Top of the Funnel: Macro + Earnings.
DVA. The company reported an Adjusted EPS of $1.58, beating the street by $0.36. All but $0.03 was brought to you by adjustments for closing centers. That did not stop the squeeze and here we are back at $100+.
Average treatments per day improved sequentially by 0.90 which was signaled by an improvement in dialysis center employment the last couple of prints. However, productivity dropped from 1.40 treatments per day (assuming DVA share of employed at 51%) to 1.36.
What the company needs is an improvement in incidence – which is not exactly good public health. Absent that they must play the stock price game through buybacks and the new twist, ESG fund pandering. Their new credit agreement includes an “ESG adjustment” after consultation with Sustainability Standards Consultant, which appears aimed at getting DVA’s profile raised among the ESG fund crowd.
As the company acknowledged, there is a lot going on upstream among the CKD population related to COVID and the mortality data suggests some improvement. However, the death rate from kidney-related disease needs to fall below baseline before we see an improvement in incidence.
Inflation. HCA (+), THC (+) PPI and CPI both reflected an increase in supply prices. Most areas were affected but the biggest driver is pharmaceutical prices. Inflation services remain mostly under control. One interesting data point is a hook up in PPI at general medical and surgical hospitals for privately insured patients. This trend if it holds would further support the cycle-end utilization thesis Tom Tobin has discussed.
CONGRESS.
PBM Reform. CI (-), UNH (-), ELV (-) CVS (-) After a little infighting, the Senate HELP committee reported out the Pharmacy Benefit Manager Reform Act of 2023. PBM reform has been banging around the hill since Sen. Lamar Alexander chaired the committee but nonetheless appears to be making some genuine bipartisan progress.
The bill includes a ban on spread pricing and a requirement that all manufacturer fees and rebates be passed on to the plan sponsor. Amendments offered and approved included one banning gag clauses in PBM contracts and one requiring justification for price hikes over 10% per year and over 25% over three years.
As it the case with a lot of legislation these days, no vehicle is in the offing especially as long as the debt ceiling issue remains pending.
Pandemic Oversight. PFE (-) The Select Subcommittee on Coronavirus Pandemic had another hearing, this time related to the immunity debate. It is an important topic because claims that only the COVID-19 vaccine could confer immunity were the basis for vaccine mandates and other nutty ideas like vaccine passports.
What made the hearing interesting was the minority’s witness, largely agreed that data and science did not support such claims after about April 2021. A majority witness, Dr. Margery Smelkinson of NIH, was also critical of vaccine immunity thesis which suggest NIH and the CDC did not consult their own scientists in 2020 when mandates were issued.
Barring any debate, the discussion focused on who was responsible for originating such claims that were so frequently repeated.
The problem is not just one of COVID-19 vaccine compliance. Hesitancy about all vaccines has emerged especially related to the childhood schedule. A very predictable outcome of mandates for anyone that has some walking around sense.
THE WHITE HOUSE.
End of a PHE-era. Yesterday, the Public Health Emergency declared in March 2020 came to an end. For three years providers have enjoyed a more deregulated environment that it had known previously. Naturally the end of the PHE, means some readjustment.
Dialysis providers have been able to conduct services at nursing homes, assisted living centers and congregate care centers during the PHE. There is no provision for the continuing this policy after May 11th and patients will need to travel to a renal dialysis center for services.
Additionally, many of the training requirements waived during the PHE will be reinstated, something that is likely to further reduce the productivity at DVA and others.
Nursing home operators have been hopeful they can get the 3-day hospital stay requirement for admission repealed. There seems to be some consensus that this requirement, written in 1965, is no longer necessary. However, with the debt ceiling talks the focus, a legislative vehicle for this change is wanting.
Importantly, most of the flexibility afforded the telehealth industry was separated from the PHE so the status quo is preserved through 2024. However, telehealth provided via an outpatient hospital department would not longer be able to provide services, barring a last-minute intervention by CMS.
Other Stuff.
OCT Birth Control. The Food and Drug Administration’s Advisory Committee voted in favor of recommending OTC status to HRA Pharma’s OTC progesterone only birth control bill.
Notwithstanding the AdCom vote, the FDA itself has expressed reservations about the supporting study. Note that Dr. Robert Califf, the Food & Drug Administration Commissioner, has suggested the FDA move away from vote results and instead consider the full body of Adcom discussions. Final approval is not assured but likely. Also likely are some conditions that would assuage concerns about HRA's studies.
Mammograms Over 40. The United States Preventive Service Task Force released a draft recommendation that mammograms begin at 40 years of age instead of the 50, the current threshold.
Have a great weekend.
Emily Evans
Managing Director – Health Policy
Twitter
LinkedIn
