Volume 27

#1 Healthcare Spending Projected to Rise

According to the latest report from the Centers for Medicare and Medicaid Services' (CMS) Office of the Actuary, healthcare expenditures in the United States are anticipated to soar beyond inflation, exceeding $7.2 trillion by 2031. This surge will be primarily driven by increased Medicare spending on hospitals and other services in the coming years. As the effects of the pandemic wane, medical spending across all categories is projected to rebound. Specifically, this year we can expect a substantial increase in spending, especially in the private sector, with medical inflation estimated to reach 7.7 percent this year, up from 3 percent in 2022.

So What’s The Big Deal? The CMS report contains a lot of information and will have widespread implications, so let’s unpack a few things:

Patients delayed care during the pandemic. As patients come back, hospitals could see a steady increase in services. For hospitals, which may be an important stabilizing effect on their bottom lines.
Physician/clinical services also will grow, but at a slower rate of growth than hospitals. Rate pressures from insurers, consumerization, and a shift to AI delivered services may decrease utilization of physician services when compared with hospitalization needs.
The Inflation Reduction Act will cause a decrease in spending for pharmaceuticals, which will push off Medicare insolvency.

Take Home Point: While this report may be good news for hospitals financially, insurers will likely respond with cost mitigation and higher premiums to maintain profitability.

#2 Health Insurers Predict Rising Costs

Like CMS, insurers have cautioned about a coming rise in medical costs. They say the trend will be particularly notable among older individuals, who are increasingly opting for procedures such as hip and knee surgeries. One of the largest health insurers in the United States, UnitedHealth Group, anticipates increased spending on medical care in the second quarter, primarily driven by the surge in outpatient services for Americans aged 65 and older enrolled in Medicare plans. As a result, UnitedHealth’s stocks have slumped.

So What’s the Big Deal? This trend could present investment opportunities related to outpatient services, orthopedics, device manufacturers, and Medicare-focused healthcare providers since they may experience increased demand and revenue growth in the coming quarters. That said, because they are predicting costs will go up, health insurers will likely identify ways to decrease costs. Investors may consider evaluating the potential impact of this trend on specific healthcare companies and sectors to make informed investment decisions.

#3 PBMs in the Crosshairs of Congress

Federal lawmakers have once again turned their attention toward pharmacy benefit managers (PBMs), offering legislation they say will improve patient outcomes within Medicare Part D. The Patients Before Middlemen Act, introduced by a bipartisan group of six senators on June 14, seeks to disconnect PBM compensation from both drug prices and utilization within the Medicare Part D program. The lawmakers’ objective is to prioritize patients’ health by addressing the role and influence of PBMs in prescription drug access and affordability.

So What’s the Big Deal? This bill has bipartisan support, but many other bills are in the works;, too, so right now it is unclear which course Congress actually will take. What we are more certain of is that, after significant public campaigns by others in the industry to paint PBMs as the cause of high drug prices, there is an appetite among both parties to do something. With proposals ranging from “transparency” requirements to “breaking up PBMs” to preventing PBM ownership by pharmacies and insurers, the implications could be significant.

#4 MEDPAC Recommends Lower Telehealth Reimbursements

On Thursday, MedPac, the entity responsible for advising Congress on Medicare policy, published a report with suggestions regarding telehealth, overpayments to Medicare Advantage plans, and site-neutral payments for certain outpatient care settings. MedPAC included telehealth in the report due to the significant rise in its use during the COVID-19 pandemic. (Before the pandemic, Medicare's coverage of telehealth was restricted. Congress lifted rules in order to ensure continued access to healthcare.) MedPac now proposes a return to pre-pandemic reimbursement rates.

So What’s The Big Deal? While MedPac’s suggestion is unsurprising, this recommendation could have significant implications for patients, providers, hospitals, telehealth companies, and, of course, investors. While certain details were not addressed (what constitutes a telehealth visit, for example), if Congress adopts this recommendation, revenues would decline significantly for telehealth companies and provider groups. Some components of telehealth are here to stay, but if revenues fall sharply it will shift the incentives significantly, making adoption, access to patients, and telehealth utilization by healthcare delivery companies less palatable.

#5 Is Another Possible Bankruptcy Looming in Physician Services?

According to The Wall Street Journal, TeamHealth, a physician-staffing company owned by Blackstone, faces serious choices about how to repay more than $1 billion in debt that is due over the next year. Two major creditors have presented competing offers, highlighting distinct options for the struggling company. In one instance, Pacific Investment Management Co., or Pimco, the largest holder of TeamHealth's loans maturing in February, has suggested a debt swap arrangement, replacing the existing loans with new debt supported by specific company assets. Sound familiar? Envision followed a similar path, which ultimately led to bankruptcy.

So What’s the Big Deal? Highly debt leveraged private equity-backed physician services companies are “going through something,” as Gen Zers would say. As I mentioned in my article in MedPage Today, “if the growth and power of private payers like UnitedHealthcare, Cigna, and Aetna is unchecked by new government regulations, we could see a slew of care providers go bankrupt in the coming months.” Some industry analysts are quite certain TeamHealth will declare bankruptcy. If it does so, the blame should not be placed completely on insurers. The whole healthcare ecosystem will need to look at how these deals are structured and how other laws, like the No Surprises Act, have factored into the financial chaos. Until then, physician services firms will struggle and hospitals and physicians must watch this space closely not only to mitigate fallout from some of these collapsing deals, but to identify opportunities to rebuild.

#6 Google's AI for Healthcare

The utilization of generative artificial intelligence (AI) in the healthcare industry is expanding rapidly. The introduction of Google Cloud's Enterprise Search on Generative AI App Builder, which Mayo Clinic has adopted, is one notable advancement. This innovative service enables users to leverage Google's technology to develop chatbots that efficiently analyze vast quantities of internal data, facilitating expedited and effective information review processes.

So What’s The Big Deal? The utilization of generative AI through cloud-based technology offers significant benefits for physicians and patients alike. By enabling rapid interpretation of diverse data sources, such as health histories, imaging records, genomics, and lab results, physicians can access comprehensive insights in a timely manner. This enhanced efficiency translates into improved clinical decision-making, more accurate diagnoses, personalized treatment plans, and, ultimately, better patient outcomes. Additionally, the seamless integration of various data formats and storage locations eliminates barriers that often hinder information access, enabling physicians to deliver comprehensive and holistic care to their patients. Overall, generative AI using cloud-based technology could revolutionize healthcare delivery by empowering physicians with advanced data analytics capabilities and optimizing patient care.

BONUS: For a great video summary of the top trends in healthcare AI in 2023, check out this YouTube video by The Medical Futurist.

#7 Moral Injury Takes Its Toll on Doctors

According to a recent New York Times Magazine article, physicians are increasingly dissatisfied and blame the commercialization of medicine for their poor feelings. While this finding is no surprise, the article provides much needed insight into how the involvement of private equity firms, hospital corporations, and private health insurers contributes to a deteriorating environment for healthcare professionals and patients.

So What’s the Big Deal? The article sheds light on the complex dynamics that impact physicians and the healthcare industry as a whole. The infiltration of commercial interests, including private equity, hospital corporations, and private health insurers, has introduced a corporate-driven approach that can exacerbate moral injury and burnout among physicians. The prioritization of financial considerations over patient care and the erosion of autonomy and professional fulfillment are among the challenges faced by healthcare workers.

#8 Health Insurers Billing Practices

According to a March 2022 Kaiser Family Foundation analysis, approximately 23 million individuals in the United States grapple with medical debt. Despite efforts to address the issue, including legislation targeting surprise billing and increased transparency in hospital billing, medical debt remains a persistent problem. SCAN Group and CareOregon have recently collaborated to alleviate medical debt in their respective regions, yet both organizations recognize more needs to be done to alleviate the burden healthcare costs place on the American population.

So What’s the Big Deal? The magnitude of medical debt in the United States demonstrates the need for comprehensive solutions. We have tried the patchwork approach with measures like the No Surprises Act. Federal lawmakers must now admit that addressing medical debt will require a collaborative, multifaceted approach involving themselves, regulators, healthcare organizations, and a host of stakeholders. This coalition will need to tackle root causes, ensure equitable access to quality care, and explore healthcare reform, insurance improvements, financial assistance programs, and pricing transparency.

#9 EHR Orientation May Decrease Burnout

According to a white paper from the Klas Arch Collaborative, a consortium of healthcare organizations focused on improving electronic health records (EHR) workflows, 67 percent of physicians who left their jobs expressed a desire for additional training in EHRs. The survey also found that 56 percent of physicians who departed their organizations had previously indicated a high likelihood of leaving. This finding emphasizes the importance of using physician-reported intentions to guide organizational changes and assess the effectiveness of interventions.

So What’s the Big Deal? The survey findings shed light on the significance of EHR training in physician job satisfaction and retention. The majority of physicians who left their positions expressed a need for more training in EHRs, indicating that this factor played a role in their decision to leave. This finding also underscores the importance of providing comprehensive and ongoing EHR training programs to support physicians in utilizing these systems effectively. Hospitals and physician staffing firms take note: shortchanging orientation and EHR comfort may save a few bucks on the front end, but may cost you dearly over the long term.

#10 Staffing Ratios Go Into Effect in NY

The Public Health and Health Planning Council of New York is expected to approve a portion of the Safe Staffing Act, which mandates a nurse-to-patient staffing ratio of 1:2 for critical care patients in hospital units. Enacted in 2021 during the COVID-19 pandemic, the law addresses long-standing concerns regarding nurses' workloads. While practitioners appreciate this move, many hope the state will extend staffing regulations to encompass nurses working outside of critical care units.

So What’s the Big Deal? Healthcare executives should proactively assess their organization's staffing practices to ensure compliance with existing and potential future regulations. By prioritizing adequate nurse staffing, healthcare facilities can better support their nursing staff, enhance patient care delivery, and foster a positive work environment. Ultimately, maintaining a balance between patient needs and nurses’ well-being is crucial to achieving high-quality care outcomes. Adequate staffing regulations, coupled with ongoing evaluation and adaptation, can contribute to a healthier and more sustainable healthcare system, but this financial shift will come at a cost. Some hospitals’ balance sheets may be challenged.

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Adam Brown