Top of the Funnel | Macro + Earnings
Employment. Health care employment continued to add people in January, creating some of the market’s consternation. Of interest to me has been dialysis employment. December employment is down 0.30% YoY and 0.15% MoM after rising 0.23% in November. The churn DVA cited on 3Q earnings call is still there.
(Note: BLS has reconfigured some of its employment classifications so the employment chartbook will be published next week. Sorry for the inconvenience.)
Earnings.
PFE. CEO Albert Bourla is positioning 2023 as a rebuilding year. He has rightly concluded that most governments are choking on vaccine supplies and will need to work through those in 2023. He did not mention, because everyone hates waste, is that a lot of those doses are going to go in the trash.
All expected.
However, I was a bit surprised by the decline in the base business. Whether anyone with a megaphone wishes to admit it or not, you must wonder if sales are being affected by the reputation damage being done by the persistent question about PFE’s COVID related products.
HUM. We will cover this in more detail on Thursday. In the meantime, HUM’s guide seems realistic, perhaps low-balled a bit given enrollment trends thus far this year. I consider RADV to be mostly noise – see below – and cuts to the capitated rate are worse news for the weaker plans that are likely to wash out in an inevitable consolidation.
CONGRESS.
Telehealth Pivot? Sen. Bill Cassidy, the new ranking member of the Senate HELP committee indicated in an interview this week that he opposed parity payments and believed telehealth providers should be licensed in the states in which they practice.
For the industry, it is not a ringing endorsement of their plans but, from a policy perspective, has a solid foundation. Parity payments made sense in the early stages of development to encourage use by doctors. But that approach puts brick and mortar physicians at a disadvantage if you take the idea too far.
The most sustainable and reasonable policy suggests telehealth should be delivered under an established physician-patient relationship not as a drive-by appointment. There is a subtext here related to abortion services delivered across the Pro/anti-Dobbs states so expect some resistance from Democrats on Cassidy’s objection to a national licensure regime.
To start the fight, Republican Attorney General have fired off letters to WBA and CVS warning them about dispensing via mail abortion-related medications.
CBD Pathway. Rep. Morgan Griffith, Chairman of House Energy and Commerce’s Oversight subcommittee has indicated to the FDA he is willing to work on developing a regulatory pathway for approval of CBD products. This move comes after the FDA threw up its hands last week and declared CBD ineligible for its existing regulatory authority.
What lies in front of Rep. Griffith is years of work so don’t hold your breath.
THE WHITE HOUSE.
Ding Dong the Witch is Dead. This week the White House announced that both the COVID national emergency and public health emergency will end on May 11th. They did not have much choice. With the two most popular parts of the PHE separated from the emergency declarations – Medicaid disenrollment and telehealth waivers – a spring termination was inevitable.
The House had voted along party lines to end it immediately and the Senate would probably consider it as well given the bipartisan fatigue around all things COVID. The White took the opportunity to rip the band-aid off.
There are a bevy of waivers like the 3-night rule for a SNF admission that need to be worked through so a bit of chaos looms.
RADV Rule. CMS released the long-awaited RADV rule. For the life of me, I cannot understand what all the fuss was about. CMS’ plan is to use standard audit procedures to review payments made to Medicare Advantage plans between 2011-17.
Beginning with the 2018 payment year, it will apply an extrapolation methodology to audit overpayments caused by inflating use of diagnosis codes.
To start with, extrapolation has a hazy legal status. CMS used it a lot during the Obama administration to prosecute false claims in the hospice sector. They eventually ran into split federal appeals court decisions that questioned the practice under due process considerations.
Put more directly, can you be found guilty through use of statistical rather than direct evidence? It isn’t clear, which is why you hear the MCOs saying they are considering their options.
Extrapolation is the only way these audits are possible, especially with a federal workforce that is suffering from the same labor issues everyone else has. Outsourcing will help but there is a point where that might not be very cost effective, unless CMS takes the approach of RAC audits and pays a bounty.
My guess is the estimated 4.7B in claw backs estimated by CMS don’t happen.
MA 2024 Advance Notice. Everyone knew the payment updates of pandemic times would not last. Perhaps they did not have a 1% increase in 2024 in mind but that is CMS’s initial offer. We will see if it sticks.
SEP for HealthCare.gov. CMS announced it would hold a special enrollment period for 16 months for people that lose Medicaid coverage. The enrollment process will be based on self-attestation so no documentation will be required.
The SEP will begin March 11th and last until July 24, 2024.
Other Stuff.
340B Victory for Drug Makers. Regardless of the merits of its original intent, the 340B program now diverts about $40B from drug manufacturers to hospitals annually. The revenue stream for hospitals created by that diversion has led to distortions in both drug prices and medical practice.
Facing margin pressures coming from every imaginable direction – from Congress to demographics to consumer choice – drug companies began to resist ~2020 when they started limiting the number of contract pharmacies to which it would dispense 340B drugs. HHS said that was not ok. The Third Circuit Court of Appeals said it was.
More cases in the pipeline but a good omen for the drug manufacturers.
Recent Events
Upcoming Evans
HUM | Only The Strong Survive. Thursday, February 9th @10am ET (add to Outlook Calendar)
Venture View with Marcus Whitney, Thursday, February 16th @ 10am ET
Have a great weekend.
Emily Evans
Managing Director – Health Policy
Twitter
LinkedIn
