Top of the Funnel | Marco Data, Policy Position Monitor + Earnings
PCE. A trend we have been watching for months is share shift from not-for-profit hospitals to their taxable analogs. MoM % change in PCE expenditure for taxable hospitals increased 0.32, which represents a normal month. YoY % change in PCE was about 2.09%, again a pretty normal report.
However, MoM and YoY % change in PCE at not-for-profit hospitals was about zero in Sept. below a more typical 2% annual growth rate. As we have noted before, NFP hospitals are not exactly the most nimble operators. Their lack of cost controls may be particularly damaging in an inflationary environment.
ECI. Compensation expenses drive reimbursement of health care. Medicare uses the Employment Cost Index for hospital employees to model compensation expenses which usually accounts for 50-60% of provider cost inputs.
In 3Q 2022, the ECI for hospitals workers increased 5.8% YoY and 1.4% MoM, hotter than the economy wide figure of 5.1% YoY. The increased ECI is generally good news for most providers as it is a major part of CMS’ reimbursement models.
For the economy at large, increases in ECI represent ongoing inflationary pressure. Less appreciated but very much in evidence is the ongoing increases in health insurance as a component of compensation. In 3Q, as a result of July repricing, health insurance expense accelerated YoY to 4.9%. As most health insurance plans are repriced in October and January, the worst is not over.
Earnings.
DVA. The death spiral begins. The company faced with nearly insurmountable headwinds of elevated mortality in their target patient demographic, higher labor costs and an ongoing penchant for buying back their stock instead of developing innovative care solutions, missed and slashed guidance.
DVA is the charter member of our “Bad for America” basket of health care companies and were it not for genuine access issue that exists and may get worse, we would hang on the rim. Link to original short presentation here.
More on Monday.
HCA & UHS. Notwithstanding DVA’s labor issues, commentary on that topic from hospitals has been relatively positive. Premium labor costs are coming down and hospitals are learning to triage patients through the hospital in the most margin preserving manner. That includes using a site of services like ASCs.
No Changes to the Policy Position Monitor.
CONGRESS
The Future of HELP. Sen. Tim Kaine of Virginia, speaking at a Harvard T.H. Chan School of Public Health, indicated the next in line to lead the Senate HELP committee could be Bernie Sanders (D-VT) and Rand Paul (R-TX).
That would not be good news for pharma or NIH. While their reasons differ, both Senators are going to ask some direct questions about vaccine approval, prices and the cozy relationship between industry and the NIH and the FDA.
THE WHITE HOUSE.
Booster-mania. The messaging between the White House and the FDA on COVID vaccines remains confusing to say the least. As much as their different messages about the need to for a booster differ, it is nothing compared to the tin ear they are using to advise the America people.
The White House, using the occasion of President Biden’s latest booster to soften the message a bit but the public remains unimpressed as the omicron-variant booster remains largely unused.
Other Stuff.
Booster Effectiveness. If CDC Director, Rochelle Walensky’s recent bout of COVID was not enough evidence to suggest the latest booster has limited upside, a pre-print article was published this week adds some academic heft to the layman's conclusion.
Vaccine Safety. Making things worse, The BMJ published a letter inquiring as to why the FDA has yet to release safety information over a year after it was promised. The FDA has acknowledged certain cardiac safety signals in the elderly and in the young, so follow-up would naturally be expected.
That follow-up would appear to be made urgent by the persistently high mortality in disease categories that align somewhat with systems most implicated in adverse event reporting. But no. The conclusion that mRNA vaccines should not be on the market until more work can be done on safety and efficacy is a very reasonable conclusion a regulatory would have drawn in more normal times.
Dialysis on the Ballot. On the ballot in California is yet another attempt by the SEIU to regulate DVA. They have sponsored a ballot measure that requires minimum levels of staffing in general and of credentialed employees. Given the labor headwinds DVA already faces, approval of this referendum will be yet another problem for the company.
Have a great weekend.
Emily Evans
Managing Director – Health Policy
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