An article published this week in Stat documents private equity’s move into the cardiovascular space. There’s reason to suspect private equity ownership could exacerbate cardiology’s overuse problem, according to several cardiologists and researchers. Studies has found private equity acquisition results in more patients, more visits per patient, and higher charges.
Outpatient atherectomies have become a poster child for overutilization, with the volume billed to Medicare more than doubling from 2011-2021.
The Gist: Fueled by the growing number of states allowing outpatient cardiac catheterization, all signs point to cardiovascular practices being the next specialty courted for PE rollups.
However, the service line brings more complexities to deal structure and future returns than recent targets like dermatology and orthopedics. Heart and vascular groups are more heterogeneous, and less profitable medical management of conditions like congestive heart failure accounts for a greater portion of patient volume. Much more of the medical group business is intertwined with inpatient care, and, unlike other proceduralists, around 80 percent of cardiologists are already employed by health systems. While that doesn’t mean health systems are safe from cardiologists seceding for the promise of PE windfalls,
the closer PE firms get to the “heart” of medicine, the more they’ll find their standard playbook at odds with the broad spectrum of care that cardiovascular specialists provide—and the more they’ll find that partnering with local hospitals will be non-negotiable to maintain the book of business.
Politicians, economists, auto industry analysts and main street business owners are closely watching the UAW strike that began at midnight last Thursday. Healthcare should also pay attention, especially hospitals. medical groups and facility operators where workforce issues are mounting.
Auto manufacturing accounts for 3% of America’s GDP and employs 2.2 million including 923,000 in frontline production. It’s high-profile sector industry in the U.S. with its most prominent operators aka “the Big Three” operating globally. Some stats:
The US automakers sold an estimated 13.75 million new and 36.2 million used vehicles in 2022.
The total value of the US car and automobile manufacturing market is $104.1 billion in 2023:
9.2 million US vehicles were produced in 2021–a 4.5% increase from 2020 and 11.8% of the global total ranking only behind China in total vehicle production.
As of 2020, 91.5% of households report having access to at least one vehicle.
There were 290.8 million registered vehicles in the United States in 2022—21% of the global market.
Americans spend $698 billion annually on the combination of automobile loans and insurance.
By comparison, the healthcare services industry in the U.S.—those that operate facilities and services serving patients—employs 9 times more workers, is 29 times bigger ($104 Billion vs. $2.99 trillion/65% of total spend) and 6 times more integral in the overall economy (3% vs. 18.3% of GDP).
Surprisingly, average hourly wages are similar ($31.07 in auto manufacturing vs. $33.12 in healthcare per BLS) though the range is wider in healthcare since it encompasses licensed professionals to unskilled support roles. There are other similarities:
Each industry enjoys ubiquitous presence in American household’ discretionary. spending.
Each faces workforce issues focused on pay parity and job security.
Each is threatened by unwelcome competitors, disruptive technologies and shifting demand complicating growth strategies.
Each is dependent on capital to remain competitive.
And each faces heightened media scrutiny and vulnerability to misinformation/disinformation as special interests seek redress or non-traditional competitors seek advantage.
Ironically, the genesis of the UAW dispute is not about wages; it is about job security as electric-powered vehicles that require fewer parts and fewer laborers become the mainstay of the sector. CEO compensation and the corporate profits of the Big Three are talking points used by union leaders to galvanize sympathizer antipathy of “corporate greed” and unfair treatment of frontline workers.
But the real issue is uncertainty about the future: will auto workers have jobs and health benefits in their new normal?
In healthcare services sectors—hospitals, medical groups, post-acute care facilities, home-care et al—the scenario is similar: workers face an uncertain future but significantly more complicated. Corporate greed, CEO compensation and workforce discontent are popular targets in healthcare services media coverage but the prominence of not-for-profit organizations in healthcare services obfuscates direct comparisons to for-profit organizations which represents less than a third of the services economy. For example, CEO compensation in NFPs—a prominent target of worker attention—is accounted differently for CEOs in investor-owned operations in which stock ownership is not treated as income until in options are exercised or shares sold. Annual 990 filings by NFPs tell an incomplete story nonetheless fodder for misinformation.
The competitive landscape and regulatory scrutiny for healthcare services are also more complicated for healthcare services. Unlike auto manufacturing where electric vehicles are forcing incumbents to change, there’s no consensus about what the new normal in U.S. healthcare services will be nor a meaningful industry-wide effort to define it. Each sector is defining its own “future state” based on questionable assumptions about competitors, demand, affordability, workforce requirements and more. Imagine an environmental scan in automakers strategy that’s mute on Tesla, or mass transit, Zoom, pandemic lock-downs or energy costs?
While the outlook for U.S. automakers is guardedly favorable, per Moody’s and Fitch, for not-for-profit health services operators it’s “unsustainable” and “deteriorating.”
Nonetheless, the parallels between the current state of worker sentiment in the U.S. auto manufacturing and healthcare services sectors are instructive. Auto and healthcare workers want job security and higher pay, believing their company executives and boards but corporate profit above their interests and all else. And polls suggest the public’s increasingly sympathetic to worker issues and strikes like the UAW more frequent.
Ultimately, the UAW dispute with the Big Three will be settled. Ultimately, both sides will make concessions. Ultimately, the automakers will pass on their concession costs to their customers while continuing their transitions to electric vehicles.
In health services, operators are unable to pass thru concession costs due to reimbursement constraints that, along with supply chain cost inflation, wipe out earnings and heighten labor tension.
So, the immediate imperatives for healthcare services organizations seem clear as labor issues mount and economics erode:
Educate workers—all workers—is a priority. That includes industry trends and issues in sectors outside the organization’s current focus.
Define the future. In healthcare services, innovators will leverage technology and data to re-define including how health is defined, where it’s delivered and by whom. Investments in future-state scenario planning is urgently needed.
Address issues head-on: Forthrightness about issues like access, prices, executive compensation, affordability and more is essential to trustworthiness.
Stay tuned to the UAW strike and consider fresh approaches to labor issues. It’s not a matter of if, but when.
PS: I drive an electric car—my step into the auto industry future state. It took me 9 hours last Thursday to drive 275 miles to my son’s wedding because the infrastructure to support timely battery charges in route was non-existent. Ironically, after one of three self-charges for which I paid more than equivalent gas, I was prompted to “add a tip”. So, the transition to electric vehicles seems certain, but it will be bumpy and workers will be impacted.
The future state for healthcare is equally frought with inadequate charging stations aka “systemness” but it’s inevitable those issues will be settled. And worker job security and labor costs will be significantly impacted in the process.
Hospitals in California are being warned not to violate state law on staffing levels or face fines. New state policy narrows the circumstances under which hospitals can claim “unpredictable circumstances” for violating the mandate.
The California Department of Public Health this week, in a notice to hospitals, warned that noncompliance can result in a $15,000 fine for a first violation and $30,000 for a second.
The state conducts periodic, unannounced inspections to enforce compliance.
New policy by Governor Newsom narrows the circumstances under which hospitals will not be penalized for violations due to “unpredictable circumstances,” requiring them to document efforts to maintain safe staffing and that such instances be truly unforeseen.
In an advisory letter to hospitals, the public health department said, “Situations that are not considered unpredictable, unknown or uncontrollable include consistent, ongoing patterns of understaffing. Facilities are expected to maintain required nurse-to-patient ratios at all times, including but not limited to, weekends, holidays, leaves of absences, among others.”
WHY THIS MATTERS
Minimum staffing ratios have been law in California since nurses and healthcare workers fought to pass AB 394, the nation’s first nurse-patient staffing ratio law in 1999.
In addition, SB 227, which passed in 2019, requires the state to assess administrative fines on hospitals that violate the safe staffing law. Law AB 1422 requires public comment before the public health department grants waivers to the critical care program flexibility requests.
THE LARGER TREND
Nurse staffing ratios are controversial and California remains the only state to have enacted them.
A study reportedly commissioned by the Centers for Medicare and Medicaid Services said there was “no single staffing level that would guarantee quality care.”
The NIH looked at survey data from 22,336 hospital staff nurses in California, Pennsylvania and New Jersey in 2006 and state hospital discharge databases. California hospital nurses cared for one less patient on average than nurses in the other states and two fewer patients in medical and surgical units, the NIH research said.
The study found that lower ratios were associated with significantly lower mortality. When nurses’ workloads were in line with California-mandated ratios in all three states, nurses’ burnout and job dissatisfaction were lower, and nurses reported consistently better quality of care, the NIH said.
Also, the hospital nurse staffing ratios in California were associated with better nurse retention than in the other states.
ON THE RECORD
“Patients in California are safer today because nurses and healthcare workers demanded that hospitals be held accountable for violating safe-staffing laws,” said Leo Pérez, RN and president of SEIU 121RN. “The COVID-19 pandemic taught us that our state’s health depends on supporting and listening to those who are on the front lines of patient care – a lesson we should never forget. Today’s action is the result of SEIU’s relentless vigilance. We applaud the step CDPH has taken to enforce laws that keep patients safe.”
Learn about the 10 major trends impacting health systems this year — from financial pressures to workforce stability to generative AI. Download these ready-to-use slides to get up to speed on what health system leaders should be watching this year.
OVERVIEW
We’ve updated our ready-to-use slides depicting the most important market forces affecting health systems in 2023. Whether you’re speaking to your board, C-suite, or community, you’ll have access to the latest data and insights, pre-formatted and ready to present for your next presentation.
The 10 major trends:
Health systems bend but do not break in the wake of the worst financial year in recent memory.
Stakeholders align on urgency to rationalize services for long-term sustainability.
Quality suffers as organizations look for workforce stability.
Virtual hospitals rise in popularity to accelerate care model transformation.
Beware vaporware! The hype and reality of generative AI comes into focus.
Mega-corporations make further inroads into care delivery.
Health systems lose the narrative in the public’s eye.
Value-based care hype is tempered by market realities.
Health systems look for new growth pastures to compensate for tepid inpatient surgery growth.
Unlikely alliances take form to counteract common pressures across the health system community.
Health plan and health system CFOs point to the current economic situation when asked to identify their top concern, according to a Sept. 14 survey from Deloitte.
The consulting firm surveyed 60 finance chiefs at American health plans and health systems about their priorities and paths forward and shared their findings with Becker’s.
Inflationary pressures have created a cost-heavy operating model for many organizations, CFOs told Deloitte. Coupled with higher care delivery, labor and supply costs — and slowed revenue growth
— financial viability weighs heavily on leaders.
More than 40 percent of health system CFOs believe their health systems may need more than two years to reach the profit levels they generated before the COVID-19 pandemic.
Seventy percent of CFOs identified the current economic situation as a greater concern than it was last year. Meanwhile, 57 percent pointed to new regulatory requirements as a growing concern, and 51 percent said the same of the current operating model and structure.
HENRY KOTULA 