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The Keckley Report

Thinking Long-Term: Changes in Five Domains will Impact the Future of the U.S. System but Most are Not Prepared

By July 31, 2023No Comments

The U.S. health system is big and getting bigger. It is labor intense, capital intense, and highly regulated. Each sector operates semi-independently protected by local, state and federal constraints that give incumbents advantages and dissuade insurgents.

Competition has been intramural: growth by horizontal consolidation within sectors has been the status quo for most to meet revenue and influence targets. In tandem, diversification aka vertical consolidation and, for some, globalization in each sector has distanced bigger players from smaller:

  • insurers + medical groups + outpatient facilities + drug benefit managers
  • hospitals + employed physicians + insurance plans + venture/private equity investing in start-ups
  • biotech + pharma + clinical data warehousing,
  • retail pharmacies + primary & preventive care + health & wellbeing services + OTC products/devices
  • regulated medical devices + OTC products for clinics, hospitals, homes, workplaces and schools.

The landscape is no man’s land for the faint of heart but it’s golden for savvy private investors seeking gain at the expense of the system’s dysfunction and addictions—lack of price transparency, lack of interoperability and lack of definitive value propositions.

What’s ahead? Everyone in the U.S. health system is aware that funding is becoming more scarce and regulatory scrutiny more intense, but few have invested in planning beyond tomorrow and the day after. Unlike drug and device manufacturers with global markets and long-term development cycles, insurers and providers are handicapped. Insurers respond by adjusting coverage, premiums and co-pays annually. Providers—hospitals, physicians, long-term care providers and public health programs– have fewer options. For most, long-range planning is a luxury, and even when attempted, it’s prone to self-protection and lack of objectivity.

Changes to the future state of U.S. healthcare are the result of shifts in these domains: they apply to every sector in healthcare and define the context for the future of each organization, sector and industry as a whole:

  • The Clinical Domain: How health, diseases and treatments are defined and managed where and by whom; how caregivers and individuals interact; how clinical data is accessed, structured and translated through AI enabled algorithms; how medication management and OTC are integrated; how social determinants are recognized and addressed by caregivers and communities: and so on. The clinical domain is about more than doctors, nurses, facilities and pills.
  • The Technology Domain: How information technologies enable customization in diagnostics and treatments; how devices enable self-care; how digital platforms enable access; how systemness facilitates integration of clinical, claims and user experience data; how operating environments shift to automation lower unit costs; how sites of care emerge; how caregivers are trained and much more. Proficiency in the integration of technologies is the distinguishing feature of organizations that survive and those that don’t. It is the glue that facilitates systemness and key to the system’s transformation.
  • The Regulatory Domain: How affordability, value, competition, choice, healthcare markets, not-for-profit and effectiveness are defined; how local, state and federal laws, administrative orders by government agencies and executive actions define and change compliance risks; how elected officials assess and mitigate perceived deficiencies in a sector’s public accountability or social responsibility; how courts adjudicate challenges to the status quo and barriers to entry by outsiders/under-served populations; how shareholder ownership in healthcare is regulated to balance profit and the public good; et al. Advocacy on behalf of incumbents geared to current regulatory issues (especially in states) is compulsory table stakes requiring more attention; evaluating potential regulatory environment shifts that might fundamentally change the way a system is structured, roles played, funded and overseen is a luxury few enjoy.
  • The Capital Domain: how needed funding for major government programs (Medicare, Medicaid, Children’s, Military, Veterans, HIS, Dual Eligibles et al) is accessed and structured; how private investment in healthcare is encouraged or dissuaded; how monetary policies impact access to debt; how personal and corporate taxes impact capitalization of U.S. healthcare; how value-based programs reduce unnecessary costs and improve system effectiveness; how the employer tax exemption fares long-term as employee benefits shrink; how U.S. system innovations are monetized in global markets; how insurers structure premiums and out of pocket payments: et al. The capital domain thinks forward to the costs of capital it deploys and anticipated returns. But inputs in the models are wildly variable and inconsistent across sectors: hospitals/health systems vs. global private equity healthcare investors vs. national insurers’ capital strategies vary widely and each is prone to over-simplification about the others.
  • The Consumer Domain: how individuals, households and populations perceive and use the system; how they assess the value of their healthcare spending; how they vote on healthcare issues; how and where they get information; how they assess alternatives to the status quo; how household circumstances limit access and compromise outcomes; et al. The original sin of the U.S, health system is its presumption that it serves patients who are incapable/unwilling to participate effectively and actively in their care. Might the system’s effectiveness and value proposition be better and spending less if consumerization became core to its future state?

For organizations operating in the U.S. system, staying abreast of trends in these domains is tough. Lag indicators used to monitor trends in each domain are decreasingly predictive of the future. Most Boards stay focused on their own sector/subsector following the lead of their management and thought leadership from their trade associations. Most are unaware of broader trends and activities outside their sector because they’re busy fixing problems that impact their current year performance. Environmental assessments are too narrow and short-sighted. Planning processes are not designed to prompt outside the box thinking or disciplined scenario planning. Too little effort is invested though so much is at risk.

It’s understandable. U.S. healthcare is a victim of its success; maintaining the status quo is easier than forging a new path, however obvious or morally clear.  Blaming others and playing the victim card is easier than corrective actions and forward-thinking planning.

In 10 years, the health system will constitute 20% of the entire U.S. economy and play an outsized role in social stability. It’s path to that future and the greater good it pursues needs charting with open minds, facts and creativity. Society deserves no less.


PS: In the sections below, there’s evidence of the need to think forward: regulatory constraints on PBMs and hospitals, media attention to the role of private equity in healthcare; a new report on equitable access to healthcare et al. Unless uniquely protected against unwanted competition, regulatory constraints or immune to eroding public support, every organization in healthcare is impacted.


Re: consumer and healthcare: “People are angry about healthcare. You might think this is a relatively small group caught up in individual tragic situations but not, on the whole, consequential. People whose plights should be addressed individually. You’d be wrong. It’s more than that…

Site neutral payments, 340B, transparency regulation, rate caps, consolidation restrictions, “hidden” fees. The efforts to tackle the cost of care are all over the map, forcing providers into defensive battles on multiple fronts in multiple places. It’s the source of that dreaded voicemail you don’t want to get from the New York Times, saying “Explain yourself, please.”

No political party loses by appearing to tackle the high cost of healthcare. It’s a rare bipartisan safe space; it polls well, in a season when little else does. Sensing blood in the water, there’s even fighting inside the family…”

David Jarrard “The High Cost of the High Cost of Care” July 29, 2023

Re: Employer, insurer negotiations “An uncertain economic environment has set the stage for a tense contract renegotiation cycle between health insurance companies and employers. Health insurers are pitching an average 10.9% increase in small group premiums across the 12 states that have released insurers’ proposed rates so far, according to a report this month by the Stephens Inc. investment bank…For-profit insurers are proposing larger premium increases than nonprofit carriers, the Stephens analysis said. Cigna has proposed the highest average increase, of nearly 23% across all markets surveyed, the report said. During the first six months of 2023, there have been 41 public contract disputes between providers and insurers, more than double the 15 reported during the same period last year, according to data compiled by FTI Consulting. “

Nona Tepper “Stage set for ‘bloodbath’ insurer-employer contract negotiations” Modern Healthcare July 26,

Re: private equity dry powder: “PE dry powder stands at $1.35 trillion, just 9.7% shy of its all-time high. An even larger cash pile is on the books of corporations. In the US, cash holdings have reportedly surpassed $5.8 trillion inclusive of reserves held overseas.

While only a portion of this is earmarked for strategic investments and acquisitions, untapped borrowing capacity and stock value easily compensate for the rest.”

“Why M&A volume and value are diverging—and prices aren’t in sync with public markets” Pitchbook July 29, 2023

Re: value-based care: “Value-based healthcare, the holy grail of American medicine, has three parts: excellent clinical quality, convenient access and affordability for all. And as with the holy grail of medieval legend, the quest for value-based care has been filled with failure…System-ness is the effective and efficient coordination of healthcare’s many parts: outpatient and inpatient, primary and specialty care, financing and care delivery, prevention and treatment.

By bringing these disparate pieces together within a well-functioning system, healthcare providers have the opportunity to maximize clinical outcomes, weed out waste, lower overall costs and provide greater levels of convenience and access.

Few organizations in the U.S. can or do offer these system-based improvements. Doing so requires skilled physician leadership, a shift in the financial model and a willingness to accept risk.”

Robert Pearl “Retail Giants Vs. Health Systems: Fight Will Come Down To ‘Systemness’” Forbes July 24, 2023

Re: Hospital CEO compensation: While organization size is the most fundamental factor in the determination of CEO pay, there are some notable pay differences that can be observed across industries, as well.  Median pay was mostly similar, hovering around the $100,000 mark, with the most notable exceptions being the “Universities,” “Hospitals,” and “Religion” bands. Median CEO pay in the “Universities” band was more than two and half times that mark, while median CEO pay in the “Hospitals” band ($400,284) was more than four times that value. The “Religion Related” industry band had the lowest median CEO pay at just above $71,000…. Universities” ranks second highest of the industry bands, with a mean pay of nearly $400,000. “Hospitals,” meanwhile, is by far the largest outlier in this category, with a mean pay of just under $700,000. The very high standard deviation in the “Hospitals” industry band suggests that there are likely some CEOs with very high pay, elevating the mean pay for that industry band as a whole…”

Economic Research Institute 2023 CEO Pay Trends in the Nonprofit World

Re: Corporate Board expectations: “As has been the case for the past few years, sector plays a key part in determining the level of optimism among board members. In July, our data shows healthcare directors as most confident in their outlook, forecasting conditions for business 12 months from now to be 7.3 out of 10.

Not far behind are directors in the industrials sector (7.2/10) and financial services directors (7.1)—the only two other groups where the outlook exceeds the average across sectors. At the other end of the scale, REIT directors offered the lowest forecast, 5.6/10, followed by directors in the consumer staples sector (6.0) and energy directors (6.2). Board members in the technology sector were on par with the average, predicting conditions to be 6.8 out of 10 by this time next year.”

Director Optimism Climbs to Highest Level in Two Years NACD July 2023

Re: food as medicine: “Proper nutrition is a crucial yet often underappreciated aspect of the prevention and management of chronic health conditions, and the concept of food as medicine has been gaining momentum due to a confluence of factors: the success of pilot food prescription programs, explicit government support, early adoption by payviders, and the rise of personalized nutrition. A food-as-medicine approach is especially relevant for those with a chronic health condition—nearly half of the US population—and could provide an avenue for underserved populations to access healthy, medically tailored foods…

Though there is clear evidence that proper diet and nutrition can prevent and reverse health conditions, it is another matter for food-as-medicine programs to have scientific, clinical backing and become part of the standard of care. There is a necessity for additional randomized, controlled studies of food-as-medicine programs; academic and scientific research to date has identified meaningful health and cost benefits…

Medicaid-sponsored food programs by state: Medicaid-sponsored food programs are currently available in four states (Arkansas, Massachusetts, Oregon, and California), while five others (Delaware, Maine, New Mexico, New York, and Washington) are in the process of obtaining federal waiver approval for their respective programs.”

Food as Medicine: An Overhyped Concept or the Next Pitchbook July 27, 2023

Re: site neutral payments: “Each year millions of patients visit their doctors’ offices for a variety of routine services. But in recent years more Americans are being charged as if they had visited a hospital. This is because the doctor’s office billing them is pretending to be a hospital.

More Americans than ever are paying these dishonest fees as large hospitals buy up the practices of local physicians. A report by the Physician Advocacy Institute found that the share of hospital-owned physician practices more than doubled, from 14% to 31%, between 2012 and 2018. By 2020 more than half of physicians worked directly for a hospital or at a physician practice owned by a hospital, according to the American Medical Association.

As a result, hospitals’ exorbitant facility fees have driven up the cost of outpatient care…These bipartisan reforms would deliver hundreds of billions in savings for families. Site-neutral payments would save taxpayers more than $153 billion in Medicare spending over the next decade and also substantially reduce premiums and cost-sharing for Medicare beneficiaries by $94 billion, according to CRFB. In total, these changes could save patients and taxpayers between $346 billion and $672 billion over the next decade.

Large hospital systems have exploited our nation’s outdated billing systems to foist gigantic bills on Americans. Bringing much-needed transparency in hospital billing will deliver more affordable care and put patients back in control.”

Bobby Jindal, Charlie Katebi “Doctor’s Office Care at Hospital Prices” July 26, 2023

Re: site neutral payments in hospitals: “Three House committees — Energy and Commerce, Education and the Workforce, and Ways and Means — have passed their own legislation that eliminates payment differences for drug administration services despite the fact that hospital outpatient departments care for everyone, maintain emergency stand-by services, take care of more complicated cases, and have to meet tougher regulatory requirements than other sites of care. This comes on top of the fact that Medicare already reimburses for this care at levels that are less than the cost of delivering the service to patients.

The Senate Committee on Health, Education, Labor and Pensions also is considering legislation that would decrease hospital reimbursements through site-neutral payment policies in the commercial sector by banning the use of facility fees and dictating reimbursement rates between payers and hospitals.

When the House and Senate return to Washington in September, it’s likely that they will continue to press forward with their attempts to implement site-neutral legislation.”

Rick Pollack AHA Today July 28, 2023

Re: employer tax exemption: “Imagine yourself in a bar…where a pickpocket takes money out of your wallet, and with it buys you a glass of chardonnay. Although you would have preferred a pinot noir, you decide not to look that gift horse in the mouth and thank the stranger profusely for the kindness, assuming he paid for it. Most economists believe that employer‐​based health insurance is an analogue of this bar scene.”

Michael Cannon “The Original Sin of U.S. Health Policy” July 24, 2023

Re:  Out of pocket caps: Despite promising aspects, closer inspection of out-of-pocket caps reveals potential unintended consequences…But an even greater inequity is generated by the financing of out-of-pocket caps: US health insurance systems pay for such expenditures by uniformly raising premiums, other cost sharing, or taxes. Among individuals covered by employer-sponsored health insurance or Medicare, these increases burden lower-income beneficiaries more than high-income beneficiaries. Compounding this, lower-income patients often use high-value services less than their higher-income counterparts (even after services have been exempted from cost sharing), while maintaining use of expensive high-acuity care such as emergency department visits. Therefore, when out-of-pocket caps are applied uniformly across the income distribution, lower-income populations experience greater financial burden while cross-subsidizing high-value care for higher-income patients.

Out-of-pocket cost caps enhance health care access and quality but could lead to unintended consequences. Lower-income populations experience greater financial burden than high-income populations when premiums increase to finance capped services, yet typically use capped services less. In addition to this regressive cross-subsidization, out-of-pocket cost caps could contribute to inflation and distract policy makers from the critical task of lowering actual health care prices. Expanding the prevalence of income-proportional health plans or implementing equitable out-of-pocket caps could minimize unfair financial burdens while optimizing access to high-value services.

  1. Frank Wharam, MD, MPH1,2; Meredith B. Rosenthal, PhD3 The Increasing Adoption of Out-of-Pocket Cost Caps Benefits, Unintended Consequences, and Policy Opportunities JAMA. Published online July 27, 2023. doi:10.1001/jama.2023.9455

Re: hospital financial stability: “Not all hospitals are in financially good shape, and I think what you’re going to see more and more is a dynamic within the hospital industry … [with] some of the less fortunate hospitals beginning to point fingers at the more fortunate hospitals”

Mark Miller, executive vice president of health care at Arnold Ventures “Hospitals are in the hotseat for their billing practices” Axios July 26, 2023

Federal Reports on U.S. Economy from Last Week

  • Bureau of Economic Analysis: the U.S. gross domestic product (GDP) grew by a 2.4% annualized rate in the second quarter–up from the 2% annualized GDP growth recorded during the first three months of 2023
  • Federal Reserve: The unanimous decision to raise the benchmark federal-funds last week to a range between 5.25% and 5.5% marks the 11th rate hike since March 2022 when it lifted rates from near zero bringing the rate to a 22-year high. Recession fears are waning for 2023, but the Federal Reserve Bank of New York projects a 71% chance of recession by May 2024.
  • Commerce Department: Consumer spending grew at an annual rate of 1.6% in the second quarter, down from 4.2% growth in the first quarter. Household outlays account for the bulk of economic activity and were responsible for nearly half of the total rise in GDP.
  • Labor Department: Initial claims, a proxy for layoffs, declined by 7,000 last week to a seasonally adjusted 221,000– a historically low level that matches the 2019 average when the labor market was also strong.

DC Regulatory Activity, Congressional Actions from Last Week

White House:

  • Proposed rule requiring mental health coverage by insurers: In introducing its yet to be released proposed rule last week, White House domestic policy adviser Neera Tanden argued that insurers deliberately make it hard for their subscribers to access mental health care from providers who take their insurance, forcing patients to pay out of pocket. The administration’s proposed rules would require insurers to set up networks and coverage-decision mechanisms for mental health care that are equivalent to those for physical health.


CMS FY24 Payment Final Rules:

  • Hospice payments final rule: CMS finalized a 3.1% ($780 million) net increase to FY 2024 payments as compared with FY 2023. This update includes a 3.3% market basket, reduced by a 2% productivity adjustment. CMS also finalized an updated payment cap per patient of $33,494.01.

Agency Reports

Commission Report re: Health Equity: “Health equity is the state in which everyone has a fair opportunity to attain full health potential and well-being, and no one is disadvantaged from doing so because of social position or any other socially defined circumstance…

Recommendation 13 (of 36): The Departments of Health and Human Services, Defense, Veterans Affairs, Homeland Security, and Justice, as federal government purchasers and direct providers of health care, should undertake strategies to achieve equitable access to health care across the life span for the individuals and families they serve in every community. These strategies should prioritize access to effective, comprehensive, affordable, accessible, timely, respectful, and culturally appropriate care that addresses equity in the navigation of health care… P 23

National Academies of Sciences, Engineering, and Medicine. 2023. Federal Policy to Advance Racial, Ethnic, and Tribal Health Equity. Washington, DC: The National Academies Press.


CB Insights: Global digital health funding down: “In Q2’23, global digital health funding slipped for the sixth straight quarter, while deals reached an 8-year low. However, investors continue to back promising startups, with Q2 seeing upticks in early-stage deal sizes and mega-round deals.” Highlights:

  • Global digital health funding ticked down 3% QoQ, from $3.5B in Q1’23 to $3.4B in Q2’23. Although digital health funding has remained relatively flat over the past 3 quarters, Q2’23 still saw funding reach its lowest level since Q3’17.
  • Digital health deals dropped 25% QoQ, from 463 in Q1’23 to 348 in Q2’23. Deal count reached its lowest level since Q2’15, 8 years ago

CB Insights

Study: Private equity investing in healthcare impact: The BMJ systematic review is based on 55 studies that address the effects of private equity buyouts in health care globally (47 in the U.S.). Findings.

“Nursing homes were the most commonly studied healthcare setting (n=17), followed by hospitals and dermatology settings (n=9 each); ophthalmology (n=7); multiple specialties or general physician groups (n=5); urology (n=4); gastroenterology and orthopedics (n=3 each); surgical centers, fertility, and obstetrics and gynecology (n=2 each); and anesthesia, hospice care, oral or maxillofacial surgery, otolaryngology, and plastics (n=1 each).

Across the outcome measures, PE ownership was most consistently associated with increases in costs to patients or payers. Additionally, PE ownership was associated with mixed to harmful impacts on quality. … In some instances, PE ownership was associated with reduced nurse staffing levels or a shift towards lower nursing skill mix. No consistently beneficial impacts of PE ownership were identified.

Conclusions Trends in PE ownership rapidly increased across almost all healthcare settings studied. Such ownership is often associated with harmful impacts on costs to patients or payers and mixed to harmful impacts on quality. Owing to risk of bias and frequent geographic focus on the US, conclusions might not be generalizable internationally.”

Borsa et al “Evaluating trends in private equity ownership and impacts on health outcomes, costs, and quality: systematic review” BMJ 2023; 382 doi: (Published 19 July 2023) Cite this as: BMJ 2023;382:e075244

Analysis: Biotech sector instability: Of the 26 biotech companies departing the Nasdaq in 2023, 13 were acquired and 13 either declared bankruptcy, liquidated, or merged into a privately held firm, according to Stifel’s latest sector update. Biotech is up about 2% for the year, following a massive drop in 2022. And the number of biotech companies with a negative enterprise value — meaning their shares are worth less than their cash reserves — has fallen from an October high of 230 to 165, by Stifel’s count

Stat July 25, 2023


Georgetown: Hospital influence waning: “The growth of outpatient facility fees — and consumers’ financial exposure to these charges — derives from the intersection of the United States’ increasingly consolidated health care provider market, highly complex health care billing systems, and frequently inadequate health insurance coverage. Addressing these issues is no small challenge, but it is a challenge more and more state policymakers and stakeholders appear ready to tackle (p.3) …. Despite their long-standing influence, several cracks are forming in hospitals’ defenses. Increased scrutiny from the general public, key stakeholders, and policymakers, are all contributing to growing bipartisan interest in regulating hospital billing practices, including with respect to outpatient facility fees. (p.24)”

CHRISTINE H. MONAHAN, KAREN DAVENPORT, AND RACHEL SWINDLE “Protecting Patients from Unexpected Outpatient Facility Fees: States on the Precipice of Broader Reform”
Georgetown University Center for Health Insurance Reforms and West Health July 2023

Modern Healthcare Analysis: 340B payment methodology: Background: “340B program grew from 8,100 eligible hospitals, clinics and pharmacies in 2000 to 50,000 in 2020. Discounted drug purchases under the 340B program reached $43.9 billion in 2021, a roughly 16% increase from 2020, according to Health Resources and Services Administration data. Hospitals qualify for 340B drug discounts by meeting certain criteria, such as having a minimum Medicare disproportionate-share hospital adjustment percentage….”

Per the Modern Healthcare analysis, “of the 50 hospitals that would receive the highest proposed 340B remedy payments, 10 spent an estimated median of 1% or less of their operating expenses on uncompensated care. Meanwhile, more than 200 of the 1,571 hospitals analyzed spent at least an estimated 8% of their operating costs on uncompensated care from 2018 to 2022. The analysis shows that the remedy payments are not correlated with hospitals’ share of operations that go to uncompensated care. It doesn’t seem like the way the program operates right now follows the original intent. There is a growing consensus that there ought to be a way to restructure the program so the incentives are aligned.”

Kacik, Broderic quoting Katherine Hempstead, a senior policy adviser at the Robert Wood Johnson Foundation “340B pay remedy favors hospitals with the least uncompensated care” Modern Healthcare July 28, 2023

Report:  Hospital Compliance with price transparency rule: Per the Patient Rights Advocate study of 2000 hospitals:

  • 36% were complying with the rule, leaving 64% of hospitals in noncompliance
  • 3.5% did not post a usable standard charges file
  • 61.4% of hospitals posted negotiated prices clearly associated with payers and plans, but 41.3% still failed compliance because their pricing data was missing or significantly incomplete

The report says that compliance varied widely among the largest hospital systems it reviewed. Including 7 large health systems listed as completely noncompliant with the law: Avera Health, Baylor Scott & White Health, HCA Healthcare, Mercy, Providence, Tenet Healthcare, UPMC

Patient Rights Advocate

Report: hospital discharge planning problems increasing: The Wellsky report found:

  • Referral volume to skilled nursing facilities (SNFs) has grown 10% since 2022, the data showed, while referrals to home health agencies (HHAs) grew 11%. These increases are likely due to the rise in demand for care and ongoing staffing shortages, the report said. HHA rejection rates rose 40% since 2022, despite rejection rates already reaching an all-time high in 2022.
  • Patients in the hospital are now 6% more acute at discharge compared to 2019 averages, the report found.
  • For patients discharged to SNFs, hospital length of stay has increased by 12% since 2019. For those discharged to home health, that’s increased by 11%.
  • More than half of nursing homes are denying patients due to staffing challenges, while 87% of nursing homes are facing moderate to high staffing shortages, the report noted. And 61% of nursing homes are limiting new admissions.

The WellSky® 2023 Evolution of Care Report Reveals Critical Changes to Care Delivery in the Past Year

Study: Trauma centers attractive to for-profit hospitals: “Between 2014 and 2018, compared with not-for-profit hospitals, for-profit hospitals gained trauma center designation in regions with lower injury-related mortality burden and in proximity to existing trauma centers. Most newly designated trauma centers outside a 60-minute radius from an existing trauma center were not-for-profit hospitals. In concordance with prior studies, for-profit trauma centers had higher average charitability ratios but were more profitable. Our analysis is limited by use of surrogate markers for trauma care demand (injury-related mortality) and supply (trauma centers).

Trauma centers can be profitable and financial incentives may motivate trauma center designation. A recent study found for-profit centers charge higher trauma activation fees. Proliferation of trauma centers within 1 region could dilute trauma care volume at any individual center. Decreased trauma care volume has been associated with worse outcomes for injured patients. A critical need exists for a national trauma system to provide standardized oversight to ensure trauma centers are built where needed and mitigate over proliferation.

Handley et al “For-Profit Status and Geographic Distribution of Trauma Centers in the US” JAMA Surg. Published online July 26, 2023. doi:10.1001/jamasurg.2023.2751

Study: Site neutral payment policies vary by state: Georgetown researchers analyzed outpatient facility fee billing laws and regulations in 11 study states (CO, CT, FL, IN, ME, MD, MA, NY, OH, TX, WA): Findings:

“The growth of outpatient facility fees — and consumers’ financial exposure to these charges — derives
from the intersection of the United States’ increasingly consolidated health care provider market, highly
complex health care billing systems, and frequently inadequate health insurance coverage. Addressing
these issues is no small challenge, but it is a challenge more and more state policymakers and
stakeholders appear ready to tackle.”

  • Between July 2012 and January 2018, hospital ownership of physician practices grew by 124% and hospital-employed physicians increased by 78%. In 2021, hospitals or corporations owned about three-quarters of all physicians in the U.S.
  • While hospitals argue these costs are essential to daily overhead operation for regulatory compliance, staffing, liability coverage, security and supplies, payer representatives said there is not enough transparency around how fees are calculated, and that it is difficult to see when care occurred.
  • Studies have found that cost-sharing has increased by 200% for elective procedures performed in hospital outpatient departments versus physician offices. Commercial payers see up to a 14.1% price increase for services acquired in these scenarios” Monahan et al Protecting Patients from Unexpected Outpatient Facility Fees: States on the Precipice of Broader Reform Georgetown University Center on Health Insurance Reforms July 2023

Fitch: NFP hospital liquidity dips: Liquidity remains a challenge for hospitals and health systems per July 25 Fitch report. “In 2022, we warned that the 2022 medians (based on 2021 data) would likely be the sector peak, and that the 2023 medians would show a significant reversal. To that end, Fitch Ratings’ 2023 medians (using audited 2022 data) largely show sizable and widespread deterioration in operating margins and balance sheet metrics, a stark contrast to last year. Similarly, last year, the 2021 medians also reflected a reversed trend from the prior-year medians (i.e., were much stronger). “Highlights:

  • The median operating margin of nonprofits rated by Fitch during 2022 was 0.2%, according to the agency’s 2023 Median Ratios report based on nonprofit hospitals and systems’ audited 2022 data. That number “ranged widely from as high as 27% to −21.5% and indicates that about half of Fitch’s portfolio logged a negative margin during 2022.”
  • The average days cash on hand declined by 44 days last year to 216 days on average, down 17 % year over year. Days cash on hand for nonprofit hospitals and health systems overall peaked in 2021 at 260 days. Prior to the pandemic, in 2019, nonprofit hospitals and health systems had an average of 219 days cash on hand.
  • Hospitals with higher ratings tend to have more days cash on hand. Hospitals with AA ratings have on average 273 days cash on hand, down from nearly 220 days in 2021. Hospitals with BIG ratings have 75 days cash on hand, down from 90 days last year.
  • Cash to debt saw a decline from 186% to 147% from 2021 to 2022, and median 2022 leverage ratios worsened. The median cash to capitalization was 34.2% in 2022, compared to 31.7% in 2021.

2023 Median Ratios: Not-for-Profit Hospitals and Healthcare Systems Fitch Ratings July 25, 2023 /

Psychiatric hospitals, UHS’ earnings: “The country’s largest private psychiatric hospital operator cherry-picks patients whose insurance will pay more, its finance chief said on an earnings call Wednesday. It’s no secret that such hospitals, especially when run by for-profit companies, base admission decisions on how much they’ll get paid, but it’s rare to hear the practice described so bluntly. The comments came from Steve Filton, the chief financial officer of investor-owned Universal Health Services, a company that runs more than 300 behavioral health hospitals nationwide…

UHS has been “simply admitting patients whose insurance will pay us more,” Filton said on the company’s second quarter earnings call. “In an environment where we can only treat a limited number of patients, we can be more selective about who we treat and the fairness of what we think we’re being paid.”

It’s working out well for the company, whose earnings blew past analysts’ expectations in the second quarter, causing it to raise its full-year outlook. UHS posted about $676 million in profit in 2022 on $13.4 billion in revenue…

Increasingly, behavioral health behemoths like UHS and its competitor, Acadia Healthcare, are expanding their reach through joint ventures with not-for-profit health systems like Beaumont Health, Geisinger, and Orlando Health. In those cases, the investor-owned companies benefit from the brand recognition of the local not-for-profit hospitals.”

Tara Bannow “UHS finance chief said company favors patients whose insurance pays more” July 26, 2023

Retail Health

JD Power: Retail Pharmacy Customer Satisfaction High, Increasing:

Following are key findings of the JD Power 2023 U.S. Pharmacy Study:

  • Overall satisfaction is 102 points higher among customers who say they know their pharmacist by name, and 93 points higher among those who say they know pharmacy staff or technicians by name.
  • Overall, 83% of brick-and-mortar pharmacy customers indicate an interest in receiving health and wellness services at their pharmacy, up three percentage points from 2022. Top services include vaccinations or flu shots (50%); health screenings (46%); and COVID-19 testing (42%).
  • While overall satisfaction in the mail order pharmacy segment is up a significant 9 points this year, customer loyalty is declining. Some 18% of mail order customers say they “definitely will” or “probably will” switch pharmacies in the next 12 months, up from 14% in 2022. Top reasons for switching include employer insurance requiring a change (31%); medication is too expensive (24%); and want flexible pick-up options (21%).
  • Digital engagement increases: Brick-and-mortar pharmacies are seeing increases in digital engagement. In 2022, 76% of customers said they relied on digital technologies to interact with their pharmacy.

U.S. Pharmacy Study, visit

Prescription Drugs

Insurance coverage for weight loss drugs increasing: Morgan Stanley analysts predict the weight loss drug market will hit $77 billion by 2030, MarketScreener reported July 21.The financial services firm had previously estimated the market size by 2030 would be $54 billion, but surging demand for the led it to raise its forecast. According to the report, Novo Nordisk’s Wegovy may have already hit $7 billion in sales this year if there were no supply shortages for the drug…. Private insurers often do not cover GLP-1 drugs for weight loss only, though they often cover the same drugs to treat Type 2 diabetes. Ozempic, Trulicity, Victoza and Mounjaro are FDA-approved to treat Type 2 diabetes, and Wegovy and Saxenda are approved for weight loss. In a June survey from the Pharmaceutical Strategies Group, 49% of plans surveyed said they currently cover medications for weight loss, compared to 41% of employers.

As Ozempic/Wegovy frenzy continues, Morgan Stanley lifts forecasts for weight-loss drugs to $77 billion Market Watch July 21, 2023