|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
The urgent COVID question: where are the vaccines?
One year ago this week, health officials in Washington State identified the first confirmed case of COVID-19 in the US. In the intervening twelve months, the pandemic has infected 24.3M Americans, and tragically claimed the lives of more than 404,000 of our fellow citizens. We now find ourselves at a precarious moment: the “third surge” may have plateaued and even begun to decline, and more than 17.5M doses of the highly effective Pfizer and Moderna vaccines have been administered—2.4M of those as second doses. Yet frustration is mounting with the availability of vaccines nationwide. We have talked to executives at several health systems—still the nexus for much of the vaccine administration in many parts of the country—who tell us they’re not able to meet demand for vaccination with the supply of vaccines they’ve been allocated, and that the shortage is worsening. They report that the infrastructure to administer shots is ready, but with supply at a trickle, they’re cancelling vaccination appointments and cutting short vaccine clinic hours. Many are eager to transition to a mass vaccination model, moving administration out of busy clinical settings (often still overwhelmed with COVID patients) and into the community.
As of today, the CDC website reports that 20M more doses have been distributed than have been administered. The US government has agreements in place to receive 200M doses by the end of March (not counting any additional doses that could become available if a new Johnson & Johnson vaccine is approved, as hoped). That level of supply would allow the new Biden administration to handily meet its goal of getting 100M doses administered in its first 100 days—indeed, some experts are now calling that goal too modest. The most urgent challenge now is distribution and administration, not supply—doses are not finding their way into arms. Solving that problem will require a massive logistical effort, dramatically ramping up shipments (Starbucks and Amazon both offered to lend assistance this week) and standing up hundreds of mass vaccination sites. The clock is ticking: by March the CDC expects a more contagious variant of the virus to be widespread, and although scientists say vaccines will be effective against it, new evidence is emerging that the variant may result in a higher mortality rate. We are in an urgent race to ensure that we aren’t forced to endure a deadly fourth wave in the spring.
The new administration unveils a national COVID strategy
As one of his first official actions upon taking office Wednesday, President Biden signed an executive order implementing a federal mask mandate, requiring masks to be worn by all federal employees and on all federal properties, as well as on all forms of interstate transportation. Yesterday Biden followed that action by officially naming his COVID response team, and issuing a detailed national plan for dealing with the pandemic. Describing the plan as a “full-scale wartime effort”, Biden highlighted the key components of the plan in an appearance with Dr. Anthony Fauci and COVID response coordinator Jeffrey Zients. The plan instructs federal agencies to invoke the Defense Production Act to ensure adequate supplies of critical equipment, including masks, testing equipment, and vaccine-related supplies; calls for new national guidelines to help employers make workplaces safe for workers to return to their jobs, and to make schools safe for students to return; and promises to fully fund the states’ mobilization of the National Guard to assist in the vaccine rollout. Also included in the plan is a new Pandemic Testing Board, charged with ramping up multiple forms of COVID testing; more investment in data gathering and reporting on the impact of the pandemic; and the establishment of a health equity task force, to ensure that vulnerable populations are an area of priority in pandemic response.
But Biden can only do so much by executive order. Funding for much of his ambitious COVID plan will require quick legislative action by Congress, meaning that the administration will either need to garner bipartisan support for its proposed “American Rescue Plan” legislation, or use the Senate’s budget reconciliation process to pass the bill with a simple majority (with Vice President Harris casting the tie-breaking vote). Even that may prove challenging, given skepticism among Republican (and some moderate Democratic) senators about the $1.9T price tag for the legislation. We’d anticipate intense bargaining over the relief package—with broad agreement over the approximately $415B in spending on direct COVID response, but more haggling over the size of the economic stimulus component, including the promised $1,400 per person in direct financial assistance, expanded unemployment insurance, and raising the federal minimum wage to $15 per hour. Some of the broader economic measures, along with the rest of Biden’s healthcare agenda (see graphic below) and his larger proposals to invest in rebuilding critical infrastructure, may have to wait for future legislation, as the administration prioritizes COVID relief as its first—and most important—order of business.
Optum expects to acquire 10,000 more doctors in 2021
UnitedHealth Group, both the nation’s largest health insurer and largest employer of physicians, just announced plans to continue to rapidly grow the number of physicians in its Optum division. This week CEO Dave Wichmann told investors in the company’s fourth quarter earnings call that Optum entered 2021 with over 50,000 employed or affiliated physicians, and expects to add at least 10,000 more across the year. (For context, HCA Healthcare, the largest for-profit US health system, employs or affiliates with roughly 46,000 physicians, and Kaiser Permanente employs about 23,300.) Optum is already making progress toward its ambitious goal with the announcement last week that the company is in talks to acquire Atrius Health, a 715-physician practice in the Boston area.
As was the case with other health plans, United’s health insurance business took an expected hit last quarter due to increased costs from COVID testing and treatment, combined with rebounding healthcare utilization. Optum, however, saw revenue up over 20 percent, which drove much of the company’s overall fourth quarter growth. Expect United, and other large insurers, flush with record profits from last year, to continue to expand their portfolio of care, digital and analytics assets (see also Optum’s recently announced plan to acquire Change Healthcare for $13B) as they looks to grow integrated insurance and care delivery offerings. It’s part of what we expect to be a 2021 “land grab” for strategic advantage in healthcare, as providers, health plans, and disruptors look to create comprehensive platforms to secure long-term consumer loyalty.