Earlier this week, the American Hospital Association (AHA) made its case before the US Supreme Court, in opposition to Medicare reimbursement cuts to hospitals that participate in the 340B Drug Pricing Program. The program allows hospitals that serve low-income patients to purchase outpatient drugs at a discount.
In the graphic above, we look at what’s at stake for hospitals in the case. Beginning in 2018, Medicare cut reimbursement for 340B-eligible drugs purchased by most hospitals by 28.5 percentage points, amounting to roughly $1.6B annually—which was a significant hit to hospitals’ 340B revenue. As we recently discussed, that revenue has become essential for many hospitals’ financial sustainability. However, the true impact on hospital bottom lines is more nuanced, as the savings from 340B rate cuts are being redistributed to all hospitals that participate in the Outpatient Prospective Payment System (OPPS), regardless of their 340B status, via a 3.2 percent payment bump for non-drug Part B services.While the cut negatively impacts those with large 340B programs—generally larger hospitals located in urban areas—the resulting redistribution actually provides a net benefit to about four in five hospitals.
Although 340B program revenues are at stake, the broader legal question before the Court centers on the level of authority federal agencies like the Centers for Medicare & Medicaid Services (CMS) have to create regulations to interpret ambiguous laws. (If the justices rule against CMS, it will overturn a key legal doctrine known as the Chevron Defense, which compels courts to defer to an agency’s interpretation of unclear statutes.)
A ruling isn’t expected until next spring, but regardless of the outcome, the 340B program faces other threats, chiefly from several lawsuits involving large pharmaceutical manufacturers’ moves to restrict discounted product sales to contract pharmacies. Undoubtedly, the ongoing scrutiny of the 340B program will continue to raise questions about whether there are better ways to subsidize the operations of hospitals serving low-income patients and ensure that underserved patients have access to lifesaving treatments.
In our work with health systems, physician groups, and other organizations over the years, we’ve often been asked to facilitate board-level discussions about governance—resolving board conflicts, navigating difficult decisions, evaluating board composition.
A recent discussion again highlighted one of our main observations in working with boards: governance problems are often strategy problems in disguise. Working with a system that has grown through acquisition over the years, and whose board includes members from several of the “legacy” hospitals which had merged into the system over time, we were asked to help facilitate a dialogue about investment priorities across the component parts of the system.
At the root of the issue: each of the “representatives” of the subsidiary entities were pushing to have their own investment needs take precedence. On the face of it, that’s a governance problem: boards shouldn’t be constituent assemblies, with each member representing the interests of a sub-unit. Rather, they should act with one purpose: to advance the interests of the whole.
But that misalignment turned out to be a symptom of a larger problem: there was no consensus at the board level about what the strategic direction of the combined system should be, and what role each component part played in that direction.
That’s a strategy problem, masquerading as a governance issue. Identifying the strategic issue allowed the board to reframe the dialogue around vision, which then unblocked the subsequent decisions about investments. Good strategy and good governance go hand in hand.
That’s what we felt when news broke about a new coronavirus variant, named omicron, being designated as a “variant of concern.” It’s been nearly two years since Covid-19 was declared a global pandemic, and we’re yet again wondering what the future holds.
Once again, there are no clear answers. But we do know enough to begin mapping out the space of possibilities.
We know enough to ask, as we have at pastmoments in the pandemic: What are the (relatively) “good,” “bad,” and “ugly” scenarios?
Full disclosure: Even in the day it took us to draft this post, we’ve had to rethink our beliefs in light of emerging information. Still, even if these predictions are shaky, we believe there’s value in reflecting on the futures that could arise—and how health care stakeholders can prepare for each one.
The (relatively) ‘good’ scenario: Our existing vaccines and treatments still work, and omicron doesn’t cause worse disease.
It would be misguided to label any outcome as truly “good” in a pandemic that has already killed more than 775,000 Americans and more than 5 million people worldwide.
Still, some possible futures are clearly better than others—and the best-case scenarios are those in which the omicron variant doesn’t fundamentally change the course of the pandemic.
America has already given 74% of people aged 5+ at least one vaccine dose. If those vaccines are as effective against omicron as other variants, that will be a promising sign for the pandemic’s future.
It’s even possible that omicron’s emergence could drive increased vaccine and booster uptake, as happened in the initial weeks of the delta surge. It could even advance efforts to vaccinate the world, a task that President Biden deemed a “moral obligation” in his early remarks on the omicron variant.
So how likely are current vaccines to work against the omicron variant? One reason for optimism is that most early cases and hospitalizations in South Africa appear to have occurred in unvaccinated individuals. Another is that vaccines have worked well against all past variants, including delta. Still, experts caution that omicron carries more mutations than past variants, and many of those mutations exist in areas associated in lab experiments with immune escape. In the coming weeks, we’ll have more data on whether the vaccines protect against the variant.
Another “good” possibility would that omicron doesn’t make people as sick as other variants (or, put more formally, that it’s not especially virulent). Here, too, there’s reason for optimism. Early reports out of South Africa indicate that most infected individuals have suffered only minor or asymptomatic illnesses.
But there’s also reason for caution: Because the variant has emerged so recently, it’s possible that most cases simply haven’t had time to progress to hospitalization and death. According to WHO, there’s simply no evidence to suggest that omicron’s symptoms are any better or worse than those caused by past variants.
On the whole, we think a relatively good scenario remains plausible, especially in highly vaccinated regions. Additionally, our current preparedness measures—like increased testing and vaccinations, as well as even renewed calls from Dr. Francis Collins from the NIH for mask wearing indoors—may help us get ahead of omicron’s spread, at least in the U.S. But there’s also a risk that things will turn worse.
The ‘bad’ scenario: Omicron is highly transmissible and slightly more virulent than previous variants, but existing vaccines and treatments still work well.
In the “bad” scenario, the omicron variant’s course could look very similar to that taken by the delta variant in the summer. It could rapidly spread throughout the nation and world, with the most severe impacts on unvaccinated populations.
Transmissibility could be a key factor in this scenario, and data on the variant’s basic reproduction ratio (R0) a metric used to describe the contagiousness or transmissibility of infectious agents, will help us further understand potential impact. The original coronavirus had a R0 of 2.79, and the delta variant had a R0 of 5.08. If the omicron variant’s R0 exceeds this number (and is more virulent), we may find ourselves in a “bad” scenario. Experts have speculated that omicron is likely highly transmissible since it carries mutations found on the very contagious delta variant, as well as other mutations hypothesized to increase transmissibility. The variant’s apparently rapid rise in South Africa also suggests it spreads easily, although experts warn we don’t yet know for sure.
If omicron turns out to be the most transmissible variant yet, we should expect another wave of cases among the unvaccinated, likely accompanied by an increase in breakthrough infections. However, so long as our vaccines still are effective, most breakthrough infections will be mild, as was the case during the delta surge.
Even in this “bad” scenario, we’re still much better off than in past coronavirus waves. In just the last several weeks, we’ve seen the emergence of new, promising treatments—notably, oral antivirals that reduce the risk of hospitalization and severe illness. Pfizer’s antiviral, Paxlovid, was shown to provide an 89% risk reduction in outpatients. Merck’s antiviral, molnupiravir, was recently shown to reduce the risk of hospitalization and death from Covid-19 by 30%.
Because of the way these treatments work in the body, experts feel confident they’ll remain effective against the omicron variant. It’s possible that, at least at first, they could be reserved for unvaccinated people or high-risk groups or sent to areas with the greatest prevalence of the variant. It’s likely that FDA will discuss these possibilities as it reviews these drugs’ applications for emergency use authorization. It will also be essential that we can overcome some of the big obstacles for anti-viral treatments, such as access, rapid testing, and sufficient tracking.
Still, while post-exposure drugs will play an important role in a “bad” scenario, the key to preventing a truly “ugly” outcome will be vaccines. The World Health Organization and the Biden administration both echoed this message, recently urging people to get vaccinated and boosted to prevent further spread. Additionally, CDC just strengthened its booster recommendations, saying all eligible adults “should” get boosted (where previous guidance said they “may” get boosted) and Pfizer announced it is seeking approval of boosters for people ages 16 and 17.
The sooner vaccines are distributed throughout America and the world, the better the outcome will be—at least so long as the vaccines themselves remain effective.
The ‘ugly’ scenario: Vaccines falter, and omicron’s virulence is dangerously high.
The biggest question, then, is: What happens if our current vaccines falter?
Here’s where we want to be cautious. Most experts say omicron is extremely unlikely to fully evade existing vaccines. Scott Gottlieb, former FDA commissioner, recently said that “… if you talk to people in vaccine circles… they have a pretty good degree of confidence that a booster vaccine so three full doses of vaccine is going to be fairly protective against this new variant.” It would be irresponsible, and unhelpful, for us to speculate—in absence of any evidence, and against scientists’ best predictions—that vaccines could simply stop working.
But it’s possible that omicron will show a degree of immune escape.
If so, then many people who are vaccinated could fall ill. They in turn could pass the virus to others. And if omicron proves to be as virulent as or worse than past variants, many of those infected—especially those who are unvaccinated—will suffer and die.
This would render the next 100 days truly “ugly,” as manufacturers race to develop new vaccines and boosters against the new variant, and an already exhausted health care system copes with yet another devastating wave of cases.
In this scenario, health care leaders, policymakers, and public health officials will need to re-evaluate preventive strategies. We could once again see draconian measures such as lockdowns and sustained capacity mandates. However, President Biden recently announced that the U.S. will not resort to lockdowns or shutdowns as a result of omicron, making this possibility unlikely.
Even this scary scenario wouldn’t quite bring us back to March 2020. We know dramatically more than we did then about how to detect, contain, and treat Covid-19, and manufacturers stand ready to adapt their vaccines with all due haste.
But this scenario would be horrific, and the next few months would feel all too much like déjà vu.
Parting thoughts
When we’ve written these predictions about the pandemic in the past, we struggled to see how our individual actions could meaningfully inflect our trajectory toward a good, bad, or ugly outcome.
But whether one or none of these scenarios play out, it is important to step back and consider how we can rely on lessons we’ve learned over the past two years. Lessons such as encouraging vaccine uptake by going into the community, combatting structural inequities by acknowledging and acting, helping out vulnerable countries around the world, supporting the health care workforce, and much more.
If you are feeling overwhelmed after reading through these various scenarios, stuck in the treacherous mental waters of the unknown, you are not alone. It is okay to acknowledge the confusion of constantly emerging data as we learn how to proceed. But this is also true: these unknowns will not be the end of us. Somehow, amid the chaos of constant pandemic updates and new death tolls, we continue to move forward as a collective—doing our best to stay prepared, protected, and proactive.
The new omicron variant is “more of a Frankenstein” than previous virus coronavirus variants, according to one virologist, and vaccine experts are at odds over how well current vaccines will provide protection against it.
A ‘Frankenstein’ variant
According to Alex Sigal, a virologist heading a team of researchers at the Africa Health Research Institute, the new variant is “probably the most mutated virus we’d ever seen.” However, Sigal added that he believes existing Covid-19 vaccines will continue to protect people against severe disease and hospitalization.
Similarly, Ugur Sahin, BioNTech co-founder, said that the Pfizer-BioNTechvaccine not only creates antibodies that prevent infection from occurring, but also creates T lymphocytes that attack cells after the body has been infected. Sahin argued that, even if omicron can evade antibodies, it would likely be vulnerable to T lymphocytes.
“Our message is: Don’t freak out, the plan remains the same: Speed up the administration of a third booster shot,” Sahin said.
Luke O’Neill, an immunologist and chair of biochemistry at Trinity College Dublin, said Sahin’s assumption makes sense from an immunological perspective. “There is optimism that the T-cells will hold the line—they are very good at stopping severe disease,” O’Neill said.
However, Stanley Plotkin, a scientist who has developed many vaccines, said Sahin’s assumptions were “gratuitous and without any proof.” Plotkin said so far there’s little evidence to suggest T-cells could fully protect against severe symptoms if a virus evades antibodies.
Further, Stéphane Bancel, CEO of Moderna, said, “There is no world, I think, where [the effectiveness] is the same level … we had with [the] Delta [variant] … I think it’s going to be a material drop. I just don’t know how much because we need to wait for the data. But all the scientists I’ve talked to … are like, ‘This is not going to be good.'”
However, former FDA commissioner Scott Gottlieb on Monday said, “There’s a reasonable degree of confidence in vaccine circles that [with] at least three doses … the patient is going to have fairly good protection against this variant.”
Angelique Coetzee, national chair of the South African Medical Association, said that so far, vaccinated patients who have tested positive for omicron “have no complication.” She noted that the nation’s hospitals were not overwhelmed by omicron patients, and most of those hospitalized were not fully vaccinated. Additionally, most patients she had seen did not lose their sense of taste and smell, and had only a slight cough, the New York Times reports.
“I have seen vaccinated people and not really very sick,” Coetzee said. “That might change going forward, as we say, this is early days. And this is maybe what makes us hopeful.”
Could omicron ‘outcompete’ delta?
Separately, Adrian Puren, acting executive director of South Africa’s National Institute for Communicable Diseases, said he believes omicron could become more pervasive than the delta variant. “We thought what will outcompete delta? That has always been the question, in terms of transmissibility at least … perhaps this particular variant is the variant,” Puren said.
William Schaffner, a professor of preventive medicine at Vanderbilt University School of Medicine, said that while nothing is certain yet, “it looks as though [omicron] will be as infectious as delta.”
As for how long it will take to answer questions about omicron, including its transmissibility and virulence, Tara Smith, an epidemiologist at Kent State University, said at minimum “it will take a month to get some preliminary data, and quite possibly longer to really know the fuller picture. We also won’t know about real-world experience in vaccine breakthroughs until that time.”
The Supreme Court appeared receptive to the claim that Medicare overstepped its authority when it cut the amount that it paid certain hospitals for drugs they dispensed in their outpatient departments. None of the justices voiced sympathy with the government’s argument that Congress had precluded judicial review of the question. And while oral argument mainly involved a technical discussion about statutory meaning, several of the conservative justices toyed with the possibility of abandoning Chevron deference — the principle that the courts will defer to an agency’s reasonable interpretation of the statute that it administers.
It is always treacherous to try to anticipate what the justices will decide from the questions they ask at oral argument. Still, it’s safe to say that the hospitals challenging Medicare’s rate change had a good day in court. If they prevail, 340B hospitals will recoup billions in withheld payments and will continue to have an enormous incentive to dispense expensive drugs in their outpatient centers, even when cheaper and equally effective alternatives exist.
That’s a bad policy outcome, whatever the Supreme Court thinks the law requires. If Medicare lacks the legal power to fix it, however, it will be up to Congress to narrow the gap between 340B drug costs and Medicare payments. We could be waiting a very long time for a solution.
Here’s how the world as a whole is currently trending:
More than 570.6 million doses of the COVID-19 vaccine have been shipped to various U.S. states as of yesterday afternoon, of which more than 459.2 million doses have been administered, according to TIME’s vaccine tracker. About 59.3% of Americans have been completely vaccinated.
Nearly 263 million people around the world had been diagnosed with COVID-19 as of 12 a.m. E.T. today, and more than 5.2 million people have died. On Nov. 30, there were 615,787 new cases and 7,704 new deaths confirmed globally.
Here’s how the world as a whole is currently trending:
Here’s where daily cases have risen or fallen over the last 14 days, shown in confirmed cases per 100,000 residents:
And here’s every country that has reported over 5 million cases:
The U.S. had recorded more than 48.5 million coronavirus cases as of 12 a.m. E.T. today. More than 780,000 people have died. On Nov. 30, there were 116,588 new cases and 1,539 new deaths confirmed in the U.S.
Here’s how the country as a whole is currently trending:
The recent dip and rise in daily cases is likely due to reduced reporting during the holiday weekend; historically, the U.S. has seen similar short-term, apparent drop offs that were later shown to be outliers.
That said, here’s where daily cases have risen or fallen over the last 14 days, shown in confirmed cases per 100,000 residents:
All numbers unless otherwise specified are from the Johns Hopkins University Center for Systems Science and Engineering, and are accurate as of Dec. 1, 12 a.m. E.T. To see larger, interactive versions of these maps and charts, click here.
While no cases of the new coronavirus variant, Omicron, have been reported in the U.S. yet, it’s only a matter of time. In fact, Dr. Anthony Fauci, chief medical advisor on COVID-19 to President Biden, says it’s likely the virus is already in the country, given how much travel is occurring between countries as pandemic restrictions have started to lift in recent months.
Even if the variant were here, could existing tests tell if someone were infected by it? Testing experts say yes and no. The majority of tests used by commercial and public health labs can detect SARS-CoV-2, but they can’t confirm which version of the virus is present. That’s because the tests intentionally target parts of the virus that don’t change much. Variants are designated based on differences in mutations—in Omicron’s case, especially those in spike protein, a part of the virus that changes frequently to bypass drugs and immune cells, and thus are difficult to test for. So the majority of the tests available will show if a person is carrying the virus—but there’s no way to tell whether that virus is Omicron.
For that, a doctor would have to send your sample to a lab that can then sequence genetically to look for the genetic signatures unique to Omicron.
There is one commercial test, from Thermo Fisher Scientific, that can perform the two-fer: both detect the presence of the virus and give testers an inkling that what they’re dealing with might be the Omicron variant. The company’s test targets three different parts of SARS-CoV-2: two relatively stable regions, and the more variable spike protein. It turns out that Omicron will show positive matches on the two more stable regions, a pattern similar to the one from the Alpha variant, but will show a mismatch on the spike protein portion.
The Delta variant, which is now responsible for nearly 99% of new cases around the world, does not share this omission, and produces a three-for-three match on all three regions targeted by Thermo Fisher’s PCR test. That means, given Delta’s dominance, if a sample produces all three matches, it’s likely Delta; if it results in only two positive matches, it’s likely to be Omicron. To confirm, researchers can then send those samples in for sequencing to definitively look for Omicron’s genetic profile.
“This happens to be good fortune that this pattern can flag the presence of Omicron,” says Mark Stevenson, executive vice president and chief operating officer at Thermo Fisher. “It’s a good early warning system.” Clients using the company’s test in South Africa alerted Thermo Fisher last Wednesday that they were seeing those unusual patterns, even before the country’s health officials announced the spurt of new cases. Stevenson expects public health labs in Europe and the U.S. are now also using the test to look for the first cases of the Omicron variant.
At Qiagen, a global testing company that makes assays for both diagnostic testing and research purposes, the team immediately evaluated their test against the samples of genetic sequences of Omicron uploaded by public health experts into the public GISAID database. “We’ve seen no drop in performance in our products,” says Dr. Davide Manissero, chief medical officer at Qiagen.
Similarly, the research team at diagnostic testing company BD ran tests of its COVID-19 assays using the Omicron sequences in GISAID. “We are confident that our rapid antigen and PCR tests for COVID-19 will detect the novel variant,” Dave Hickey, president of BD Life Sciences, said in a statement.
If you prefer to rely on the at-home tests available over-the-counter at pharmacies that can provide results in a few minutes, those are also still useful, at least for letting you know if you might be positive. Like most PCR tests, the at-home kits cannot determine if someone is infected with the Omicron variant specifically, but they will turn positive for anyone infected with any version of the virus.
The first known U.S. case of the Omicron variant was detected in California, the Centers for Disease Control and Prevention confirmed Wednesday.
Driving the news: The confirmed case was detected in a traveler returning from South Africa who was fully vaccinated and has mild symptoms, according to the CDC.
Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases, had previously cautioned that the Omicron would “inevitably” be found in the U.S.
What they’re saying: “The recent emergence of the Omicron variant … further emphasizes the importance of vaccination, boosters and general prevention strategies,” the CDC said in a statement.
“We know what we need to do to protect people,” Fauci said following the announcement. “Get vaccinated if you’re not already vaccinated.”
Hospitals saw operating margins continue to erode in October, declining 12% from September under the weight of rising labor costs, according to a national median of more than 900 health systems calculated by Kaufman Hall. It was the second consecutive monthly drop and comes as facilities are preparing for the fast-spreading omicron variant of the coronavirus.
Although expenses remained highly elevated, patient days and average length of stay fell for the first time in months in October, likely reflecting lower hospitalization rates as the pressure of treating large numbers of COVID cases began to ease, Kaufman Hall said in its latest report.
At the same time, operating room minutes rose 6.8% from September, pointing to renewed patient interest in elective procedures.
Dive Insight:
Doctors and nurses have barely caught a breath from the most recent surge in inpatient volumes driven by the delta variant. Now, hospitals face the possibility of a fresh wave of cases led by omicron.
“Performance could continue to suffer in the coming months as hospitals face sustained labor increases and the uncertainties of the emerging omicron variant,” according to the Kaufman Hall report.
The new variant has not been detected in the U.S. as of Wednesday morning, but Canada is amongthe 20 countries that have confirmed cases.
Scientists are scrambling to understand the characteristics of the omicron variant. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, told a White House press briefing Tuesday that omicron’s mutation profile points to “increased transmissibility and immune evasion.” But it is too soon to tell whether omicron will cause more severe disease than other COVID-19 variants, or how well current vaccines and treatments work against it, Fauci said.
Moderna CEO Stéphane Bancel told the Financial Times he thought existing vaccines would be less effective against omicron than earlier variants. Moderna, Pfizer, Johnson & Johnson and other manufacturers are already working to adapt their vaccines to combat the new threat, first reported by South African scientists on Nov. 24.
Regeneron also said its COVID-19 antibody drug, the top-selling treatment in the U.S., might be less effective against omicron. The company said it is now conducting tests to determine how the variant affects its drug.
The median hospital operating margin, not including federal Coronavirus Aid, Relief, and Economic Security Act funding, was down 31.5% in October, compared to pre-pandemic levels in the same month of 2019, according to Kaufman Hall’s snapshot. Hospitals in the West, South and Midwest that were hardest hit by the delta variant saw year-over-year margin declines.
Total labor expenses rose nearly 3% from September to October, 12.6% compared to October 2020 and 14.8% compared to October 2019, Kaufman Hall said. Full-time equivalents per adjusted occupied bed decreased 4.5% versus 2020 and 4% versus 2019, suggesting higher salaries due to nationwide labor shortages, rather than increased staffing levels, are driving up labor expenses.
Total non-labor expenses, however, decreased 1% in October from September for supplies, drugs and purchased services, following months of increases.
“Broader economic trends such as U.S. labor shortages are adding to the extreme pressures of the pandemic. Hospitals face greater uncertainties in the coming months as a result, as COVID-19 cases and hospitalizations appear to once again be on the upswing before many have even had a chance to recover from the last surge,” Erik Swanson, a senior vice president of data and analytics at Kaufman Hall said.
There’s a lot of talk about “natural immunity” to Covid-19, and some people are refusing vaccination onthe grounds that they’ve got this natural immunity thanks to a previous Covid-19 infection. In this episode we take a look at how infection and vaccination compare in terms of immunity, reinfection, and overall health risks and benefits.
HENRY KOTULA 