Category Archives: Health System

JPM 2024 just wrapped. Here are the key insights

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https://www.advisory.com/daily-briefing/2024/01/23/jpm-takeaways-ec#accordion-718cb981ab-item-4ec6d1b6a3

Earlier this month, leaders from more than 400 organizations descended on San Francisco for J.P. Morgan‘s 42nd annual healthcare conference to discuss some of the biggest issues in healthcare today. Here’s how Advisory Board experts are thinking about Modern Healthcare’s 10 biggest takeaways — and our top resources for each insight.

How we’re thinking about the top 10 takeaways from JPM’s annual healthcare conference 

Following the conference, Modern Healthcare  provided a breakdown of the top-of-mind issues attendees discussed.  

Here’s how our experts are thinking about the top 10 takeaways from the conference — and the resources they recommend for each insight.  

1. Ambulatory care provides a growth opportunity for some health systems

By Elizabeth Orr, Vidal Seegobin, and Paul Trigonoplos

At the conference, many health system leaders said they are evaluating growth opportunities for outpatient services. 

However, results from our Strategic Planner’s Survey suggest only the biggest systems are investing in building new ambulatory facilities. That data, alongside the high cost of borrowing and the trifurcation of credit that Fitch is predicting, suggests that only a select group of health systems are currently poised to leverage ambulatory care as a growth opportunity.  

Systems with limited capital will be well served by considering other ways to reach patients outside the hospital through virtual care, a better digital front door, and partnerships. The efficiency of outpatient operations and how they connect through the care continuum will affect the ROI on ambulatory investments. Buying or building ambulatory facilities does not guarantee dramatic revenue growth, and gaining ambulatory market share does not always yield improved margins.

While physician groups, together with management service organizations, are very good at optimizing care environments to generate margins (and thereby profit), most health systems use ambulatory surgery center development as a defensive market share tactic to keep patients within their system.  

This approach leaves margins on the table and doesn’t solve the growth problem in the long term. Each of these ambulatory investments would do well to be evaluated on both their individual profitability and share of wallet. 

On January 24 and 25, Advisory Board will convene experts from across the healthcare ecosystem to inventory the predominant growth strategies pursued by major players, explore considerations for specialty care and ambulatory network development, understand volume and site-of-care shifts, and more. Register here to join us for the Redefining Growth Virtual Summit.  

Also, check out our resources to help you plan for shifts in patient utilization:  

2. Rebounding patient volumes further strain capacity

By Jordan Peterson, Eliza Dailey, and Allyson Paiewonsky 

Many health system leaders noted that both inpatient and outpatient volumes have surpassed pre-pandemic levels, placing further strain on workforces.  

The rebound in patient volumes, coupled with an overstretched workforce, underscores the need to invest in technology to extend clinician reach, while at the same time doubling down on operational efficiency to help with things like patient access and scheduling. 

For leaders looking to leverage technology and boost operational efficiency, we have a number of resources that can help:  

3. Health systems aren’t specific on AI strategies

By Paul Trigonoplos and John League

According to Modern Healthcare, nearly all health systems discussed artificial intelligence (AI) at the conference, but few offered detailed implementation plans and expectations.

Over the past year, a big part of the work for Advisory Board’s digital health and health systems research teams has been to help members reframe the fear of missing out (FOMO) that many care delivery organizations have about AI.  

We think AI can and will solve problems in healthcare. Every organization should at least be observing AI innovations. But we don’t believe that “the lack of detail on healthcare AI applications may signal that health systems aren’t ready to embrace the relatively untested and unregulated technology,” as Modern Healthcare reported. 

The real challenge for many care delivery organizations is dealing with the pace of change — not readiness to embrace or accept it. They aren’t used to having to react to anything as fast-moving as AI’s recent evolution. If their focus for now is on low-hanging fruit, that’s completely understandable. It’s also much more important for these organizations to spend time now linking AI to their strategic goals and building out their governance structures than it is to be first in line with new applications.  

Check out our top resources for health systems working to implement AI: 

4. Digital health companies tout AI capabilities

By Ty Aderhold and John League

Digital health companies like Teladoc, R1 RCM, Veradigm, and Talkspace all spoke out about their use of generative AI. 

This does not surprise us at all. In fact, we would be more surprised if digital health companies were not touting their AI capabilities. Generative AI’s flexibility and ease of use make it an accessible addition to nearly any technology solution.  

However, that alone does not necessarily make the solution more valuable or useful. In fact, many organizations would do well to consider how they want to apply new AI solutions and compare those solutions to the ones that they would have used in October 2022 — before ChatGPT’s newest incarnation was unveiled. It may be that other forms of AI, predictive analytics, or robotic process automation are as effective at a better cost.  

Again, we believe that AI can and will solve problems in healthcare. We just don’t think it will solve every problem in healthcare, or that every solution benefits from its inclusion.  

Check out our top resources on generative AI: 

5. Health systems speak out on denials

By Mallory Kirby

During the conference, providers criticized insurers for the rate of denials, Modern Healthcare reports. 

Denials — along with other utilization management techniques like prior authorization — continue to build tension between payers and providers, with payers emphasizing their importance for ensuring cost effective, appropriate care and providers overwhelmed by both the administrative burden and the impact of denials on their finances. 

  Many health plans have announced major moves to reduce prior authorizations and CMS recently announced plans to move forward with regulations to streamline the prior authorization process. However, these efforts haven’t significantly impacted providers yet.  

In fact, most providers report no decrease in denials or overall administrative burden. A new report found that claims denials increased by 11.99% in the first three quarters of 2023, following similar double digit increases in 2021 and 2022. 

  Our team is actively researching the root cause of this discrepancy and reasons for the noted increase in denials. Stay tuned for more on improving denials performance — and the broader payer-provider relationship — in upcoming 2024 Advisory Board research. 

For now, check out this case study to see how Baptist Health achieved a 0.65% denial write-off rate.  

6. Insurers are prioritizing Star Ratings and risk adjustment changes

By Mallory Kirby

Various insurers and providers spoke about “the fallout from star ratings and risk adjustment changes.”

2023 presented organizations focused on MA with significant headwinds. While many insurers prioritized MA growth in recent years, leaders have increased their emphasis on quality and operational excellence to ensure financial sustainability.

  With an eye on these headwinds, it makes sense that insurers are upping their game to manage Star Ratings and risk adjustment. While MA growth felt like the priority in years past, this focus on operational excellence to ensure financial sustainability has become a priority.   

We’ve already seen litigation from health plans contesting the regulatory changes that impact the bottom line for many MA plans. But with more changes on the horizon — including the introduction of the Health Equity Index as a reward factor for Stars and phasing in of the new Risk Adjustment Data Validation model — plans must prioritize long-term sustainability.  

Check out our latest MA research for strategies on MA coding accuracy and Star Ratings:  

7. PBMs brace for policy changes

By Chloe Bakst and Rachael Peroutky 

Pharmacy benefit manager (PBM) leaders discussed the ways they are preparing for potential congressional action, including “updating their pricing models and diversifying their revenue streams.”

Healthcare leaders should be prepared for Congress to move forward with PBM regulation in 2024. A final bill will likely include federal reporting requirements, spread pricing bans, and preferred pricing restrictions for PBMs with their own specialty pharmacy. In the short term, these regulations will likely apply to Medicare and Medicaid population benefits only, and not the commercial market. 

Congress isn’t the only entity calling for change. Several states passed bills in the last year targeting PBM transparency and pricing structures. The Federal Trade Commission‘s ongoing investigation into select PBMs looks at some of the same practices Congress aims to regulate. PBM commercial clients are also applying pressure. In 2023, Blue Cross Blue Shield of California‘s (BSC) decided to outsource tasks historically performed by their PBM partner. A statement from BSC indicated the change was in part due to a desire for less complexity and more transparency. 

Here’s what this means for PBMs: 

Transparency is a must

The level of scrutiny on transparency will force the hand of PBMs. They will have to comply with federal and state policy change and likely give something to their commercial partners to stay competitive. We’re already seeing this unfold across some of the largest PBMs. Recently, CVS Caremarkand Express Scripts launched transparent reimbursement and pricing models for participating in-network pharmacies and plan sponsors. 

While transparency requirements will be a headache for larger PBMs, they might be a real threat to smaller companies. Some small PBMs highlight transparency as their main value add. As the larger PBMs focus more on transparency, smaller PBMs who rely on transparent offerings to differentiate themselves in a crowded market may lose their main competitive edge. 

PBMs will have to try new strategies to boost revenue

PBM practice of guiding prescriptions to their own specialty pharmacy or those providing more competitive pricing is a key strategy for revenue. Stricter regulations on spread pricing and patient steerage will prompt PBMs to look for additional revenue levers.   

PBMs are already getting started — with Express Scripts reporting they will cut reimbursement for wholesale brand name drugs by about 10% in 2024. Other PBMs are trying to diversify their business opportunities. For example, CVS Caremark’s has offered a new TrueCost model to their clients for an additional fee. The model determines drug prices based on the net cost of drugs and clearly defined fee structures. We’re also watching growing interest in cross-benefit utilization management programs for specialty drugs.  These offerings look across both medical and pharmacy benefits to ensure that the most cost-effective drug is prescribed for patients. 

Check out some of our top resources on PBMs:  

To learn more about some of the recent industry disruptions, check out:   

8. Healthcare disruptors forge on

 By John League

At the conference, retailers such as CVS, Walgreens, and Amazon doubled down on their healthcare services strategies.

Typically, disruptors do not get into care delivery because they think it will be easy. Disruptors get into care delivery because they look at what is currently available and it looks so hard — hard to access, hard to understand, and hard to pay for.  

Many established players still view so-called disruptors as problematic, but we believe that most tech companies that move into healthcare are doing what they usually do — they look at incumbent approaches that make it hard for customers and stakeholders to access, understand, and pay for care, and see opportunities to use technology and innovative business models in an attempt to target these pain points.

CVS, Walgreens, and Amazon are pursuing strategies that are intended to make it more convenient for specific populations to get care. If those efforts aren’t clearly profitable, that does not mean that they will fail or that they won’t pressure legacy players to make changes to their own strategies. Other organizations don’t have to copy these disruptors (which is good because most can’t), but they must acknowledge why patient-consumers are attracted to these offerings.  

For more information on how disruptors are impacting healthcare, check out these resources:  

9. Financial pressures remain for many health systems

By Vidal Seegobin and Marisa Nives

Health systems are recovering from the worst financial year in recent history. While most large health systems presenting at the conference saw their finances improve in 2023, labor challenges and reimbursement pressures remain.  

We would be remiss to say that hospitals aren’t working hard to improve their finances. In fact, operating margins in November 2023 broke 2%. But margins below 3% remain a challenge for long-term financial sustainability.  

One of the more concerning trends is that margin growth is not tracking with a large rebound in volumes. There are number of culprits: elevated cost structures, increased patient complexity, and a reimbursement structure shifting towards government payers.  

For many systems, this means they need to return to mastering the basics: Managing costs, workforce retention, and improving quality of care. While these efforts will help bridge the margin gap, the decoupling of volumes and margins means that growth for health systems can’t center on simply getting bigger to expand volumes.

Maximizing efficiency, improving access, and bending the cost curve will be the main pillars for growth and sustainability in 2024.  

 To learn more about what health system strategists are prioritizing in 2024, read our recent survey findings.  

Also, check out our resources on external partnerships and cost-saving strategies:  

10. MA utilization is still high

By Max Hakanson and Mallory Kirby  

During the conference, MA insurers reported seeing a spike in utilization driven by increased doctor’s visits and elective surgeries.  

These increased medical expenses are putting more pressure on MA insurers’ margins, which are already facing headwinds due to CMS changes in MA risk-adjustment and Star Ratings calculations. 

However, this increased utilization isn’t all bad news for insurers. Part of the increased utilization among seniors can be attributed to more preventive care, such as an uptick in RSV vaccinations.  

In UnitedHealth Group‘s* Q4 earnings call, CFO John Rex noted that, “Interest in getting the shot, especially among the senior population, got some people into the doctor’s office when they hadn’t visited in a while,” which led to primary care physicians addressing other care needs. As seniors are referred to specialty care to address these needs, plans need to have strategies in place to better manage their specialist spend.   

To learn how organizations are bringing better value to specialist care in MA, check out our market insight on three strategies to align specialists to value in MA. (Kacik et al., Modern Healthcare, 1/12)

*Advisory Board is a subsidiary of UnitedHealth Group. All Advisory Board research, expert perspectives, and recommendations remain independent. 

Nurse sues UPMC over alleged labor abuses

Posted on by • Posted in Antitrust, Class Action Lawsuit, Health System, Hospital, Hospital Industry, Labor Abuses, Labor Relations, Labor Spend Management, Lawsuit, Market Consolidation, Market Power, Market Share, Mergers & Acquisitions, Monopoly, Monopoly Behavior, Nurses, Unfair Business Practices, Unfair Labor Practices • Leave a comment
https://www.healthcaredive.com/news/nurse-sues-upmc-monopoly-labor-abuse-pennsylvania/705287/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202024-01-23%20Healthcare%20Dive%20%5Bissue:58423%5D&utm_term=Healthcare%20Dive

The lawsuit filed in federal court seeks to represent thousands of other UPMC employees.

Dive Brief:

  • A nurse is suing the University of Pittsburgh Medical Center for allegedly leveraging its monopoly control over the employment market in Pennsylvania to keep wages down and prevent workers from leaving for competitors, all while increasing their workload.
  • The lawsuit, filed late last week in a federal court, seeks class action status to represent other staff at the nonprofit health system. Plaintiff Victoria Ross, who worked as a nurse at UPMC Hamot in Erie, Pennsylvania, seeks damages and is asking the judge to enjoin UPMC from continuing its unfair business practices.
  • If granted class action status, the lawsuit could represent thousands of current and former UPMC workers, including registered nurses, medical assistants and orderlies. UPMC has denied the allegations in statements to other outlets but did not respond to a request for comment by time of publication.

Dive Insight:

UPMC has grown steadily over the past few decades into the largest private employer in Pennsylvania, employing 95,000 workers overall.

From 1996 to 2018, the system acquired 28 competing healthcare providers, greatly expanding its market power, according to the lawsuit. The acquisitions also shrunk the availability of healthcare services. Over the same period, UPMC closed four hospitals and downsized operations in three other facilities, eliminating 1,800 full- and part-time jobs, the lawsuit said.

UPMC relied on “draconian” mobility restrictions and labor law violations to lock employees into lower pay and subcompetitive working conditions, according to the 44-page complaint.

Specifically, the system enacted restraints like noncompete clauses and “do-not-rehire blacklists” to stop workers from leaving. Meanwhile, UPMC allegedly suppressed workers’ labor law rights to prevent them from unionizing.

“Each of these restraints alone is anticompetitive, but combined, their effects are magnified. UPMC wielded these restraints together as a systemic strategy to suppress worker bargaining power and wages,” the lawsuit said. “As a result, UPMC’s skilled healthcare workers were required to do more while earning less — while they were also subjected to increasingly unfair and coercive workplace conditions.”

According to the complaint, UPMC has faced 133 unfair labor practice charges since 2012, and 159 separate allegations. Roughly 74% of the violations were related to workers’ efforts to unionize, the lawsuit said.

Meanwhile, UPMC workers’ wages have fallen at a rate of 30 to 57 cents per hour on average compared to other hospital workers for every 10% increase in UPMC’s market share, said the lawsuit, citing a consultant’s economic analysis.

The lawsuit also noted that UPMC’s staffing ratios have been decreasing, even as staffing ratios on average have increased at other Pennsylvania hospitals.

The alleged labor abuses and UPMC’s market power are linked, according to the complaint.

“Had UPMC been subject to competitive market forces, it would have had to raise wages to attract more workers and provide higher staffing levels in order to avoid degrading the care it provided to its patients, and in order to prevent losing patients to competitors who could provide better quality care,” the lawsuit said.

UPMC is facing similar labor allegations. In May, two unions filed a complaint asking the Department of Justice to investigate labor abuses at the nonprofit.

Hospitals were plagued by staffing shortages during the COVID-19 pandemic. Many facilities still bemoan the difficulty of hiring and retaining full-time workers, and point to shortages (of nurses in particular) as the reason for overworked employees and poor staffing ratios.

Yet some studies suggest that’s not the case. One recent analysis of Bureau of Labor Statistics data found employment in hospitals — including registered nurses — is now slightly higher than it was at the start of the pandemic.

Despite the controversy, UPMC — which now operates 40 hospitals with annual revenue of $26 billion — continues to try and expand its market share. Late last year, the system signed a definitive agreement to acquire Washington Health Care Services, a Pennsylvania system with more than 2,000 employees and two hospitals. The deal faces pushback from local unions.

The rising debate about hospital community benefits: Sanders vs AHA

Posted on by • Posted in American Hospital Association (AHA), Community Benefit, Health System, Hospital, Hospital Industry, Medical Debt, Tax Exempt Status • Leave a comment
The rising debate about hospital community benefits: Sanders vs AHA

We’ve been getting more and more questions about our Fair Share Spending work that assesses whether hospitals are giving back enough in financial assistance and community health investments to justify their generous tax breaks. Two new reports—one from a United States Senate committee and one from the American Hospitals Association—delve into this space and provide very different views. Here’s what you need to know.

Sanders report calls out hospitals

Nonprofit hospitals receive an estimated $28 billion in total tax breaks each year, but give back far less in meaningful community benefits. A Lown Institute report found that nonprofit hospitals received $14 billion more in tax breaks than they spent on financial assistance and community health programs in 2020, what we call a Fair Share Deficit. About three quarters of hospitals failed to give back to their communities in amounts commensurate with their tax exemption.

In August, four US Senators sent letters to the IRS asking for clarification on how hospitals are complying with the community benefit standard. And this week majority staff of the Senate Health, Education, Labor, and Pensions (HELP) Committee, chaired by Senator Bernie Sanders, released a report showing how some large hospital systems spend little on financial assistance, despite paying their CEOs whopping 8-figure salaries.

The Sanders report highlights examples of nonprofit hospitals engaging in aggressive billing activities such as sending patients’ medical debt to collections and denying care to patients with outstanding medical debt. The report also adds a new analysis of how much the 16 largest nonprofit hospital systems spend on financial assistance (free and discounted care for patients who can’t afford to pay). They find that 12 of these systems spent less than $0.02 for each dollar in revenue on financial assistance, and six gave less than $0.01. 

The report also called attention to “massive salaries” for some system CEOs, like Commonspirit which paid their CEO $35 million in 2021. Lown Institute data shows vast inequities at some hospitals, with some CEOs making up to 60 times what other hospital workers make.

This underinvestment in financial assistance causes real harm to patients. When hospitals charge patients for care they can’t afford, patients go into debt and often sacrifice basic needs and avoid additional care. An estimated 100 million Americans are in medical debt, and most owe at least some to hospitals. If hospitals paid off their $14 billion fair share deficit, it would be enough to erase the debt of 18 million Americans, which would be a huge step forward for fairness in the country.

AHA provides opposing view

The American Hospitals Association just published their analysis of hospital community benefit spending, finding that hospitals spent $130 billion in 2020, amounting to 15.5% of hospital expenses. That’s far more than other studies estimate. 

How can the AHA estimate be so different? The answer depends on what’s being counted as a “community benefit.” When you imagine programs to improve community health, you might think of free immunizations, health fairs and educational classes, food pantries and other nutritional assistance, investments in affordable housing, healthcare for the homeless, etc. However, spending on those types of programs made up only 1.8% of hospital expenses in 2020, according to the AHA’s report.

Financial assistance, free or discounted care for eligible patients, is another important category of community benefit spending. But the AHA report doesn’t break out this amount on its own; instead, they lump it in together with Medicaid shortfall and other unreimbursed costs of government programs.

While it’s important that hospitals care for patients with Medicaid, the “shortfall” they report does not go towards tangible community programs or into the pockets of patients. Instead, this is an accounting item related to the discounted prices in Medicaid. Hospitals offer discounts on care to insurers all the time, but these aren’t considered community benefits–why should Medicaid discounts be any different? Most hospitals already make up this shortfall from public insurers by charging private insurers more than their costs of care. The same goes for Medicare shortfall, which the AHA report also includes in their total, despite this not even being considered a “community benefit” by the IRS.

The AHA report also includes bad debt, which is money the hospital expected to get from patients but never received. The AHA argues this spending is a benefit to the community because many patients who don’t pay would have qualified for financial assistance. However, in the real world, policies on financial assistance vary widely and getting access to it can be easy or hard. If a hospital goes to great lengths to make their financial assistance application simple and accessible, and give more in assistance as a result, that should be rewarded. On the other hand, if hospitals make getting assistance hard and hound low-income patients to pay their bills or send their debt to collection agencies, that hardly seems like a “community benefit.”

What can policymakers do?

The Sanders report adds to existing evidence that nonprofit hospitals could do much more to improve community health and earn their tax-exempt status. How can federal policymakers improve transparency and incentives around the community benefit standard? See some of our key recommendations for Congress on this issue.

The rising danger of private equity in healthcare

Posted on by • Posted in Adverse Events, Federal Trade Commission, Federal Trade Commission (FTC), Financialization of Health, Health Insurance Industry, Health System, Hospital, Hospital Industry, Joint Liability, Management Company, Market Consolidation, Market Power, Market Trends, Mergers & Acquisitions, Ownership Transparency, Private Equity, Regulation, Social Responsibility, Tax Loopholes • Leave a comment
The rising danger of private equity in healthcare

Private equity (PE) acquisitions in healthcare have exploded in the past decade. The number of private equity buyouts of physician practices increased six-fold from 2012-2021. At least 386 hospitals are now owned by private equity firms, comprising 30% of for-profit hospitals in the U.S. 

Emerging evidence shows that the influence of private equity in healthcare demands attention. Here’s what’s in the latest research.

What is private equity?

There are a few key characteristics that differentiate private equity firms from other for-profit companies. At a 2023 event hosted by the NIHCM Foundation, Assistant Professor of Health Care Management at The Wharton School at the University of Pennsylvania Dr. Atul Gupta explained these factors:

  1. Financial engineering. PE firms primarily use debt to finance acquisitions (that’s why they’re often known as “leveraged buyouts”). But unlike in other acquisitions, this debt is placed on the balance sheet of the the target company (ie. the physician practice or hospital). 
  2. Short-term goals. PE firms make the majority of their profits when they sell, and they look to exit within 5-8 years. That means they generally look for ways to cut costs quickly, like reducing staff or selling real estate. 
  3. Moral hazard. PE companies can make a big profit even if their target firm goes bankrupt. This is different from most investments where the success of the investor depends on how well the target company does.

The nature of private equity itself has serious implications for healthcare, in which the health of communities depends on the long-term sustainability and quality improvement of hospitals and physician practices. But are these concerns borne out in the real world?   

PE acquisition and adverse events

A recent study in JAMA from researchers at Harvard Medical School and the University of Chicago analyzed patient mortality and the prevalence of adverse events at hospitals acquired by private equity compared to non-acquired hospitals. The study used Medicare claims from more than 4 million hospitalizations from 2009-2019, comparing claims at 51 PE-acquired hospitals and 249 non-acquired hospitals to serve as controls.

In-hospital mortality decreased slightly at PE-acquired hospitals compared to controls, but not 30-day mortality. This may be because the patient mix at PE-acquired hospitals shifted more toward a lower-risk group, and transfers to other acute care hospitals increased. 

However, there were concerning results for patient safety. The rate of adverse events at PE-acquired hospitals compared to control hospitals increased by 25%, including a 27% increase in falls, 38% increase in central line-associated bloodstream infections (CLABSI), and double the rate of surgical site infections. The authors found the rates of CLABSI and surgical site infections at PE-acquired hospitals alarming because overall surgical volume and central line placements actually decreased. 

What could be behind these higher rates of adverse events after PE acquisition? In a Washington Post op-ed, Dr. Ashish Jha, dean of the School of Public Health at Brown University, writes that it’s down to two things: staffing levels and adherence to patient safety protocols. “Both cost money, and it is not a stretch to connect cuts in staffing and a reduced focus on patient safety with an increased risk of harm for patients,” he writes.   

Social responsibility impact

Private equity acquisitions may have a negative effect on patient safety, but what about social responsibility? In a recent report from PE Stakeholder on the impact of Apollo Global Management’s reach into healthcare, the authors use the Lown Institute Hospitals Index to understand hospitals owned by Apollo perform on social responsibility. Lifepoint Health, a health system owned by Apollo, was ranked 222 out of 296 systems on social responsibility nationwide. And in Virginia, North Carolina, and Arizona, some of the worst-ranked hospitals in the state for social responsibility are those owned by Lifepoint Health, the PE Stakeholder report shows.

Apollo Global Management is the second largest private equity firm in the United States, with $598 billion total assets under management, according to the report. The PE stakeholder report outlines concerning practices by Apollo, including putting high levels of debt that lowers hospitals’ credit ratings and increases their interest rates, cutting staff and essential healthcare services, and selling off real estate for a quick buck. If we care about hospital social responsibility we should clearly be concerned about private equity acquisitions. 

The bigger picture

Private equity buyouts did not come from out of nowhere, so what does this trend tell us about our healthcare system? PE acquisitions are in many ways a symptom of larger issues in healthcare, such as increasing administrative burden, tight margins, and lack of regulation on consolidation. For owners of private physician practices that face a lot of administrative work, deciding to sell to a PE firm to reduce this workload and focus on patient care (not to mention, getting a hefty payout) is a tempting proposal. 

In the Washington Post, Ashish Jha describes what made his colleague decide to sell his practice to a PE firm: “The price he was getting was very good, and he was happy to outsource the headache of running the business (managing billing, making sure there was adequate coverage for nights and weekends, etc.).”

“In many ways, private equity is both a response to and an accelerator of broader health system trends – one in which consolidation is happening quickly, care is being delivered by larger and larger entities, and corporate influence is growing.”Jane M. Zhu, MD, MPP, MSHP, Associate Professor of Medicine at Oregon Health & Science University, at NIHCM Foundation Event

PE buyouts are also indicative of a larger trend, what some researchers call the “financialization” of health. As Dr. Joseph Bruch at the University of Chicago and colleagues describe in the New England Journal of Medicine, financialization refers to the “transformation of public, private, and corporate health care entities into salable and tradable assets from which the financial sector may accumulate capital.”  

Financialization is a sort of merging of the financial and healthcare sectors; not only are financial actors like private equity buying up healthcare providers, but healthcare institutions are also acting like financial firms. For example, 22 health systems have investment arms, including nonprofit system Ascension, which has its own private equity operation worth $1 billion. The financialization of healthcare is also reflected in the boards of nonprofit hospitals. A 2023 study of US News top-ranked hospitals found that a plurality of their board members (44%) were from the financial sector. 

What we can do about it?

What can we do to mitigate harms caused by PE acquisitions? In Health Affairs Forefront, executive director of Community Catalyst Emily Stewart and executive director of the Private Equity Stakeholder Project Jim Baker provide some policy ideas to stop the “metastasizing disease” of private equity:

  • Joint Liability. Currently PE firms can put all of their debt on the balance sheet of the firm they acquire, letting them off the hook for this debt and making it harder for the acquired company to succeed. “Requiring private equity firms to share in the responsibility of the debt…would prevent them from making huge profits while they are saddling hospitals and nursing homes with debts that ultimately impact worker pay and cut off care to patients,” write Stewart and Baker.
  • Regulate mergers. Private equity acquisitions often go under the radar because the acquisitions are small enough to not be reported to authorities. But the U.S. Federal Trade Commission could be more aggressive in evaluating mergers and buyouts by PE, as they have done recently in Texas, where a PE firm has been buying up numerous anesthesia practices. 
  • Transparency of PE ownership. It can be hard to know when hospitals are bought by a PE firm. The Department of Health and Human Services could require disclosure of PE ownership for hospitals as they have done for nursing homes.
  • Remove tax loopholes. The carried interest loophole allows PE management fees to be taxed at as capital gains, which is a lower rate than corporate income. Closing this loophole would remove a big incentive that makes PE buyouts so attractive for firms.  

“It is clear that the problem is not the lack of solutions but rather the lack of political will to take on private equity,” write Steward and Baker.

We need not to not only stem the tide of PE acquisitions sweeping through healthcare, but address the financialization of healthcare more broadly, to put patients back at the center of our health system.

Apollo’s 220-hospital ‘stranglehold’ harms patients and workers, report alleges

Posted on by • Posted in Do No Harm, Health System, Hospital, Hospital Industry, Market Consolidation, Market Power, Market Trends, Mergers & Acquisitions, Private Equity • Leave a comment
https://www.beckershospitalreview.com/finance/apollos-hospital-stranglehold-harms-patients-and-workers-report-alleges.html?origin=CFOE&utm_source=CFOE&utm_medium=email&utm_content=newsletter&oly_enc_id=2893H2397267F7G

Private equity firm Apollo Global Management’s ownership of two large health systems — Louisville, Ky.-based ScionHealth and Brentwood, Tenn.-based Lifepoint Health — downgrades hospital services, hurts workers and puts patients at risk, according to a study published Jan. 11 by the Private Equity Stakeholder Project.

Since acquiring Lifepoint in 2018 and spinning off ScionHealth in 2021, Apollo has consolidated ownership of 220 hospitals in 36 states, with a workforce of about 75,000 employees. Many of the hospitals have experienced service cuts, layoffs, poor quality ratings and regulatory investigations, according to the report. 

The report comes amid rising scrutiny of private equity hospital ownership. 

In December, the Senate Budget Committee launched an investigation into the effects of private equity ownership on hospitals that specifically mentioned Apollo’s ownership of Lifepoint. Iowa Sen. Chuck Grassley and Rhode Island Sen. Sheldon Whitehouse requested “documents and detailed answers” about certain hospital transactions and the degree to which private equity firms are calling the shots at hospitals. 

A Harvard Medical School-led study published Dec. 26 in JAMA also found that hospitals that are bought by private equity-backed companies are less safe for patients. On average, patients at private equity-purchased facilities had 25.4% more hospital-acquired conditions, according to the study. 

“Apollo’s purchase of these hospital systems follows a disturbing pattern of harm caused by the growing influence of private equity in the healthcare sector,” PESP Healthcare Director Eileen O’Orady, said in a news release. “Private equity’s utmost priority to maximize short-term profit over the long-term viability of the companies it controls leads to excessive debt, cost cutting, worse outcomes for patients and deteriorating working conditions for employees. Apollo’s management of its hospitals seems to follow the usual playbook.”

The study, “Apollo’s Stranglehold on Hospitals Harms Patients and Healthcare Workers,” was developed in conjunction with the American Federation of Teachers and the International Association of Machinists and Aerospace Workers. Click here to access the full report.

Apollo, Lifepoint and ScionHealth did not respond to Becker’s request for comment.

The Healthcare Industry Mega Trend to Watch in 2024

Posted on by • Posted in Health Insurance Industry, Health System, Market Consolidation, Market Power, Market Trends, Mega Trends, Private Equity, Strategy • Leave a comment

The Nelson A. Rockefeller Institute of Government is a public policy think tank founded in 1981 that conducts cutting-edge research and analysis to inform lasting solutions to the problems facing New York State and the nation.

Introduction & Definitions

In 2023, I noted 10 trends within three broad categories in healthcare worth watching and provided a mid-year update on those trends. They included: the impact of unwinding the Public Health Emergency on insurance coverage, healthcare workforce shortages, price inflation, declining margins at hospitals, private equity in healthcare, consolidations, alternate payment models, attention to health equity, digital telehealth expansion, and the expansion of non-traditional providers in healthcare. These trends continue to be worth watching in 2024.

More significant than any one of these trends is the combined interaction of the trends in the industry overall—what I’ll call a “mega-trend,” which results in a trifurcation of the industry. Currently, there are parts of the healthcare industry struggling to exist. This is due to different factors, including high expenses, staffing challenges, and a lack of access to capital and technology, among other things. I call the types of healthcare entities that fall into this category “Today” entities because they exist now but may or may not exist in the future. In contrast, there is another set of entities in healthcare that have emerged in the last five or so years. They are becoming larger through consolidation and integration, and have greater access to capital and technology. I call these types of healthcare entities the “Tomorrow” entities because their size, resources, and forward-looking strategies are changing the future of healthcare.

In between these two categories, are existing and traditional entities in healthcare that seek sustaining strategies. I call these entities the “Striving Survivors” whose success and ability to persevere is still an open question. Most look like the healthcare entities of Today, but what distinguishes them is their ability to partner, use technology, and diversify what they offer. To understand the mega–trend phenomena of this trifurcation in healthcare and what’s happening within and across each of these three categories, this blog dissects how the trends I highlighted in 2023 are impacting the Today and the Tomorrow entities and discusses how the Striving Survivors are attempting to keep pace as the healthcare industry evolves.

The “Today” Healthcare Entities

As noted in my 2023 blog, price inflation and expense growth—particularly as they relate to workforce and labor costs—were two trends impacting existing healthcare organizations. Today’s healthcare entities are heavily reliant on people, and, unsurprisingly, increased expenses for personnel, which had a major impact on organizations’ bottom lines for the past few years, as did general inflation and increased supply prices. However, for some providers, revenue and patient volume have returned to levels comparable to pre–pandemic. According to Kaufman Hall, a healthcare consulting firm, by the end of 2023, some hospitals’ margins were beginning to stabilize.

In looking at what may happen in 2024 for providers, however, the return of patient volume and, therefore, more predictable revenue may not be enough to yield positive margins. This is because expenses are predicted to be challenging. Industry experts estimate that healthcare prices will grow 7 percent in the coming year. The estimate reflects increases in pharmaceutical costs, growing provider expenses given the high labor and supply costs noted earlier, and insurer rate increases.

Another challenge to the healthcare entities of Today is the availability of capital to make strategic investments. More of this capital is now being provided by private equity firms, an estimated $750 billion in the last decade. To secure capital in the private market, bond rating agencies typically favor larger providers because they are less risky. This, among other factors, has contributed to growing consolidation in the industry among physician groups, insurers, and hospitals. Not only do these entities need capital for projects like upgrades to existing facilities, but to also make strategic investments. Such investments include acquisitions of other providers or companies that add to the revenue base, or technologies that allow improvements in care delivery.

The Today entities are increasingly challenged with adapting to consumer demands for tech–enabled care options. Consumers want more tech–supported smart applications that allow them to book appointments or get assistance with care more quickly via chatbots. Consumers also want new options for care at home—including hospital–at–home, which provides acute care in a home-based setting, and home–based care. As noted in my November blog on AI in healthcare, access to such technologies is not only creating further separation between healthcare entities, but can also create further inequities among consumers.

The “Tomorrow” Healthcare Entities

With the challenges for the healthcare entities of Today outlined above, it is important to note that those same challenges are not as significant for the healthcare players of Tomorrow. This is because most are substantial in size and have sufficient revenue, technology, and capital resources—often in the form of private equity. And many of them did not start in healthcare. They include, for example, Amazon—which started as an online bookstore and now has annual revenues of over $500 billion, CVS—which started as a retail pharmacy and now has revenues close to $300 billion; Uber—which started as a tech-enabled taxi-like transport application and now has revenues of over $30 billion, and Microsoft—which started as computer company but has expanded into healthcare with annual revenues of over $200 billion.

Some of these companies have entered healthcare by partnering with, or acquiring companies already in the sector such as Amazon’s 2023 acquisition of One Medical, a tech–enabled primary care entity; the 2022 partnership between United Health Group and Change Healthcare, a technology company; and CVS’s official 2023 acquisition of Signify, a home health organization. This was on top of CVS’s earlier (2018) merger with health insurance company Aetna, and its 2022 partnership announcement with Uber with the stated aim of improving access to care and decreasing health inequities in underserved communities across the country. Other entities have increased their footprint in healthcare by launching their products, such as Microsoft’s 2020 launch of Cloud services, specifically for healthcare.  Some of these companies are now collaborating, including the 2021 partnership between CVS Health and Microsoft, which was designed to customize care further, enable frontline workers to more easily access and use data, and digitize operations.

In addition to these large nontraditional healthcare entities, the health insurance industry has also experienced large–scale consolidation and diversification that enables them to compete. One of the most notable companies in the world of healthcare integration is the nation’s largest insurer, United Health Group (UHG). UHG continued to outpace provider margins, with 2023 third quarter margins for UHG at levels 14 percent higher year-over-year.  The continued growth at UHG was largely due to the increasing number of individuals served and a growing provider base of 90,000 physicians, or 10 percent of all physicians nationwide. This contrasts with one of the largest provider margins (Kaiser) whose 2023 third-quarter margin was only $239 million, an improvement from the $1.5 billion loss they experienced in the third quarter from the previous year. Although no other insurers are as big as UHG, the next biggest including,  Aetna, Anthem, Cigna, and Humana all had 2023 third–quarter net incomes ranging from $1 billion to $1.4 billion.

The Striving Survivors

Not all traditional healthcare entities are being left behind; I call these the Striving Survivors. They may currently be considered Today entities, but they are attempting to put in place strategies so they can be Tomorrow entities in the future.  Here are three primary strategies that may help these entities survive into the future:

  1. Partnering—The number of independent hospitals as well as the number of independent physician groups has shrunk dramatically in the past decade, and there is increasing pressure for both to consider merging. A report by Kaufman Hall prepared at the request of the American Hospital Association, shows that merging can have advantages such as creating economies of scale, improving leverage to bargain for better payments from increasingly large insurance companies, and allowing better access to capital markets. Other advantages to partnering include diversifying what services can be offered to patients, allowing providers to assume risk for the care of a larger population, or leveraging complementary strengths for strategic investments. Although many of these consolidations used to be regional in nature (providers would merge with neighboring providers), new mergers are occurring across broader geographic areas, as was the case with the merger of west–coast–based Kaiser and Pennsylvania-based Geisinge.
  2. Maximizing Technology—Striving Survivors are also seeking to compete and survive into the future by partnering to maximize technology.  Technologies like telehealth, remote monitoring, artificial intelligence, and hospital–at–home, are growing because they are delivering care in ways that are preferable to consumers. As recently noted by Deloitte, “Adopting new technologies and business models—while under sustained financial pressure—might be the biggest challenge health care executives will face in 2024.” The good news for the healthcare players of Today is the use of data and technology in new and creative ways can counteract some of their current financial and care delivery challenges. Technology can make care more convenient for consumers, reduce costs, or provide care in places where it is sometimes inaccessible.  Some recent examples of partnerships between technology companies and today’s healthcare entities include women’s health tech startup Tia’s partnership with Common Spirit, one of the largest healthcare systems in the country.  Similarly, Strive Health is managing kidney patients for Bon Secours Mercy Health; Carbon Health is providing tech–enabled urgent care for Milwaukee–based Froedtert Health. Even Best Buy, a home electronics store, has begun offering homecare through several partnerships, including, for example, Mass General Brigham.
  3. Revenue Diversification—Revenue diversification has long been a growth strategy in many industries. Up until recently, there hasn’t been the same pressure for such diversification for healthcare entities. That is changing, in part, because many of the healthcare entities of Tomorrow come from non–health–related industries.  Diversification can occur using either of the strategies noted above (partnership or maximizing the use of technology). Diversification might also include providing services in areas of healthcare where demand is growing (e.g. urgent care or outpatient instead of legacy inpatient services). It might also include services that are not currently widely used but are likely to become more commonplace in the future, such as precision medicine or hospital–at–home.

Conclusion

In 2024, it will not only be important for healthcare policymakers to monitor single trends such as the continued focus on health equity, the expansion of alternate payment models, or the cost of the healthcare workforce, but it will also be important to understand how trends may be interacting with each other to create larger market trends. Such is the case for the emergence of non-traditional players in healthcare, the influx of private equity, digital expansion, and major consolidations— which when combined —are resulting in a mega trend of trifurcation of the industry into Today, Tomorrow, and Striving entities in healthcare that are seeking to survive into the future.  For healthcare policymakers, all these trends along with their interaction will be worth monitoring and understanding so that effective policies can be developed that result in a healthcare system that supports innovation, protects patients, reduces inequities, and results in better health outcomes at lower cost.

Allina Health doctors unionize over health system’s objections

Posted on by • Posted in Doctors Council Service Employees International Union (SEIU), Health System, Hospital, Hospital Industry, Labor Organizing, Labor Relations, Labor Spend Management, Labor Union, Labor Union Grievance, Patient Safety, Physician Burnout, Physician Employment, Physician's Labor Union • Leave a comment
https://www.healthcaredive.com/news/allina-health-doctors-union/704751/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202024-01-17%20Healthcare%20Dive%20%5Bissue:58245%5D&utm_term=Healthcare%20Dive

Dive Brief:

  • The National Labor Relations Board has certified the union election of more than 130 Allina Health doctors at Mercy and Unity Hospitals, nearly a year after they voted to join the Doctors Council Service Employees International Union (SEIU).
  • The certification follows objections from the Minneapolis-based nonprofit health system, which said that physicians active in the union drive held supervisor or managerial positions and may have unlawfully pressured colleagues into supporting the union. The NLRB rejected that claim.
  • It’s another victory for Doctors Council SEIU at Allina facilities. In October, more than 500 Allina doctors, physician assistants and nurse practitioners at over 60 facilities voted to join the union, according to NLRB documents.

Dive Insight:

Allina doctors and physician assistants said that chronic understaffing, high levels of burnout and compromised patient safety due to the corporatization of care motivated them to seek union representation.

“We have been seeing the shift of healthcare control going to corporations and further and further away from patient voices and patient advocacy. That really fell apart during the pandemic,” said Allina physician Liz Koffel during a press conference on Aug. 15 announcing primary care physicians’ unionization drive.

Koffel detailed workplace grievances that she said occurred due to Allina’s push for profits, including high productivity demands backed by few support staff and the health system’s now-abandoned policy of interrupting non-emergency medical care for patients with high levels of debt. 

In a statement to Healthcare Dive, an Allina spokesperson said the system had “committed to taking steps to make sure the National Labor Relations Board’s process was fair to all involved,” and that it would not take further procedural action against the union.

Across the country, physicians’ feelings of limited autonomy is driving similar interest in unionization, according to John August, director of healthcare labor relations at Cornell’s School of Industrial and Labor Relations. 

“Frankly, I’ve never seen anything like it in my whole career — where so many people are saying exactly the same thing at the same time, from a profession that heretofore has been essentially not unionized,” he said.

Although doctors have historically shown little interest in unionization — the physician unionization rate was under 6% nationwide in 2021 — the tide is beginning to turn. 

Doctors are increasingly working in consolidated hospitals owned by larger health systems or private equity firms. They report consolidation limits the influence they have on their day-to-day jobs, according to a December study from the Physician Advocacy Institute.

In addition, other options, such as physician-owned practices, are disappearing, with the percentage of owned practices falling 13% between 2012 and 2022, according to an analysis from the American Medical Association.

Elsewhere in the healthcare industry, unionization and strikes have led to gains for workers.

Last year, nurses at Robert Wood Johnson University Hospital successfully negotiated nurse-to-patient ratios by holding the picket line for nearly four months in New Jersey, and more than 75,000 healthcare workers secured a 20% raise over four years at Kaiser Permanente by staging the largest healthcare strike in recent history.

New Jersey systems plan to combine for-profit, nonprofit hospitals

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https://www.beckershospitalreview.com/hospital-transactions-and-valuation/new-jersey-systems-plan-to-combine-for-profit-nonprofit-hospitals.html?origin=BHRE&utm_source=BHRE&utm_medium=email&utm_content=newsletter&oly_enc_id=2893H2397267F7G

Jersey City, N.J.-based CarePoint Health and Hudson Regional Hospital in Secaucus, N.J., have signed a letter of intent to combine under a new management company, Hudson Health System, which will incorporate the acute care facilities of both organizations.

Hudson Health System would be a four-hospital system that includes both nonprofit and for-profit hospitals in an innovative new model and continue to be in-network with all major payers. 

The transaction is expected to strengthen CarePoint’s financial position and improve patient care and outcomes across the hospitals, according to John Rimmer, CarePoint’s chief medical officer, said in a Jan. 12 news release. 

“Hudson County is the most diverse and dynamic community in New Jersey, and its residents deserve nothing less than exceptional care, affordable access, the most advanced specialties and technology, and the highest caliber physicians to serve patients’ needs, especially the underserved communities that rely on our facilities,” said CarePoint President and CEO Achintya Moulick, MD, who will be president and CEO of Hudson Health System. “With adequate state support, I believe we can build a hospital system that will deliver on its core mission.”

The letter of intent is the precursor to a new organizational structure and operating plan that will require approval from the New Jersey State Department of Health. Hudson Health System would be a four-hospital system that includes Hudson Regional, Bayonne Medical Center, Hoboken University Medical Center and Christ Hospital in Jersey City.  

“This new system expands our mutual impact far beyond and far sooner than what we could ever have achieved separately,” Hudson Regional CEO Nizar Kifaieh, MD, said. “The possibilities are enormous and will energize the entire medical community to deliver that much more to the patients.”

More details about Hudson Health System are expected to be announced in the coming days.

Jefferson hospital to close residency program

Posted on by • Posted in Academic Medical Center, Health System, Pediatric Care, Residency Programs • Leave a comment
https://www.beckershospitalreview.com/hospital-physician-relationships/jefferson-hospital-to-close-residency-program.html?origin=BHRE&utm_source=BHRE&utm_medium=email&utm_content=newsletter&oly_enc_id=2893H2397267F7G

Jefferson Einstein Hospital in Philadelphia is implementing a two-year phased closure of its pediatric residency program, according to a Jan. 11 statement provided to Becker’s.

Residents currently enrolled will be able to complete the three-year program, but there will be no new class this year. 

Jefferson Health, the hospital’s operator, said the decision was made in response to “the changing medical needs of our communities.”

“We consistently examine all opportunities to continually improve health care delivery in the communities we serve,” the system said in the statement. “We remain committed to caring for the outpatient pediatric patients in our community and will continue to provide inpatient services in the perinatal newborn unit and neonatal intensive care unit at Jefferson Einstein Hospital.”

Jefferson Einstein Hospital came under Jefferson’s umbrella after the health system merged with Einstein Healthcare Network in October 2021.

Earlier this week, Upland, Pa.-based Crozer-Chester Medical Center’s surgical residency program’s lost its accreditation, with the program needing to close by Jan. 12. Accreditation for the program — which had 15 filled resident positions — was withdrawn “under special circumstances,” according to a note on the ACGME’s website. 

Economic Indigestion for U.S. Healthcare is Reality: Here’s What it Means in 2024

Posted on by • Posted in Health Policy, Health System, Hospital, Hospital Industry, Market Consolidation, Market Power, Market Trends, Mergers & Acquisitions, Private Equity, Regulation, Tax Exempt Status • Leave a comment
Economic Indigestion for U.S. Healthcare is Reality: Here’s What it Means in 2024

By the end of this week, we’ll know a lot more about the economic trajectory for U.S. healthcare in 2024: it may cause indigestion.

  • Digesting deal announcements and industry prognostics from last week’s 42nd JPM conference in San Francisco. Notably, with the exceptions of promising conditions for weight loss drugs, artificial intelligence and biotech IPOs, the outlook is cautionary for providers and inviting for insurers and retail health. Expanded conflicts in Ukraine and Gaza loom as threats. The U.S. trade relationship with China and its growing tension with Taiwan poses an immediate threat to the U.S. healthcare supply chain for raw materials in drugs, OTC products, disposables. U.S. public opinion about its institutions is arguably shaped in part in social media: TikTok is owned by Chinese internet tech company ByteDance and operates in 150 countries. The 16 not for profit health system presentations at JPM sounded a chorus in unison: ‘our core business—hospital care– is not sustainable. We need deals with private capital to stay afloat.’ By contrast, national insurers and retailers sang a different tune: ‘the market is receptive to our products and services that are cheaper, better and more easily accessed through digital platforms. The status quo is outdated’.
  • Digesting results from today’s Iowa GOP Caucus which serves as a gatekeeper for Presidential candidate wannabes. In the run-up to Campaign 2024, polls show voters interested in abortion rights and affordability. But specific health system reforms have not surfaced to date in this election cycle and understandably: per the November 2023 Keckley Poll, 76% of U.S. adults agree that “Most politicians avoid healthcare issues because solutions are complicated and they fear losing votes” vs. 6% who disagree. Thus, the Iowa results might narrow the President contestant pool, but it will do little to clarify U.S. health policies in 2025 and beyond.
  • Digesting takeaways from the World Economic Forum (WEF) in Davos. The annual confab draws world leaders and big-name consultancies and bankers who want to rub elbows with them. It’s notable that the WEF pre-conference Global Risk Survey indicated growing concern about a looming “global catastrophe” and its agenda includes sessions on women’s health, misinformation and artificial intelligence—all central to healthcare’s future. The world is small: 8 billion inhabitants in 195 countries. There’s growing global attention to healthcare and recognition that the integration of social services (nutrition, housing, transportation, et al) and elimination of structural barriers that limit access are necessary to the effectiveness of their systems. The U.S. lacks both though it’s the world’s most expensive system. Thus, U.S.-based solutions to enhance clinical efficacy for specialty care are accessible to global markets at prices significantly lower than what U.S. taxpayers pay because their government’s refuse to pay U.S. rates.
  • Digesting where Congress lands this week on the fiscal 2024 budget. A deal was reached tentatively yesterday on a short-term funding bill that would avert a partial government shutdown this Friday. The $1.6 trillion continuing resolution funds the government through March 1 and March 8 and includes $886B for defense and $704B for other total discretionary programs. While payments for social security and Medicare are not impacted, most other federal health programs are impacted and therefore caught in the Congressional crossfire between budget hawks wary of the ballooning federal deficit ($34 trillion) and progressives who think the federal government spends too much on the ‘have’s’ and not enough, including health and social services, on its ‘have not’s.’ And this deal is TENTATIVE!

My take:

The cumulative effect of these events in economic indigestion for the entire U.S. economy and especially for those of us who work in its healthcare industry. So, for the balance of 2024, the realities for U.S. healthcare are these:

  1. Public support for the health system is eroding. Trust and confidence in the U.S. health system is low. No sector in U.S. healthcare is immune though some (community hospitals, public health programs, independent physicians) are more favorably viewed than others. Confidence in government agencies (CDC, FDA, CMS) is fractured due to misinformation and disinformation. ‘Not-for-profit’ designation is a meaningful distinction to some but secondary to characteristics more readily understood and valued.
  2. Federal policies toward healthcare are increasingly antagonistic. They’re popular and in most cases, bipartisan. Federal policies that expand price transparency (drugs, hospitals, health insurance), constrain on consolidation (horizontal) and private equity investing, expose/reduce conflicts of interest, address workforce resilience (compensation, work-rules) and protect consumers will be prominent. Beyond these, court actions and budgetary negotiations will define/refine federal health policies. Notably, the rumored DOJ antitrust action against Apple will be a closely watched barometer as will the government’s attention toward Microsoft given its leading role in ChatGPT and AI platform Copilot et al.
  3. The big players enjoy advantages over smaller players. It’s a buyer’s market for them. The corporatization of U.S. healthcare has rewarded big operators in each sector and punished smaller, independent operators. More regulation, higher operating costs, escalating administrative complexity and shifting demand require capital that’s increasingly unaffordable/inaccessible to less credit-worthy players. In 2024, in every sector, bigger fish will eat the smaller as readily-accessible private capital is deployed to welcoming sellers. But mechanisms whereby ‘independents’ are protected and growing disparity in how care is financed and delivered will be a prominent concern to policymakers.

Regrettably, an off-the-shelf Pepto-Bismol is not available to the U.S. system. It is complex, fragmented, inequitable and expensive, but also profitable for many who benefit from the status quo.

So, the conclusion that can be deduced from the four events this week is this: economic indigestion in U.S. healthcare will persist this year and beyond because there is no political will nor industry appetite to fix it.  Darwinism aka ‘survival of the fittest’ is its destiny unless….???