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Be Ready for the Reorganized Healthcare Landscape
Running a health system recently has proven to be a very hard job. Mounting losses in the face of higher operating expenses, softer than expected volumes, deferred capex, and strained C-suite succession planning are just a few of the immediate issues with which CEOs and boards must deal.
But frankly, none of those are the biggest strategic issue facing health systems. The biggest
strategic issue is the reorganization of the American healthcare landscape into an ambulatory care
business that emphasizes competing for covered lives at scale in lower cost and convenient settings
of care. This shift in business model has significant ramifications, if you own and operate acute care
hospitals.
Village MD and Optum are two of the organizations driving the business model shift. They are
owned by large publicly traded companies (Walgreens and UnitedHealth Group, respectively). Both
Optum and Village MD have had a string of announced major patient care acquisitions over the past
few years, none of which is in the acute care space.
The future of American healthcare will likely be dominated by large well-organized and well-run
multi-specialty physician groups with a very strong primary care component. These physician
service companies will be payer agnostic and focused on value-based care, though will still be
prepared to operate in markets where fee-for-service dominates. They will deliver highly
coordinated care in lower cost settings than hospital outpatient departments. And these companies
will be armed with tools and analytics that permit them to manage the care for populations of
patients, in order to deliver both better health outcomes and lower costs.
At the same time this is happening, we are experiencing steady growth in Medicare Advantage.
And along with it, a stream of primary care groups who operate purpose-built clinics to take full risk
on Medicare Advantage populations. These companies include ChenMed, Cano Health and Oak
Street, among others. These organizations use strong culture, training, and analytics to better
manage care, significantly reduce utilization, and produce better health outcomes and lower costs.
Public and private equity capital are pouring into the non-acute care sectors, fueling this growth. As
of the start of 2022, nearly three quarters of all physicians in the US were employed by either
corporate entities (such as private equity, insurance companies, and pharmacy companies), or
employed by health systems. And this employment trend has accelerated since the start of the
pandemic. The corporate entities, rather than health systems, are driving this increasing trend.
Corporate purchases of physician practices increased by 86% from 2019 to 2021.
What can health systems do? To succeed in the future, you must be the nexus of care for the
covered lives in your community. But that does not mean the health system must own all the
healthcare assets or employ all of the physicians. The health system can be the platform to convene these assets and services in the community. In some respects, it is similar to an Apple iPhone. They are the platform that convenes the apps. Some of those apps are developed and owned by Apple. But many more apps are developed by people outside of Apple, and the iPhone is simply the platform to provide access.
Creating this platform requires a change in mindset. And it requires capital. There are many opportunities for health systems to partner with outside capital providers, such as private equity, to position for the future – from both a capital and a mindset point of view.
The change in mindset, and the access to flexible capital, is necessary as the future becomes more and more about reorganizing into an ambulatory care business that emphasizes competing for covered lives at scale in lower cost and convenient settings of care.
KPMG primes shrinking CFO, CPA pipeline
The shortage of accountants is one of the main concerns keeping KPMG’s Greg Engel up at night. The firm is teaming up with universities to expand the talent pool.
KPMG’s Greg Engel likens the accounting profession to the turtle in the proverbial race with the hare — a turtle that’s seeking to pull ahead even as it competes with flashier industry sectors for workers.
The shortage of accounting talent is one of the main concerns keeping Engel — vice chair of tax in the U.S. for the Big Four accounting firm — up at night as he assesses the new year’s challenges, even as KPMG has undertaken numerous initiatives to ease the talent crunch.
At the same time, he sees a potential silver lining for his sector in the recent surge of layoffs in the formerly sizzling tech sector that has won over some college graduates who might have otherwise gone into accounting.
“A lot of people went to the technology sector because it was exciting. But now that Meta and Twitter and all these other companies are laying off people, kids going into college might go, ‘wait a minute, maybe KPMG sounds a little better than Twitter,’” Engel said in an interview. “Accounting is that boring, stable profession that doesn’t do as well in hugely expansive economies but does great when the economy’s on the downslide.”
Making accounting’s case
Historically, the Big Four accounting and consulting firms have mounted robust programs designed to recruit and train accounting students right out of colleges and major universities.
KPMG, along with PwC, Ernst & Young and Deloitte, hire thousands of graduates and students each year out of colleges, often training them through internships which lead to full-time jobs. Many of the certified public accountants go on to be controllers, tax directors and even CFOs. The entry level accounting salary range at such programs in the tax area can be roughly in the $70,000 to $80,000 range, depending on the market, according to some industry estimates.
“The hallmark of the Big Four was to train people really, really well,” Engel said. The longer employees stay at a firm, the better their prospects after they leave, Engel said.
That means an employee who leaves after a couple years could probably join a company’s accounting department at a lower level, he said. But if the employee leaves after rising to the level of senior manager, he or she could join the same company as controller — and those who leave as a partner might join as a CFO, Engel said.
CFO machine showing signs of wear
But the machine generating CPAs and CFOs has shown signs of wear in recent years. For one thing, KPMG has not been immune to the Great Resignation. It was hit by the surge in turnover that weakened the middle ladder rungs of its workforce. “There’s a kind of battle in the middle,” Engel said. The company responded in part by hiring experienced accountants from companies like Apple and Home Depot, he said.
At the same time, accounting has attracted fewer students in recent years. The total number of U.S. students completing a Bachelor’s degree in accounting fell about 8% in the 2019-2020 school year compared with the 2011-2012 period, shrinking to 52,481 graduates from 57,482, according to a 2021 report from the American Institute of Certified Public Accountants.
Priming the pipeline
Firms and accounting organizations have been taking deliberative steps in recent years to boost their case with talent and solve the talent shortage. For instance, the AICPA and the Department of Labor announced in November that they had teamed up to cultivate candidates and expand the pool of professionals, CFO Dive reported.
If students are not deterred by the accounting profession’s long hours and subdued reputation, they may feel reluctant to put in the credit hours required before taking the exam to become a Certified Public Accountant. That typically means a student will need more study beyond that of a four-year degree.
In an effort to make the extra course work pay off, KPMG worked with a number of universities to develop a Master in Accounting and Data Analytics Program that gives students the data analysis skills that are increasingly important in the field.
Recently, an additional seven universities were added to the program and KPMG has pledged to provide more than $7 million in scholarships. The schools added to the program included some historically Black Colleges and Universities such as Howard University School of Business and North Carolina Agricultural and Technical State University. Other universities that offer the program include Villanova University and The Ohio State University.
Separately, KPMG has teamed up with Engel’s alma mater, the University of Northern Iowa in Cedar Falls, Iowa, to help strengthen the accounting program and opportunities for students attending Des Moines Area Community College.
The company will also aim to provide internships to the students who often attend school at night or part-time, which can make it difficult to obtain the credit hours needed to become a CPA.
“We’re going to start adding people to the profession with two-year associates degrees,” Engel said, noting that similar programs are cropping up elsewhere. “We’ll give them a pathway to add the extra courses and programs they need.”
New booster works against dominant Covid strain
A new CDC study has found that the Covid-19 bivalent booster reduces the risk of symptomatic infection from the most common subvariant circulating in the U.S. right now by about half.
Additional new data, set to be published on the CDC website on Wednesday, also shows that individuals who received an updated vaccine reduced their risk of death by nearly 13 fold, when compared to the unvaccinated, and by two fold when compared to those with at least one monovalent vaccine but no updated booster.
CDC officials said during a briefing on Wednesday that the new findings were “reassuring.” But only 15.3 percent of eligible Americans — or about 50 million people — have received the new shot, which was rolled out in September.
Meanwhile, the highly transmissible Omicron subvariant XBB.1.5 — nicknamed “the Kraken” by some — is now the dominant SARS-CoV-2 strain in the U.S., projected by the CDC to make up just over 49 percent of cases in the country as of last week.
Earlier this month, the WHO said XBB.1.5 is the most transmissible variant to date, and is circulating in dozens of countries. Though a catastrophic wave has not emerged in the U.S. yet, there has nevertheless been a spike in deaths this month, with an average of 564 people dying of Covid-19 each day as of Jan. 18, compared with an average of 384 around the same time in December.
The new vaccine efficacy study, which used data from the national pharmacy program for Covid testing, found that the bivalent booster provided 48 percent greater protection against symptomatic infection from the XBB and XBB.1.5 subvariants among people who had the booster in the previous two to three months, compared with people who had only previously received two to four monovalent doses.
It also provided 52 percent greater protection against symptomatic infection from the BA.5 subvariant, though according to CDC estimates, BA.5 only accounted for about 2 percent of U.S. cases last week.
CDC officials cautioned that the findings reflected a population-level rate of protection, and that individual risk of infection varies.
“It’s hard to interpret it as an individual’s risk, because every individual is different,” said Ruth Link-Gelles, the author of the vaccine effectiveness study published in MMWR Wednesday. “Their immune system is different, their past history of prior infection is different. They may have underlying conditions that put them at more or less risk of COVID-19 disease.”
She also said it was unclear, given the limitations of the study, how long the bivalent booster protection will last.
“It’s too early to know how waning will happen with the bivalent vaccine,” she said. “What we’ve seen in the past is that your protection lasts longer for more severe illness. So even though you may have diminished protection over time against symptomatic infection, you’re likely still protected against more severe disease for a longer period of time.”
Uninsured rate fell for those historically lacking coverage
The national rate of uninsured people under the age of 65 fell from 11.1% in 2019 to 10.5% in 2021 as government policies aimed at increasing accessible coverage for those with lower incomes, according to an HHS report out last week.
The rate decline was highest among those who had incomes between 100% and 200% of the federal poverty level. Those in traditionally uncovered demographies, such as people who are Latino, American Indian/Alaska native and those who don’t speak English, saw larger gains in coverage.
The research comes as the Biden administration reported an 8% national uninsurance rate, a historic low, in the first quarter of last year for all Americans.
Half of the top 10 states for coverage gains expanded Medicaid under the Affordable Care Act between 2019 and 2021. The leading state, Maine, reached a 7.1% uninsured population in 2021, dropping from 10.2% in 2019. Officials shifted to a state-based exchange for the 2022 plan year.
“Many of the areas with the greatest coverage gains since 2019 had higher than average uninsured rates in 2021, suggesting progress in narrowing geographic disparities but still with substantial gaps remaining; the lack of Medicaid expansion in 11 states plays a key ongoing role in coverage disparities across states,” the report authors wrote.
The state with the largest increase in uninsured people was Alabama, which reached 12.5% in 2021 compared to 12.1% in 2019.
In addition to Medicaid expansion, other policies that helped those receive coverage include increased premium tax subsidies under the American Rescue Plan.
Also helping is the Medicaid continuous coverage provision, which has barred states from kicking people off rolls during the COVID-19 public health emergency.
That policy is set to end in April, however. Researchers have said that as many as 15 million to 18 million people could be affected.
States are taking some steps to help those eligible remain in the program. Most states plan to update enrollee mailing addresses and follow up with those people when action is recovered to maintain coverage, according to a recent Kaiser Family Foundation report.
Forty-one states said it will take up to 12 months to process renewals, KFF said.
Record-breaking 16.3M people signed up for ACA coverage
The CMS announced Wednesday that a record-breaking 16.3 million people signed up for Affordable Care Act marketplace plans during the 2023 open enrollment season, a result of extended pandemic-era subsidies enacted by the American Rescue Plan.
Over 1.8 million more people enrolled in marketplace coverage compared to last year — a 13% increase, and the most amount of plan selections of any year since the launch of the ACA marketplace a decade ago, according to the CMS. The record-breaking enrollment numbers include 3.6 million first-time marketplace enrollees.
Enrollment comes after last year’s passage of the Inflation Reduction Act extended ACA subsidies into 2025, protecting millions of Americans from premium hikes and reflecting a broader push in policy from the Biden administration aimed at increasing healthcare insurance coverage. This month, the HHS announced that the national rate of uninsured people under the age of 65 fell from 11.1% in 2019 to 10.5% in 2021.
However, some coverage protections rely on the federal COVID-19 public health emergency status, which will expire without an extension in mid-April. Medicaid enrollment numbers are expected to drop at the end of the public health emergency, with as many as 18 million enrollees projected to lose Medicaid coverage, according to the Robert Wood Johnson Foundation.
In addition to a boost from subsidies, the CMS announced this month that it had quadrupled the number of navigators used to assist plan signups.
U.S. economy expands at 2.9% annual rate in fourth quarter
The U.S. economy grew at an annualized 2.9% rate in the final months of 2022, the Commerce Department said on Thursday.
Why it matters:
Economists are bracing for a significant slowdown in economic activity as the Federal Reserve’s interest rates hikes take hold, but that certainly wasn’t the case in the final months of last year.
- Economists expected the Gross Domestic Product figures to show the economy grew at a 2.6% annualized rate last quarter, after expanding at a 3.2% pace in the prior quarter.
Details:
Consumer spending and businesses built up private inventories gave GDP the biggest boost. Among the biggest drags: fixed investment, a category that includes housing.
By the numbers:
Over the calendar year, GDP grew by 2.1% in 2022 — a decent pace, especially considering the historically aggressive rate hikes by the Federal Reserve that sought to restrain economic activity to contain inflation.
- Those rate hikes hit the housing sector particularly hard, which dragged down overall growth earlier last year.
Catch up quick:
The first half of 2022 was dogged by fears that the economy had entered a recession, after back-to-back quarters of contractions. But by the second half of the year, the economy had returned to growth mode.
- The growth over 2022 was an expected slowdown from the 5.9% achieved in 2021, when the economy bounced back from the pandemic shock.
Four Insights from Healthcare Reimagined: BDO’s J.P. Morgan Conference Event
https://www.linkedin.com/pulse/four-insights-from-healthcare-reimagined-bdos-jp-morgan-steven-shill/
This January, BDO hosted healthcare and life sciences leaders on the sidelines of JP Morgan’s Healthcare Conference to glean insights from those at the forefront of these rapidly evolving industries.
In a series of intimate breakout discussions, these leaders discussed the challenges they’re seeing and what they anticipate the near future will hold. Here are four of their biggest takeaways that industry stakeholders need to know:
· Healthcare labor needs a makeover
One of the biggest issues we’re seeing in healthcare today is the overburdening of clinicians and other healthcare staff. This year, healthcare leaders need to prioritize enabling clinicians to practice at the top of their licenses. That means reducing their administrative burden so they can spend more time doing what they do best: working with patients and dispensing care.
· Healthcare valuations are moderating
In the past year, healthcare company valuations have been very high. We’re now seeing valuations moderate, which could mean a major shift in the deal landscape, with deal opportunities opening up as the price is right.
· Health equity is about choice
The reality is that each individual patient has unique needs that require tailored solutions. One important tool for improving health equity is technology that enables patients to choose what is right for them and their situation. That’s why capabilities like self-scheduling are so important, despite the fact that they are currently a missed opportunity for many providers.
· Life sciences leaders are looking at drug timelines differently
COVID-19 showed how quickly a drug can be safely developed when the right resources are in place. Moving forward, life sciences leaders are likely to pressure test drug timelines, which could lead to a shift in how the industry looks at drug development as a whole.
· While it’s impossible to know exactly what the future holds, we’re thankful that we were able to hear from industry leaders with on-the-ground knowledge of what’s happening now and what’s likely ahead. In the months and years ahead, we’ll continue to look to these leaders for their insights.
HENRY KOTULA 