HCA has purchased MD Now Urgent Care, Florida’s largest urgent care chain, adding 59 urgent care centers to its existing 170. Meanwhile Tenet’s $1.1B deal to buy SurgCenter Development cements its position as the nation’s largest ambulatory surgery center (ASC) operator, eclipsing Envision-owned AMSURG and Optum-owned Surgical Care Affiliates.
The Gist: Healthcare services are increasingly moving outpatient and even virtual—a trend only accelerated by the pandemic. With this latest acquisition, Tenet will now own or operate nearly seven times as many ASCs as hospitals. Such national, for-profit systems are looking to add more non-acute assets to their portfolios, to capitalize on a shift fueled by both consumer preference for greater convenience, and purchaser pressure to reduce care costs.
Another challenging year defined by the continued COVID-19 fight and vaccination drives has created a unique healthcare landscape. Pandemic-induced telehealth booms, continued strain due to understaffing and pressure from big tech disruptors are just some of the issues that have presented themselves this year.
Here are five major trends that hospitals and health systems may see in 2022. While some present challenges, others present significant opportunities for healthcare facilities.
Record numbers of workers have quit their jobs in 2021, with some 4.4 million people quitting in September. That means that 1 in 4 people quit their jobs this year across all industries. Around 1 in 5 healthcare workers have left their positions, creating issues with understaffing and lack of resources in hospitals and health systems. Stress, burnout and lack of balance have all been cited as reasons for staff leaving their roles. An increase in violence toward medical professionals, continued COVID-19 surges and low pay and benefits have contributed to the exodus of healthcare workers. None of those problems seems poised to disappear come 2022, so the new year could bring continued workforce and staffing challenges.
Pressure from disruptors
Big tech and retail giants have continued their push into healthcare this year. Companies like Apple, Amazon and Google stepped up their game in the wearables market. Pharmacy and retail chains Walmart and CVS Health both detailed their intended expansions into primary care. The pandemic also encouraged big corporations outside the healthcare sector, like Pepsi and Delta Airlines, to consider hiring CMOs to make sense of public health regulations guide them on their policy. These moves all mean there is a tightening of competition for the top physicians and hospital executives. Going into 2022, health systems may be under pressure to hang onto top talent and keep patients from using other convenient health services offered by retail giants.
The unequal toll of the pandemic on people of color both medically and economically helped shed a light on the rampant inequities in American healthcare and society at large. Indigineous, Black and Hispanic people were much more likely than white or Asian people to suffer severe illness or require hospitalization as a result of COVID-19. Increasing numbers of hospitals, health systems and organizations are starting initiatives to advance health equity and focus on the socioeconomic drivers of health. The American Medical Association launched a language guide to encourage greater awareness about the power of language. Z-code usage has also been encouraged by CMS to increase knowledge and data about the social determinants of health. Next year, the perspective of health as holistic instead of just a part of an individual’s life will continue, with special attention being paid to social drivers.
The pandemic helped the telemedicine industry take off in a big way. Telehealth was often the only healthcare option for many patients during the height of the lockdown measures introduced during the pandemic. Despite a return to in-person visits, telehealth has retained its popularity with patients. Some advocates argue that telehealth can help increase access to healthcare and improve health equity. About 40 percent of patients said that telehealth makes them more engaged and interact more frequently with their providers. However, while Americans see telehealth as the future of healthcare, a majority still prefer in-person visits. Regardless of patient opinion, telehealth will remain a key part of health strategy. In late December, the FCC approved $42.7 million in funding for telehealth for 68 healthcare providers. This suggests that there are investments and subsidies available in the future for health systems to bolster their telehealth services.
At the 2021 UN Climate Conference, Cop26, in Glasgow, Scotland, hospitals and health systems acknowledged the role they have to play in mitigating the effects of climate change. Hospitals and health systems shed light on the health-related effects of climate change, such as illness and disease from events like wildfires and extreme weather. Health systems are also becoming more aware of their own contributions to climate change, with the U.S. healthcare system emitting 27 percent of healthcare emissions worldwide. To that end, HHS created an office of climate change and health equity that will work alongside regulators to reduce carbon emissions from hospitals. More health systems too are taking charge and pledging net neutrality and zero carbon emissions goals, including Kaiser Permanente and UnitedHealth group. It’s expected that more systems will follow suit in the coming year and make more concrete plans to address emissions reduction.
Initial jobless claims, week ended Dec. 18: 205,000 vs. 205,000 expectedand a downwardly revised 205,000 during prior week
Continuing claims, week ended Dec. 11: 1.859 million vs. 1.835 million expected and an upwardly revised 1.867 million during prior week
This week’s new jobless claims report coincides with the survey week for the December monthly jobs report from the Labor Department, offering an early indication of the relative strength expected in that print due for release in early January.
At 205,000, initial unemployment claims were expected to come in below even pre-pandemic levels yet again, with jobless claims having averaged around 220,000 per week throughout 2019. Earlier this month, first-time unemployment filings fell sharply to 188,000, or the lowest level since 1969. And based on the latest report, the four-week moving average for new claims was near its lowest in 52 years, ticking up by 2,750 week-over-week to reach 206,250.
Continuing claims have also come down sharply from pandemic-era highs, albeit while remaining slightly above the 2019 average of about 1.7 million. This metric, which counts the total number of individuals claiming benefits across regular state programs, came in below 2 million for a fourth straight week and reached the lowest level since March 2020.
“The claims data indicate strong demand for workers and a reluctance by businesses to lay off workers,” Rubeela Farooqi, chief economist for High Frequency Economics, wrote in a note. “However, disruptions around Omicron and Delta could be a headwind if businesses have to close for health-related reasons.”
“Overall, the direction in the labor market recovery remains positive, with demand still strong,” she added. “Labor shortages are persisting, preventing a stronger recovery, although these appeared to ease somewhat in November.”
Many Americans have also cited solid labor market conditions, especially as job openings hold at historically high levels. In the Conference Board’s latest Consumer Confidence report for December, 55.1% of consumers surveyed said jobs were “plentiful.” While this rate was down slightly from November’s 55.5%, it still represented a “historically strong reading,” according to the Conference Board.
The boom in global mergers and acquisitions in 2021 will surge into 2022, fueled by abundant investment capital, historically low interest rates and a rebound in global economic growth, according to a survey of 345 corporate dealmakers in the U.S. by KPMG.
“Based on the volume of new pitches in November and December — transactions that would come to market in Q1 and Q2 of 2022 — there are no signs of a slowing deal market,” according to Philip Isom, global head of M&A at KPMG. While facing high valuations, “most investors have limited time horizons to invest in, so they may be willing to reach further on price than they have historically.”
More than 80% of the survey respondents across several industries expect total M&A valuations to rise further next year, with about one out of every three predicting at least a 10% increase, KPMG said. Dealmakers said transaction levels will remain robust because companies “need to remain on the offense with the competition” and “feel pressure from investors to raise their own valuations.”
Worldwide deal value from January until mid-November this year hit $5.1 trillion, the highest level since 2015 and a 34% gain compared with all of 2020, KPMG said. U.S. transactions rose to $2.9 trillion, or 55% more than during all of last year.
M&A has soared in 2021 as the economy recovered from a pandemic shock, record monetary and fiscal stimulus pumped up liquidity and many companies sought through acquisitions to regain their footing after months of lockdowns and persistent supply chain disruptions.
A widespread labor shortage will probably push up dealmaking next year. One-third of survey respondents said they want to use M&A to acquire talent, KPMG said.
Also, companies increasingly use acquisitions to change their business or operating models, KPMG said, noting that industrial and financial services companies buy companies that help speed their digital transformation.
“The aim is to increase efficiencies and contribute to having more agile workforces,” according to Carole Streicher, KPMG’s deal advisory and strategy service group leader in the U.S.
Private equity firms will continue to push up the volume and value of M&A next year, after increasing their involvement in transaction value by more than 55% so far in 2021, KPMG said. PE firms have pursued deals this year in part because of the prospect of an increase in corporate capital gains taxes.
Growing support for sustainability among investors, regulators and other stakeholders may prompt M&A, “as businesses look at their ecological footprint and consider purchasing, rationalizing or divesting assets,” KPMG said. Investors are likely to consider sustainable businesses more adaptable to market shifts.
Finally, concerns about the potential for rising borrowing costs may prompt dealmakers who rely on debt financing to speed up acquisition plans. Federal Reserve Chair Jerome Powell late last month said policymakers at their two-day meeting beginning Tuesday will likely consider speeding up the withdrawal of accommodation.
Dealmakers face some headwinds. Democrats in the Senate have yet to muster enough support for a roughly $2 trillion social policy bill that would help sustain economic growth. Meanwhile, the outbreak of the omicron variant of COVID-19 has highlighted the fragility of financial markets and the economy to any setbacks in curbing the pandemic.
Survey respondents identified several factors that will influence dealmaking next year, with 61% underscoring high valuations, 56% pointing to liquidity and other economic considerations, and 55% noting intense competition for a limited number of highly valued acquisition targets, KPMG said.
Still, only 7% of the survey respondents said they expect deal volumes to decline in their industries next year.
Survey respondents work at companies in industries ranging from media and financial services to energy and technology, with 194 of them CFOs, CEOs or other C-suite executives.
CFOs rank the challenge of attracting and retaining employees far above other internal risks for 2022, citing labor shortages and the difficulty of crafting a balance between remote and in-office work, Deloitte found in a quarterly survey.
“The number of times CFOs cited talent/labor and related issues heavily outweighed other priorities for 2022,” Deloitte said Thursday in a report on the survey of Fortune 500 CFOs. “‘Retention, retention, retention’ was a resounding refrain, including through wages and incentives.”
Eighty-eight percent of the 130 respondents said they will use a hybrid work model next year, 92% will increase automation and 41% expect to shrink their companies’ real estate footprint, Deloitte said.
The slow return of workers from coronavirus lockdowns has led to labor shortages, competition for hires and an increase in wages.
Employees are switching jobs for higher pay at a near-record pace. The quits rate, or the number of workers who left their jobs as a percent of total employment, rose from 2.3% in January to 2.8% in October, the second-highest level in data going back to 2000, the U.S. Labor Department said. The quits rate hit a high of 3% in September.
Attracting and retaining employees vaulted to the No. 2 ranking of business risks for 2022 and the next decade, from No. 8 a year ago, according to a global survey of 1,453 C-suite executives and board members by Protiviti and NC State University. (Leading the list of risks for 2022 is the impact on business from pandemic-related government policy).
Companies are trying to hold on to workers, and attract hires, by raising pay. Private sector hourly wages rose 4.8% in November compared with 12 months before, according to the Labor Department.
Tight labor markets and the highest inflation in three decades have prompted companies to budget 3.9% wage increases for 2022 — the biggest jump since 2008, according to a survey by The Conference Board.
The proportion of small businesses that raised pay in October hit a 48-year high, with a net 44% increasing compensation and a net 32% planning to do so in the next three months, the National Federation of Independent Business said last month.
CFO respondents to the Deloitte survey said they plan to push up wages/salaries by 5.2%, a nine percentage point increase from their 4.3% forecast during the prior quarter.
“Talent/labor — and several related issues, including attrition, burnout and wage inflation — has become an even greater concern of CFOs this quarter, and the challenges to attract and retain talent could impinge on their organizations’ ability to execute their strategy on schedule,” Deloitte said.
The proportion of CFOs who feel optimistic about their companies’ financial prospects dropped to just under half from 66% over the same time frame.
“CFOs over the last several quarters have become a little more bearish,” Steve Gallucci, managing partner for Deloitte’s CFO program, said in an interview, citing the coronavirus, competition for talent, inflation and disruptions in supply chains.
CFOs have concluded that the pandemic will persist for some time and that they need to “build that organizational muscle to be more nimble, more agile,” he said.
At the same time, CFOs expect their companies’ year-over-year growth will outpace the increase in wages and salaries, estimating revenue and earnings next year will rise 7.8% and 9.6%, respectively, Deloitte said.
“We are seeing in many cases record earnings, record revenue numbers,” Gallucci said.
Describing their plans for capital in 2022, half of CFOs said that they will repurchase shares, 37% say they will take on new debt and 22% plan to “reduce or pay down a significant proportion of their bonds/debt,” Deloitte said.
CFOs view inflation as the most worrisome external risk, followed by supply chain bottlenecks and changes in government regulation, Deloitte said. The Nov. 8-22 survey was concluded before news of the outbreak of the omicron variant of COVID-19.
New initial jobless claims improved much more than expected last week to reach the lowest level in more than five decades, further pointing to the tightness of the present labor market as many employers seek to retain workers.
Initial unemployment claims, week ended Dec. 4: 184,000 vs. 220,000 expected and an upwardly revised 227,000 during prior week
Continuing claims, week ended Nov. 27: 1.992 millionvs. 1.910 million expected and a downwardly revised 1.954 million during prior week
Jobless claims decreased once more after a brief tick higher in late November. At 184,000, initial jobless claims were at their lowest level since Sept. 1969.
“The consensus always looked a bit timid, in light of the behavior of unadjusted claims in the week after Thanksgiving in previous years when the holiday fell on the 25th, but the drop this time was much bigger than in those years, and bigger than implied by the recent trend,” Ian Shepherdson, chief economist for Pantheon Macroeconomics, wrote in an email Thursday morning. “A correction next week seems likely, but the trend in claims clearly is falling rapidly, reflecting the extreme tightness of the labor market and the rebound in GDP growth now underway.”
After more than a year-and-a-half of the COVID-19 pandemic in the U.S., jobless claims have begun to hover below even their pre-pandemic levels. New claims were averaging about 220,000 per week throughout 2019. At the height of the pandemic and stay-in-place restrictions, new claims had come in at more than 6.1 million during the week ended April 3, 2020.
Continuing claims, which track the number of those still receiving unemployment benefits via regular state programs, have also come down sharply from pandemic-era highs, and held below 2 million last week.
“Beyond weekly moves, the overall trend in filings remains downward and confirms that businesses facing labor shortages are holding onto workers,” wrote Rubeela Farooqi, chief U.S. economist for High Frequency Economics, in a note on Wednesday.
Farooqi added, however, that “the decline in layoffs is not translating into faster job growth on a consistent basis, which was evident in a modest gain in non-farm payrolls in November.”
“For now, labor supply remains constrained and will likely continue to see pandemic effects as the health backdrop and a lack of safe and affordable child care keeps people out of the workforce,” she added.
Other recent data on the labor market have also affirmed these lingering pressures. The November jobs report released from the Labor Department last Friday reflected a smaller number of jobs returned than expected last month, with payrolls growing by the least since December 2020 at just 210,000. And the labor force participation rate came in at 61.8%, still coming in markedly below its pre-pandemic February 2020 level of 63.3%.
“There is a massive shortage of labor out there in the country that couldn’t come at a worst time now that employers need workers like they have never needed them before. This is a permanent upward demand shift in the economy that won’t be alleviated by companies offering greater incentives to their new hires,” Chris Rupkey, FWDBONDS chief economist, wrote in a note Wednesday. “Wage inflation will continue to keep inflation running hot as businesses fall all over themselves in a bidding war for talent.”
For the 1st time during the pandemic, initial UI claims have dipped below pre-crisis levels, falling to 199,000 (vs the Feb 2020 avg: 211,700). Layoffs are hitting new lows amid ongoing labor shortages as employers look to hold onto hard-to-find workers.
New weekly claims for jobless aid plunged to the lowest level in more than 50 years last week, according to data released Wednesday by the Labor Department.
In the week ending Nov. 20, there were 199,000 initial applications for unemployment insurance, according to the seasonally adjusted figures, a decline of 71,000 from the previous week. Claims fell to the lowest level since November 1969 and are now well below the pre-pandemic trough of 225,000 applications received the week of March 14, 2020.
The steep drop in unemployment applications comes after several strong months of job growth and rising consumer spending heading into the holiday shopping season. While high inflation has stressed many household budgets, U.S. job growth, economic production, stock values and corporate profits have all steamed ahead.
“Getting new claims below the 200,000 level for the first time since the pandemic began is truly significant, portraying further improvement,” said Mark Hamrick, chief economic analyst at Bankrate.com.
“The strains associated with higher prices, shortages of supplies and available job candidates are weighed against low levels of layoffs, wage gains and a falling unemployment rate,” he continued. “Growth will likely be above par for the foreseeable future, but within the context of historically high inflation which should relax its grip on the economy to some degree in the year ahead.”
The U.S. added 531,000 jobs in October and job growth in the previous months was revised substantially higher after a string of what first appeared to be meager gains. While businesses have struggled to hire enough workers to meet surging consumer demand, the decline in jobless claims appears to be a sign of an improving labor market.
“Layoffs are hitting new lows amid ongoing labor shortages as employers look to hold onto hard-to-find workers,” said Daniel Zhao, senior economist at Glassdoor, in a Wednesday thread on Twitter.
Even so, Zhao said the sharp decline below pre-pandemic levels may have been due to a lower than expected seasonal impact on hiring.
“As you can see from the above chart, this is in part due to the seasonal adjustment expecting a much larger jump in non-seasonally adjusted claims, so this dip below pre-crisis levels may be short-lived,” he explained.
We recently caught up with a health system chief clinical officer, who brought up some recent news about CVS. “I was really disappointed to hear that they’re going to start employing doctors,” he shared, referring to the company’s announcement earlier this month that it would begin to hire physicians to staff primary care practices in some stores. He said that as his system considered partnerships with payers and retailers, CVS stood out as less threatening compared to UnitedHealth Group and Humana, who both directly employ thousands of doctors: “Since they didn’t employ doctors, we saw CVS HealthHUBs as complementary access points, rather than directly competing for our patients.”
As CVS has integrated with Aetna, the company is aiming to expand its use of retail care sites to manage cost of care for beneficiaries. CEO Karen Lynch recently described plans to build a more expansive “super-clinic” platform targeted toward seniors, that will offer expanded diagnostics, chronic disease management, mental health and wellness, and a smaller retail footprint. The company hopes that these community-based care sites will boost Aetna’s Medicare Advantage (MA) enrollment, and it sees primary care physicians as central to that strategy.
It’s not surprising that CVS has decided to get into the physician business, as its primary retail pharmacy competitors have already moved in that direction. Last month, Walgreens announced a $5.2B investment to take a majority stake in VillageMD, with an eye to opening of 1,000 “Village Medical at Walgreens” primary care practices over the next five years. And while Walmart’s rollout of its Walmart Health clinics has been slower than initially announced, its expanded clinics, led by primary care doctors and featuring an expanded service profile including mental health, vision and dental care, have been well received by consumers. In many ways employing doctors makes more sense for CVS, given that the company has looked to expand into more complex care management, including home dialysis, drug infusion and post-operative care. And unlike Walmart or Walgreens, CVS already bears risk for nearly 3M Aetna MA members—and can immediately capture the cost savings from care management and directing patients to lower-cost servicesin its stores.
But does this latest move make CVS a greater competitive threat to health systems and physician groups? In the war for talent, yes. Retailer and insurer expansion into primary care will surely amp up competition for primary care physicians, as it already has for nurse practitioners. Having its own primary care doctors may make CVS more effective in managing care costs, but the company’s ultimate strategy remains unchanged: use its retail primary care sites to keep MA beneficiaries out of the hospital and other high-cost care settings.
Partnerships with CVS and other retailers and insurers present an opportunity for health systems to increase access points and expand their risk portfolios. But it’s likely that these types of partnerships are time-limited. In a consumer-driven healthcare market, answering the question of “Whose patient is it?” will be increasingly difficult, as both parties look to build long-term loyalty with consumers.
Dallas-based Tenet Healthcare and one of its subsidiaries have entered into a definitive agreement to acquire Towson, Md.-based SurgCenter Development.
Under the agreement, Tenet and its subsidiary United Surgical Partners International will acquire ownership interests in 92 ambulatory surgery centers and related ambulatory support services for approximately $1.2 billion. Of the 92 ASCs, 16 of them are under development and have not yet opened.
Under the deal, expected to close in the fourth quarter of this year, SurgCenter and USPI will also enter into an agreement to develop at least 50 centers over a five-year period.
“We are extremely pleased to announce this transformative transaction and partnership, which builds upon USPI’s position as a premier growth partner and SCD’s track record of developing high-quality centers with leading physicians,” Saum Sutaria, MD, CEO of Tenet Healthcare, said in a Nov. 8 news release. “By welcoming these centers into our company, USPI will maintain its reach as the largest ambulatory platform for musculoskeletal services, a high-growth service line.”
Tenet said it expects the deal to generate strong financial returns.
The job market added a stunning 531,000 jobs last month. The unemployment rate ticked down to 4.6% — a new pandemic-era low.
Why it matters: America’s job market recovery has been on track all along.
Between the lines: Revisions to prior months are often overlooked. Not this month: Upgrades to both August and September were so enormous — fully 366,000 jobs higher than originally reported — that they have definitively reversed the narrative that there was a Delta-induced hiring slump in late summer.
By the numbers:America has now recovered 80% of the jobs lost at the depth of the recession in 2020.
The big picture: Leisure and hospitality added 164,000 jobs last month — but jobs growth was widespread. The disappointment — again — came in public sector education. State and local education shed a combined 65,000 jobs.
Wages are still rising: Average hourly earnings rose another 11 cents an hour in October, to $30.96. That’s enough to keep up with inflation.
What to watch: Millions of workers remain on the sidelines — and there wasn’t much improvement in pulling them back into the workforce.
The bottom line: “The Fall hiccup is now at best a Fall deep breath,” tweeted University of Michigan economist Justin Wolfers.