Volume 35

#1 HLTH Takeaways

HLTH 2023 attracted approximately 10,000 attendees from health systems, digital health startups, and beyond. Talk of artificial intelligence (AI) dominated the event, from exhibit booths to main stage presentations and networking gossip, underscoring AI’s increasingly pivotal role in health care. Indeed, tech giants like Google, Microsoft, and Amazon had significant footprints at the show.

Virtual care was also a hot topic. In a post-pandemic era, where virtual care has become seamlessly interwoven into the fabric of health care delivery and where stark fissures in mental health care infrastructure have been laid bare, it is clear health insurers are strategically aligning with digital startups to amplify access to behavioral health care in a landscape punctuated by soaring consumer demand and a dearth of providers.

So What’s The Big Deal? Two things: First, HLTH is THE conference for healthcare, providing value, setting industry trends, and connecting leaders and thinkers in healthcare. (Other conference organizers in health care need to pay close attention.) Second, despite industry challenges and reimbursement instability, healthcare startups and established entities are optimistic about the market, especially Medicare Advantage, signaling a resilience and innovative spirit prevailing amidst the complexity of the sector.

Your BIG Thoughts: Were you at HLTH? What were your big takeaways?

#2 FTC Is Full Steam Ahead

Lina Khan, the chair of the Federal Trade Commission (FTC), recently spoke at the American College of Emergency Physicians annual meeting, highlighting a myriad of recently proposed regulations and enforcement actions that, together, reveal a comprehensive update to the FTC’s health care policy. Khan's virtual keynote touched on the proposed ban on non-compete agreements and a recalibration of antitrust enforcement, both of which illustrate a resolve against the specter of noncompetitive health system conglomeration. Her discussion is timely considering the recent FTC action against US Anesthesia partners and Welsh-Carson within the Texas anesthesia market.

So What’s the Big Deal? With the proposed amendments to the Hart-Scott-Rodino Form simmering, the FTC has strategically positioned itself to better scrutinize — and, if necessary, stymie — possible anticompetitive consolidations by private equity and vertically integrated behemoths. These moves signal the dawn of an era where precision and mitigating risk through compliance will be paramount for healthcare executives.

Your BIG Thoughts: Republicans and certain business groups are no fans of Khan and have made it clear they will challenge her in court. Will these rules pass legal muster?

#3 UnitedHealth Posts Record Profits... Again

Once again, UnitedHealth Group (UHG) announced BIG earnings, revealing $5.8 billion in profits for the third quarter. Profits were up from $5.3 billion during the same period last year. Despite middling results from other healthcare service providers and hospitals, UHG has reaped an impressive $16.9 billion in profits through its first nine months of 2023, up from $15.4 billion during that same period in 2022. Revenues were $92.4 billion last quarter, a 14% improvement from 2022's Q3 revenue of $80.9 billion.

So What’s The Big Deal? UHG’s performance illustrates the power of vertical integration, opportunistic growth, and value-chain monopolization. Two revenue streams greatly impacted UHG’s earnings: their provider group, Optum, had a revenue growth of 22% to $56 billion, and their total membership climbed to 52.8 million beneficiaries. Without regulatory or legislative changes, this trend will continue.

Your BIG Thoughts: UHG soars while others stagnate. Is it time for legislative or regulatory changes?

#4 Envision Bankruptcy Done As Company Announces CEO Transition

Envision Healthcare navigated COVID, dwindling patient volumes, clinician shortages, debt, and decreased reimbursements, but finally received some good news last week. U.S. Bankruptcy Court has set its reorganization plans into motion, a salient step toward erasing a formidable $5.6 billion debt. The court-approved plan, which eradicates 70% of its financial pre-petition obligations, symbolizes a pivotal lifeline for the beleaguered group. Concurrently, in a dramatic pivot, Envision’s CEO Jim Rechtin announced his departure (he will head up Humana), adding an executive transition into the mix as the company emerges from bankruptcy.

So What’s the Big Deal? Envision, like many of the other private-equity backed healthcare services firms, continues to face headwinds. Declining reimbursements and rising wage pressures will continue. So, while the court’s ruling may be a temporary lifeline, the fundamentals of the physician healthcare services market remain unchanged.

Your BIG Thoughts: Can Envision emerge from bankruptcy stronger? How?

#5 Nonprofit Hospitals Face Scrutiny

U.S. Sen. Bernie Sanders (I-Vt.) is ready to crack down on nonprofit hospitals that impose substantial fees on patients. Why? These institutions are expected to provide care at minimal or no cost, but do not always do so. Indeed, variations in financial assistance eligibility have come under scrutiny, especially given the $28 billion in charity care costs reported by hospitals in 2019, according to a KFF report. In 2020, charity care costs accounted for just 2.6% of average operating expenses, with some institutions allocating as little as 0.1% or even less toward charity care despite their legal obligations to offer such care as a condition for tax-exempt status.

So What’s The Big Deal? Nonprofit health systems must consider the balance between fiscal sustainability and societal obligation, particularly in navigating the intricacies of charity care amidst financial and regulatory pressures. Congress is watching.

Your BIG Thoughts: Sen. Sanders has cited very real, and very heart-wrenching examples of patients who have been let down for nonprofit hospitals. What do you think Congress will do to ease the pain?

#6 Surprise, The No Surprises Act Arbitration Process Still Sucks

Two years after the enactment of a ban on surprise medical bills, the resolution process for billing disputes among insurers and providers is still the subject of intense litigation, a problem that leaves numerous cases in limbo. The ambiguity surrounding payment mechanisms for contested out-of-network services is poised to persist amidst ongoing legal challenges to the Biden administration's arbitration rules. Recently, the Centers for Medicare and Medicaid Services (CMS) reinitiated its portal for claim submission pertaining to unpaid out-of-network services, marking its first utilization since early August. Despite a federal district court dismissing sections of the regulations related to payment benchmark calculations in August, and with no imminent plans to unveil new guidance, federal officials have intimated a six-month enforcement discretion period and signaled an intention to appeal.

So What’s The Big Deal? The No Surprises Act (NSA) will continue to be a significant financial and administrative drag on provider groups. While the law appropriately banned out-of-network billing (and has succeeded at that objective), it is unquestionable that insurers have been handed a gift. Congress continues to look at this law, while judges continue to strike down portions of the law. Despite the increased scrutiny of the botched roll-out, little will likely be done with a divided, dysfunctional Congress.

Your BIG Thoughts: How much longer can providers hold out against the NSA pressures that keep them from being paid?

#7 Walgreens Adds Telehealth

Later this month, Walgreens will unveil a new suite of virtual healthcare services meant to address prevalent healthcare demands, including urgent care and seasonal allergies. The forthcoming virtual healthcare endeavor is set to proffer an assortment of services to patients, which include immediate virtual consultations with healthcare providers for ubiquitous health requirements, coupled with streamlined prescription services.

So What’s The Big Deal? Like CostCo and other retailers, Walgreens wants to leverage its retail footprint to enhance accessibility and convenience in healthcare delivery, intertwining digital and physical realms to serve diverse patient needs.

Your BIG Thoughts: How will Walgreen’s entrance into this market affect demand for virtual services from more traditional providers?

#8 Digital Health Investment Continues to Fall

While we are talking about Walgreen’s effect on the virtual health market, it is worth noting that U.S. digital health startups encountered more turbulence in the third quarter, securing just $2.5 billion over 119 deals. While the number sounds high, this figure is the second-lowest quarterly funding since the fourth quarter of 2019.

So What’s The Big Deal? This financial deceleration in digital health investments requires a recalibration of funding strategies that will not only harness innovation but also be able to navigate potential investment and collaboration opportunities in a constricting fiscal environment. Digital health market saturation may also be a factor affecting funding. Many investors are interested in seeing how existing digital health companies succeed (or fail).

Your BIG Thoughts: Can digital health startups compete against the Costcos and Walgreens of the world?

#9 Kaiser Reaches Tentative Labor Deal

Kaiser Permanente and its frontline healthcare workers’ union have reached a potential resolution to a payment and staffing dispute that caused a walkout earlier this month. The deal improves staffing ratios and increases salaries by 21% over four years. The labor strike by a staggering 75,000 workers not only spotlights troubles within Kaiser, but also underscores the dissatisfaction permeating the healthcare industry.

So What’s The Big Deal? This deal serves as a critical reminder to healthcare executives nationwide: they must address worker remuneration and staffing inadequacies while honoring the intrinsic value of the healthcare workforce. These moves are necessary to ensure the organizational stability that is needed to deliver care in U.S. communities. A second issue, though, is how the rate increase and strike may shift the broader market. Other hospitals in proximity to Kaiser facilities will likely need to make adjustments as they compete for clinical staffing. Watch this space.

Your BIG Thoughts: Will other hospitals and systems follow suit and raise pay before their personnel walk out?

#10 Critical Access Hospitals Band Together

Nearly two dozen critical access hospitals in North Dakota have woven a network of clinical integration. The strategic alliance between 23 institutions aims to reduce costs by leveraging group purchasing and service aggregation. Moreover, the hospitals hope to bolster their bargaining muscle with commercial insurers and leverage their size for better reimbursement rates.

So What’s The Big Deal? This collaboration provides an alternative to the traditional health system that sees larger hospitals gobbling up smaller ones. This strategic collaboration and resource pooling may mitigate the challenges besieging rural health care.

Your BIG Thoughts: How innovative and enticing is this model? Will is be picked up in other parts of the country?

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Adam Brown