ML address specific problems within industries and are not always AI first. Many startups in this category design a solution to an industry problem using software and integrate AI & ML to optimize some part of their product. These solutions typically differentiate based on the quality of the dataset used to train the industry-specific model and the industry expertise of the data scientists identifying decision-making areas that can be enhanced by AI & ML models. As a result, many of these startups help automate specific functions within their industry
but have limited ability to cross apply their AI & ML to other industries.
AI in healthcare: Includes technologies that leverage AI & ML to improve medicine and the
provision of care. Product categories include AI-based drug discovery, clinical decision support,
genetic analytics, healthcare administration, and personal health.”
Artificial Intelligence & Machine Learning Overview Pitchbook April 11, 2023 https://files.pitchbook.com
Re: banking parallels to healthcare: “America’s banks are worth only about their combined book value, having traded at nearly a 40% premium at the start of the year. The likely result of their low valuations, combined with a landscape in which size matters, is a tried-and-tested response to banking crises over the past four decades: consolidation.
America has 4,700 banks and savings institutions, or one for every 71,000 residents. To observers in the EU, which has only one bank for every 85,000 people, that seems excessive. Yet it is a historical low: in 1984, when comparable data begin and the population was much smaller, there were nearly four times as many institutions. Since then, the industry has seen almost continuous consolidation…
The most important changes to the market’s structure are likely to be among banks which are close to significant regulatory thresholds. There are 20 banks which are between $100bn and $250bn in size. If the penalty for crossing the $250bn threshold is reduced, many may find it advantageous to merge. Doing so would allow them to spread the growing costs of complying with regulation over a bigger business, while making it even more likely that their depositors would be bailed out in a crisis. Regulators would probably look favorably on tie-ups that swallowed up zombie banks which might otherwise “gamble for resurrection” by taking big risks—a tactic that made the S&L crisis in the 1980s much worse. If so, then the latest crisis will provide the latest impetus for banks to get bigger.”
Why America will soon see a wave of bank mergers The Economist April 20,2023 www.economist.com/leaders/2023/04/20/why-america-will-soon-see-a-wave-of-bank-mergers
Hospitals
Study: hospital price transparency: Examining Turquoise Health price data for 70 shoppable services reported by 2,379 hospitals as of September 9, 2022 by, Johns Hopkins’ researchers found.
- On average, cash prices and commercial negotiated rates were 64% and 58% of the corresponding chargemaster prices for the same procedures at the same hospital and in the same service setting, respectively.
- Cash prices were lower than the median commercial negotiated rates in 47% of instances, and most likely so at hospitals with government or nonprofit ownership, located outside of metropolitan areas, or located in counties with relatively high uninsurance rates or low median household incomes.
- “Hospitals with stronger market power were most likely to offer cash prices below their median negotiated rates, whereas hospitals in areas where insurers had stronger market power were less likely to do so.”
Wang et al The Relationships Among Cash Prices, Negotiated Rates, And Chargemaster Prices For Shoppable Hospital Services April 2023 https://doi.org/10.1377/hlthaff.2022.00977
Study: Rural hospital solvency 2010-2018: Researchers analyzed the rate of hospital closures and mergers in predominantly rural markets during the period 2010–18, focusing on hospitals that were unprofitable at baseline. Findings:
- A minority of unprofitable hospitals (7%) closed. A larger share (17%) merged, most commonly with organizations from outside of their local geographic market. Most unprofitable hospitals (77%) continued to operate through 2018 without closure or merger and half of these hospitals returned to profitability.
- At the market level, 22% of markets served by unprofitable hospitals lost a competitor to closure or within-market merger. Out-of-market mergers affected 33%of markets with an unprofitable hospital. Overall, our results suggest that rural markets are experiencing meaningful rates of hospital closures and mergers, yet many hospitals have survived despite poor financial performance.
Carroll et al Hospital Survival In Rural Markets: Closures, Mergers, And Profitability Health Affairs April 2023https://doi.org/10.1377/hlthaff.2022.01191
KFF: Hospital Inpatient expenses per day by ownership category: Notably, ranges are wide and the median expenses per day in non-profit hospitals are 24% higher than for-profit and 9% high than public hospitals:
- Nonprofit hospitals: $3,013/day (Range: $1584 in SD to CA $4568 in CA)
- For-profit hospitals: $2,296/day (Range: $1185 in WV to $4397 in NE)
- State/local government hospitals: $2,742/day (Range: $973 in MT to $4884 in OR)
Hospital Adjusted Expenses per Inpatient Day by Ownership www.kff.org/health-costs/state-indicator/expenses-per-inpatient-day-by-ownership
Tech-enabled home care proposed to ease Medicare spending: Per proposed legislation from Reps. Adrian Smith (R-Neb.) and Debbie Dingell (D-Mich.) backed by Moving Health Home, a coalition of tech-enabled home care companies including Ascension, Intermountain and dialysis provider DaVita.Legislation that would…
- Create a new Medicare benefit allowing certain beneficiaries ineligible for Medicaid to have a home health worker for up to 12 hrs./week
- Facilitate house calls by paying doctors monthly in place of the existing fee-for-service structure
- Broaden reimbursement for home-based services, including dialysis, lab tests and infusions
- Task HHS with studying whether other procedures could move to the home, such as X-rays
Moving Health Home Coalition www.movinghealthhome.org
HCA: Highlights of 1Q 2023: Highlights from Friday’s announcement:
- Revenues totaled $15.591 billion
- Net income attributable to HCA Healthcare, Inc. totaled $1.363 billion, or $4.85 per diluted share
- Adjusted EBITDA totaled $3.172 billion
- Cash flows from operating activities totaled $1.803 billion
- Same facility admissions increased 4.4 % and same facility equivalent admissions increased 7.5%
The company raised its guidance for 2023, projecting annual net income to fall between $4.75 billion and $5.16 billion, compared with the $4.525 billion and $4.895 billion range projected earlier this year. It also estimates capital spending will reach $4.6 billion in 2023, excluding acquisitions. Last year, it was $4.2 billion.
HCA Healthcare Reports First Quarter 2023 Results April 21, 2023 https://investor.hcahealthcare.com/news/news-details/2023/HCA-Healthcare-Reports-First-Quarter-2023-Results
Health Insurance
CMS issues final rule on exchange plans: Last Monday, the Centers for Medicare and Medicaid Services (CMS) issued the 2024 Notice of Benefit and Payment Parameters final rule that…
- requires insurers on the Affordable Care Act exchanges to include substance abuse and mental health providers in their plans, among other things.
- lifts limits on the number of plan options exchange insurers can offer & standardization of formularies: Carriers can have 16 offerings, or 4 non-standard plans each for the bronze, silver, gold and platinum categories, excluding benefits such as dental and vision. Note: the number of plans available to consumers has ballooned from 27 in 2019 to 131 for 2023: CMS said it expects the final rule to cut the average number of plans available on the exchanges to 90.5 next year.
- decreases the fees insurers must pay to market their products on federal and state-based exchanges.
- allows state-based marketplaces to implement a special enrollment periods for enrollees losing Medicaid or Children’s Health Insurance Program coverage with a 60-day window prior and 90-day window after losing coverage to enroll in marketplace plans. The effective coverage date would be the first day of the following month.
- requires carriers to submit their plans’ marketing names for federal or state approval and tightens marketing activities i.e., brokers’ sales tactics, increase navigators’ enrollment flexibilities, reduce insurers’ exchange fees et al
Non Tepper, Victoria Turner “CMS finalizes ACA plan limits, health equity provisions” Modern Healthcare April 17, 2023 www.modernhealthcare.com
Elevance Health profits up despite employer client losses: Wednesday, the company, which operates Blue Cross Blue Shield plans in 14 states, on Wednesday reported first-quarter earnings of $2.8 billion, or $8.30 per share, a 16.6% year-over-year increase. Quarterly revenue increased 10.5% to $41.8 billion, driven by membership growth among exchange, Medicaid and Medicare Advantage customers, premium increases and higher pharmacy scripts revenue from CarelonRx, its pharmacy benefit manager business.
Membership increased to 48.1 million customers, up 2.8% despite declines in business customers. Enrollment in its commercial, risk-based business declined 5.7% to 3.7 million and its fee-based employment business remained flat at 20.2 million members.
Elevance Health Reports Q1 2023 Earnings April 19, 2023 www.elevancehealth.com/newsroom/elv-quarterly-earnings-q1-2023
Physicians
MedScape: Physician income up 18% since 2018: Medscape surveyed 10,011 physicians across more than 29 specialties about their income, work hours, job satisfaction and more from Oct. 7, 2022, to Jan. 17, 2023.Highlights:
- Physicians on average make $352,000 annually, with primary care physicians making $265,000 and specialists making $382,000.
- 65% say they’ll continue to see new Medicaid/Medicaid patients, 22% are unsure and 13% are considering other options
- Median work week for all physicians is 50 hours which includes patient care, documentation and administrative responsibilities (per BLS, national avg is 38.7 hrs./week)
- 27% would not choose medicine as their career if given the opportunity
- Self-employed physicians earn more than employed physicians: Median $374K to $344K
- Physicians spend 15.5 hours per week on paperwork and administration: nine hours are on EHR documentation.
Medscape Physician Compensation Report 2023:April 14, 2023 www.medscape.com/slideshow/2023-compensation-overview
Prescription Drugs
Senate Finance Proposes PBM Reforms: Last Thursday, the chair (Ron Wyden D-OR) and ranking Republican (Mike Crapo R-ID) on the Senate Finance Committee unveiled reforms to pharmacy benefits managers business practices: key elements:
- Detach PBM discounts from retail drug prices
- Allow Medicare beneficiaries to get the benefit of rebates and discounts that PBMs negotiate
- Facilitate access to prescriptions filled at any pharmacy willing to be part of insurance companies’ networks.
- Increase transparency in PBM relationships with insurers.
John Wilkerson Powerful Senate duo drops a bipartisan PBM reform plan StatNews April 20, 2023 /www.statnews.com/2023/04/20/senate-finance-pbm-reform
Public Health
CDC: Dietary supplement use: The researchers from the CDC’s National Center for Health Statistics examined dietary supplement use from 2017 to March 2020. Findings:
- 5% of adults said they used at least one, dietary supplement in the last month and 34.8% of children and adolescents had– an increase from 57.6% of adults in 2018 although numbers among kids have stayed about the same.
- 18% of adults took vitamin D, the next most-popular supplement.
Note: In 2022, the US Preventive Services Task Force, a panel of independent experts that creates guidelines around health practices, found “insufficient evidence” to recommend for or against the use of vitamins A,C or E; multivitamins with folic acid; or antioxidant combinations for the prevention of cancer or cardiovascular disease for a healthy non-pregnant adult.
A 2022 JAMA lit review of 84 studies found that multivitamin use had little or no benefit in preventing cancer, heart and lung disease or death. They provided only a small benefit for numbers of cancer cases, although the evidence was limited. The USPSTF said there was enough evidence in that study to recommend against the use of beta carotene supplements, which the body turns into vitamin A, to prevent cardiovascular disease or cancer because of a possible higher risk of mortality, cardiovascular mortality and lung cancer.
National Health Statistics Reports, April 18, 2023 www.cdc.gov/nchs/data/databriefs
Health Economy
Re: DEI: “Women are strongly represented at the entry level in healthcare but are still underrepresented in more senior roles. Women account for 75% of entry-level jobs in the sector but just 32% of C-suite positions. For women of color, representation at the C-suite level is just 4%.”
Gretchen Berlin “Leveling up in healthcare” McKinsey April 20, 2023 ttps://www.mckinsey.com/featured-insights
Altarum: health prices up driven by drugs, nursing home sectors: Per Altarum’s monthly Health Sector Economic Indicators (HSEI) April 2023 report:
“Private payer health care services price growth hits a new record high”
- The overall Health Care Price Index (HCPI) increased by 3.1% year over year in March, up from the slightly revised 2.8% growth rate observed a month prior in February.
- Prices for health care services paid for by private insurance increased by 4.5% in March (up from 4.1% in February and 3.5% in January), while Medicare price growth was flat year over year.
- Economywide inflation slowed again in March, as overall CPI growth fell from 6.0% to 5.0% and PPI price growth fell from 4.9% to 2.7%. Economywide services (less healthcare) inflation fell for the first time since July 2021 (from 8.3% in February to 8.0% in March).
- Among the major health care categories, prices for nursing home care (7.0%) grew fastest, followed by dental services (6.8%), while physician services (0.9%) price growth was the slowest.
“National health spending is holding at 17.2% of GDP”
- In February 2023, national health spending grew by 4.9%, year over year. Neglecting government subsidies, spending on personal health care increased by 7.0%, but that growth was dampened by a decline in federal government support, especially to public health activities.
- Neglecting government subsidies, spending on nursing home care (10.6%) and prescription drugs (9.5%) grew fastest in February, while physician and clinical services spending increased the least (4.3%).
- Health spending in February 2023 accounted for 17.2% of nominal GDP and has hovered around that rate since August 2022.
- Nominal GDP in February 2023 was 7.3% higher than in February 2022, as GDP growth continues to outpace health spending growth.
Health Sector Economic Indicators (HSEI) April 2023 https://altarum.org/publications/april-2023-health-sector-economic-indicators-briefs
