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The Keckley Report

Hospitals declare War on Corporate Insurance: Handicapping the Players

By April 22, 2024No Comments

At the Annual Meeting of the American Hospital Association in DC last week, its all-out attack on “corporate insurance” was a prominent theme. In the meeting recap, AHA CEO Rick Pollack made the influential organization’s case:

“This year, there was special focus on educating policymakers that our health care system is suffering from multiple chronic conditions. These include continued government underpayment, cyberattacks, workforce shortages, broken supply chains, access to behavioral health, and irresponsible behavior by corporate commercial health insurance companies, among others — that put access to services in serious jeopardy.”

The AHA’s declaration of war came on the heels of last week’s Congressional investigation of Change Healthcare’ (UnitedHealth Group subsidiary) cybersecurity breech and the widely-noticed earnings release by Elevance (aka Anthem) that featured prominently its plans to build a $4 billion business unit focused on primary care and chronic care management. Per company CEO Gail Boudreaux:

“This will help us continue through having a focus on advanced primary care; it’s still very much focused on our chronic patients and complex patients. We are still building specialty care enablement, which is another very important component of what we’re trying to prime through… In time, Elevance Health will have full ownership of what we expect will be a leading platform for value-based care delivery and physician enablement at scale.”

To industry watchers, the war is no surprise. It’s been simmering for years but most recently inflamed as operating margins for most hospitals eroded while profits among corporate insurers led by Big 6 (UnitedHealth, Humana, CVS-Aetna, Elevance, Cigna, Centene) swelled at double-digit rates.

To outsiders, it’s not quite so clear. Big names (Brands) are prominent in both. Corporatization seems embedded in the business models for both. And both appear complicit in well-documented beliefs that the health system is failing as unnecessary higher costs make it less accessible, affordable and effective.

As the War intensifies, each combatant is inclined to make their cases aggressively contrasting “us” against “them.” Here’s where things stand today:

Consideration Hospitals Corporate Insurers Advantage
Public Standing Hospitals enjoy relatively strong public support but growing discontent about their costs, prices and household affordability. Hospitals blame insurers & drug companies for increasing health costs.

Increased attention to affordability, value and low prices is a threat.

Insurers enjoy reasonably high support among middle & high-income consumers who think it necessary to their financial security. Insurers blame drug companies, hospitals and unhealthy consumer behaviors for increased health costs. It’s a tossup. Though polls show trust in hospitals is higher than insurers, both are declining especially among younger, urban and low-middle income consumers
Regulatory positioning Scrutiny of business practices & the impact of consolidation on consumer prices, workforce wage compression, competition et al is significant and increasing in 5 Congressional Committees and 3 Federal agencies. Hospitals also face state and local regulatory challenges around pricing, community benefits, et al. Compliance with plan transparency rules, prior authorization requirements, Medicare Advantage marketing & coverage, and antitrust are targets. Levels of Congressional attention to business practices are relatively low. Insurers are primarily overseen by states, so the regulatory landscape varies widely except. Insurers enjoy regulatory advantages today not withstanding current attention to UnitedHealth Group.  Hospitals are “soft targets” for state legislatures, Congress and investigators in state and federal agencies.
Confidence of capital markets in their core businesses:

Hospitals: inpatient, outpatient care

Insurers: group & individual coverage, claims data commercialization

The acute sector, especially rural & systems operating in low-growth markets, face insurmountable headwinds due to reimbursement cuts, value-based purchasing initiatives by Medicare and private insurers and clinical innovations that drive demand away from inpatient care. Hospital Outpatient services are profitable for the near term despite growing competition from privately investors.   The consolidation of power, financial strength & influence among the corporate insurers is assuring to lenders & investors who value their performance and support their vertical integration expansion role.   Lenders and investors favor “corporate insurers” over others. The potential (likelihood) that hospitals will lose on high profile revenue-enhancer issues (facility fees, site neutral payments, et al) and restrict tax exemptions for NFP hospital operators is concerning to the capital markets.  
Relationships with Physicians


Hospitals employ 58% of physicians directly & relate to all. Regulations (i.e. Stark Laws, et al), capital deployment for hospital programs and administrative overhead are factors of high importance to physicians seeking clinical autonomy & financial security.  Hospitals are a viable option to physicians seeking income security though not without concern. Insurers employment of physicians plus contractual relationships with network physicians are transactional. Physicians inclined toward business relationships with “corporate insurers” believe their role in healthcare’s future is more stable than that of hospitals based on the belief hospitals are wasteful and non-responsive to physician input. Hospitals enjoy a relationship advantage with most physicians. Corporate insurers enjoy a transactional relationship with physicians that’s premised on shared views about the future of the system vs. hospitals that focus on protecting the past.

Hospitals enjoy a near-term advantage but the long-term is uncertain.

Unity of voice Relatively strong around “chronic ailments” of the system but unclear about long-term destination and limited to universal hospital concerns (i.e. 340B) vs. cohort issues (tax exemptions for not for profits). The delineations between not-for-profit, investor-owned and public/government restricts the strength of hospital voice overall as each seeks unique recognition and regulatory protections. Corporate insurers have corporate boards, broader membership, stronger balance sheets and scale. Their messaging is customized to their key customers and influencers and aligned with but not controlled by their trade groups. And they direct considerable resources to their proprietary messaging strategies. Corporate insurers have fewer constraints in their messaging and enjoy an advantage in opining to issues that resonate with consumers (prices, quality, value).
Long-term Vision for the U.S. Health System A private connected system of health in which hospitals coordinate and provide services for patients across the continuum of their care: preventive, chronic, acute and long-term. A private system of comprehensive, customized products and services that operates efficiently, effectively and in the interests of all consumers. The public and Congress aren’t sure which is better positioned to develop a “new” system of health.

This war has been simmering. It’s now a blaze. The outcome is uncertain despite the considerable resources both will spend to win.

Stay tuned.


P.S. Last week, I participated in Scottsdale Institute’s Annual Leadership Summit in Arizona. It’s 62 institutional members and corporate partners include most of the major not-for-profit health systems and the biggest names in healthcare information technology solutions. I left with two strong impressions I’ll share: 1-How GenAI and HCIT influence the future of healthcare services delivery is very much speculative but no-less certain. It’s a work in process for everyone. 2- To navigate its evolution, knowledge sharing (and mistake sharing) among those in the trenches is essential. SI afforded a great venue for both, and also a platform for those of us who are easily overwhelmed by all this to ask honest questions and get candid answers. Check it out.


Working Together to Advance Health and Build a Better Future | AHA News

CEO Gail Boudreaux. April 18, 2024 Elevance Health | Advancing Health Beyond Healthcare

Sections Today

  • Quotables
  • Economy
  • Insurers
  • Physicians
  • Retail Health


Re: Big insurers: “Health insurance companies have swelled in both size and scope over the last decade, with the revenues of six for-profit parent companies making up nearly 30% of total U.S. health spending spending last year — compared with less than 10% in 2011. Some of them have also recently acquired primary care providers, home health companies and urgent care services. The recent Change Healthcare hack — which disrupted claims payments and operations across the country — has prompted a round of mergers and consolidation within the health care sector.  It’s not just that health insurers have merged with companies that do other things: They’ve also expanded into government-regulated markets through the Affordable Care Act exchanges, Medicare Advantage and Medicaid managed care. These markets — MA in particular — have been lucrative for insurers, and fierce debates are underway over whether the federal government is overpaying them. The term “too big to fail” usually evokes the idea of government bailouts. But in health care, it may have a different meaning: They may be big enough to always win.”

Major health insurance companies nearing too big to fail status (

Re: income disparities: “By most measures, the US economy is in good shape. However, it could be the case that much of the persistent strength is being driven by high-income earners, and particularly by their spending patterns. While it’s not a sign of an impending recession by any means, weakening economic measurements for middle-income earners is a sign that there could be some stress bubbling under the hood for the U.S. economy. If inflation continues to move towards the Fed’s 2% target, reduced interest rates this summer could prevent any dampening in economic activity. But on the other hand, if rates need to remain higher for longer, a weaker middle class could start to slow the roaring economy. “

Middle Income Households Report Weakening Economic Conditions (

Re: Change Healthcare cyberattack: “I think [it’s] important for the country that we own Change Healthcare. This attack would likely still have happened and it would have left Change Healthcare, I think, extremely challenged to come back because it was a part of UnitedHealth Group, we’ve been able to bring it back. We’re going to bring it back much stronger than it was before.”

UnitedHealth Group CEO Andrew Witty April 16, 2024

Re: AI and Public Policy: “Artificial intelligence (the branch of computer science concerned with endowing computers with the ability to simulate intelligent human behavior) incorporates multiple types of technologies (of which, LLMs are just 1 type). The most complex cognitive task in medicine is the act of diagnosing the cause of a patient’s symptoms. Errors in diagnosis have been estimated to account for nearly 800 000 deaths or permanent disabilities each year in the US, more than 80% of which are associated with cognitive errors or clinical reasoning failures. This burden creates a unique quality improvement opportunity for AI-based systems to save lives at public health scale…

A national effort to improve the quality of AI diagnostic systems could improve patient care over time. The goal should be to leverage the complementary strengths of humans and computers to yield better diagnoses than either one alone.7 Absent these steps, the risks of AI for diagnosis may overshadow the benefits, leading to worse health outcomes, biased care, and a less-skilled clinician workforce. The alternative future of diagnostic excellence through AI starts with recognizing the challenge. Dedicated resources and thoughtful public policies can drive substantial improvements in the care and health of patients.”

The Role for Policy in AI-Assisted Medical Diagnosis | JAMA Health Forum | JAMA Network

Re: population growth trends: “Between 2010 and 2020 over half of the country’s counties, home to a quarter of Americans, lost population. Over the coming decades still more will, because America’s population is growing more slowly. The change will be wrenching, because of America’s demographic and administrative peculiarities.

Between 2010 and 2020 the number of people in the country grew by around 7.4%. That was the slowest decade of growth since the Great Depression (when the population grew by 7.3%). In the 1990s the growth rate was 13%. The main culprit is falling birth rates. The total fertility rate—a measure of how many children a typical woman will have in her lifetime—was steady or rising for 30 years from the mid-1970s. In 2008, however, it fell below 2.1, the level needed to keep the population stable, and has since declined to 1.67 (see chart 1). If it remains below 2.1, only immigration can keep the population growing in the long run. Yet net immigration, too, has been falling since the 1990s.

The pandemic almost stopped the population growing altogether. In 2020 over 500,000 more people died than in 2019, even as the birth rate also fell. With borders closed and American diplomatic outposts shuttered, net immigration dropped precipitously….”.

Between 2010 and 2020 just two states lost population: Mississippi and West Virginia…Death spirals tend to be worse in America because of the remarkable level to which the government is decentralized. Just 8% of spending on primary and secondary education comes from the federal government, for example, and less than a quarter of the spending on law enforcement. Local and regional authorities levy 48% of all tax collected in America, compared with just 20% in France and 6% in Britain (see chart 2). And even America’s federal spending typically comes in the form of grants linked to population levels. So, when local tax revenues shrink, services must be cut or taxes must rise.

America is uniquely ill-suited to handle a falling population (

Re: role of consumers in healthcare: “As healthcare organizations look to the futurethey cannot overlook the need to place the consumer at the center of all they do. Only by improving care outcomes and consumer experience will they deliver financial returns and remain competitive while meeting consumers’ holistic health and wellness needs.

Consumers are more motivated than ever to choose healthcare options that offer a better experience, higher quality of care, and greater value. As the shift to consumerism continues, organizations that embrace it most successfully will emerge as leaders of the healthcare ecosystem. In the near term—beyond benefits to consumer experience and care—developing a distinctive consumer experience could translate to financial gains through increased acquisition, retention, and share of engagement; reduced administrative costs; and improved Consumer Assessment of Healthcare Providers and Systems (CAHPS)1 and Medicare Advantage Star ratings.”

Capturing growth with a consumer centric healthcare experience | McKinsey

Study: Youth depression:  The United Hospital Fund study found: “Adolescents were less likely to receive care for major depressive episodes (MDE) than adults—only 39% of adolescents received care in 2021 vs. 56% of adults. Based on the 2022 prevalence of adolescent behavioral health conditions and symptoms, the ripple effects of the adolescent behavioral crisis are estimated at up to $185 billion in lifetime medical costs and $3 trillion in lifetime lost productivity and wages. “

The Ripple Effects of the Adolescent Behavioral Health Crisis: Recent Trends and Impacts on American Adolescents, Families, and Society: Publications | United Hospital Fund (


Report: Healthcare Private equity deals in 2023: The PE Stakeholder Project analysis found:

  • 2023 saw a wave of bankruptcies at private equity-owned companies. At least 17 (21%) of the 80 healthcare companies that filed for bankruptcy in 2023 were owned by private equity firms.
  • Another wave of PE-driven healthcare bankruptcies is expected in 2024 – almost all of the most distressed US healthcare companies are owned by private equity firms.
  • Private equity’s excessive use of debt and aggressive financial strategies put healthcare companies at risk, and in turn threaten the stability of critical healthcare resources across the country.

Private Equity Healthcare Bankruptcies are on the Rise (

Analysis: growing financial distress in middle income market: “By many measures, the U.S. economy has outperformed expectations, bouncing back from the widespread unemployment brought on by the pandemic and the recent inflationary surge that followed. However, conditions have slowly started changing since last summer. As disinflation has appeared to stagnate in recent months, elevated interest rates continue to pressure debt-saddled consumers, and wage growth eases somewhat…

Strength in consumer spending is in large part supported by the labor market. Unemployment continues to remain below 4%, and although wage growth has slowed from its historic highs in 2022, average hourly earnings have been growing faster than inflation for 10 months. Additionally, U.S. adults of all income levels have benefitted from recent income gains. One unique element of the economic recovery following pandemic-related lockdowns was that lower income earners had the largest gains in income.

However, conditions have slowly started changing since last summer. As disinflation has appeared to stagnate in recent months, elevated interest rates continue to pressure debt-saddled consumers, and wage growth eases somewhat. Although consumer sentiment continues to lag behind its pre-pandemic levels, economic optimism is at a more than 2-year high at an index score of 93, about 26% higher than its low of 74 in July 2022.

Recent growth in consumer sentiment has been particularly strong for adults making $100k or more annually, widening the gaps between higher earners and everyone else. In fact, when sentiment reached a low in July of 2022, high-income earners’ consumer sentiment was on average 9 points higher than the lowest income earners, but today that difference more than doubled to 22 points. Some of this gap could be explained by the strength in the stock market: High-income consumers are more likely to have equity and are often swayed both positively and negatively by the market.

But it’s not just the lowest income consumers who are being left behind by the wealthiest consumers. Middle-income earners, although generally feeling more optimistic than their lower earning peers, have been tracking closely with low-income consumers since inflation began falling from its heights. This recent development runs counter to the pre-pandemic trend where sentiment for middle- and high-income adults trended more closely together while lower income adults lagged considerably behind. In addition, the Morning Consult/Axios inequality index has also been trending up since late 2022. The inequality index takes into account several inputs, including consumer sentiment, to measure inequality. Recent increases in inequality have been driven not only by sentiment, but also by increased financial vulnerability: The share of low-income adults who say they lack savings to cover a month’s worth of basic expenses, were they to lose their income, has increased, while the same share has decreased for the highest earners.

Middle Income Households Report Weakening Economic Conditions (

Report: Fifth Third Capital Markets for 1Q2024:  The S&P Healthcare Services Select Index slightly underperformed the broader market in the 1st quarter of 2024, increasing +6.6% versus a +10.2% and a +9.1% increase for the S&P 500 and NASDAQ, respectively.

The median Enterprise Value (EV) / 2024P EBITDA multiple for the 91 companies in Fifth Third Capital Markets’ healthcare services comp set was 10.6x at the end of Q1 2024 vs. 11.1x and 10.2x valuation for the same comp set 12/31/2023 and 9/30/2023.Individual sub-sector performance was nearly all positive in Q1 2024, the largest increases occurred in Rehabilitation +24.7%, Acute-Care Hospitals +24.3%, and Distribution & Supplies +15.3% ▪ Staffing (0.9%), Specialty Pharmacy Services (1.8%), and Clinical Laboratories (5.0%) were the only sub-sectors to decline in Q1 2024

Healthcare Services deal counts declined in 2023 compared to prior years with 18 deals announced in 2023 versus an average annual deal count of 28 from 2019 – 2022.  Average valuations increased to 9.3x EV / EBITDA in 2023 from 8.4x EV / EBITDA in 2022, led mostly by larger platforms continuing to benefit from greater premiums in valuation

Fifth Third Capital Market’s Healthcare Services Newsletter 1st Quarter 2024 Update



Mathematica: Chronic care management in Medicare:At least two-thirds of Medicare enrollees have two or more chronic health conditions, federal data shows. That makes them eligible for a federal program that, since 2015, has rewarded doctors for doing more to manage their health outside office visits. But while early research found the service, called Chronic Care Management, reduced emergency room and in-patient hospital visits and lowered total health spending, uptake has been sluggish.

Federal data from 2019 shows just 4% of potentially eligible enrollees participated in the program, a figure that appears to have held steady through 2023…The federal data showed about 4,500 physicians received at least $100,000 each in CCM pay in 2021.

Through the CCM program, Medicare pays to develop a patient care plan, coordinate treatment with specialists, and regularly check in with beneficiaries. Medicare pays doctors a monthly average of $62 per patient, for 20 minutes of work with each, according to companies in the business.

Without the program, providers often have little incentive to spend time coordinating care because they can’t bill Medicare for such services.

Medicare, trying to do a better job on chronic care, is hitting roadblocks: Shots – Health News : NPR

Coverage: access to mental health: Research Triangle Institute (RTI) used 2019–2021 information from one of the largest commercial insurance claims databases to evaluate a key measure of health plan benefits that indicates whether individuals can access in-network behavioral health treatment as readily as medical/surgical treatment: the rate of use of out-of-network behavioral health providers. Findings:

  • Out-of-network use was 3.5 times higher for behavioral health treatment than medical/surgical treatment, which created a significantly greater financial burden for behavioral health patients. This was true even for tele behavioral visits as compared to telemedicine visits.
  • The rate was 8.9 times higher for visits to psychiatrists, who had higher out-of-network use than 24 medical/surgical specialties evaluated. Health insurers on average reimbursed medical and surgical care 22% higher than behavioral health visits.
  • Office visit in-network reimbursement levels were much lower for behavioral health providers than for medical/surgical providers creating disincentives for behavioral health providers to participate in-network. For example, psychiatrists and psychologists had lower reimbursements than physician assistants.
  • The disparities in out-of-network use have remained large over the last 9 years for office visits, where most behavioral health care is delivered.
  • Provider shortages do not explain the disparities in out-of-network utilization and reimbursement.
  • These results demonstrate the need for more robust parity enforcement.



Study: AI messaging assistance in physician communications: Researchers analyzed whether access to generative artificial intelligence–drafted replies correlate with decreased physician time on reading and replying to patient messages, alongside an increase in reply length.

Findings:In this quality improvement study including 122 physicians, generative AI-drafted replies correlated with increased message read time, no change in reply time, and significantly longer replies. Physicians valued AI-generated drafts as a compassionate starting point for their replies and also noted areas for improvement…. Rigorous empirical tests are necessary to further examine GenAI’s performance. Future studies should examine patient experience and compare multiple GenAIs, including those with medical training.”

AI-Generated Draft Replies Integrated into Health Records and Physicians’ Electronic Communication | Shared Decision Making and Communication | JAMA Network Open | JAMA Network

Report: CBO analysis of ACOs: The Congressional Budget Office found:” Certain types of ACOs are associated with greater savings– ACOs led by independent physician groups, ACOs with a larger proportion of primary care providers (PCPs), and ACOs whose initial baseline spending was higher than the regional average. (An ACO’s baseline spending is generally the average spending per person in the Medicare fee-for service, or FFS, program among beneficiaries that would have been assigned to the ACO over several calendar years before the start of the ACO’s contract period. Some factors limit the savings from Medicare ACOs–weak incentives for ACOs to reduce spending, a lack of the resources necessary for providers to participate in ACO models, and providers’ ability to selectively enter and exit the program on the basis of the financial benefits or losses they anticipate from participating.”

Medicare Accountable Care Organizations: Past Performance and Future Directions (

Re: physician unionization: “It’s still too early to assess whether this new wave of physician unionization can counteract the monopolistic and corporate tendencies of hospital employers and whether unions can help satisfy physicians’ interest in governance and restore some of their professional autonomy. Regardless of how union-organizing efforts pan out, understanding the motivations underlying this trend is critical. For most physicians who have been accustomed to making decisions about resources, service provision, and staffing, the new prevailing employment model remains something of a shock. But hospital-consolidation trends that have implications for both professional satisfaction and clinical autonomy most likely aren’t going away. If the collective response is hopelessness and dissatisfaction, the medical field may be at risk for large numbers of physicians exiting practice at a time when demand for services is increasing owing to the aging of the U.S. population. We believe that both the physician community and policymakers should monitor growth in unionization efforts to assess whether unions have exhibited the ability to achieve their stated goals and continue to explore parallel strategies for redressing potential harms associated with hospital consolidation. It’s clear that the medical field in the United States is in a period of adjustment, and it remains an open question how important physician unions will be during this restructuring.

Hospital Consolidation and Physician Unionization | New England Journal of Medicine (

Doctors Strike at Detroit Hospital After Unionizing Last Year | MedPage Today

Study: telemedicine uses 2019-2022: Researchers compared traditional Medicare patients receiving care at health systems that used more telemedicine during the COVID-19 pandemic with patients in systems that relied more on in-person services. Findings:

“Telemedicine use remains substantially higher than it was before the COVID-19 pandemic, although it has fallen from pandemic highs…In 2020, patients receiving care at health systems in the highest quartile of telemedicine use had 2.5 telemedicine visits per person (26.8% of visits) compared with 0.7 telemedicine visits per person (9.5% of visits) in the lowest quartile of telemedicine use. In 2021–22, relative to those in the lowest quartile, patients of health systems in the highest quartile had an increase of 0.21 total outpatient visits (telemedicine and in-person) per patient per year (2.2% relative increase), a decrease of 14.4 annual non-COVID-19 emergency department visits per 1,000 patients per year (2.7% relative decrease), a $248 increase in per patient per year spending (1.6% relative increase), and increased adherence for metformin and statins. There were no clear differential changes in hospitalizations or receipt of preventive care.”

The Impact of Telemedicine on Utilization, Spending, And Quality, 2019–22 | Health Affairs


Retail Health

Amazon, Walmart Health: With Amazon having just recently pulled ahead of Walmart in health and wellness, the latter is looking to regain its lead by expanding its presence in the space. The retailer is adding 18 more Walmart Health centers in Texas this year alone, per a Wednesday (April 10) announcement, on top of the existing four locations in the state. The company operates these health centers, which offer a range of health services, in six states, with 50 existing locations.

In fact, healthcare is one area where Walmart comes closer to holding its ground against Amazon for consumers’ spending than other sectors, though Amazon’s market share continues to rise, according to the latest edition of PYMNTS Intelligence’s “Whole Paycheck Report: New Consumer Spend Data Finds Amazon Way Ahead of Walmart.”

Findings showed that, as of Q4 2023, Amazon held a 4.4% share of total consumer spending, while Walmart held 3%.

Yet in healthcare, Amazon has only recently pulled ahead of Walmart, capturing 6.6% versus Walmart’s 5.7%. Amazon is growing its share quickly, while Walmart’s share remains roughly flat. Just a quarter earlier, Walmart had still been in the lead (5.9% versus 5.7%).

The healthcare opportunity is significant, especially in urban and suburban areas, according to the 2023 PYMNTS Intelligence study “Connected Economy™ Monthly Report: The Urban-Rural Health Divide Edition” which drew from a survey of nearly 2,500 U.S. consumers. The results revealed that, as of a year ago, 62% of consumers living in urban areas participated in healthcare-related activities, as did one in three consumers in suburban locales, versus just 23% of those in rural areas.

Retail Sales: The Walmart, Amazon Battle Continues Into 2024 (

Walmart Aims to Regain Healthcare Lead Over Amazon (