Volume 14
For this newsletter, our final edition of the year, we look at the top 10 healthcare stories of 2022… and one that will frame the healthcare and political landscape for years to come.
We know you’ve got some eggnog and family time waiting for you somewhere, so let’s dig right in.
1. Dueling Public Health Emergencies Add Pressure To Already Stressed System
From COVID19’s Omicron variant (and all the sub-variants that followed) and then Monkeypox (now called MPOX), 2022 was another year where stories about viruses went, well, viral. After a challenging winter with record hospitalizations and deaths from COVID, the late spring and early summer brought another concerning, poorly understood virus: MPOX (formerly known as Monkeypox). Like COVID, misinformation spread, stigma grew, testing and treatment options were few, and issues surrounding vaccine access plagued the first few months of the summer.
By August, the United States had declared MPOX the second virus-related public health emergency (PHE) and named a “tzar” over the response. The executive actions turned the tide on the viral cases. Unlike COVID, the public health response to MPOX turned into a public health success story. With a focused containment approach, including early recognition of symptoms by physicians and the public, vaccinations for communities at highest risk, use of currently available treatments and tests, and tailoring communication to populations at highest risk, MPOX cases declined rapidly.
The Biden administration plans to end the MPOX PHE in early 2023. While COVID19 is very much with us, and a winter wave is pending, we do have a better understanding of viral transmission and ways to protect ourselves with masks, vaccines, and medications.
2. Retail Mergers And Acquisitions
We saw our share of healthcare mergers and acquisitions this year. Amazon and other retails will likely continue down the path of consolidating critical parts of the healthcare ecosystem. Walmart, CVS, Walgreens, and others will continue to control multiple components of healthcare in an effort to reduce costs and increase profits. According to KPMG, industry leaders and PE firms will “keep making hundreds of deals per quarter into 2023, including some large ones,” but “most will tread cautiously” since “the threat of recession, geopolitical turmoil, supply chain challenges, labor shortages, and higher interest rates could affect company operating results and reduce buyers’ leverage.” The question remains: is this better for patients?
3. Hospitals In Trouble
Almost half of Texas hospitals currently have negative fiscal margins and one in 10 are facing closure as a result. Two big culprits are post-pandemic increases in labor costs and in medical supply costs. But Lone Star State hospitals aren’t the only ones in trouble. There were at least 19 hospital closures or bankruptcies in 2022, and a report prepared by Kaufman Hall found more than half of all hospitals in the U.S. could end 2022 with negative margins. Hospitals are a vital piece of healthcare access for patients around the country, but as expenses rise and reimbursements fall, more challenges are on the way. Lawmakers, investors, and health systems executives must find new ways to balance the public need for healthcare services with the financial needs of the healthcare system.
4. What Does The Future Of Telehealth Look Like?
Most patients and clinicians enjoy the benefits and flexibility of telehealth and see value in the technology. According to the story linked to in the headline, telehealth has improved access to care, and it has reduced some measures of racial healthcare disparities. But are investors still excited and will pending regulations change the appetite for continued investment? It depends.
According to a survey of 50 digital health venture capital (VC) investors, VCs plan to make roughly the same number of health tech investments this year as they did last year (but not necessarily in telehealth). They do continue to have strong interest in remote patient monitoring, mental health, AI enabled software, and other digital platforms that can reduce burnout and workload for providers.
As for telehealth, Congress may extend some of the benefits for two more years (far beyond what was initially thought). While the final Omnibus bill has yet to be passed, Congress will need to extend COVID payment policies and flexibilities for telehealth for this fairytale to continue.
5. How Are Our Doctors Doing? (And Our Nurses Too …)
Clinician burnout is real and worsening. The surgeon general has issued warnings, and so has the U.S. Department of Health and Human Services. We’re seeing the repercussions in rising numbers of strikes too. According to a three-year study of more than 20,600 clinicians published in JAMA Health Forum, in 2019, around 45% of clinicians reported feeling burnt out. At the end of 2020, that number was 50% and at the end of 2021 it was roughly 60%. Additionally, a National Academy of Medicine (NAM) found 54% of nurses and clinicians, 60% of medical students and residents, and 61% of pharmacists report burnout. As the article linked to in the headline explains, “If hospitals and health systems want to be successful, they must invest in their clinical workforce” … and that means focusing on their mental health. Now.
6. With Burnout, Comes Labor Shortages
Clinician burnout leads to good people leaving the industry. According to some estimates, 1 million nurses will retire over the next 8 years. As the shortage grows, fewer patients will get the care they need in a timely manner. Costs also will grow. Hospitals spent almost 40% of their total nurse labor costs on travel nurses in January 2022, compared to 5% in 2019. The American Hospital Association expects labor costs to increase by $86 billion this year. The nursing shortage also has led to increased interest by private equity. A new report by the nonprofit Private Equity Shareholder Project revealed a “record-breaking” number of private equity deals involving travel nursing agencies in 2021. Specifically, there were 27 private equity deals in the medical staffing space during 2021, up from 11 in 2020, and higher than in any year during the past decade. Is this good for nurses and patients? Only time will tell.
7. “The House Always Wins”: Insurers Clock Record Profits
As Becker’s reported, “With most healthcare organizations having now released their third quarter earnings, the gap between provider and payer profits continues to widen. The nation's largest insurers, UnitedHealth Group and Elevance Health, reported profits that were 28% and 7% higher than the same period last year, respectively.” UnitedHealth raked in $5.3 billion (that’s billion with a B in one quarter), while Elevance took in $1.6 billion. UnitedHealth’s profits were driven by strong performances from Optum Health and the insurer’s health plans. The provider service portion of the organization saw the biggest gains with a 31% increase in revenues per customer (compared to previous year) mostly with value based care contracting and moves. We can expect more of the same in 2023.
8. Hospital Based Provider Healthcare Service Trends
Since the start of the pandemic, hospitals have faced continued reimbursement declines, supply chain woes, and labor struggles that have resulted in significant financial challenges. But the challenges for hospitals are not isolated to just the hospital itself; they extend to contracted physician services within the hospital, like emergency medicine, hospitalist medicine, anesthesia, and radiology services. Some of the biggest companies – Envision and TeamHealth, for example – are expected to face continued financial burdens well into 2023. The drivers of the revenue impacts are:
AND SOME LATE BREAKING NEWS: Speaking of CMS rate cuts, it appears Congress may step in to reduce the planned cuts to 2% from 4.5%. While not as bad at originally thought, the news is still bad news for physician groups like TeamHealth, Envision and smaller groups.
For Envision, Moody’s believes: “Envision's capital structure is unsustainable … Recovery rates for much of the company's debt will be low” and that restructuring or even bankruptcy is possible in 2023. Could Envision or TeamHealth be the canaries in the coal mine for hospital-based physician services? We will need to see.
9. What’s To Come For Healthcare Policy?
Congress will be divided next year, but that does not mean Washington gridlock. In fact, work certainly will not stop at federal executive branch agencies. Indeed, U.S. Department of Health and Human Services (HSS) Secretary Xavier Beccera said his focus during the 118th Congress will be to fully implement the No Surprises Act and Inflation Reduction Act, which set new mechanisms for drug pricing. In the states, we will continue to see debates about expanding Medicaid, especially since hospitals in more conservative are starting to put pressure on legislatures. According to one law firm, the 118th Congress also could focus on:
Further telehealth regulation and protections especially in mental health
Inflation, healthcare costs, and workforce shortages
Expiring funding or cuts in October 2023 (Medicaid DSH cuts, community health center funding, etc.)
Addressing perennial problems with formula-driven updates and shortcomings in the 2015 Medicare Access and CHIP Reauthorization Act driving physician reimbursement
Policies to rein in Medicare Advantage costs
10. Growth In Medicare Advantage
Speaking of Medicare Advantage, earlier this month, Humana announced it expects higher growth in Medicare Advantage plans next year. MA plans are proving to be an attractive option for patients, private payers, and for Medicare, but we do keep hearing more about overpayments, which have caught the eye of multiple lawmakers. With declining premiums and expanded services, more patients will want to participate in MA plans. These plans will continue to grow in 2023 and beyond as long as Congress does not intervene. Still: as CMS incentivizes participation from both beneficiaries and other private companies, innovators and investors must consider products and services that can reduce the cost of care while maintaining quality. Investors also should consider how their investments (portfolio companies, products) could be a critical component of an MA plan, augmenting their offerings.
AND …
THE CASE HEARD ROUND THE WORLD: Supreme Court Ends Roe v. Wade
In the wake of the Supreme Court’s reversal of Roe v Wade, clinicians have been harassed and threatened. It will only get worse. Dozens of legislatures will start their new terms in early 2023, and abortion restrictions and birth control restrictions will be on the docket in many of them. Earlier this month, a GOP lawmaker proposed a total abortion ban in Virginia, for example. Clinicians’ have warned that these laws could put women’s lives in danger. The political repercussions of the end of Roe v. Wade also will continue for some time. The “red wave” that should have met an unpopular president in his first midterm year did not materialize, and experts think the Supreme Court decision is the reason why. Bolstering that belief: According to NPR, “pro-choice policies, in isolation, did well.” Indeed, 4 statewide ballot measures all came out in favor of abortion rights, even in red states like Kentucky and Montana. And remember: those wins came after an August success for abortion rights supporters on a Kansas ballot measure.
About Our Newsletter: Whether you’re a physician, investor, or healthcare executive, it’s impossible to keep up with the research, policy, information – and misinformation! – that will impact patients and our industry. This newsletter provides actionable intelligence to help leaders solve the big problems in healthcare.
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