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.
The end of the COVID-19 Public Health Emergency will bring the largest health coverage changes since implementation of the Affordable Care Act.
The Families First Coronavirus Response Act’s continuous coverage requirement prevents state Medicaid agencies from disenrolling people during the COVID-19 public health emergency. However, when the declaration of the emergency expires—currently scheduled for April 2023—states will resume normal eligibility determinations. This could result in millions losing access to affordable health coverage through Medicaid.
18 million people could lose Medicaid coverage when the COVID-19 public health emergency (PHE) ends, according to a new analysis.
While many who are currently enrolled in Medicaid will transition to other coverage options, nearly 4 million people (3.8M) will become completely uninsured.
19 states will see their uninsurance rates spike by more than 20 percent.
3.2 million children will transition from Medicaid to separate Children’s Health Insurance Program (CHIP) health plans.
State Medicaid officials and policymakers must continue to ensure that individuals currently enrolled in Medicaid are aware of the approaching end of the public health emergency, and that they have a plan to maintain or find new health coverage through their employer, the federal healthcare Marketplace, or Medicaid.
Before 2006, Medicare Advantage in its current form didn’t exist. Now, the public-private program is expected to overtake traditional Medicare this year — how did it get here?
Medicare Advantage basics
Medicare is a federal insurance program that started in 1965 to primarily provide health coverage to Americans 65 and older.
Medicare Advantage is a federally-approved plan from a private insurance company that provides more coverage than traditional Medicare.
In 2022, 28.4 million people were enrolled in MA out of 58.6 million Medicare beneficiaries overall – or 48 percent.
Medicare is divided into four parts: A: Hospital insurance (hospital, skilled nursing, home health and hospice services) B: Medical insurance (outpatient services, physician visits, preventive screenings) C: Medicare Advantage D: Prescription drug insurance
The Centers for Medicare and Medicaid Services (CMS) oversees all Medicare plans. In 1997, Part C (MA) was created, and Part D was introduced in 2006.
Traditional Medicare includes Parts A and B, though Part B is optional. MA plans cover Parts A, B and D benefits.
When Congress created MA, it was initially called Medicare+Choice. In 2003, most Medicare+Choice plans were rebranded as Medicare Advantage.
Supplemental Medicare, or Medigap, are plans that can be purchased from commercial payers by traditional enrollees to cover more services.
Part C (MA) operates under a capitated fee, or when MA insurers are paid a set amount per beneficiary, and then pay for their health expenses. Traditional Medicare is fee-for-service, where providers are paid per service delivered.
If a provider accepts Medicare, enrollees are able to receive care there. MA members are typically confined to a select network of providers for non-emergency care, but coverage must meet or exceed traditional Medicare standards.
Terminology: Words and phrases associated with MA
Preferred Provider Organization (PPO): An MA plan with a large provider network that members pay less to use. Out-of-network providers can provide covered services for a higher cost, and emergency care is always covered. PPOs make up 40 percent of MA offerings in 2023.
Health Maintenance Organization (HMO): An MA plan where care is only covered with in-network providers, except for emergency care. HMOs account for 58 percent of MA offerings in 2023.
HMO-Point-of-Service (HMO-POS): HMO plans that allow some out-of-network services for a higher copayment.
Dual-Eligible Special Needs Plans (D-SNP): Special MA plans that provide coverage to beneficiaries eligible for both Medicare and Medicaid.
Private Fee-for-Service (PFFS): A fee-for-service MA plan that pays set amounts for care. Most PFFS plans have provider networks that charge less. They must cover out-of-network care, but usually at a higher cost – these make up less than 1 percent of plans.
Accountable Care Organization (ACO): A group of providers who join together to provide high-quality care to Medicare patients. ACO models are overseen by CMS, and several types now exist.
Prior authorization: Permission needed from the insurer for coverage, often for specialists or out-of-network care. Part D plans usually require PA for specialty drugs, but the process is plan specific.
Star ratings: An annual performance rating from CMS ranging from 1 to 5 stars, with 5 being the highest. Plans with four or more stars receive monetary bonuses that then must be used to improve benefits.
Medicare Advantage today
MA is expected to make up half of all Medicare enrollment in 2023. Under current growth, the program will hit 69 percent by 2030.
A record 3,998 MA plans are available nationwide in 2023, up 6 percent from the previous year.
The average beneficiary has 43 MA plans to choose from in 2023, up from 38 in 2022.
In 2023, 57 MA and Part D plans earned a five star designation, a decline from 2022, when 74 plans earned the designation.
The top five reasons enrollees chose MA plans over traditional in 2022: More benefits: 24 percent Out-of-pocket limit: 20 percent Recommended by trusted people: 15 percent Offered by former employer: 11 percent Maintain same insurer: 9 percent
The largest MA insurers in 2022: UnitedHealthcare: 7 million Humana: 5.1 million BCBS plans: 4.1 million CVS Health/Aetna: 3.3 million Kaiser Permanente: 1.8 million Centene: 1.5 million Cigna: 540,000
The average monthly MA premium is projected to be $18 for 2023, down from $19.52 in 2022.
Part D average premiums for 2023 are expected to be $31.50, down from $32.08 in 2022.
The standard monthly premium for Part B enrollees is $164.90 for 2023, a decrease of $5.20 from 2022.
Traditional Medicare members spent about 7 percent more on average for healthcare compared to MA members in 2019, according to an AHIP study published Sept. 21.
MA members spent $1,965 less on average on out-of-pocket costs and premiums annually compared to traditional Medicare beneficiaries in 2019, an April 19 study from the Better Medicare Alliance found.
Around 16 percent of MA enrollees switch insurance after one year of enrollment, an Oct. 4 study in the American Journal of Managed Care found. Nearly half switched insurers by their fifth year.
MA enrollees received 9.2 percent fewer low-value services than their counterparts using traditional Medicare, a study published Sept. 9 in JAMA Open Network found.
About a third, or 31.6 percent, of the 57 MA plans that earned five stars in 2023 are a part of the Alliance of Community Health Plans, a trade group representing integrated payer-providers.
MA plans were the most likely health plans to use alternative payment models in 2022, with 57 percent using some kind of alternative payment. Of those, 35 percent used a risk-based model.
Half of the 13 percent of employers who offered retirement health benefits in 2022 did so through MA plans, up from 26 percent in 2017, according to a report from Kaiser Family Foundation published Dec. 1.
In 2023, 1,111 MA plans will offer extra benefits beyond vision, dental and hearing, which is up from 351 in 2020.
Percentage of MA plans offering extra benefits in 2022: Vision: 99 percent Hearing: 98 percent Fitness: 98 percent Dental: 96 percent Remote access: 72 percent Meals: 71 percent Acupuncture: 45 percent Transportation: 39 percent In-home support: 12 percent Bathroom safety: 9 percent Part B rebate: 7 percent Telemonitoring: 4 percent Plans with caregiver support: 4 percent
Texas saw the most growth in MA offerings from 2022 to 2023, with 42 more plans. That was followed by Florida (26) and Pennsylvania (21).
Alabama had the highest MA enrollment rate (53 percent of all Medicare) in 2022, while Wyoming had the lowest (6 percent).
In 34 percent of metropolitan areas, one payer controls more than half of the MA market, according to a 2022 AMA report. In 91 percent of metros, one payer controls at least 30 percent of the market.
Humana offers MA plans in 89 percent of U.S. counties in 2023, and UnitedHealthcare offers plans in 84 percent.
Number of counties payers offering MA plans in 2023: *There are 3,143 counties
Counties with the most MA plans available: 1. Summit County, Ohio: 87 T-2. Cuyahoga County, Ohio: 84 T-2. Medina County, Ohio: 84 T-4: Lake County, Ohio: 83 T-4: Stark County, Ohio: 83
Alaska, Montana, South Dakota and Wyoming have the least 5-star MA plans available, with one in 2022. New York and Ohio have the most 5-star plans, with 12 available.
To date, nearly every major insurer has been accused of or settled allegations of MA fraud from the federal government. Payers have been accused of exploiting the program through elaborate coding schemes that make patients appear sicker on medical records than they actually are — thereby leading to higher payments from CMS. Insurers dispute these claims. MA overpayments to payers are estimated to have cost as much as $25 billion in 2020. Physicians told The Washington Post in June that it is common practice for payers and health systems to “data mine” a patient’s medical history if that individual is covered by MA because the program pays a set amount based on patient risk.
Some experts have said the issue stems from the flexibility of interpretation around current MA risk adjustment coding guidelines — others expect there to be increased scrutiny of the program in 2023.
Recent policy moves
CMS issued a proposed rule Dec. 6 that would require electronic prior authorization processes among MA organizations.
CMS is cracking down on deceptive marketing practices and no longer allows MA or Part D prescription drug plans to advertise on television without agency approval as of Jan. 1. The agency said it issued the new policy after reviewing thousands of beneficiary complaints regarding confusing, misleading or inaccurate information from plans — plan sponsors are also responsible for all marketing activities from brokers and third-party agencies.
CMS issued a proposed rule Dec. 14 to continue its efforts to overhaul prior authorization and marketing practices around MA and Part D plans, along with adding health equity measures to star ratings and boosting behavioral health network adequacy requirements.
A CMS rule revising MA and Part D marketing and communication regulations went into effect June 28 to increase oversight over third-party marketing organizations.
China is in the middle of what may be the world’s largest covid-19 outbreak after authorities abruptly loosened almost three years of strict pandemic restrictions in December following nationwide protests against the measures.
The sudden dismantling of China’s “zero covid” regime — enforced through mass lockdowns, testing and contact tracing — has left the country’s health system unprepared and overwhelmed. It has alarmed international health experts concerned about Beijing’s transparency and caused diplomatic friction as countries enforce travel restrictions on arrivals from China.
How many people have been infected?
So far, there are no reliable national figures for the number of people among China’s 1.4 billion population who have been infected in the current outbreak. After admitting the difficulty of tracking infections, China’s National Health Commission stopped reporting daily tallies in December.
The data is still maintained by the Chinese Center for Disease Control and Prevention, based on counts from hospitals and local health commissions. But because mandatory mass testing has been dropped, the official figure is believed to massively underestimate the rate of infection. As of Jan. 8, there have been a little more than 500,000 confirmed covid cases since the pandemic began, according to the CDC.
Statements from local governments indicate that the true number of infections is exponentially higher. Officials in Henan province estimated this week that 89 percent of the province’s 99 million residents have been infected. In Zhejiang province, officials said the province was seeing over a million new infections a day in late December. As of Jan. 8, all 31 provinces, municipalities and regions had reported covid infections, according to the CDC.
How serious is the outbreak?
The number of deaths remains unknown, even as evidence is mounting that the true death count is much higher than what has been reported — a little more than 5,200 deaths since the pandemic began and fewer than 40 since zero-covid restrictions were lifted on Dec. 7.
As of Dec. 25, the takeup of intensive care beds in secondary and tertiary hospitals across the country was about 54 percent, but that figure has since increased to 80 percent, Jiao Yahui, director of the Department of Medical Affairs of the National Health Commission, said in an interview with state broadcaster CCTV on Sunday.
Officials reassured the public by noting that the fatality rate of the coronavirus’s omicron variant is 0.1 percent. The current outbreak has mostly consisted of the omicron subvariants BA.5.2 and BF.7, the State Council Information Office said in a news conference Monday.
The lack of testing combined with the narrow definition of what counts as a covid death — positive patients who die of respiratory failure — continue to skew the statistics. Officials have said they will investigate fatalities and release the results in the future.
What is the government saying?
Authorities say the worst of the outbreak is over for Chinese cities where infections spread quickly in December. Now, they are preparing for a new surge in rural areas around the upcoming Lunar New Year holiday that begins Jan. 21.
State media has reported that cases in most major cities have started to decline. Yin Yong, acting mayor of Beijing, told CCTV on Monday that the city had reached its peak and that authorities were turning their focus to monitoring potential new coronavirus variants or subvariants of omicron, and to mitigating the impact of covid on the elderly and other vulnerable groups.
Officials also said the peak had been reached in the province of Jiangsu in late December, while in Zhejiang, authorities said, “the first wave of infections has passed smoothly,” according to Health Times, a publication managed by People’s Daily. The state-run Farmers’ Daily said that visits to 51 villages across 31 provinces showed that most residents had been infected and had recovered.
Officials have predicted a second wave over the Lunar New Year holiday, when the total number of passenger trips by residents is expected to reach 2.1 billion as pent-up demand for travel is unleashed. At this point, more contagion could spread to rural areas, where severe shortages of anti-fever drugs and medical staff have been reported.
How did zero covid affect the outbreak?
China’s pursuit of zero covid, eliminating the spread of the virus through lockdowns, mandatory quarantines, travel restrictions and mass testing, has proved to be a double-edged sword. While the approach kept infections and death rates low throughout most of the pandemic, it left the Chinese population with little natural immunity to the virus.
Many elderly residents — already skeptical of vaccines, which have had a troubled past in China — did not get vaccinated, feeling that they would be protected by the zero-covid strategy. Only 40 percent of residents above the age of 80 have had booster shots.
Under China’s covid policy, the population was immunized with domestically made vaccines that are not as effective against the omicron variant as mRNA vaccines. China has yet to approve foreign mRNA vaccines, and a domestically made one is still under production.
What does this mean for the rest of the world?
Concerns about the possibility of a new variant emerging in China have prompted countries including the United States, Japan and South Korea, and many European countries, to require extra screening for arrivals from China.
Wu Zunyou, the chief epidemiologist at the CDC, told CCTV in a report published Sunday that no new variants have emerged and that new strains are being collected every day to monitor changes.
“All the strains we found so far have already been shared with international sharing platforms,” he said. “They are the ones either reported abroad, or have been introduced to China after spreading overseas. So far, no newly emerged mutated strains have been found in China.”
The World Health Organization has called on China to share more real-time data on the outbreak. Michael Ryan, the health emergencies director, said at a news conference in Geneva on Wednesday that the WHO “still believes that deaths are heavily underreported from China.” He added: “We still do not have adequate information to make a full comprehensive risk assessment.”
Beijing has criticized travel restrictions on people arriving from China imposed by other countries as “ridiculous” and politically motivated. It has threatened countermeasures and this week suspended short-term visas for Japanese and South Korean citizens.
In any industry, market consolidation limits competition, choice and access to goods and services, all of which drive up prices.
But there’s another—often overlooked—consequence.
Market leaders that grow too powerful become complacent. And, when that happens, innovation dies. Healthcare offers a prime example.
And industry of monopolies
De facto monopolies abound in almost every healthcare sector: Hospitals and health systems, drug and device manufacturers, and doctors backed by private equity. The result is that U.S. healthcare has become a conglomerate of monopolies.
For two decades, this intense concentration of power has inflicted harm on patients, communities and the health of the nation. For most of the 21st century, medical costs have risen faster than overall inflation, America’s life expectancy (and overall health) has stagnated, and the pace of innovation has slowed to a crawl.
This article, the first in a series about the ominous and omnipresent monopolies of healthcare, focuses on how merged hospitals and powerful health systems have raised the price, lowered the quality and decreased the convenience of American medicine.
Future articles will look at drug companies who wield unfettered pricing power, coalitions of specialist physicians who gain monopolistic leverage, and the payers (businesses, insurers and the government) who tolerate market consolidation. The series will conclude with a look at who stands the best chance of shattering this conglomerate of monopolies and bringing innovation back to healthcare.
This is no incongruity. It’s what happens when hospitals and health systems merge and eliminate competition in communities.
Today, the 40 largest health systems own 2,073 hospitals, roughly one-third of all emergency and acute-care facilities in the United States. The top 10 health systems own a sixth of all hospitals and combine for $226.7 billion in net patient revenues.
Though the Federal Trade Commission and the Antitrust Division of the DOJ are charged with enforcing antitrust laws in healthcare markets and preventing anticompetitive conduct, legal loopholes and intense lobbying continue to spur hospital consolidation. Rarely are hospital M&A requests denied or even challenged.
The ills of hospital consolidation
The rapid and recent increase in hospital consolidation has left hundreds of communities with only one option for inpatient care.
But the lack of choice is only one of the downsides.
Hospital administrators know that state and federal statutes require insurers and self-funded businesses to provide hospital care within 15 miles of (or 30 minutes from) a member’s home or work. And they understand that insurers must accept their pricing demands if they want to sell policies in these consolidated markets. As a result, studies confirm that hospital prices and profits are higher in uncompetitive geographies.
These elevated prices negatively impact the pocketbooks of patients and force local governments (which must balance their budgets) to redirect funds toward hospitals and away from local police, schools and infrastructure projects.
Perhaps most concerning of all is the lack of quality improvement following hospital consolidation. Contrary to what administrators claim, clinical outcomes for patients are no better in consolidated locations than in competitive ones—despite significantly higher costs.
How hospitals could innovate (and why they don’t)
Hospital care in the United States accounts for more than 30% of total medical expenses (about $1.5 trillion). Even though fewer patients are being admitted each year, these costs continue to rise at a feverish pace.
If our nation wants to improve medical outcomes and make healthcare more affordable, a great place to start would be to innovate care-delivery in our country’s hospitals.
To illuminate what’s possible, below are three practical innovations that would simultaneously improve clinical outcomes and lower costs. And yet, despite the massive benefits for patients, few hospital-system administrators appear willing to embrace these changes.
Innovation 1: Leveraging economies of scale
In most industries, bigger is better because size equals cost savings. This advantage is known as economies of scale.
Ostensibly, when bigger hospitals acquire smaller ones, they gain negotiating power—along with plenty of opportunities to eliminate redundancies. These factors could and should result in lower prices for medical care.
Instead, when hospitals merge, the inefficiencies of both the acquirer and the acquired usually persist. Rather than closing small, ineffective clinical services, the newly expanded hospital system keeps them open. That’s because hospital administrators prefer to raise prices and keep people happy rather than undergo the painstaking process of becoming more efficient.
The result isn’t just higher healthcare costs, but also missed opportunities to improve quality.
Following M&A, health systems continue to schedule orthopedic, cardiac and neurosurgical procedures across multiple low-volume hospitals. They’d be better off creating centers of excellence and doing all total joint replacements, heart surgeries and neurosurgical procedures in a single hospital or placing each of the three specialties in a different one. Doing so would increase the case volumes for surgeons and operative teams in that specialty, augmenting their experience and expertise—leading to better outcomes for patients.
But hospital administrators bristle at the idea, fearing pushback from communities where these services close.
Innovation 2: Switching to a seven-day hospital
When patients are admitted on a Friday night, rather than a Monday or Tuesday night, they spend on average an extra day in the hospital.
This delay occurs because hospitals cut back services on weekends and, therefore, frequently postpone non-emergent procedures until Monday. For patients, this extra day in the hospital is costly, inconvenient and risky. The longer the patient stays admitted, the greater the odds of experiencing a hospital acquired infection, medical error or complications from underlying disease.
It would be possible for physicians and staff to spread the work over seven days, thus eliminating delays in care. By having the necessary, qualified staff present seven days a week, inpatients could get essential, but non-emergent treatments on weekends without delay. They could also receive sophisticated diagnostic tests and undergo procedures soon after admission, every day of the week. As a result, patients would get better sooner with fewer total inpatient days and far lower costs.
Hospital administrators don’t make the change because they worry it would upset the doctors and nurses who prefer to work weekdays, not weekends.
Innovation 3: Bringing hospitals into homes
During Covid-19, hospitals quickly ran out of staffed beds. Patients were sent home on intravenous medications with monitoring devices and brief nurse visits when needed.
Building on this success, hospitals could expand this approach with readily available technologies.
Whereas doctors and nurses today check on hospitalized patients intermittently, a team of clinicians set up in centralized location could monitor hundreds of patients (in their homes) around the clock.
By sending patients home with devices that continuously measure blood pressure, pulse and blood oxygenation—along with digital scales that can calibrate fluctuations in a patient’s weight, indicating either dehydration or excess fluid retention—patients can recuperate from the comforts of home. And when family members have questions or concerns, they can obtain assistance and advice through video.
Despite dozens of advantages, use of the “hospital at home” model is receding now that Covid-19 has waned.
That’s because hospital CEOs and CFOs are paid to fill beds in their brick-and-mortar facilities. And so, unless their facilities are full, they prefer that doctors and nurses treat patients in a hospital bed rather than in people’s own homes.
Opportunities for hospital innovations abound. These three are just a few of many changes that could transform medical care. Instead of taking advantage of them, hospital administrators continue to construct expensive new buildings, add beds and raise prices.