Congress.
Nominations. Robert Califf appears to have enough support for confirmation to run the Food and Drug Administration. For innovators, it could be welcome news, Califf, is a proponent of digital health technologies in support of clinical trials, for example. He also pledged to continue the risk stratified approach that excluded health and fitness apps from being considered as devices.
Unfortunately, the agency has bigger problems right now as demonstrated by its COVID-19 response and the Aduhelm debacle. On that latter point, Califf has suggested improvement to the Accelerated Approval pathway to speed up post-market approval submission of clinical data. It will take Congress to act.
Otherwise, Congress spent part of the week co-starring in its own drama until both Senators Joe Manchin and Krysten Sinema put down any notion of amending the filibuster. Perhaps they will get more done next week.
Hearings Next Week.
Using Budget Principles to Prepare for Future Pandemics and Other Disasters
The White House.
Vaccine Mandates. The Supreme Court handed the White House a political defeat by reversing the OSHA-sponsored mandate for large employers. The court also upheld the mandates for health care workers, citing the government’s role in paying for health care.
This bifurcation of the mandate means more trouble for the health care work force. Low skill, low wage workers have many options now and if, for any reason they do not wish to be vaccinated, well they can exploit them. ((-) DVA)
Testing. As labor woes have piled up due to COVID sickness and mandated isolation/quarantine, the White House has scrambled to make up for putting too many eggs in the PCR testing basket. In the last week it has promised to send at home tests directly to Americans, mandate insurance coverage of up to eight at-home tests per month and promised to deliver test kits to schools.
Aside from the insane amount of money being spent a little too late, the efforts do serve two important purposes. First, at-home testing is invisible to the public health reporting system. The positives that occur and followed only by bed rest and fluids, will disappear from the epi charts we have been looking at for 2 years. That makes the situation look better than it might otherwise when relying almost solely on PCR tests.
The second important effect is that it forces a giant step back to using COVID-19 tests to diagnoses and treat disease, specifically cases that require the attention of a physician. You can expect that where it matters – and your ski trip next month is not that – COVID tests will be used aggressively. It is critically important that providers and congregate living sites like homeless shelters and nursing home test symptomatic and asymptomatic, depending on the situation.
The shift probably won’t begin until February and thus will probably be imperceptible as the Omicron variant infections abate. However, a summer southern wave, if it were to occur should look a lot less bad than 2021. DGX,LH
Aduhelm Coverage. The Centers for Medicare and Medicaid released their preliminary National Coverage Determination on Aduhelm. The proposed National Coverage Determination would cover Aduhelm through “coverage with evidence development” (CED) – which means that FDA-approved drugs in this class would be covered for people with Medicare only if they are enrolled in qualifying clinical trials.
The decision will limit the number of eligible patients. The silver lining is that the taxpayers are picking up the tab for BIIB’s clinical trials. Nice work if you can get it. ((-) BIIB)
Direct Contracting Under Pressure. Rep. Pramilla Jayapal released a letter cosigned by 50 other members – most of them part of the Progressive Caucus - asking CMS to terminate the program. Her position is not likely to be adopted but real concerns are being raised about ownership structure.
In September, former CMS direct published a Health Affairs article criticizing the Direct Contracting Program as a vehicle for Medicare Advantage Plans to attract covered lives not subject to MA rules like Medical Loss Ratios. Plans like CLOV are acting merely as services organization.
The National Association of Accountable Care Organizations has expressed support for the program but only for DCEs that are provider led. We also know, based on comments from CMMI leadership, that private equity and venture backed interests are raising concern.
If you are going to be concerned, be wary of DC as a growth driver for plan sponsors and DCEs that seem to be expanding outside the geographical limits originally identified. CANO, AGL
Pending Rules
Other Stuff
PPI. Hospital PPI was near normal levels after a wild ride through 2020-21, but has shown some uptick in the last several months. PPI for physicians’ offices is off the hook, however, at 4.4% YoY. Since most insurance contracts limit price increase (PPI in health care measures reimbursement) the delta is attributable to higher acuity and, if anecdotes are accurate, more intense procedures.
Our PPI conclusion is supported by increases in Ambulatory Care Employment, which now exceeds pre-pandemic levels.
Policy Notes from J.P. Morgan’s Health Care Conference. I took a macro approach to company presentations this week. In other words, I listened to presentations that would best describe the current macro-operating environment like payers, payviders, hospital and manufacturers.
Labor. Everyone is being asked about labor supply and cost and everyone is reporting shortages/challenges. These shortages spring first from retirements and quits, something Tom Tobin and I have articulated repeatedly for the last year. Those shortages have been dramatically exacerbated by isolation/quarantine/sickness related to the high incidence of COVID-19. QDEL reported that 10% of their workforce as out sick.
Many of the services companies are relying on contract labor but it was much more common for them to report reduced volumes instead. AVAH made the comment that once you “get premium [labor] in there it is hard to get it out.” (AMN).
Interestingly, the payers and providers noted that the commercially insured have maintained utilization at pre-pandemic levels. Reduced volumes can be attributed to the Medicare and Medicaid populations.
Inflation. Broadly, there were reports of increased prices and shortages that were all manageable. Although it has been a long time since health care has experienced inflation, it usually manifests itself as reduced volumes in the near term and higher prices in the long term.
CAH provided the helpful comment that most of their contracts are on a 4-5-year term, and they were in the process of reducing that. They also noted that they have been working to nearshore manufacturing capacity to Central and South America. Distributors that are not as levered to insurance, like PDCO, reported that price increases can be passed on. MCK appears to be pivoting to a role in managing the drug channel more generally. It is not unexpected response. Being in a spread business during massive deflation of generic drugs, is great. When prices start going up, it can be painful.
Risk. Lots of new entrants into the business of taking risk except the people you would expect: insurance companies. Having been “Amazon’d” – telehealth providers sprang up like daisies during the pandemic – TDOC wants to be a national primary care practice that takes risk.
CVS and WBA are leaning into providing health care services through their massive real estate footprint. WBA is leveraging its relationship with VillageMD to assume risk through the Direct Contracting program. I was surprised to find myself more compelled by CVS' vision.
In the meantime, insurers are doing what they can to shift risk to someone else. HUM and CI both stressed clinical programs with HUM being behind the curve a bit. In the context of Employer-sponsored Insurance, CI’s plans seem to align with an early trend in employer-sponsored insurance to aggressively manage the spend.
Recent Events
Replay | In Their Own Words: Silly Things CEOs Say TDOC, UHS, DVA, SHCR
Replay | Sequestration, More Sequestration & Medicare Payments | DVA, EHC, CHE
Hedgeye Health Policy Publication/Event Calendar. Click here for searchable calendar.
IPOs + SPACs
Quiet week in IPO and SPAC land. Still about $28B in SPAC money laying about looking for a dance partner. Access SPAC spreadsheet here.
Have a great weekend.
Emily Evans
Managing Director – Health Policy
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