Arguably, three trade groups have emerged at the center of healthcare system transformation efforts in the U.S.: the American Hospital Association (AHA), America’s Health Insurance Plans (AHIP) and the Pharmaceutical Research and Manufacturers of America (PhRMA). Others weigh in—the American Medical Association, AdvaMed, the American Public Health Association and others—but this trio is widely regarded as the Big Tents under which policy changes are pursued.
Each plays a unique advocacy role in the system, protecting their members’ turf from unwelcome regulation while fighting against restrictions that might limit their growth opportunities. Their focus is their members:
| AHA | AHIP | PhRMA | |
| Members | 5000 hospitals & 43,000 individual members | 125 Health Insurers | 31 Manufacturers |
| Board Composition | 26 (10 female) | 33 (5 female) | 25 (3 female)
|
| Revenues (’22) | $138.8 Mil | $78.6 Mil | $568.3 Mil |
| Revenue chg. ’22 v. ‘21 | +7.7% | -7.1% | -6.7 |
| Margin (’22) | $6.6 Mil | $4.7 Mil | $-0.1% |
| Exec Comp % of ’22 Rev | 8.4% | 9.6% | 3.9% |
| CEO (Tenure) | Richard J. Pollack (since 2015, with AHA 37 yrs.). | Mike Tuffin (since Jan 2024)
Prior: SVP UHG, APCO |
Stephen J. Ubl (since 2015)
Prior: CEO AdvaMed, FAH |
| Direct Lobbying ‘23 | $30.2 Mil | NA | $27.6 Mil |
| Total Industry Lobbying 2023 (includes all sources) | $133.3 Mil | $129.3 Mil | $383.7 Mil |
Sources:*Nonprofit Explorer – ProPublicaIndustries IRS Form 990 for 2022, the latest year available • OpenSecrets based on year-end 2023.
Ironically, these Big Tents have much in common:
- All three serve diverse memberships and are highly protective of their Big Tents. But each faces growing intramural pressure from member cohorts that seek special attention–especially their large and highly profitable members vs. the rest.
- All three struggle with the notions of affordability, price transparency, profit, executive compensation and value. These terms appear frequently in their white papers and comment letters but each tent defines them differently.
- All three depend on physicians to fund member revenues: they’re gatekeepers to member patients, referrals and prescriptions. Each Big Tent is focused on advocacy that enables physician interactions upon which member revenues can be sustainable and service disruption minimal. Thus, physician well-being is a concern to the Big Tents.
- All blame factors outside their control for health costs escalation. The health habits of population, over-regulation and U.S. monetary policy are frequent targets. Projections by the CBO of annual health spending of 5.6% through 2032 are justified by the Big Tents as the net result of increased demand and flaws in the system’s incentives, legals protections and funding mechanisms. Each Big Tent is on the defensive about how they address costs and waste, and how their prices enable increased affordability.
- All three spend heavily to influence lawmakers to avoid unwelcome regulation. Their spending for direct lobbying is multiplied by formal coalitions with friendly trade groups, political action committees, high net worth contributors and corporations. Coalition building is a major function in each Big Tent used against swings in public opinion of concern or against pending legislation that threaten member interests.
- All three serve memberships that operate primarily with business-to-business (B2B) business models primarily. Each subordinates ‘consumerism’ to ‘patients, enrollees, and communities’ served by their members. Maximizing consumer (voter) good will and counter-messaging against hostile media coverage are core functions in each Big Tent.
- All three favor incremental changes to the status quo over transformational reform of the system top to bottom. Wholesale change is unwelcome though the majority of U.S. adults say it’s fundamentally flawed and needs a fresh start.
In each campaign cycle, the Big Tents create playbooks based on possible election outcomes and potential issues they’ll confront. Each identifies possible political appointees to key government posts, committee appointments and legislative staff that with whom they’ll deal. Each reaches out to friendly think-tanks, ex-pats from previous government roles and research organizations to create favorable thought leadership for the talking heads they trust. And each lines up outside lobbyists to augment their staff.
The Boards of the Big Tent trio weigh in, but senior staff in each of the Big Tents drive the organization’s strategy. They’re experienced in advocacy, well-paid and often heavy-handed in dealing with critics.
Operationally, the 3 Big Tents have much in common. Strategically, they’re far apart and the gap appears to be widening. Each blames the other for medical inflation and unnecessary cost. Each alleges the others use unfair business practices to gain market advantages. And each thinks their vision for the future of the U.S. health system is accurate, complete and in the best interest of the public good.
And none of the three has put-forth a vision for the long-term future of the U.S. health system. Protecting the immediate interests of their members against unwelcome regulatory changes is their focus.
Paul
P.S. It can be argued that the American Medical Association is the Fourth Big Tent. However, fewer than a fourth of the million active practitioners are AMA members contrasted to the other Big Tents. Like the trio, AMA’s primary advocacy focus is its members: protecting against encroachment by non-physicians, maintenance of clinical autonomy, restrictions on the use of artificial intelligence in patient care and Medicare reimbursement rate changes are major concerns. And, akin to the others, the wider set of issues facing the system i.e. structure, funding, ownership, price transparency, workforce modernization et al. has gotten less attention.
Sections in today’s Report:
- Quotables
- Consumers
- Hospitals
- Insurers
- Investors
- Polling
- Prescription Drugs
- Public Health
Quotables
Re: hospital profitability “nuance”: “Large health systems publicly reported billions in profits for the first half of 2024 and Kaufman Hall data shows a strong uptick in year over year hospital margins. Average operating margins reached nearly 5% in January, up from 2.7% in the previous month, and have hovered between 4.4% and 4.1% since then.
But the margin averages don’t tell the whole story. The actual financial performance for hospitals and health systems, especially smaller and rural organizations, is much more nuanced.
Some health systems are struggling to remain operational and are forced to join a larger system or close, while others are highly profitable and going on a buying spree, she told Becker’s. Both Kaufman Hall and S&P have sounded the alarm about the widening gap between the financial results from best and worst performing hospitals.”
The truth about hospital profitability (beckershospitalreview.com)
Re: hospital prices and private insurance: “Over the past 20 years, the prices of hospital services have grown faster than any other sector of the US economy. Unfortunately, the federal government recently issued a regulation—intended to address underpayment of hospitals by Medicaid—that could push hospital prices higher for 66% of the US population who have commercial health insurance coverage.
Despite growing evidence showing that wide hospital price variation is driven by hospital market power rather than underlying costs of care or the level of payment by Medicare and Medicaid, federal regulators are allowing states to compensate hospitals at “average commercial rates” under Medicaid managed care (MMC) plans…Unfortunately, the commercial market for hospital services is not a competitive market, and therefore holds no validity as a benchmark for this kind of price setting. Consolidation, anticompetitive contracting terms with payers, and out-of-network “surprise billing” practices among hospital-based physicians are just a few of the causes and symptoms of hospital market failure…
If federal and state Medicaid officials want to target more Medicaid funds to hospitals, they should do it without creating incentives for hospitals with market power to keep raising prices paid by commercial plans covering working families…”
New Medicaid Rule Adds Fuel to The Fire of Commercial Hospital Price Inflation | Health Affairs
Re: Gap between rich and poor hospitals: “Some of America’s largest hospital systems saw their financials soar in the first half of 2024. And yet, more than 700 facilities across the country still are at risk of closing.
Health systems with big footprints, including large academic medical centers, have weathered the pandemic and economic headwinds and are seeing margins as good or better than before COVID-19.
- Nashville-based industry behemoth HCA Healthcare posted 25% year-over-year profit growth and revised the forecast for the rest of the year, projecting it’ll reach as much as $6 billion.
- King of Prussia, Pennsylvania-based Universal Health Services similarly reported a strong second quarter, while Dallas-based Tenet Healthcare reported a 111% jump in its net income over the same quarter last year.
Yes, but: Smaller nonprofit hospitals, especially in rural areas, that made it through the crisis with the help of government aid are paring services like maternity wards and struggling to stay open.
A new report from the Center for Healthcare Quality and Payment Reform estimated 703 hospitals — or more than one-third of rural hospitals — are at risk of closure, based on CMS financial information from July. Losses on privately insured patients are the biggest culprit.”
Axios Gap between https://www.axios.com/2024/08/06/hospitals-risk-closing-operating-margins?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosvitals&stream=top
Re: hospital measurement of physician well-being: “Health care professionals deserve a practice environment that supports them. Regular assessment of clinician well-being using standardized instruments is a foundational component of organizational efforts to improve the practice environment. Although public reporting of well-being survey data may seem alluring, for a host of reasons it will likely hinder, rather than promote, organizational improvement. Instead, organizations should be held accountable for structure and process measures to improve occupational well-[1]being, which may be incorporated into accreditation criteria over time. The fundamental goal is not to determine an organization’s per[1]centile score on a distribution curve at any one moment but rather to foster genuine and ongoing improvement across all organizations, thereby shifting the entire distribution in a favorable direction and creating a better health care workplace for clinicians as well as the patients and communities they serve.”
Shanafelt Accountability for Well-Being.pdf
Re: competition in healthcare: “Since 2000, healthcare antitrust enforcement has been like that, characterized by a Whac-A-Mole®-like approach heavily focused on individual provider transactions at the local level coupled with a curious silence on the handful of health economy stakeholders that habitually exhibit monopolistic behavior.
The reality is that most health economy stakeholders don’t want to compete, and even fewer know how to compete, the proof of which is AHA, AHIP and PhRMA. People under siege try to extend the moat, not engage the enemy, and that describes the “strategy” of most health economy stakeholders.
The reality is that most health economy stakeholders don’t want to compete, and even fewer know how to compete, the proof of which is AHA, AHIP and PhRMA. People under siege try to extend the moat, not engage the enemy, and that describes the “strategy” of most health economy stakeholders…
Re: hospital care for pre-term infants: “Medical advances over the past several decades have given hospitals the ability to save younger and younger premature newborns. Yet most hospitals don’t try—and parents often aren’t aware of what’s possible or that other hospitals, even just a few miles away, might offer their newborns a fighting chance.
Doctors are now capable of saving the lives of babies born at 22 weeks and, in rare cases, a week earlier, with improved techniques to help tiny lungs develop and protect fragile skin and organs. Hospitals with extensive experience resuscitating extremely premature babies report survival rates as high as 67% for babies born at 22 weeks.
Some U.S. hospitals aren’t sufficiently equipped or capable of pulling off the new advances. Others have chosen not to offer the care, saying it is likely to fail, is expensive—typically more than $100,000 a child, and sometimes much more—and subjects tiny, fragile infants to needless pain and the risk of long-term disabilities. Instead, they often provide comfort care: wrapping the newborn in a blanket, placing it on the mother’s chest and sometimes giving medicines to ease the child’s final moments.
The difference can be a matter of life or death for the roughly 8,000 infants born between 22- and 24-weeks’ gestation in the U.S. each year.”
Doctors Can Now Save Very Premature Babies. Most Hospitals Don’t Try. – WSJ
Re: Consolidation: “For decades, the health industry has undergone consolidation despite government efforts to maintain competition. When health systems expand, adding hospitals and doctor practices to their portfolios, they often gain a large enough share of regional healthcare resources to command higher prices from insurers. That results in higher premiums and other healthcare costs for consumers and employers, according to numerous studies.
Health insurers have also consolidated in recent decades, leaving only a handful controlling most markets…
There were nearly 1,600 hospital mergers in the U.S. from 1998 to 2017 and 428 hospital and health system mergers from 2018 to 2023, according to a KFF study . The percentage of community hospitals that belong to a larger health system rose from 53 in 2005 to 68 in 2022. And in another sign of market concentration, as of January, well over three-quarters of the nation’s physicians were employed by hospitals or corporations, according to a report produced by Avalere Health .”
Harris’ California Healthcare Battles Signal Fights Ahead for Hospitals if She Wins | MedPage Today
Re: VC Investing environment: “It’s been a rough two years for VCs. Fundraising dried up. Firms downsized. Valuations have stagnated or, God forbid, gone down. That’s left workers wondering: What the hell happened?
VCs are on pace to raise $200 billion this year, which is about half of what they did in 2021. AI is the only bright spot in the startup community, making it incredibly crowded.
Meanwhile, exit opportunities — a chance for VCs to cash out — are few and far between. Eye-popping IPOs are a thing of the past, and acquisitions are a lot harder with high interest or at a much lower valuation than they once were.”.
VC’s Reality Check: “a Ton of People Looking to Get Out Everywhere” – Business Insider
Re: value-based care: “‘Value-based care’ has strayed far from its original intent to align healthcare delivery incentives with the interests of patients, to improve patient outcomes and to create real value in healthcare. ‘Value-based care’ has increasingly become a financial construct, more focused on managing reimbursement models than on patient well-being. What was once a philosophy centered on enhancing patient care has been reduced to a polarizing buzzword that exemplifies the lack of alignment between the financial and delivery elements of the healthcare system.” — Paul Hinchey, MD, COO of Cleveland-based University Hospitals
Healthcare buzzwords executives are tired of hearing (beckershospitalreview.com)
Re: prevalence of frailty: “Frailty is a clinically identifiable state of diminished physiological reserve and increased vulnerability to a broad range of adverse health outcomes. Frailty becomes more common as populations age. In a report covering 62 countries worldwide, the prevalence of frailty among community-dwelling persons ranged from 11% among those who were 50 to 59 years of age to 51% among those who were 90 years of age or older. Older persons in acute care hospitals and nursing homes, those in low- or middle-income countries, and those with a socially vulnerable status are all at increased risk for frailty.”
Frailty in Older Adults | New England Journal of Medicine (nejm.org)
Consumers
CFPB Issues new guidance on Medical debt: “This April, the Consumer Financial Protection Bureau (CFPB) found that, despite these changes, 15 million Americans still have $49 billion worth of medical bills on their credit reports. In particular, CFPB found that medical debt disproportionately burdens older Americans as well as low-income and rural communities….
Medical debt is a leading cause of bankruptcy in the United States and affects about 100 million Americans. Medical debt can impact patients’ well-being, making them less likely to seek future medical care and negatively affecting their financial stability. One of ways in which medical debt can negatively affect a patient’s financial health is through its impact on their credit report.
Given the limited utility of using medical debt to make credit decisions, CFPB’s proposed rule would amend Regulation V, which implements FCRA, to incorporate three main changes. First, it would remove the financial information exception that currently allows creditors to use medical information related to medical debt when making credit eligibility determinations. Second, the proposed rule would prohibit consumer reporting agencies from including medical debt information in credit reports provided to creditors, when it believes that creditors are prohibited from considering it…Lastly, the proposal would ban repossession of medical devices… If finalized, the rule would be effective 60 days after publication in the Federal Register.”
Biden Administration Proposes Rule to Ban Medical Debt from Credit Reporting | Health Affairs
Hospitals
Sullivan Cotter Report: 2024 Healthcare Executive Compensation: Per Sullivan Cotter: data.
- Median base salaries for all healthcare executives increased 3.8% in this year’s survey, compared with 4.1% in 2023. The survey findings were calculated by comparing salaries as of Jan. 1, 2024, with those as of Jan. 1, 2023.
- Salaries for all health system executives grew 4.5%, outpacing the 2.9% salary increase for executives at subsidiary hospitals. Last year, salaries for health system executives grew 4.8%, compared with 3.9% for hospital executives.
- Among health systems, salaries rose 7.8% for presidents and CEOs, 3.8% for chief operating officers and 5.5% for chief administrative officers. Among subsidiary hospitals, salaries rose 1.9% for presidents and CEOs, 2.8% for COOs and 3.3% for hospital administrators.
- Median total cash compensation among health system executives rose 6.5% in the last year, faster than the 4.5% rate for salaries.
- Median base salaries for chief technology officers at health systems rose 3.4% in the past year, and total cash compensation increased 8.5%. Base salaries for information security executives grew 6.2%, and total cash compensation rose 10.7%, according to the executive compensation survey.
Executive Compensation 2024: Sullivan Cotter https://www.modernhealthcare.com/businessdata/sf1278/executive-compensation:-2024
Orlando Health-Tenet deal: “As for-profit Tenet Healthcare slims its hospital portfolio; it found an unlikely buyer for its Alabama hospitals: Florida’s Orlando Health. In a deal expected to close this fall, Orlando Health will pay $910 million in cash for Tenet’s 70% stake in five central Alabama hospitals.
It’s not at all surprising that a multi-billion-dollar health system would have ambitions of expanding beyond its home state. That’s especially true as hospital systems continue to merge at a breakneck pace, increasingly jumping across multiple states to do so.
Meanwhile, study after study concludes that hospitals use their newfound market power to drive up prices
Orlando Health, a $6 billion Florida powerhouse, is expanding into Alabama
BPC Report: Hospital at home program: “…As of March 2024, just 5% of all U.S. hospitals and 15% of all academic medical centers have received CMS authorization to operate the AHCAH model. Participating hospitals typically manage higher patient volumes across all payers and tend to be in urban areas. Although, as of June 2024, CMS had authorized 331 hospitals in 37 states to operate this model, not all authorized hospitals currently do so. Hospitals’ financial and operational concerns often cause delays in implementation. For example, in 2022, 284 hospitals received approval to operate the AHCAH model, but only 105, or 37%, were actively treating patients under the program. On average, these active hospitals discharged about 59 patients each in 2022….
Research shows that hospital at home models yield positive health outcomes. For example, patients often prefer home-based care, and mortality rates are comparable to traditional care. “
“The Future of Acute Hospital Care at Home” BPC July 2024 bipartisanpolicy.org/download/?file=/wp-content/uploads/2024/07/BPC_Health_Brief_RV3.pdf
Study: Follow-up care after cardiac hospitalizations: “Between 2010 and 2019, the rate of cardiology follow-up increased from 48.3% to 61.4% for AMI hospitalizations and from 35.2% to 48.3% for HF hospitalizations. For both conditions, follow-up rates increased for all subgroups, yet disparities worsened for Hispanic patients with AMI and patients with HF who were Asian, Black, Hispanic, Medicaid dual eligible, and residents of counties with higher levels of social deprivation. By 2019, the largest disparities were between Black and White patients AMI, 51.9% vs. 59.8%, difference, HF, 39.8% vs. 48.7%, difference, and Medicaid dual-eligible and non–dual-eligible patients (AMI, 52.8% vs. 60.4%, difference, HF, 39.7% vs. 49.4%, difference. Differences between hospitals explained 7.3 pp [CI, 6.7 to 7.9 pp] of the variation in follow-up for AMI and 7.7 pp [CI, 7.2 to 8.1 pp]) for HF.
Study: Trauma center price variability: “We leveraged the federal Hospital Price Transparency rule to systematically describe trauma activation fees as captured in the Turquoise Health database for all Level I–III trauma centers nationally and across payer types. As of April 18, 2023, a total of 38% of US trauma centers published trauma activation fees. These fees varied widely by payer type. The minimum fee charged was $40 (for a Medicaid contract); the maximum fees charged were $28,356 (self-pay) and $28,893 (commercial payers). Trauma centers that were larger, metropolitan, located in the West, and associated with proprietary (investor-owned, for-profit) hospitals had higher trauma activation fees. Proprietary hospitals posted fees that were 60 percent higher than those published by public, nonfederal hospitals. Unmerited variation in trauma activation fees may suggest that the current funding strategy is equitable neither for trauma centers nor for the severely injured patients who rely on them for lifesaving care.
Trauma Activation Fees Vary Widely Across US Trauma Centers | Health Affairs
Insurers
CDC: National Health Interview Survey: Update: 1.6 million more people lost health coverage in the first quarter of this year bringing the total to 27.1 million. After the uninsured rate hit a record low of 7.2% in Q22023, it increased to 8.2% in Q12024—lower than the peak 10.3% in 2019. The percentage of uninsured people making less than the federal poverty level grew to 15.7% in the first quarter of the year, accounting for the biggest jump among income levels.
NHIS – National Health Interview Survey (cdc.gov)
PWC: 2025 private insurance cost forecast: PwC forecasts a 13-year high in commercial healthcare spending in 2025, with an 8% increase for group plans and a 7.5% for individual plans due to inflation, rising prescription costs and increased behavioral health services. Revised trends for 2023 and 2024 also reflect higher use of GLP-1 drugs and higher acuity inpatient and outpatient care.
Medical cost trend: Behind the numbers 2025 PWC https://www.pwc.com/us/en/industries/health-industries/library/behind-the-numbers
WSJ Investigation: Over-use of home visits in MA: “Millions of times each year, insurers send nurses into the homes of Medicare recipients to look them over, run tests and ask dozens of questions.
The nurses aren’t there to treat anyone. They are gathering new diagnoses that entitle private Medicare Advantage insurers to collect extra money from the federal government.
A Wall Street Journal investigation of insurer home visits found the companies pushed nurses to run screening tests and add unusual diagnoses, turning the roughly hourlong stops in patients’ homes into an extra $1,818 per visit, on average, from 2019 to 2021. Those payments added up to about $15 billion during that period, according to a Journal analysis of Medicare data…
Last month, the Journal reported that insurers received nearly $50 billion in payments from 2019 to 2021 due to diagnoses they added themselves for conditions that no doctor or hospital treated. Many of the insurer-driven diagnoses were outright wrong or highly questionable, the Journal found…
The home-visit industry has grown in recent years. UnitedHealth’s HouseCalls sent nurse practitioners to the homes of more than 2.7 million people last year. CVS’s Signify performed about 2.6 million home visits in 2023.”
Exclusive | The One-Hour Nurse Visits That Let Insurers Collect $15 Billion From Medicare – WSJ
Report: UnitedHealth over-use of Medicare Advantage code: “… Testing for peripheral artery disease began to skyrocket within Medicare Advantage in 2018
From 2018 to 2021, UnitedHealth tallied more than 1.3 million unspecified artery disease diagnoses, according to Lown’s analysis. The code for that diagnosis is worth roughly $3,000 annually on average, according to federal Medicare experts, meaning UnitedHealth took in approximately $4 billion in taxpayer money from both valid and questionable PAD diagnoses during that four-year stretch.
UnitedHealth’s own data, published in late 2022, showed the company’s clinicians diagnosed Medicare Advantage patients with peripheral artery disease at almost four times the rate of patients in traditional, government-run Medicare, which does not provide the same financial incentives…
The flood of codes for the illness and other chronic conditions, such as kidney disease and substance use disorder, dramatically boosted reimbursements to Medicare Advantage insurers, resulting in excessive payments expected to cost taxpayers $50 billion this year alone, according to the Medicare Payment Advisory Commission…”
UnitedHealth artery disease screening program boosted profits | STAT (statnews.com)
KFF Report: Medicare Advantage in 2024: Highlights:
- In 2024, 32.8 million people are enrolled in a Medicare Advantage plan, accounting for more than half, or 54%, of the eligible Medicare population, and $462 billion (or 54%)of total federal Medicare spending (net of offsetting receipts, such as premiums). average Medicare beneficiary in 2024 has access to 43 Medicare Advantage plans, the same as in 2023, but more than double the number of plans offered in 2018.
- Generally, research shows that Medicare pays more to private Medicare Advantage plans for enrollees than their costs would be in traditional Medicare. The Medicare Payment Advisory Commission (MedPAC) reportsthat plans receive payments from CMS that are 122% of spending for similar beneficiaries in traditional Medicare, on average, translating to an estimated $83 billion in higher spending in 2024.
- The share of Medicare beneficiaries in Medicare Advantage plans varies across states, ranging from 2% to 63%. In 7 states, AL, CT, MI, HI, ME, FL, RI (and Puerto Rico), 60% or more of all Medicare beneficiaries are enrolled in Medicare Advantage plans, an increase from 3 states in 2023.
- Medicare Advantage enrollment is highly concentrated among a small number of firms, with UnitedHealthcare and Humana accounting for nearly half (47%) of all Medicare Advantage enrollees nationwide.
Medicare Advantage in 2024: Enrollment Update and Key Trends | KFF
Kodiak Report: Claims administration, revenue cycle management: Per Kodiak’s quarterly benchmarking report is based on its analysis of 39,000 claims denials from 5 health systems:
- Through the first five months of this year, payors initially denied 3.82% of all billed charges from providers vs, 3.51% in 2022 and 3.68% in 2023.
- Providers spent $1.9 billion in the first five months of 2024 responding to requests for more information compared with $1.7 billion for the same period in 2023 and $1.5 billion in 2022. Kodiak projects providers will spend nearly $4.6 billion for the full year. Comparative numbers for 2023 were not included in the report.
- insurers eventually paid 88.4% of those claims once more information was provided.
- Medicaid and commercial payers issue the most denials. Denials Jan-May, 2024 as % of billed charges by payer: Traditional Medicaid–9.2%, commercial payers–8.1%, Medicaid managed care– 5.5%, charges, Medicare Advantage7%,. Traditional Medicare–0.5%.
K1005+KPI+Benchmarking+Report+Aug+Q3+2024.pdf (squarespace.com)
Investors
Pitchbook: Q2 Healthcare Services Report: Highlights: .
- Although deal count is down 25% from last quarter (mostly attributable to PPMs), we’re calling a turning point, with a handful of significant platform trades completed in the quarter and more on the horizon.
- Firms with high quality assets will bring them to market now/soon. This will crystallize pricing expectations, which are settling on multiples similar to 2017-2019 levels underwritten on a fairly conservative version of EBITDA.
- Heat map, from hottest to coolest: pharma services, HCIT, behavioral/home care, everything else, PPMs. But significant processes are underway even in PPMs.
- ABA has been the first category to really come back, with a pair of platform trades at strong multiples, a couple of platform creations this year, and more activity expected.
- Very high levels of regulatory activity (see: CA AB 3129) and headline risk continue to keep most large-cap firms away from healthcare services, limiting the buyer universe for many PPMs. Physician compensation models are also under pressure.
- Spotlight: Mental health has topped many firms’ wish lists for a while, but deal flow has been hampered by the lack of scaled targets. We expect to see an uptick soon. Outpatient, especially PHP/IOP, is strongly favored over inpatient/residential.
Pitchbook: Q2 Healthcare Services Report
Polling
YouGov Poll: Per the poll of 1,200 U.S. adults conducted June 21-24
- 53% hold a “very or somewhat” unfavorable view of the system, while 40% hold a “very or somewhat” favorable view.
- Favorable views of the system are more common with men (42%) than with women (39%); with Black Americans (49%) than with white Americans (38%); with straight people (43%) than with LGBTQ+ people (25%); and with adults 65 and older (59%) than with adults younger than 30 (28%).
- 56% say they think patients “very or somewhat often” receive worse care because of their insurance plan, while only 28% thinks this happens “never or not very open.”
- 27% say they think doctors treat patients worse because of their gender, and 19% say doctors treat patients worse because of their religion.
Most Americans hold unfavorable view of US health care system in new survey https://thehill.com/policy/healthcare/4815857-americans-unfavorable-view-us-healthcare/
Prescription Drugs
R&D Spending cuts: “The pandemic led to massive increases in research and development among pharmaceutical companies as they raced to discover vaccines and treatments for Covid-19. But those days are over, and many pharma companies are looking to cut costs as they contend with a slowdown.
While many companies, from Pfizer PFE -0.31%decrease; red down pointing triangle to Bristol-Myers Squibb BMY 0.75%increase; green up pointing triangle to Bayer and Novartis, have announced big layoffs, news from a key outsourcer on Wednesday showed that the industry’s cost-cutting ways are intensifying.
Foster said his clients are blaming the cuts on the Inflation Reduction Act, which allows Medicare to negotiate some drug prices directly with manufacturers, and a looming patent cliff, which will see more than $200 billion in annual drug sales come under threat from copycat generics…
Big pharma wants to clean house. Expensive studies of drugs that won’t make it to market for many years to come are an easy target.”
Big Pharma Cuts R&D, Sending Shudders Through Industry – WSJ
IRA Drug Price Negotiation results this week: This Thursday, the White House will unveil its negotiated prices for 10 prescription drugs subject to and on the second anniversary of Inflation Reduction Act. Negotiations with the 10 manufacturers ended August 1 and price disclosure is required by September 1 with full implementation by January 2026. In Campaign 2024, Democrats have pledged to increase the annual number of drugs subject to the policy to 50/year.
Public Health
Commonwealth Fund Report: Community Health Center (CHC) Survey: “Every year, they provide care to over 20 million people with low incomes, 17 million people of color, 15 million enrollees in Medicaid or the Children’s Health Insurance Program, and nearly 6 million people who are uninsured. . At the time of this survey, there were 1,368 centers operating in more than 15,000 service sites…. This brief reports on responses from 737 CHC leaders, including executive directors, clinical directors, or project directors, who were surveyed in fall of 2023 and spring of 2024.” Highlights
- Nearly all community health centers offer timely appointments (88%) and expanded hours for patients to receive care (93%). Rural community health centers are more likely to offer timely appointments (93%) than urban community health centers (86%).
- Most offer telehealth services in 2024 (96%), almost four times as many as in 2018 (24%).
- Significantly more community health centers have made substance use disorder treatment (66%) and medication-assisted treatment (62%) available to patients in 2024 compared to 2018.
- Community health centers face growing workforce challenges, with over 70 percent reporting primary care physician, nurse, or mental health professional shortages in 2024.
- Most community health centers find it difficult to obtain specialty care appointments for their patients (73%), particularly those covered by Medicaid or lacking insurance.
CHCs’ Progress and Challenges Meeting Patients’ Primary Care Needs | Commonwealth Fund
Mental health among youth:” It is no mystery why rates of anxiety and depression in the United States climbed in 2020, at the height of the pandemic. But then life began a slow return to normal. Why haven’t rates of distress returned to normal, too?
Self-reported anxiety and depression have declined from the peak they reached in November 2020, when 42.6%of adults said they had symptoms, according to the Household Pulse Survey, a Census Bureau tool that measures well-being. Since then, that figure has declined to 20.7%. That’s still double the 11% of Americans who said the same thing before the pandemic…Researchers say a big reason for this stubbornly elevated distress is young people, whose low mood was not linked to the pandemic.
The share of young adults reporting anxiety and depression had been rising for about a decade before Covid struck. That continued throughout the pandemic — and did not ease as quickly when vaccines became available.
This is likely because their symptoms were tied to problems other than the virus, like economic precarity, the housing crisis, social isolation and political turmoil……”
CDC: 2023 mortality rate: “In 2023, a provisional total of 3,090,582 deaths occurred in the United States. The age-adjusted death rate per 100,000 population was 884.2 among males and 632.8 among females; the overall rate, 750.4, was 6.1% lower than in 2022 (798.8). The overall rate decreased for all age groups. Overall age-adjusted death rates in 2023 were lowest among non-Hispanic multiracial (352.1) and highest among non-Hispanic Black or African American persons (924.3). The leading causes of death were heart disease, cancer, and unintentional injury. The number of deaths from COVID-19 (76,446) was 68.9% lower than in 2022 (245,614). “
CDC Mortality in the United States — Provisional Data, 2023 https://www.cdc.gov/mmwr/volumes/73
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Study: Cancer screening costs: “Total health care system costs for initial cancer screenings in the United States in 2021 were estimated at $43 billion. Approximately 88.3% of costs were attributable to private insurance; 8.5% to Medicare; and 3.2% to Medicaid, other government programs, and uninsured persons. Screening for colorectal cancer represented approximately 64% of the total cost; screening colonoscopy represented about 55% of the total. Facility costs (amounts paid to facilities where testing occurred) were major drivers of the total estimated costs of screening….
The $43 billion estimated annual cost for initial cancer screening in the United States in 2021 is less than the reported annual cost of cancer treatment in the United States in the first 12 months after diagnosis. Identification of cancer screening costs and their drivers is critical to help inform policy and develop programmatic priorities, particularly for enhancing access to recommended cancer screening services.”
