Citing lax enforcement, senators ramp up scrutiny of nonprofit hospitals’ tax exemptions

Posted on by • Posted in Charity Care, Community Benefit, Health Policy, Health System, Hospital, Hospital Industry, Non-Profit Healthcare Industry, Tax-Exempt Status, Uncompensated Care • Leave a comment

https://www.fiercehealthcare.com/providers/citing-lax-enforcement-senators-ramp-scrutiny-nonprofit-hospitals-tax-exemptions

A bipartisan quartet of influential senators is tapping tax regulators within the U.S. Treasury for detailed information on nonprofit hospitals’ reported charity care and community investments, the latest in legislators’ increasing scrutiny of tax-exempt hospitals’ business practices.

In a pair of letters (PDF) sent Monday, Sens. Elizabeth Warren, D-Massachusetts, Raphael Warnock, D-Georgia, Bill Cassidy, M.D., R-Louisiana, and Chuck Grassley, R-Iowa, wrote they “are alarmed by reports that despite their tax-exempt status, certain nonprofit hospitals may be taking advantage of this overly broad definition of ‘community benefit’ and engaging in practices that are not in the best interest of the patient.”

The missives referenced a bevy of news reports as well as an investigation conducted by Grassley’s office detailing tax-exempt hospitals and health systems’ aggressive debt collection practices.

They also outlined studies from academic and policy groups highlighting that the tax-exempt status of the nation’s nonprofit hospitals collectively was worth about $28 billion in 2020 and how this tally paled in comparison to the charity care most of those hospitals had provided during that same period.  

Such studies have been quickly contested by the hospital lobby, which highlights that charity care is just one component of the broader activities that constitute a nonprofit hospital’s community benefit spending.

However, that ambiguity was squarely in the crosshairs of the legislators who said the long-standing community benefit standard “is arguably insufficient in its current form to guarantee protection and services to the communities hosting these hospitals.”

They cited a 2020 report from the Government Accountability Office that found oversight of nonprofit hospitals’ tax exemptions was “challenging” due to the vague definition of community benefit.

Though the IRS implemented several of the office’s recommendations from the report, “more is required to ensure nonprofit hospitals’ community benefit information is standardized, consistent and easily identifiable.” Included here could be additional updates to Form 990’s Schedule H, where nonprofits detail their community benefits and related activities.

To get a better handle on the agencies’ current oversight, the legislators requested from the IRS and the Treasury’s Tax Exempt & Government Entities Division a laundry list of information related to nonprofits’ tax filings from the last several years, including “a list of the most commonly reported community benefit activities that qualified a nonprofit hospital for tax exemptions in FY2021 and FY2022.”

They also sought lists of the nonprofit hospitals that were flagged, penalized or had their tax-exempt status revoked for violating community benefit standard requirements.

In another letter to the Treasury’s inspector general for tax administration, they asked the auditor to update their upcoming reviews to evaluate existing standards for financial assistance policy and other “practices that reduce unnecessary medical debt from patients who qualify for free or discounted care.”

The lawmakers also asked the inspector general to explore how often nonprofit hospitals bill patients with “gross charges” and to make sure the IRS is doing enough to ensure hospitals are making “’reasonable efforts’ to determine whether individuals are eligible for financial assistance before initiating extraordinary collection actions.”

Both letters from the senators gave the tax regulators 60 days to provide the requested information.

RELATED

As nonprofit hospitals reap big tax breaks, states scrutinize their required charity spending

Kaiser Permanente reports $2.1B profit, 2.9% operating margin in Q2 2023

Posted on by • Posted in Geisinger Health, Health System, Hospital, Hospital Industry, Kaiser Permanente, Net Income, Nonoperating Income, Operating Expense Reduction, Operating Expenses, Operating Income, Operating Margin, Operating Metrics, Operating Performance, Operating Revenue, Risant Health • Leave a comment

https://www.fiercehealthcare.com/providers/kaiser-permanente-reports-21b-profit-29-operating-margin-q2-2023

Kaiser Permanente built on 2023’s strong start with $2.08 billion of net income during the quarter ended June 30, bringing its midyear total to about $3.29 billion, the integrated system announced late Friday.

Operating income was also strong at $741 million (2.9% margin) and raised the organization’s six-month performance to $974 million (1.9% margin).

The numbers are both a sequential improvement and a stark turnaround from 2022. By the midpoint of that year, Kaiser Permanente was reporting a $1.3 billion net loss for the quarter and an $89 million operating gain (0.4% margin). Across 2022’s first half, the system had been down a total of $2.26 billion and added just $17 million from operations (0.0% margin).

The Oakland, California-based nonprofit is likely safe from repeating the nearly $4.5 billion net loss and $1.3 billion operating loss of full-year 2022.

Leadership, however, noted that the integrated system historically sees higher operating margins during the first half of the year “due in part to the annual enrollment cycle and seasonal care.”

“Our second-quarter financial results reflect operational improvements that, together with our ongoing expense reduction efforts, will help us face additional financial pressures in the second half of the year,” Kathy Lancaster, executive vice president and chief financial officer at Kaiser Permanente, said in a release. “The process of building our financial performance back to pre-pandemic levels requires that we continue to redesign our cost structure to support investments in our facilities, technology and people while staying competitive in a dynamic healthcare marketplace.”

Kaiser Permanente reported $25.17 billion in operating revenues for the second quarter, a 7.2% increase year over year. Operating expenses increased 4.5% year-over-year to $24.42 billion.

“Like all health systems, Kaiser Permanente is experiencing ongoing cost headwinds and volatility driven by inflation, labor shortages, and the lingering effects of the pandemic on access to care and service,” the system wrote in a release.

Kaiser Permanente’s membership has increased by more than 81,000 members since the start of the year and sits at almost 12.7 million as of June 30. The organization noted that it has kicked off an outreach campaign for Medicaid members “to ensure they have critical enrollment information as states go through the mandated process of eligibility redetermination.”

The largest impact on Kaiser Permanente’s bottom line came from investments. Owing to “favorable financial market conditions,” the organization recorded $1.34 billion in “other income and expense,” nearly a full reversal of the $1.39 billion loss on the same line item it’d logged during the same period last year.

The system’s capital spending reached $824 million for the quarter, which was up from $789 million during the second quarter of 2022 but a pullback from the first quarter of 2023’s $930 million.

“The post-pandemic financial pressures have led many in the industry to cut back on care and service,” CEO Greg Adams said in an accompanying statement. “At Kaiser Permanente, we remain focused on improving access and affordability for our patients, members and communities, which requires continued investment in care and coverage. … I want to thank all employees and physicians for turning the disruptions and challenges of the past three years into opportunities to make our healthcare system stronger and more equitable, with improved outcomes for all.”

Kaiser Permanente is the largest nonprofit health system in the country by revenue with more than $95 billion in annual revenues. As of June 30, it spanned 39 hospitals, 622 medical offices and 43 clinics in addition to its millions of covered health plan members.

Earlier in the year the system highlighted efforts to trim administrative and discretionary spending as well as a workforce push that improved clinical hiring by 15% year over year. It is in the midst of negotiating a new labor contract covering 85,000 unionized healthcare workers who are seeking workforce development investments and higher staffing levels across clinical settings.

The organization is also working toward its high-profile acquisition of fellow integrated nonprofit Geisinger Health, which Kaiser Permanente said would be the first step toward a cross-country value-based care organization called Risant Health.

UnitedHealth cutting back on prior authorizations

Posted on by • Posted in Center for Medicare and Medicaid Services (CMS), Prior Authorization, UnitedHealth Group, UnitedHealthcare • Leave a comment
https://www.axios.com/2023/08/10/unitedhealth-prior-authorization-roll-back?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosvitals&stream=top

Starting next month, UnitedHealthcare says it will move forward with plans to drop prior authorization requirements for a range of procedures, including dozens of radiology services and genetic tests, among others.

Why it matters: 

UnitedHealth is among the health insurance giants who have announced plans to cut back on prior authorization as federal regulators consider tougher curbs on the practice.

Catch up quick: 

Prior authorization is often criticized by patients and doctors, who complain they are an administrative burden or impede necessary care. Insurers, meanwhile, say prior authorization provides important guardrails against improper health care utilization, helping to keep costs down.

  • UnitedHealth, the largest commercial U.S. insurer, previously said its prior authorization removals will represent roughly 20% of its overall prior authorization volume.
  • Cigna and Aetna also announced plans to roll back some prior authorization requirements.
  • The Centers for Medicare and Medicaid Services proposed a rule to limit the amount of time insurers have to review requests on services for which they require prior approval, BenefitsPro previously reported.
  • Congress is also eyeing a plan to streamline and add transparency to the process by which Medicare Advantage plans can deny coverage for services via prior authorization.

Zoom in: 

UnitedHealth says the removals will take effect Sept. 1 and Nov. 1 across the vast majority of its plans.

  • The company also spelled out which procedures would see prior authorization requirements removed. For instance, hundreds of codes for genetic testing — accounting for tens of thousands of prior authorization requests a year from commercial and Medicaid members — are among those that will be removed, officials said.
  • A code for cardiology stress test prior authorization for Medicare Advantage members will also be eliminated, reducing roughly 316,000 prior authorization requests a year.
  • The company next year also will roll out a “gold card” program eliminating most prior authorization requirements for doctors who have high approval rates.
  • Flashback: Earlier this summer, UnitedHealth walked back a controversial plan to require prior authorizations for colonoscopies and other endoscopic procedures.

Federal drug discount program faces renewed scrutiny

Posted on by • Posted in Center for Medicare and Medicaid Services (CMS), Health System, Hospital, Hospital Industry, Medicare 340B Drug Discount Program, Pharmaceutical Industry, Supreme Court • Leave a comment
https://www.axios.com/2023/08/11/340b-federal-drug-discount-scrutiny?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosvitals&stream=top

A federal drug discount program for safety-net providers that’s been a perennial source of fierce disputes among health care industry powerhouses is back in the spotlight, with billions of dollars at stake.

The big picture: 

Separate but coinciding issues are generating renewed focus on the decades-old 340B program, which requires that drugmakers give large discounts on outpatient drugs to health care providers serving low-income patients.

  • A Biden administration proposal to issue hefty back payments due to 340B providers, drugmakers’ efforts to limit discounts, and rebooted congressional interest in broader reforms are again igniting debate about the program’s scope.

Context: 

The Supreme Court last year unanimously sided with hospitals who challenged a nearly 30% reduction to their 340B payments by the Centers for Medicare and Medicaid Services that began under the Trump administration.

  • In response to the court decision, CMS last month announced a $9 billion plan to repay 340B providers that’s generated some controversy. While 340B hospitals are happy they’re getting paid back, industry groups are upset that the payments are funded by clawing back money to other hospitals.
  • Meanwhile, the Biden administration is battling drugmakers in court over restrictions they’ve placed on where hospitals can use their 340B discounts.
  • A bipartisan group of senators this summer also released a request for information on how to improve stability and oversight within the program.
  • Hospitals could face further cutbacks if Congress or the courts place new limits on 340B.

Flashback: 

The 340B program began in 1992 to help providers serving patient populations who struggled to afford their prescription drugs. It allows hospitals and other safety-net providers like community health clinics to save an average of 25% to 50% on drug purchases, according to the federal government.

  • When hospitals partner with off-site pharmacies to dispense drugs, the pharmacies also benefit financially from 340B savings.
  • The program has grown significantly since its inception, increasing from 8,100 participating safety-net providers in 2000 to 50,000 in 2020.

Between the lines: 

The expansive program growth has drawn lawmakers’ scrutiny and complaints from pharmaceutical companies, who accuse providers of using the program to pad their profits rather than help vulnerable patients. Providers dispute those accusations and say the program helps them stretch limited federal resources.

  • More than 20 drug companies have placed restrictions on when providers can use 340B discounts at off-site pharmacies. Drug companies say the limits help prevent them from having to give duplicate discounts, which occurs when both the provider and state Medicaid agency receive a discount on the same drug.
  • The Biden administration asked several drugmakers to lift their 340B restrictions and threatened fines if they don’t comply.
  • Several drugmakers have sued the administration, arguing federal officials didn’t have the right to stop them from limiting discounts. One appellate judge ruled in favor of drugmakers earlier this year, and two other cases are pending in federal appellate courts. Experts say the cases could go all the way to the Supreme Court.
  • As the legal fight plays out, 340B providers are urging Congress to approve new measures to prevent drugmakers from restricting access to discounts.
  • The other side: Drugmakers, meanwhile, want lawmakers to tighten hospital eligibility standards and place stronger limits on how 340B pharmacies can profit from the program.
  • Of note: Rural hospitals, some of which were spared from the 340B cuts made years ago, are especially concerned about the hit they would take from CMS’ proposed funding clawbacks.
  • Rural facilities today rely heavily on 340B to offset other financial losses, Brock Slabach, chief operations officer at the National Rural Health Association, told Axios.
  • “You can’t get out of this problem without harming those who were helped,” Slabach said.
  • What we’re watching: Expect to keep hearing about 340B in the coming months.
  • CMS still needs to finalize the 340B repayment plan after the public comment ends Sept. 5.
  • The D.C. Circuit Court of Appeals and the 7th Circuit Court of Appeals will issue rulings on whether the Biden administration can reverse drugmakers’ 340B restrictions.
  • Congress could take up a serious reform effort following the Senate’s information request, though that would take time.

Seniors’ medical debt soars to $54 billion in unpaid bills

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Seniors’ medical debt soars to $54 billion in unpaid bills

Seniors face more than $50 billion in unpaid medical bills, many of which they shouldn’t have to pay, according to a federal watchdog report.

In an all-too-common scenario, medical providers charge elderly patients the full price of an expensive medical service rather than work with the insurer that is supposed to cover it. If the patient doesn’t pay, the provider sends the bill into collections, setting off a round of frightening letters, humiliating phone calls and damaging credit reports.

That is one conclusion of a recent report titled Medical Billing and Collections Among Older Americans, from the Consumer Financial Protection Bureau.

The report recounts a horror story from a patient in southern Pennsylvania over a hospital visit, which should have been covered by insurance.

“I never received a bill from anyone,” the patient said in a 2022 complaint. Then came a phone call from a collection agency. “The woman on the phone started off aggressively screaming at me,” saying the patient owed $2,300.

“I told her there must be some mistake, that both Medicare and my supplement insurance would have covered it. It has in the past. She started screaming, very loud, ‘If you don’t pay me right now, I will put this on your credit report.’ I told her, ‘If you keep screaming at me, I will hang up.’ She continued, so I hung up.”

Nearly 4 million seniors reported unpaid medical bills in 2020, even though 98 percent of them had insurance, the report found. Medicare, the national health insurance program, was created to protect older Americans from burdensome medical expenses.

Total unpaid medical debt for seniors rose from $44.8 billion in 2019 to $53.8 billion in 2020, even though older adults reported fewer doctor visits and lower out-of-pocket costs in 2020.

Medical debt among seniors is rising partly because health care costs are going up, agency officials said. But much of the $53.8 billion is cumulative, they said, debt carried over from one year to the next. Figures for 2020 were the latest available.

Millions of older Americans are covered by both Medicare and Medicaid, a second federal insurance program for people of limited means. Federal and state laws widely prohibit health care providers from billing those patients for payment beyond nominal copays.

Yet, those low-income patients are more likely than wealthier seniors to report unpaid medical bills. The agency’s findings suggest that health care companies are billing low-income seniors “for amounts they don’t owe.” The findings draw from census data and consumer complaints collected between 2020 and 2022.

Many complaints depict medical providers and collection agencies relentlessly pursuing seniors for payment on bills that an insurance company has rejected over an error, rather than correcting the error and resubmitting the claim.

“Many of these errors likely are avoidable or fixable,” the report states, “but only a fraction of rejected claims are adjusted and resubmitted.”

When a patient points out the error, the creditors might agree to fix it, only to ignore that pledge and double down on the debt collection effort.

An Oklahoma senior recounted a collection agency nightmare that followed a hospital stay. After paying all legitimate bills, the patient discovered new charges from a collection agency on a credit report. In subsequent months, additional charges appeared.

The patient assembled billing statements and correspondence, hoping to clear the bogus charges. “I then proceeded to spend every weekday, all day, for two weeks on the phone, trying to find out who was billing me and why,” the patient said in a 2021 complaint.

The Oklahoman eventually paid the bills, “even though I don’t owe them.” Then, more charges appeared.

“Nice racket they have going,” the patient quipped.

As anyone with health insurance knows, medical providers occasionally charge patients for services that should have been covered by the insurer. Someone forgets to submit the claim, or types the wrong billing code or omits crucial documentation. Some providers charge patients more than the negotiated rate, a discounted fee set between the provider and insurer.

Americans spend hours of their lives disputing such charges. But many seniors aren’t up to the task.

“It’s tiring to have multiple conversations, sitting on the phone for an hour, chasing representatives,” said Genevieve Waterman, director of economic and financial security at the National Council on Aging.

“I think technology is outpacing older adults,” she said. “If you don’t have the digital literacy, you’re going to get lost.”

Older adults are more likely than younger people to have multiple chronic health conditions, which can require more detailed insurance documentation and face greater scrutiny, yielding more billing errors and denied claims, the federal report says.

Seniors are also more likely to rely on more than one insurance plan. As of 2020, two-thirds of older adults with unpaid medical bills had two or more sources of insurance.

Multiple insurers means a more complex billing process, making it harder for either patient or provider to file a claim and see that it is paid. With Medicaid, “you have 50 states, plus the territories,” said one official from the federal agency, speaking on condition of anonymity. “They each have their own billing system.”

In an analysis of Medicare complaints filed between 2020 and 2022, the agency found that 53 percent involved debt collectors seeking money the patient didn’t owe. In a smaller share of cases, patients reported that collection agents threatened punitive action or made false statements to press their case.

The complaints “illustrate how difficult it is to identify an inaccurate bill, learn where it originated, and correct other people’s mistakes,” the report states. “Some providers refuse to talk to consumers because the account has already been referred to collections. Even when providers seem willing to correct their own mistakes, debt collectors may continue attempting to collect a debt that is not owed and refuse to stop reporting inaccurate data.”

Rather than carry on a fight with collection agents over multiple rounds of calls and correspondence, many seniors become ensnared in a “doom loop,” the report says, convinced their appeal is hopeless. They pay the erroneous bill.

“I think some people get to the point where they just throw up their hands and give up a credit card number just to make the problem go away,” said Juliette Cubanski, deputy director of the Program on Medicare Policy at KFF.

Debt takes a toll on the mental and physical health of seniors, research has shown. Older adults with debt are more prone to a range of ailments, including hypertension, cancer and depression.

As the Oklahoma patient said, recalling a years-long battle over unpaid bills, “It nearly sent me back to the hospital.”

The Three Major Challenges for Private Equity Investors in Healthcare Services

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The Three Major Challenges for Private Equity Investors in Healthcare Services

Healthcare is a capital intense industry: facilities, technologies, workforces, infrastructures and clinical breakthroughs require access to funding from banks willing to lend and investors willing to bet.

For most, being a limited partner in a private equity fund is an attractive hedge against inflation, especially a fund that targets healthcare wherein demand is increasing and shifting, costs are soaring and consumers are receptive to new alternatives.

Private equity is big business:

Private equity funds have nearly $2 trillion in dry powder to invest. The Securities and Exchange Commission (SEC) recently reported that private funds’ gross assets now surpass those of the commercial banking sector at more than $25 trillion–up from $9 trillion in 2012. And the American Investment Council reports that…

·       12 million are employed at Private Equity-Backed Companies.

·       32,041 Private Equity-Backed Businesses have been funded since 2017.

·       34 million Americans Depend on Private Equity to Support Their Retirements.

And healthcare is a prime target:

  According to data compiled by Pitchbook, “private equity invested more than $206 billion in U.S. health care throughout 2021 to fund research into deadly diseases like Alzheimer’s and Parkinson’s, expand and renovate facilities, modernize medical records and health care data, and make other needed investments.”  Bain reported “Despite the slowdown in healthcare private equity deal flow in the second half of 2022, firms continued to create healthcare-focused funds and raise near-record levels of capital in 2022. Data from Preqin suggests that firms raised more than $15 billion in new buyout capital for funds where healthcare is the exclusive or core focus, which has happened in only two other years in the last two decades—2019 and 2021.”

In 2021, the Medicare Payment Advisory Commission (MedPAC) released a report affirming that private equity investments “play an important role providing hospitals, nursing homes, and physician practices with capital and expertise to navigate an increasingly complex health care landscape” but offered Congress no recommendations about how to navigate its growing role.

The playbook for PE investing in healthcare services is widely-known:

·       Thesis: Healthcare is expensive, wasteful and unsustainable in its current structure: Incumbents in healthcare services, especially hospitals and physicians,  need capital to survive and are receptive to private money.

·       Strategy: Land, Expand, and Exit in 5-7 years: Leverage debt at competitive rates to fund most of the deal; operate aggressively by lowering operating costs; grow revenue aggressively thru adjacency acquisitions and partnerships; price aggressively and avoid compliance penalties associated with safety or quality issues.

·       Keys to success: Timing, attractive deal terms, a scalable operating platform, exceptional CEO and dispassionate exit strategy. And for navigating expectations of limited partners (high net worth individuals, pension funds, et al), the General Partner gets a 2% management fee and 20% of the value created in the enterprise at exit.

My take:

For the past decade, PE investments in distressed hospitals, medical specialties (radiology, dentistry, dermatology et al), outpatient surgery/ diagnostic facilities and logistics solutions have been popular targets. Going forward, opportunities in services will increasingly center on business models that produce significant, near-term cost-reduction compared to alternative solutions as issues around affordability and employer health costs mount.  But three issues will impact the role and success of PE investing in healthcare services looking ahead:

1-Heightened Regulatory Scrutiny: There’s growing concern in Congress and among regulatory agencies about the role of private equity in healthcare services.

·       In Congress and in some states, ownership restrictions and added disclosure requirements are being considered.

·       The SEC is advancing changes to require added protections for investors in PE funds.

·       The FTC is examining the correlation between PE ownership and business practices and consumer choices.

·       CMS is considering analyzing the association between PE ownership and prices.

2-The Maturity Wall: “A maturity wall is fast approaching for PE funds that are nearing the end of their term life to distribute their capital back to investors through exits. PE investors will need to pick up their exit pace or will be confronted with 20% to 26% of the capital initially invested by funds to hit the maturity wall. The cumulative amount of still- held investments could grow to over $360 billion in the next 12 years.” (Pitchbook June 30, 2023). The maturity wall will be especially problematic in communities where medical practices and/ancillary services providers acquired thru PE-sponsored deals are forced to switch owners necessitating possible disruptions in care.

3-Heightened Competition among PE Funds: PE funds compete for good deals and satisfied investors. Bigger funds have advantages over smaller funds i.e., domain expertise, analytic models and access to effective executive talent. The deal landscape in healthcare services has slowed though opportunities remain. It’s a buyer’s market prompting intensified competition between funds and aggressive negotiations between buyers and sellers. Qualified investors are comparing fund performance and moving funds to the most successful.

The healthcare services market in the U.S. is worth $3.5 trillion and is forecast to increase at 5%/yr. for the next decade. It’s traditionally dominated by nonprofit operators and market conditions that favor incumbents over newbies, bigger over smaller and business to business (B2B) models over business to consumer (B2C). That’s changing. Investor-ownership in healthcare services is increasing. Distinctions between privately operated PE owned hospitals and services providers and investor-owned publicly traded operators are being scrutinized by regulators even as the tax-exempt status enjoyed by not-for-profits is under the microscope.

Access to capital that’s cost-effective is critical to the future of health services providers.  PE will be increasingly part of that discussion and with it, added risk.

Thinking Long-Term: Changes in Five Domains will Impact the Future of the U.S. System but Most are Not Prepared

Posted on by • Posted in Change, Change Mindset, Health System, Hospital, Hospital Industry, Market Consolidation, Market Power, Market Trends, Market Uncertainty, Private Equity, Regulation, Regulatory Pressures, Strategic Change, Strategic Imperative, Strategic Leadership, Strategy Sustainable Long Term • Leave a comment
Thinking Long-Term: Changes in Five Domains will Impact the Future of the U.S. System but Most are Not Prepared

The U.S. health system is big and getting bigger. It is labor intense, capital intense, and highly regulated. Each sector operates semi-independently protected by local, state and federal constraints that give incumbents advantages and dissuade insurgents.

Competition has been intramural:

Growth by horizontal consolidation within sectors has been the status quo for most to meet revenue and influence targets. In tandem, diversification aka vertical consolidation and, for some, globalization in each sector has distanced bigger players from smaller:

  • insurers + medical groups + outpatient facilities + drug benefit managers
  • hospitals + employed physicians + insurance plans + venture/private equity investing in start-ups
  • biotech + pharma + clinical data warehousing,
  • retail pharmacies + primary & preventive care + health & wellbeing services + OTC products/devices
  • regulated medical devices + OTC products for clinics, hospitals, homes, workplaces and schools.

The landscape is no man’s land for the faint of heart but it’s golden for savvy private investors seeking gain at the expense of the system’s dysfunction and addictions—lack of price transparency, lack of interoperability and lack of definitive value propositions.

What’s ahead? 

Everyone in the U.S. health system is aware that funding is becoming more scarce and regulatory scrutiny more intense, but few have invested in planning beyond tomorrow and the day after. Unlike drug and device manufacturers with global markets and long-term development cycles, insurers and providers are handicapped. Insurers respond by adjusting coverage, premiums and co-pays annually. Providers—hospitals, physicians, long-term care providers and public health programs– have fewer options. For most, long-range planning is a luxury, and even when attempted, it’s prone to self-protection and lack of objectivity.

Changes to the future state of U.S. healthcare are the result of shifts in these domains:

They apply to every sector in healthcare and define the context for the future of each organization, sector and industry as a whole:

  • The Clinical Domain: How health, diseases and treatments are defined and managed where and by whom; how caregivers and individuals interact; how clinical data is accessed, structured and translated through AI enabled algorithms; how medication management and OTC are integrated; how social determinants are recognized and addressed by caregivers and communities: and so on. The clinical domain is about more than doctors, nurses, facilities and pills.
  • The Technology Domain: How information technologies enable customization in diagnostics and treatments; how devices enable self-care; how digital platforms enable access; how systemness facilitates integration of clinical, claims and user experience data; how operating environments shift to automation lower unit costs; how sites of care emerge; how caregivers are trained and much more. Proficiency in the integration of technologies is the distinguishing feature of organizations that survive and those that don’t. It is the glue that facilitates systemness and key to the system’s transformation.
  • The Regulatory Domain: How affordability, value, competition, choice, healthcare markets, not-for-profit and effectiveness are defined; how local, state and federal laws, administrative orders by government agencies and executive actions define and change compliance risks; how elected officials assess and mitigate perceived deficiencies in a sector’s public accountability or social responsibility; how courts adjudicate challenges to the status quo and barriers to entry by outsiders/under-served populations; how shareholder ownership in healthcare is regulated to balance profit and the public good; et al. Advocacy on behalf of incumbents geared to current regulatory issues (especially in states) is compulsory table stakes requiring more attention; evaluating potential regulatory environment shifts that might fundamentally change the way a system is structured, roles played, funded and overseen is a luxury few enjoy.
  • The Capital Domain: how needed funding for major government programs (Medicare, Medicaid, Children’s, Military, Veterans, HIS, Dual Eligibles et al) is accessed and structured; how private investment in healthcare is encouraged or dissuaded; how monetary policies impact access to debt; how personal and corporate taxes impact capitalization of U.S. healthcare; how value-based programs reduce unnecessary costs and improve system effectiveness; how the employer tax exemption fares long-term as employee benefits shrink; how U.S. system innovations are monetized in global markets; how insurers structure premiums and out of pocket payments: et al. The capital domain thinks forward to the costs of capital it deploys and anticipated returns. But inputs in the models are wildly variable and inconsistent across sectors: hospitals/health systems vs. global private equity healthcare investors vs. national insurers’ capital strategies vary widely and each is prone to over-simplification about the others.
  • The Consumer Domain: how individuals, households and populations perceive and use the system; how they assess the value of their healthcare spending; how they vote on healthcare issues; how and where they get information; how they assess alternatives to the status quo; how household circumstances limit access and compromise outcomes; et al. The original sin of the U.S, health system is its presumption that it serves patients who are incapable/unwilling to participate effectively and actively in their care. Might the system’s effectiveness and value proposition be better and spending less if consumerization became core to its future state?

For organizations operating in the U.S. system, staying abreast of trends in these domains is tough. Lag indicators used to monitor trends in each domain are decreasingly predictive of the future. Most Boards stay focused on their own sector/subsector following the lead of their management and thought leadership from their trade associations. Most are unaware of broader trends and activities outside their sector because they’re busy fixing problems that impact their current year performance. Environmental assessments are too narrow and short-sighted. Planning processes are not designed to prompt outside the box thinking or disciplined scenario planning. Too little effort is invested though so much is at risk.

It’s understandable. U.S. healthcare is a victim of its success; maintaining the status quo is easier than forging a new path, however obvious or morally clear.  Blaming others and playing the victim card is easier than corrective actions and forward-thinking planning.

In 10 years, the health system will constitute 20% of the entire U.S. economy and play an outsized role in social stability. It’s path to that future and the greater good it pursues needs charting with open minds, facts and creativity. Society deserves no less.

Searching for new hope in primary care

Posted on by • Posted in Consumer Centered Medical Home, Consumer Experience, Consumer Loyalty, Consumer-Centric, Consumerism, Physician, Physician Acquisition, Physician Burnout, Physician Coverage, Physician Leadership, Physician Network, Physician Practice Valuation, Physician Shortage, Physician Specialist, Physician Staffing, Primary Care, Primary Care Loyalty, Primary Care Strategy • Leave a comment

https://mailchi.mp/377fb3b9ea0c/the-weekly-gist-august-4-2023?e=d1e747d2d8

A physician who has led the primary care enterprise for a large health system for over twenty years told us he’s never seen physician morale as low as it is now:

“Burnout is bad across the board for all specialties, but I’m having a really hard time finding the bright spots for primary care”.

We recalled a recent survey of primary care physicians that confirmed his observations, with 61 percent of doctors stating that primary care is “crumbling”. But it struck us that we’ve been seeing these kinds of dire surveys about the state of primary care for the entire quarter-century we’ve been doing this work.

What’s different now?


He posited one critical change. Ten years ago, during the heyday of accountable care, primary care was central to health system strategy. Systems were devoting resources to converting practices to patient-centered medical homes. “We felt like primary care was at the heart of transforming health systems, and that we were finally getting resources to help patients,” he shared.

“Now it feels like the health system has moved away from ‘value’, the focus is all on specialists and growing procedure volume again, and we’re being treated as a cost center and told to cut staff and up our referral targets.”

We agree. Although large independent primary care groups continue to command record valuations, overall, the transition to value has slowed, and work burden has increased given staffing shortages.

Where could optimism come from now?

We both agreed that workflow innovations to ease documentation burden and help the transition to virtual care appear closer to reality than ever before.

And the increased focus on “consumerism” has many systems recognizing that primary care is the first—and principal—touchpoint for most patients and will be key to winning consumer loyalty.

The changing face of the nursing workforce

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Last week we discussed how hospitals are still struggling to retain talent. This week’s graphic offers one explanation for this trend: 

a significant share of older nurses, who continued to work during the height of the pandemic, have now exited the workforce, and health systems are even more reliant on younger nurses. 

Between 2020 and 2022, the number of nurses ages 65 and older decreased by 200K, resulting in a reduction of that age cohort from 19 percent to 13 percent of the total nursing workforce. While the total number of nurses in the workforce still increased, the younger nurses filling these roles are both earlier in their nursing careers (thus less experienced), and more likely to change jobs. 

Case in point:

From 2019 to 2023, the average tenure of a hospital nurse dropped by 22 percent. The wave of Baby Boomer nurse retirements has also resulted in a 33 percent decrease from 2020 to 2022 in the number of registered nurses who have been licensed for over 40 years. 

Given these shifts, hospitals must adjust their current recruitment, retention, training, and mentorship initiatives to match the needs of younger, early-career nurses.

Signs of a summer COVID bump could signal a tougher fall.

Posted on by • Posted in Coronavirus, Flu Season, Flu Transmission, Public Health, Respiratory Syncytial Virus (RSV), Vaccine • Leave a comment

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After experiencing steadily declining numbers across 2023, the country is currently seeing an uptick in COVID-19 hospitalizations, which increased 12 percent week-over-week, to approximately 8,000 in the week ending July 22. This rise, the largest since December, follows an increase in national wastewater levels of COVID across the past month, particularly in the Northeast and South. Given that most health agencies are no longer tracking COVID case levels, and many Americans are no longer getting tested or testing themselves, actual case counts are unclear. 

The Gist: Though COVID hospitalizations are up, weekly totals are still among the lowest the nation has seen since the pandemic began. And while COVID deaths are a lagging indicator, the most recent Centers for Disease Control and Prevention (CDC) data charts them at their lowest level since the start of the pandemic. 

Nonetheless, if this COVID uptick continues into fall, we could once again be facing a “tripledemic” of COVID, flu, and respiratory syncytial virus (RSV) circulating at high levels all at once, straining hospital resources. 

Fortunately, an updated COVID vaccine is coming this fall. Urging Americans, particularly older and vulnerable patients, to get vaccinated for all three viruses will be critical—although convincing individuals to get three separate shots will increase the challenge.