|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
A high-profile reminder of the importance of therapeutics
Along with the many political and public health questions raised by President Trump’s recent and very public bout with COVID-19 is the issue of when the public might have access to the same monoclonal antibody therapy that he received from doctors last week. Having seen the President tout the benefits of Regeneron’s experimental antibody cocktail, COVID patients have reportedly been asking physicians about participating in clinical trials of the therapy, which is only available on a “compassionate use” basis outside of ongoing studies. On Wednesday, Regeneron announced it had submitted a request to the US Food and Drug Administration (FDA) for an Emergency Use Authorization (EUA) for the treatment, claiming that early data from ongoing trials showed promise in moderating coronavirus symptoms. Eli Lilly, which is developing a similar antibody therapy, also announced plans to apply for an EUA, saying its drug has shown the ability to reduce hospitalizations among those infected with the virus. The US government has already paid Regeneron $450M to access up to 300,000 doses of the therapy, and on Friday a spokesman for the Department of Health and Human Services (HHS) said the government would acquire up to a million doses from Regeneron and Eli Lilly by the end of the year, which it will allocate to hospitals in a similar approach to the way it has distributed Gilead Science’s antiviral drug remdesivir, which the President was also given last week.
News on the availability of potentially effective therapies to mitigate the impact of COVID-19 is welcome, particularly as the timeline for COVID vaccines appears to be lengthening. In guidance released this week, the FDA said it would require pharmaceutical companies to submit two months’ worth of data on vaccine safety and efficacy after patients received their final dose, as part of the EUA application process. The data requirement effectively means that, despite repeated promises from the White House, none of the vaccine candidates being developed will be available before the November 3rd Presidential election. The head of the government’s vaccine program said separately this week that he expects data on vaccines being developed by Pfizer and Moderna to be available by December. As many have predicted, it will take months beyond that for a safe and effective vaccine to be distributed and administered to a majority of Americans. Challenges will abound: ensuring sufficient manufacturing capacity, managing a complex supply chain, setting up specialized distribution and vaccination centers, and tracking those vaccinated (especially if two shots will be required). A massive public education campaign will also be needed to overcome vaccine hesitancy and ensure widespread immunization. And all of that will take time, and money. President Trump’s recent and unfortunate illness underscores the importance of paying equal attention to the development of therapies and treatments—which are essentially a holding maneuver to get us through the coming winter and spring, and eventually to the promise of immunity that lies beyond.
A strong rebound allows HCA to pay the government back
Investor-owned hospital chain HCA Healthcare announced this week that it plans to return all of the approximately $6B it received in financial assistance under the CARES Act, including Provider Relief Fund payments of around $1.6B and roughly $4.4B in accelerated payments from Medicare. The company reported strong financial performance for the third quarter, with same-facility revenue for overall admissions up 15 percent compared to last year, despite a 9 percent drop in total admissions, and emergency department (ED) volume that is down 20 percent from the same period last year. “We greatly appreciate the CARES Act funding,” said HCA’s CEO Sam Hazen in a press release. “As the initial immediacy of the emergency has passed, and with more information and more experience managing our operations during the pandemic, we believe returning these taxpayer dollars is appropriate and the socially responsible thing to do.” The company reported having implemented a number of cost-control measures in the wake of the drop in elective procedures and visits during the lockdown period, as well as steps to quickly return to normal operations during reopening. At the same time, an increase in patient acuity and a more favorable payer mix drove revenues higher. We’ve heard from many health systems that the CARES Act funding helped stem massive financial losses during the height of the pandemic, turning otherwise negative margins into breakeven performance or better. Whether others follow HCA’s lead in refunding the government remains to be seen. In general, volumes are at or slightly ahead of budgeted levels at many systems, although ED visits continue to lag at about the same level as reported by HCA. The longer-term question for hospitals—as for much of the rest of the economy—is what the “new equilibrium” for volume and revenue will be. Our guidance: plan for a “90 percent future”, and build an economic model less reliant on the ED as an intake engine, with greater investment in convenient, distributed physical and virtual access points—delivered at lower cost.
A formidable player in Medicare Advantage takes shape
Open enrollment for Medicare starts in less than a week, and just in time to capture a piece of the booming Medicare Advantage (MA) market, the nation’s largest retailer announced plans to participate in a big way. Walmart, which has been a constant object of speculation regarding its designs on the healthcare industry, is launching Walmart Insurance Services LLC, an insurance brokerage licensed in all 50 states. It will market MA plans from UnitedHealthcare, Humana, Anthem, Wellcare (Centene), and Amerigroup, along with Medicare Part D prescription drug plans and Medicare Supplemental plans. Notably absent from the lineup is Aetna, now part of CVS Health, whose new HealthHUB clinics have been integrated into Aetna’s benefit plans, and with whom Walmart’s own health clinics are directly competitive. Intriguingly, Walmart’s new brokerage will also sell MA plans from startup insurer Clover Health, with whom it recently launched a joint-venture MA product in the eight Georgia counties where Walmart Health clinics are located. It’s been a busy week for Clover Health, one of the new-breed, technology-powered MA startups, which this week announced plans to merge with a special purpose acquisition company (SPAC) and go public in a deal valued at $3.7B. Clover anticipates significant growth from MA enrollment, as well as from its participation in Medicare’s “direct contracting” pilot program. The “Clover Powered, Walmart Enhanced” product is a zero-dollar, zero-copay PPO plan, which includes prescription drug, dental, vision, and hearing benefits, along with $400 of rebates on purchases at Walmart stores—sure to be attractive to the fixed-income Medicare beneficiaries it targets. We’ve long viewed health insurance as the missing piece to Walmart’s healthcare puzzle, and believe that to fully realize the promise of combining its pharmacy and clinic operations to deliver lower-cost care, it will need to capture the premium dollar, not just provider revenues. Short of an outright acquisition of an insurance company (Humana? Centene?), this week’s flurry of announcements is surely the latest sign of healthcare’s sleeping giant awakening.