July 29, 2022

The Weekly Gist: The Russian Chess Death Robot Edition

by Chas Roades and Lisa Bielamowicz MD

They’ll come for the weakest among us first. At least, that appears to be the plan among our new robot overlords. Last week, at a chess tournament in Moscow, a chess-playing robot unceremoniously broke the finger of a seven-year-old chess prodigy, in the middle of a match. Having watched his robot opponent make a move, the boy reached out for a quick riposte, only to have the machine grab his finger and break it. “This is of course bad,” said the president of the Moscow Chess Federation. He added, “Apparently children need to be warned. It happens.” It happens??? That’s a bit of an understatement, Ivan Drago. The boy in question is fine and went on to complete the tournament. No word on the next assignment for the Russian Chess Death Robot, so look out.


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

  1. Democrats reach deal on healthcare and climate bill. Senate Majority Leader Chuck Schumer (D-NY) and Senator Joe Manchin (D-WV) surprised everyone Wednesday night by announcing they reached a deal on a legislation package called the Inflation Reduction Act of 2022. The deal is a revival of portions of President Biden’s “Build Back Better” plan, more narrowly scoped to meet the demands of Sen. Manchin. On the healthcare front, the bill would allow Medicare to negotiate prices for certain prescription drugs starting in 2026, and limit seniors’ annual out-of-pocket spending on Part D prescriptions to $2,000. It also includes $64B to extend the enhanced tax credits for Affordable Care Act exchange plans through 2025, avoiding health plan rate increases for millions of Americans.

The Gist: While several Senate Democrats have announced support for the legislation, the party can’t afford any holdouts given its razor-thin majority. If all Democrats get on board, this legislation will fulfill the party’s longtime promise to lower prescription drug prices. But it stops well short of other major healthcare measures being discussed last year, including expanding Medicare coverage to include dental, vision, and hearing coverage, and closing the so-called Medicaid coverage gap. 

  1. For-profit hospital company earnings announcements show economic headwinds are mounting. While for-profit health system giants HCA Healthcare and Tenet Healthcare reported reductions in contract labor usage last quarter, sustained higher labor costs and sluggish demand resulted in both of them, along with Community Health Systems and Universal Health Services, seeing their net income decline in the second quarter. Like many systems, the for-profit chains seem to have successfully weaned themselves from earlier reliance on expensive temporary nurses, but are facing more structural increases in labor costs as salaries have risen to remain competitive in a very tight labor market.

The Gist: The earnings reports from for-profit companies are a canary in the coal mine for the overall margin performance of the industry. Although investor-owned companies are vastly outnumbered by their not-for-profit peers, they often move more quickly, and with more vigor, to reduce costs in order to meet the earnings expectations of Wall Street investors. They also typically rely more heavily on volume growth—particularly emergency department visits—as a driver of earnings. If for-profits are now finding it more difficult to pull those levers, we’d expect that the broader universe of nonprofit systems is experiencing even tougher sledding. That’s consistent with what we’re hearing anecdotally from health systems we work with.

  1. Large nonprofit health systems in the spotlight again for not providing enough charity care. A recent Wall Street Journal analysis, published this week, provides further evidence that large, nonprofit health systems often offer less charity care than their for-profit peers. It found that, on average, nonprofit systems spent 2.3 percent of their net patient revenue on financial aid for patients, whereas for-profit hospitals spent 3.4 percent. The American Hospital Association criticized the analysis, arguing that it doesn’t fully capture the broader community benefits that nonprofit hospitals provide. Earlier this year the Lown Institute, a Boston-based think tank, also found that most nonprofit hospitals invest less in their communities and spend less on charity care than the amount they receive from tax exemptions.

The Gist: The issue of whether hospital systems should continue to enjoy tax-exempt status is a perennial stalking horse in the health policy community. The topic often gets conflated with whether nonprofit systems are truly “nonprofit”, since many larger systems make robust profits. There’s no question that nonprofit systems enjoy a huge economic advantage from not being subject to taxation, in return for which we should expect them to provide “community benefit” at a level commensurate with the status. The difficulty is in defining and measuring community benefit— for example, should serving Medicaid patients count? Is it fair to count discounts for the uninsured as “charity care”, if we know prices are artificially inflated in the first place? These are thorny questions with no obvious answers, but ones that would benefit from clearer guidance and more transparency from policymakers.

Plus–what we’ve been reading.

  1. Value-based care isn’t yielding much “value.” Despite the hype, accountable care organizations (ACOs) and other Medicare-driven payment reform programs intended to improve quality and lower healthcare spending haven’t bent the cost curve to the extent many had hoped. A recent and provocative opinion piece in STAT News, from health policy researcher Kip Sullivan and two single-payer healthcare advocates, calls for pressing pause on value-based payment experimentation. The authors argue that current attempts to pay for value have ill-defined goals and hard-to-measure quality metrics that incentivize reducing care and upcoding, rather than improving outcomes.

The Gist: We agree with the authors that current value-based care experiments have been disappointing. The intention is good, but the execution has been bogged down by entrenched industry dynamics and slow-to-move incumbents. One fair criticism: ACOs and other “total cost management” reforms largely focus on the wrong problem. They address utilization, rather than excessive price. But we’re having a price problem in the US, not a utilization problem. Europeans, for example, have more physician visits each year than Americans, yet spend less per-person on healthcare. It’s our high prices—for everything from physician visits to hospital stays to prescription drugs—that drive high healthcare spending. The root cause: our third-party payer structure actively discourages real efforts to lower price—every player in the value chain, including providers, brokers, and insurers, does better economically as prices increase. That’s why price control measures like reference pricing or price caps have been nonstarters among industry participants. Recent reforms that increase price transparency, while not the entire solution, at least shine a light on the real challenges our healthcare system faces.


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

Developing a compelling value proposition for employees

As we’ve been discussing, the COVID pandemic and ensuing economic environment have driven health system job vacancies and attrition rates to all-time highs. Right now, for myriad reasons, many hospital workers are deciding that the financial, emotional, and professional benefits of working for a hospital are outweighed by the toll working in a hospital takes on them personally. Health systems are responding to this challenge with a wide variety of discrete measures—including hiring and retention bonuses, incentive pay, employee wellbeing initiatives, and expanded professional development opportunities— that target specific groups of employees, but don’t form a long-term solution to workforce instability. To rebuild a stable and committed workforce, health systems must create, and then communicate, a compelling employee value proposition—a concise statement highlighting why employees should work for them.

The graphic below shows what we believe are the key components of a successful employee value proposition, which must have a clear vision and focus on the things most important to employee needs: compensation, work-life balance, and career support. Systems can use the guiding questions listed in each column to craft a value proposition that is differentiated in their local labor market, informed by their level of resources, and undergirded by their own culture and values. (Find more guidance on developing an effective employee value proposition on our Gist Insights blog.) 


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

We’re hiring—be our host!

We’re interrupting our regular report from the road to share some bittersweet news. After three years of incredible work, our rockstar podcast host and Managing Editor Alex Olgin has decided to return to the world of traditional newsroom journalism, leaving us with one very big pair of shoes to fill. With Alex’s help, the Gist Healthcare Daily podcast has grown into an industry-leading show, routinely ranked among the top daily newscasts nationally, and enjoyed by thousands of listeners each day. Our audience includes executives, investors, policymakers, and others at the forefront of healthcare. We’re looking for a hard-charging, inquisitive person to join our team, taking on the daily challenge of keeping the industry up to speed on the “gist” of what matters in healthcare. It’s a great opportunity to connect with newsmakers, get to the heart of what’s really going on in the industry, and drive the national conversation among healthcare leaders. Interested, or know someone who might be? Check out more details on the position here—and drop us a line!


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

On last Monday’s episode, we joined Alex to discuss how current economic pressures are pushing health systems to figure out how to deliver less expensive care, in lower cost settings, and with lower-wage workers.

Earlier this month, Morgan Health invested $30M in Centivo, an innovative health plan for self-insured employers. Coming up this Monday, we’ll hear from Dan Hartman, Executive Director at Morgan Health, and Ashok Subramanian, CEO of Centivo, about how Centivo plans to leverage the Morgan investment to expand its services.

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

Enough for now. Thanks for taking time to read the Weekly Gist—we hope you found it worthwhile. We’re so grateful for your readership, and we hope you’ll share our work with your friends and colleagues, and encourage them to subscribe and check out our daily podcast. We’ll be off next week, but back later in August with more thoughts on the goings-on of the day.

Meanwhile, don’t hesitate to 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-Founder and CEO

Lisa Bielamowicz, MD
Co-Founder and President