May 12, 2023

The Weekly Gist: The Winnebago Man Edition

by Chas Roades and Lisa Bielamowicz MD

We are saddened to report the death, at age 93, of Winnebago Man. You may remember Jack Rebney, who was best known by that moniker, from the early days of the internet, when the profanity-laced outtakes from a promotional video he was shooting for the RV manufacturer went viral (click at your own risk). But the genesis of the classic recordings goes further back than that. The videos were actually shot on VHS tape back in 1988 and were “discovered” as part of a “found film” festival in the early 2000s. Rebney’s misadventures with the Winnebago spawned a documentary in 2009, which rocketed Winnebago Man to international fame. The EDM producer Zedd even mixed a popular dance track interlaced with Rebney’s blue tirades. We’ve all had Winnebago Man days (and we’ve had a fair few lately), but whenever they happen to us, we recall Jack Rebney’s wise counsel: “Don’t slam the f***ing door!”


What happened in healthcare this week—and what we think about it.

  1. Federal COVID public health emergency (PHE) ends after more than three years. On Thursday, the Biden administration allowed the emergency declaration governing the nation’s COVID response since Jan 31, 2020 to expire. Hospitals will now no longer receive a 20 percent Medicare payment boost for treating COVID patients, who currently still occupy nearly 8,000 beds, and consumers may now face cost-sharing for COVID testing and treatment. Several key provisions originally tied to the PHE have already been temporarily extended, including some Medicare telehealth flexibilities, virtual prescription of controlled substances, and the Acute Hospital Care at Home waiver program, while Medicaid redeterminations have already begun.

The Gist: While few policies remained tied to the PHE, the end of the COVID emergency period still represents a momentous, symbolic shift in the direction of our policymaking. The pandemic’s unprecedented disruption to healthcare will linger on, for good and for bad. We’re still in the process of codifying the beneficial changes, largely around telehealth policy, that the pandemic necessitated, but have made far less progress reckoning with the weaknesses it exposed in our public health infrastructure. Federal pandemic readiness efforts remain disorganized and underfunded, while many local public health agencies have seen their powers restricted by state legislatures. Each day, COVID still takes the lives of hundreds of Americans. The two unanswered questions: how will the country respond if that number rises again, and how will we fare if (or when) another pandemic arrives?

  1. Envision Healthcare plans to file for Chapter 11 bankruptcy. On Tuesday, the Wall Street Journal reported that Nashville, TN-based Envision Healthcare, a private equity (PE)-backed physician staffing firm that staffs around 40 percent of the nation’s emergency departments (EDs), could file for bankruptcy protection as soon as this weekend. Envision’s annual pre-tax earnings fell from $1B in 2020 to less than $250M in 2022, driven by a combination of the No Surprises Act’s elimination of surprise billing, higher labor costs, and a negotiations dispute with UnitedHealthcare, in which the insurer was recently ordered to pay $91M. Envision, which now has around $7B in outstanding debt, is backed by PE firm KKR, which bought the then-public company in 2018 in a debt-financed deal worth $10B.

The Gist: When KKR bought Envision, it expected that its out-of-network billing revenue and cost-saving staffing model would generate returns well worth the significant debt burden. Between spiking labor costs, volatile ED volumes, and the implementation of the No Surprises Act, Envision could no longer deliver sufficient returns, though it remained profitable. Envision could be the canary in the coal mine for other PE-backed, hospital-based physician staffing firms that are experiencing similar difficulties. But while PE groups may be losing interest in hospital-based physicians, hospitals will continue to rely on the likes of Envision, once it restructures, for staffing their EDs, as the trend toward outsourced physician staffing is unlikely to reverse.

  1. California lawmakers pass loan program for financially distressed hospitals. Last week, California’s legislature passed a bill establishing the Distressed Hospital Loan Program, which will dole out $150M in interest-free emergency loans to struggling nonprofit hospitals in the state which meet specific eligibility criteria, including operating in an underserved area and serving a large share of Medicaid beneficiaries. A combination of state agencies will establish a specific methodology for selection, but hospitals that are part of a health system with more than two separately licensed hospital facilities will be ineligible. Hospitals receiving loans must provide a plan for how they will use the loans to achieve financial sustainability, and must pay back the money within six years.

The Gist: With twenty percent of the state’s hospitals at risk of shuttering, California lawmakers are hoping to provide the most vulnerable hospitals an alternative to either closure or consolidation, an example other states may follow. But unlike the Paycheck Protection Program loans that shored up businesses through the pandemic’s initial disruption, the outlook for small, struggling, independent hospitals isn’t expected to improve in coming years, even if the economy recovers. Whether these loans provide lifelines or merely serve as Band-Aids on an untenable situation will depend on whether recipient hospitals can use them to restructure their operating models to absorb increased labor costs amid stagnating volumes and commercial reimbursement. If these loans aren’t used for transformation, they will only delay the inevitable: more closures, and more mergers to find shelter in scale.

Pluswhat we’ve been reading.

  1. The extraordinary decline in not-for-profit healthcare debt issuance. Last month, Eric Jordahl, Managing Director of Kaufman Hall’s Treasury and Capital Markets practice, blogged about the dangers of nonprofit healthcare providers’ extremely conservative risk management in today’s uncertain economy. Healthcare public debt issuance in the first quarter of 2023 was down almost 70 percent compared to the first quarter of 2022. While not the only funding channel for not-for-profit healthcare organizations, the level of public debt issuance is a bellwether for the ambition of the sector’s capital formation strategies. While health systems have plenty of reasons to be cautious about credit management right now, it’s important not to underrate the dangers of being too risk averse. As Jordahl puts it: “Retrenchment might be the right risk management choice in times of crisis, but once that crisis moderates that same strategy can quickly become a risk driver.”

The Gist: Given current market conditions, there are a host of good reasons why caution reigns among nonprofit health systems, but this current holding pattern for capital spending endangers their future competitiveness and potentially even their survival. Nonprofit systems aren’t just at risk of losing a competitive edge to vertically integrated payers, whom the pandemic market treated far more kindly in financial terms, but also to for-profit national systems, like HCA and Tenet, who have been flywheeling strong quarterly results into revamped growth and expansion plans. Health systems should be wary of becoming stuck on defense while the competition is running up the score.


A key insight or teaching point from our work with clients, illustrated in infographic form.

As inflation ameliorates, healthcare returns as top financial concern

With the latest Bureau of Labor Statistics’ Consumer Price Index (CPI) report revealing the 12-month inflation rate in April 2023 rose again after hitting a recent low in March, we’re using this week’s graphic to show the cumulative picture on price and consumer sentiment changes across the last five years. Since 2018, the CPI for all goods has risen 21 percent, while medical services have become 15 percent more expensive, in terms of consumer out-of-pocket spending. Leading into COVID, medical service prices were rising faster than general inflation, but the cumulative rise in the price of all goods caught up to medical services in early 2022. Since December of last year, the price of medical services has actually experienced some deflation, partly due to a lagging decline in insurer profits. Reports of easing inflation had elicited a slight rebound in consumer sentiment, but last month’s 9 percent drop, the largest since June 2022, suggests this confidence is easily shaken. Unfortunately for healthcare providers, according to a recent pollfewer consumers worrying about elevated grocery and gas prices means that healthcare has reclaimed the top spot for household financial concerns.


A recommendation from our weekly diet of music, movies, TV, and other good stuff.

The Diplomat (Netflix)—Fans of The Americans, rejoice! Keri Russell is back, with another gripping show full of tense thrills and featuring an unorthodox marriage at its center. This time Russell is the US ambassador to London, married to a former ambassador, and caught up in a web of international intrigue and double-dealing. With whip-smart, West Wing-esque dialogue and a strong supporting cast, it’s a perfect vehicle for Russell’s talents. Terrific.


What we learned this week from our work in the real world.

The imperative to “parallel process” mergers and integration

Given the somewhat frantic pace at which transactions are happening in healthcare these days, with insurers buying up primary care assets, private equity firms rolling up specialty practices, hospital systems looking to consolidate, and everyone circling around digital players, it’s little surprise that we’ve begun to hear some angst among health system executives about their ability to keep pace. “Some of these disruptors are focused entirely on M&A strategies,” one CEO told us recently. “My team still has to run a complex health system at the same time. It takes us forever to get deals done.” The concern is legitimate: for many health systems, M&A has been a one-at-a-time proposition. Evaluating and completing an acquisition takes many months, if not a year or more—and the integration of even a relatively small entity into a larger health system often takes longer.

There is a growing sentiment that the pace of single, sequential mergers and acquisitions will not allow health systems to keep pace. One CFO shared, “We did a large merger a decade ago, and we’re just at the point of feeling like we act as a single system. We’re looking at one or two others, and we can’t delay the next opportunity because we’re still working to integrate the last.” His strategy: systems aiming to build a super-regional organization should “rapidly build the network and integrate it once you have all the pieces”. It’s a strategy, he said, that is serving vertically integrated payers like CVS and UHG well. To keep pace in a consolidating market, health systems must maintain a pipeline of potential partners that fit with their vision. But we’re also wary of “saving” all the integration until the deals are done. Rather, health systems looking to rapidly expand must be able to “parallel process” multiple acquisitions and integration. With smaller financial reserves compared to payer behemoths, health systems need mergers to generate value more quickly. And moreover, as providers are held to a higher standard by regulators, new partnerships will benefit from demonstrating value to consumers and communities.


All the headlines in healthcare policy, business, and more, in ten minutes or less every weekday morning.

Last Monday, we heard from Zocdoc founder and CEO Oliver Kharraz, MD about how patient acquisition is changing and how the company has evolved over its 15-year history.

Coming up this Monday and Tuesday, we’ll hear an encore pair of JC’s conversations with Ochsner Health Chief Wellness Officer Nigel Girgrah, MD, and Even Health CEO David Black. Even Health developed the anonymous, digital peer support platform Cabana, which Ochsner has used along with other services to support its workforce amid unprecedented stress among caregivers. The two conversations delve into mental wellbeing among healthcare professions and the programs available to support them.

[Subscribe on Apple, Spotify, Google, or wherever fine podcasts are available.]

Thanks for taking time to read the Weekly Gist! We were sorry to miss you the past couple of weeks—it’s been an incredibly busy run of travel, with lots of great meetings with health system leaders. We’ll be sharing some of what we’re seeing out there across the coming weeks. In the meantime, don’t forget to share the Weekly Gist with friends and colleagues, and encourage them to subscribe. And be sure to check out our awesome daily podcast!

Most importantly, please let us know if we can be of assistance in your work. You’re making healthcare better—we want to help!

Best regards,

Chas Roades
Co-President and Managing Director

Lisa Bielamowicz, MD
Co-President and Managing Director