Volume 8

Whether you’re an investor, physician, healthcare executive, it’s impossible to keep up with all the research, policy, information – and misinformation! – that will impact patients and our industry. This newsletter provides actionable intelligence to help payers, investors, practitioners, and thought leaders to solve the big problems in healthcare.

This week we cover social media and medical data privacy, hospital debt and what it means for care access, increased regulation of telehealth, nonprofit hospitals and their use of the 340B program, and much more. 

1. Congress Has Its Eye On Hospitals’ Use Of Meta Pixel

Big Synopsis: Members of the U.S. Senate Homeland Security and Government Reform Committee hauled officials from Meta, Facebook’s parent company, in for a hearing on Sept. 14 to ask whether its product, Meta Pixel, is mining and collecting patient health data. More than 33 hospitals use Meta Pixel, which transmits the details of patient appointments to Meta when patients book them on a health system's website.

So what’s the big deal? For one, an individual’s privacy surrounding their healthcare information has been enshrined in law for more than two decades under HIPAA. There could be some financial and legal implications for hospitals if private patient data is being shared without consent of the patient. From a public health perspective, some patients may be reluctant to access healthcare services if there is fear their personal healthcare information could become private. 

So what’s next? Until the Senate conducts a full investigation, it will be difficult to understand the potential ramifications of Meta’s data collection operation. Understanding what Meta is doing with the data and what their plans may be will likely bring about more questions than answers.

2. Half Of Hospitals Will Be In Red For 2022

Big Synopsis: Hospital contract labor costs are up nearly 500 percent from before the pandemic, and hospitals are struggling to stay afloat as a result. A new report prepared by Kaufman Hall for the American Hospital Association found more than half of all hospitals could end 2022 with negative margins. The expected deficits are largely due to a $135 billion increase in expenses, more than half of which ($86 billion) is because of higher labor costs. 

So what’s the big deal? Hospitals are a vital piece of healthcare access for patients around the country. With hospitals continuing to lose money, closures or cuts to vital services are becoming inevitable. As a result, some of our most vulnerable citizens could be left exposed with delays or care or cessation of services. 

So what now? Our lawmakers, investors, and health systems executives must balance the public need for healthcare services with the financial needs of the healthcare system. As expenses rise and reimbursements fall, more challenges are on the way for hospitals (especially those with challenged balance sheets). 

3. Investigator Says CMS Needs To Increase Telehealth Oversight

Big Synopsis: According to a U.S. Department of Health and Human Services Inspector General (IG) report, two in five Medicare Advantage beneficiaries used telehealth services between March 1, 2020 to Feb. 28, 2021. While very little fraud was found, the IG recommended the Centers for Medicare and Medicaid Services: reinforce monitoring and oversight; educate physicians about proper billing; improve transparency; determine the identities of contractors who provide telehealth guidance to doctors’ offices; and contact providers identified as incorrectly billing Medicare.

So what’s the big deal? Despite low incidents of fraud, CMS has been signaling greater regulatory oversight. Telehealth companies should be prepared for greater oversight and return of some restrictions that had been lifted during the public health emergency (PHE). 

So what now? We will need to see what regulatory changes may be implemented or more likely suggested once the public health emergency ends. We will also need to see if Congress and CMS place further guardrails on telehealth companies.

4. Telehealth Giant Acquires A Pharmacy

Big Synopsis: Telehealth powerhouse LetsGetChecked recently bought a Florida-based pharmacy. The acquisition is part of a plan to eventually provide pharmaceutical services to customers nationwide. The news came after LetsGetChecked closed on $150 million in Series D funding and after it launched CarePathways™, which will  provide remote care to patients with ailments and chronic conditions. LetsGetChecked also provides 100 validated at-home tests for various healthcare conditions including COVID-19 and diabetes.

So what’s the big deal? To gain market share and profitability, healthcare companies must reduce costs. LetsGetChecked does this by owning (and controlling) both the detection side of the equation and now the treatment side of the equation. By offering a more comprehensive solution to patients they gain market share and perhaps, reduce their costs. 

So what’s next? For LetsGetChecked specifically, we will need to see how this may change their offerings to patients and their pricing structure. If appealing to patients, other companies may follow. The key question will be whether the company is able to pocket more of their profits. MA plans or other entities may find a similar plan attractive to reduce patient expenses while expanding access to care for patients. 

5. Private Equity Goes After Radiology

Big Synopsis: Private equity funds have raised more than $30 billion over the last several years to target healthcare providers and companies. One area getting a particularly good look is radiology. Why? It is a highly fragmented sub-industry with a strong demand for its product. 

So what’s the big deal? As physicians and providers have a greater dependency on radiological services, the field will continue to expand. More payers (government and otherwise) are financially incentivizing more outpatient procedures and services via reimbursements. Radiology is well positioned for flexible work environments since the majority of reading services can occur irrespective of location.

So what now? Outpatient-focused radiology revenues will continue to rise as more patient volumes are shunted to outpatient facilities if payer reimbursements continue to remain relatively constant. 

6. Are Nurse Staffing Requirements Coming?

Big Synopsis: The Congressional Select Subcommittee on the Coronavirus Crisis has been investigating the impact of nursing ratios in for-profit nursing homes. Their findings have indicated significant staffing concerns with one report demonstrating “one nurse to care for 35 residents per shift in the rehabilitation unit since the COVID-19 pandemic began”. As a result, patients were found to have deficient care. 

So what’s the big deal? If CMS or Congress regulates staffing-to-patient ratio requirements for nursing homes, the implications could be huge both on the quality of care patients and residents receive and the costs for running nursing homes. Some believe that mandating staffing coverage models will cause increased costs with little benefit to patients. While others believe mandates will protect patients by delivering higher quality of care. If CMS and Congress move forward with these plans, hospitals may be next.

So what next? Other states have implemented nursing-to-patient ratios so the idea (and its implementation) is not completely foreign. If Congress makes national standards for nursing ratios for nursing homes, other entities (like hospitals) could be next. 

7. Humana Expanding Number Of Primary Care Clinics

Big Synopsis: Humana will pay up to $550 million to acquire 67 senior-focused primary care centers by early 2023. The insurer already operates more than 200 clinics and previously reported it should have 250 online by the end of this year. The most recent announcement is part of a deal from 2020 with Welsh, Carson, Anderson & Stowe that also included options for Humana to acquire the private equity firm’s interest in the joint venture in stages over the next five to 10 years. 

So what’s the big deal? There are two very important things to know about this story. One, again a large insurance company is purchasing a key building block of an integrated healthcare system – outpatient provider groups. This approach of integrating payers and providers is a way to control revenues and, more importantly, payer costs. Second, we see a clear trend line develop with private equity firms investing more on an outpatient strategy. The question remains what Humana will do once acquiring these practices. Is this play simply a cost cutting strategy or is Humana hoping to expand their footprint into Medicare Advantage plans or is there something else?

So what’s next? We will continue to see continued investment in outpatient practices and integration between payers and provider groups.

8. America About To Fall Off Health Insurance Cliff

Big Synopsis: To ensure more Americans were insured during the public health crisis, federal lawmakers the Affordable Care Act’s insurance marketplace by enhancing tax credits and by guaranteeing continuous enrollment benefits. The change led to 14.5 million Americans signing up for health insurance during open enrollment in 2022, a 21% increase from last year. While Congress averted one health insurance cliff associated with the passage of the Inflation Reduction Act, there still remains another cliff that’s tied to the Public Health Emergency and continuous Medicaid enrollment. Without continuous enrollment protections 5-14 million beneficiaries could lose coverage.

So what’s the big deal? Analysts believe that without action from Congress, millions could lose insurance since states (not the federal government) can determine if Medicaid beneficiaries qualify for continuous enrollment. The loss of insurance has not only direct health implications for patients, but greater pressures on providers (hospitals, physicians) to provide unreimbursed care. 

So what’s next? States will need to decide if beneficiaries who had coverage expansion under the PHE will remain – it’s unlikely. Congress will need to step in on this matter, otherwise, a large section of the population (and often the most vulnerable) will be without insurance coverage.

9. Health Care Inflation Is Coming

Big Synopsis: U.S. consumer prices were up 8.5% from July 2021 to July 2022, but medical care expenses rose just 4.8% during the same period. That lighter inflation rate could soon end, however, as payers and providers renegotiate contracts that were hammered out well before rising prices became a national concern. 

So what’s the big deal? Patients and providers (hospitals and physicians) will likely face the biggest impact of healthcare inflation. For patients, the impact could be further economic pain and delays in care due to costs. For hospitals and physicians, expenses have been pushing both groups to greater economic strain. 

So what’s next? As a result of inflation, we will likely see more hospitals pushed into the red and more provider groups looking for help from outside investors.

10. Shunting Resources Away from the Most Vulnerable

Big Synopsis: One of the nation’s largest nonprofit hospital systems, Bon Secours, is under intense scrutiny after this New York Times investigative report detailed how the organization took millions of dollars from the federal government’s 340B drug program, but failed to reinvest it in Richmond Community, a Black physician-founded hospital that serves a predominantly minority neighborhood. Instead, Bon Secours used the money to improve clinics in wealthier neighborhoods. 

So what’s the big deal? While this story focuses on one hospital system, this practice of hospitals shunting resources away from low-income communities into more wealthy ones for higher reimbursements is a growing trend (despite the mission and  “non-profit” status). Another recent example is the pending closure of Atlanta’s Wellstar Medical Center.  As non-profit hospitals discontinue services and even close doors in vulnerable communities, disparities widen.  

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-Dr. N. Adam Brown

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