Top of the Funnel | Macro Data + Policy Position Monitor+ Earnings.
PPI. ((HCA (+), THC (+)) Excluding COVID periods, PPI for hospitals is at a multi-year high. In June YoY% change was just shy of 3.50% and MoM was 1.17%. When considered in conjunction with employment, PMI and even CPI, that imperfect measure of health care consumption, the industry has found its status quo in the post-COVID world.
Eventually, this period will be remembered as a transition from a labor-intense, innovation-less and highly regulated industry to…something else.
Inflation Chartbook is here
No changes to the Policy Monitor. .
Earnings.
UNH. As CEO Andrew Witty continues to move UHS into a value-based purchasing platform and away from traditional insurance, the company starts to look more and more like the US Government but without all the politics.
The company has announced an end to cost sharing for certain critical drugs like insulin. It is also rolling out a U-card to make benefit payments easier for everyone.
Witty used his opening sentences on today's call to argue for cost containment of pharmaceutical drugs. That cost containment includes their own independently developed analysis of clinical outcomes and development of treatment protocols. In other words, UNH plans to do some of CMS’s and the FDA’s work for them.
In other news the company did not report markedly higher increases in acuity but also indicated that certain services which would proceed an acute finding are just getting back to baseline. They also reported lower than usual ER visits – which could be a result of their chronically out-of-network status with EVHC’s Emcare unit.
Most interesting comment was on developing products with pre-service guaranteed pricing which sounds a lot like the price transparency the federal government is supposed to be enforcing.
CONGRESS
Manchin, the Fly, Revisits the Ointment. ((ANTM (-), CI (-), CVS (-)) Senator Joe Manchin announced late yesterday he would support a reconciliation bill that includes “negotiation” of prices by Medicare, Part D reform. and extending the ACA subsidies that were enacted as part of COVID relief. He later clarified that he would also consider including tax, energy, and climate provisions that are on the Democrats wish list but not until after more inflation data comes in.
In other words, Democrats can have a slimmed down – but mostly bipartisan - version of reconciliation (which, with 10 Republican votes, would not have to be a reconciliation all) before the August recess. In the alternative, Democrats can wait until September and maybe pass reconciliation that includes the drug and insurance provisions as well as proposals acceptable to Manchin on energy, taxes and climate.
Manchin’s approach recognizes that progressives, looking at their last, best chance before a dismal mid-term outcome, may continue to stick to positions with insufficient support from moderates. In other words, for Sen. Manchin, a bird in the hand is worth more than a whole flock in the bush. The bird in this case being ACA subsidies and Part D reform and other drug price policies.
The added value of Manchin’s balletic moves here – which, as a lover of hard ball political tactics, has our respect – is he limits the danger imposed by Minority Leader McConnell’s warning that Republicans would not support the technology related CHIPS bill if Democrats drove through a partisan reconciliation bill.
We have long argued that Part D reform, which has bicameral and bipartisan support, will make it across the finish line and Manchin’s position seems to reinforce that.
What the What? Burr Pivots on LDT Regulation. ((MYGN (+), NVTA (+), NTRA (+) et al)) After months of work on FDA User Fee legislation, Sen. Richard Burr, Ranking Member of the Senate Health, Education, Labor and Pensions Committee has shifted his support to a leaner version of the FDA’s user fee legislation.
The original bill that was reported out of committee, Food and Drug Administration Safety and Landmark Advancements Act, included regulation of cosmetics and food supplements, in addition to the user fee assessments for regulation of drugs and devices. It also included Sen. Burr’s VALID Act which proposed to regulate Laboratory Developed Tests on a risk stratified basis.
The House version which passed last month includes none of those enhancements, although leadership has indicated they would consider adding them during conference committee negotiations.
Burr now argues that a “clean” user fee bill has the best chance of passing quickly and ensuring FDA operations are not disrupted. The regulatory add-ons in the Senate Bill can be considered later.
There is an echo in here.
Burr, like Manchin, knows the political dynamic among Democrats will make it hard to get the agreement necessary and that could bog down final passage. Whether anyone says it out loud, time is running out for progressive priorities, putting inordinate pressure on any legislation that could be the vehicle.
Other factors may include the rapidly developed understanding that the FDA is once again bleeding talent calling into question whether it can regulate anything. Their reputation with the general public is not helping.
All that said, moving the probability of passing LDT regulation to 50-50%.
THE WHITE HOUSE.
Medicare Rule-a-Rama. ((THC (+/-), SGRY (+/-)) CMS released the Hospital Outpatient Rule with a 2.7% payment update for both hospital outpatient departments and Ambulatory Surgery Centers.
CMS is also asking if it should regularly release data on mergers, acquisitions, consolidations and changes of ownership for other provider types to promote “competition.” Not sure how a retrospective view of things will do anything for competition but as I have said, they don’t have the A team on duty these days but they had to do something.
Governor Newsom, I Like Your Style. As talk swirls that President Biden cannot/should not run for re-election in 2024, hopeful nominee, California Governor Gavin Newsom, made a show of visiting the White House, shortly after President Biden’s departure for the Middle East.
It probably won’t have the effect Governor Newsom wants – to secure himself as the heir of the Resolute Desk – but as far as hard ball politics goes, it was a pretty epic move.
Recent Events
U.S. Medical Economy Macro update.
West Virginia v. Environmental Protection Agency with JT Taylor & Paul Glenchur
Upcoming Events
PFE: Bad for America (joking, but only kind of). Tuesday July 27 @ 10am ET. Event link here.
Have a great weekend.
Emily Evans
Managing Director – Health Policy
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