Shay Pratt (00:00):
The difference I'm thinking about is in 2008 and during COVID, you had a very big focus point for each of those events. You had a housing crisis that caused an economic meltdown. COVID, you obviously had this brand new virus that was wreaking havoc across the world. Actually, it's in some ways easier to confront those things than what we're talking about.

Rae Woods (00:22):
From Advisory Board, we are bringing you Radio Advisory, your weekly download on how to untangle healthcare's most pressing challenges. My name is Rachel Woods. You can call me Rae. I think there's an underlying assumption about healthcare. It's this idea that our business is recession-proof, or at least recession-resistant, or maybe it's the assumption that the next recession will impact healthcare business in the same way as the last one, whether it's the Great Recession or the economic fallout from the pandemic.

(00:52):
Here's the problem with all of those assumptions. When folks refer to our business as being recession-resistant, they're actually focusing on something very specific. Maybe they're focusing on healthcare employment, how it's stable, maybe even needed during financial downturns. But in 2025, there are a lot more variables and a lot more uncertainty hitting business leaders at the same time.

(01:17):
So I want to dig deeper into this assumption. Look, we are not economists here, but we are healthcare experts. And for the purposes of today's conversation, I'm going to argue that that's a good thing, because we know the ways that the wider political economy influences healthcare and how those moves can frankly hurt healthcare finances in bigger ways than one recession or the next.

(01:41):
So in this conversation, we want to push ourselves and you towards asking the right questions and to get the right answers that will actually help you in your strategic planning. To figure out what yesterday's economic landscape can tell us about the future, I've invited two advisory board experts, Shay Pratt and Vidal Seegobin. Hey, Shay. Hey, Vidal. Welcome to Radio Advisory.

Shay Pratt (02:05):
Thanks for having me.

Vidal Seegobin (02:06):
Excited to join.

Rae Woods (02:09):
If I think about the state of the economy in the US right now, there's one word that jumps to mind for me and it's uncertain, because there's just so much up in the air right now and it's hard for anyone, healthcare researchers or healthcare leaders, to really get a sense of what they should be preparing for. I'm going to ask a hard question to start with. What's your assessment of the economic moment that we're in?

Vidal Seegobin (02:34):
I think one of the things that becomes a little difficult to try to pull apart is that there's so many different indicators that people are talking about and they're not heading in the same direction. So I'd say we don't even agree about what we say or what we're talking about or pointing to when we say the economy's either doing well or not well. Are we talking about the stock market?

(02:55):
Are we talking about public equities? Are we talking about unemployment rate? Are we talking about household savings rates? Are we talking about consumer sentiment? All of these things are changing and changing pretty wildly and reported very often, and I think it just creates a lot of noise that makes people say, "I don't really know what's going on right now, but it doesn't feel good."

Rae Woods (03:17):
And everything you just said, Vidal, is an economic headwind facing any business. Nothing that you just said is specific to healthcare, which we also have to consider.

Shay Pratt (03:26):
Well, I think the other thing that is happening is the healthcare industry just went through a huge amount of disruption, and there's a sentiment now that a lot of organizations feel like they're getting their feet under them again. And now you're staring at something a lot of different vectors of change that could or couldn't be happening. So there's a little bit of probably exhaustion going on, a lot of feeling like, what do I have to contend with now because I just went through this other thing that was a huge pivotal moment in the industry?

Rae Woods (03:52):
Yes, absolutely. And I like that you said vectors of change as opposed to the other word that I'm hearing a lot of which is crisis. And I hate that word now because it's becoming overused, but the fear that folks have is economic crisis. We're not there, at least not yet, but there are certainly reasons to be concerned. Inflation, potential for even the higher cost of goods, couple that with an eroding safety net, the picture can get pretty bad pretty quickly. How bad do you think things are going to get? More specifically, should our listeners be bracing for a recession?

Vidal Seegobin (04:28):
One thing I think we talk about when we say inflation is we're talking about two consecutive quarters of GDP not growing. And we already had one quarter where the GDP did not grow. Now, it's not unforeseen that we will revise those numbers because they're barely negative that it might end up being positive. But what we're generally saying is in a recession, we expect that economic activity will slow down. Businesses may pull back on those activities.

(04:59):
They may reduce their workforce. And from a healthcare perspective, when incomes go down in households or employment goes down in households, they are less inclined to seek out healthcare services in aggregate, and we get worried about that because then it'll have impact on the financial performance of providers and probably means that patients are delaying care, which is not good for anyone's health.

Rae Woods (05:23):
And you're getting to the healthcare business impacts of something like a recession, or even if it's not a true recession, if we're getting into things like stagflation. And this is where I want to admit that our collective boss said, "You know, Rae, I'm hearing our client say that healthcare is still recession-proof or at least recession-resilient." Do we actually know where that belief comes from? Why does healthcare have this reputation?

Shay Pratt (05:53):
Well, during the last big recession, the notion of healthcare resiliency was because healthcare employment was still very good. But of course, the recession can have all kinds of impacts, not just on healthcare employment, and there are many reasons why I would say we're less resilient than we think we are.

Rae Woods (06:12):
And you're talking about the global financial crisis, right?

Shay Pratt (06:14):
Talking about the 2008 crisis, yes.

Rae Woods (06:17):
And so employment is this one big piece that's tied to the idea that we're recession-resilient because people need jobs and healthcare jobs, particularly I'm thinking about nurses, are really, really important and can be a stable job even in an academic downturn. The other reason, I think, is more about what consumers need. You still need healthcare if you're having a heart attack. You still need healthcare if you have cancer. And that's part of the belief that healthcare is necessity and not a luxury. Is that even still true?

Shay Pratt (06:49):
There are probably entire physician specialties that are a lot more susceptible to recession impact than others. So the answer is it all depends. But from a macro level, yes, people need healthcare, but the recession will still change a lot of dynamics about how people use, what do they pay for, what are they comfortable paying, and so on.

Rae Woods (07:07):
And this is exactly why this question is coming up in our conversations with health leaders and why I think it is natural for folks to compare what we may be going through, a potential recession in 2025, to the last let's say several recessions in recent history. Shay, you already mentioned '08-'09. I think the other one that we can compare ourselves to is the pandemic era recession. So let's actually take a moment and talk about what's the same and what's different, and let's start with 2008-2009. How did the healthcare industry fare in '08-'09? Is it true that we were relatively unscathed?

Shay Pratt (07:47):
That is not true. What you had in 2008 is that unemployment went up quite dramatically, and unemployment was high for a long time for multiple consecutive years. And at that time, a lot of individuals lost their employer-sponsored insurance and other types of conditions. What happened was you had an increase in uncompensated care.

Rae Woods (08:07):
Yes.

Shay Pratt (08:07):
Overall, consumers still use healthcare, but what changed was how much of that care was actually uncompensated or undercompensated and so on.

Rae Woods (08:17):
So said differently, even though consumers still tried to receive care, the healthcare systems were not making money on that care. Because while our industry didn't face dramatic changes in employment, especially when it comes to the clinical workforce, the change in unemployment more broadly affected our business because it meant these people don't have insurance, which means we're not making money.

Shay Pratt (08:39):
Correct. I think the average reimbursement per case declined, and that was largely because of that uncompensated care impact.

Rae Woods (08:48):
How much should we worry about a trend like that coming back today? Because if I'm thinking about 2008-2009 versus 2025, the biggest difference in healthcare business is that the ACA did not exist then. How wary should we be about the unemployment or underinsurance to uncompensated care pipeline?

Shay Pratt (09:11):
We should be worried about it, but not to the extent that we saw in 2008. In 2010, the Affordable Care Act was passed and that opened up a lot of avenues for more uninsured or underinsured people to get care. Now we're also talking though about potential or legislation that could actually reduce the number of covered lives in the country. And so that should be concerning, but it won't be a 180 to the 2008 uninsured rate.

Rae Woods (09:38):
Not a 180, but also not single digit degrees of difference, at least if the Senate takes up the bill and keeps large parts of what the House had passed.

Shay Pratt (09:49):
The impact will be felt and it'll be very real to providers' overall volume and revenue profiles.

Vidal Seegobin (09:56):
At the highest point of the global financial crisis, our unemployment rate was almost at 10%. And then two years after the coronavirus, our unemployment rate was below what it is right now. So the highest of the high during the global financial crisis is still unmatched, and the ability basically from stimulus from the government to bolster these employers so that they retain their staff made it that our recovery on the unemployment side post COVID was actually very dramatic.

(10:35):
The challenge there is that the same time you saw at the post COVID period an unemployment rate that was relatively low, lower than it is right now as of recording on June 2nd, inflation was at 8%. So consumer sentiment and general household confidence about where the future was going to go and how much money they had to spend on things both planned and unplanned, which I think is arguably what we're talking about healthcare, was way worse after the pandemic than we are right now.

Rae Woods (11:03):
Which is exactly back to where you started, which is what the heck are we even talking about here? Does it matter if we're talking about recession or otherwise or which economic indicators are we even looking at, or even which policy indicators are we looking at?

(11:15):
Vidal, you already started to go down the path of the second recession in recent history, which is the pandemic related recession, and there's already one huge difference that you've called out between what we experienced collectively in '08-'09 and what we experienced in 2020, and that was the dramatic difference in unemployment. That meant that in 2020 there wasn't the same problem as a lot of uncompensated or undercompensated care.

(11:41):
I think the challenge for healthcare business was actually the change in utilization. Because we were talking about a healthcare crisis, meaning that folks were concerned about their public health and public safety, they suddenly weren't getting elective procedures. They were delaying and deferring care. How do we compare the utilization swing away from healthcare in 2020 to what we saw in '08-'09?

Vidal Seegobin (12:06):
So you had certain types of what you would describe as un-elective or required care that would be consistent across the global financial crisis. Like you had a heart attack while outside. You were going to go for care in 2009, 2010 regardless of whether or not you were employed or not. What you were more likely to defer or delay or if you were unemployed in 2010, you probably were not going for planned interactions with the health system.

(12:32):
So that can be anything from things that would be considered discretionary, particularly if it's exposed to self-pay. All those things that are more susceptible to income level or income volatility for healthcare services, I think we saw people delay.

Rae Woods (12:48):
And for me, that line is around any services that are under or around the deductible. The other big change between the financial crisis and the pandemic is just the number of high deductible health plans that people in the United States carry. High deductible health plans weren't new in 2008, but there are certainly a lot of them in 2020 and a lot of them in 2025. That's where I start to get worried about can we rely on these volumes staying stable if folks are more price sensitive and therefore delaying or deferring care that is underneath the cost of the deductible.

Shay Pratt (13:27):
I think that in 2008, we definitely saw more sensitivity to deductibles. So Pete, when you look at the trend line in 2009, 2010, 2011, overall volumes were very stable. Inpatient utilization per a thousand emergency visits per a thousand and outpatient visits per a thousand were all flat line of utilization. So basically there was no real change, very stable. But I would also say that hidden underneath that trend line were some services like imaging, colonoscopies, services that if a patient were to pay out of pocket would be around the size of that deductible.

(14:01):
I'd also probably estimate that in 2009 the average deductible was lower than it is today. So I think that's also an interesting thing to think about. Had the deductibles of 2025 been in 2009, there probably been more care avoided. But overall, the fall out of risk of the Great Recession, the housing crisis, volumes didn't really change that much. I do think there's probably a little bit of volume suppression going on because you would ideally seen the trend line go up and up gradually. What we actually saw was just a flat line for several years.

Rae Woods (14:35):
So growth was not possible when I think about health systems wanting to grow, but the volumes were relatively stable.

Shay Pratt (14:42):
Yes, it was a really long recovery. Organizations will look to volume growth as an indicator of recovery in times of economic disruption. And what you saw with the 2008 situation was that that volume recovery really never materialized. The interesting thing about the 2008 economic crisis was that it was at that point where inpatient utilization per a thousand started to decline steadily all the way up to today. So it's actually that volume recovery never really happened for health systems. They just made up for it in other ways, and it took them several years to do that.

Vidal Seegobin (15:18):
Which is an interesting contrast when you think about where we were 2022 to now. I remember writing a piece being like, I'm surprised that the volumes have not bounced back as quickly as they did. At 2023, we started to see some of these elective volumes come back into the outpatient space. But now in conversations that I'm having with health systems right now, it's around more volume than they can manage within the emergency department presentation.

(15:42):
Bottlenecks on the post-acute side, not enough staffing capacity on the post-acute side, longer length of stay are only seeing minimal improvements they're in. So I think that snap back compared to global financial crisis feels very pronounced and very quick, even though I was wrong in terms of still predicting it too early.

Shay Pratt (16:00):
There's an unrealized recovery that hasn't happened. You forget that hiding in the background of any kind of big disruption like COVID or the Great Recession of 2008, all the other trendlines are still happening. Outpatient shift, for example, is still going and going.

(16:16):
When the COVID recovery started to happen, organizations didn't see as high of a volume bounce back because a lot of the volume was occurring elsewhere, or organizations didn't actually even have availability for that volume, so their schedule was still full. And that tells me that there's actually a lot more volume they could have had. They weren't able to get it.

Rae Woods (16:37):
And this conversation is telling me exactly why it is such a complicated picture to try to make sense of multiple shocks, multiple forces that are hitting all at once, but to a degree to which we don't actually know yet. So we've been talking about things like how employment impacts healthcare.

(16:55):
We've been talking about how an eroding safety net and how changes in insurance that's tied to employment will impact us. We're talking about how volume shifts and utilization patterns will impact healthcare. I actually just want us to pause and pull up. Because at the end of the day, Radio Advisory is a healthcare business podcast. So let's talk about the financial impact specifically.

Vidal Seegobin (17:21):
Interestingly enough, the drop in operating margin in the pandemic was orders of magnitude worse than it was during the global financial crisis. Insofar as there was a smaller ding and longer recovery for health systems during the global financial crisis, during the pandemic, there was a catastrophic drop and pretty meteoric increase. I mean, what that leads me to think is this bounce back was pretty dramatic insofar as the health system is squarely at the epicenter of a pandemic.

(18:01):
It seems like a biological contagion is easier to recover from than a financially originating contagion that had impacts on banks and people's house and mortgage, which is an interesting contrast when you look at the data because I never would've thought that.

Rae Woods (18:16):
You both each now said the word recovery in this conversation. I don't mean to be too blunt, but has the healthcare industry even recovered from the last recession and its aftermath? I'm thinking about all of the impacts that happened after COVID, the changes in volumes. That came back, but margin didn't necessarily come back, if I'm channeling my best Abby Burns. Are we even at a place of recovery before we start thinking about the next big hit?

Shay Pratt (18:44):
Well, I think there's some ongoing huge structural challenges that organizations are still contending with. So yes, volumes bounced back quite quickly during the pandemic and the post-pandemic phase, but some of those other trends were still happening. Inpatient care was getting more complex, more medical, less surgical. Site of care shift was still happening. And so all these are also impacting margins at the same time.

(19:09):
And so as organizations got their volumes back, those volumes weren't quite in the same place they were in the beginning of 2020. And so the recovery I would say is still happening. Organizations are now having to contend with a very different economic picture per case than they were I would say in 2019. It's only been five or six years, but things can change pretty quickly.

(19:30):
And I think that's what is happening right now with a lot of organizations. They're trying to figure out how to get the same amount of margin performance out of a very different patient profile.

Vidal Seegobin (19:40):
I would overlay that with just the human element of the conversations we have with leaders. It felt a little bit coming out of the pandemic and the recovery, we turned a corner when it came to the financial performance of the health system. And then at the exact same time as that's happening and you saw the finish line right in front of you, someone grabbed the finish line and pulled it like another four miles into the future.

(20:05):
And so from that perspective, I just find that a lot of leaders and staff and health systems are just not 100% sure where the gas in the tank is in order to make that last leap or make that last distance. And so I appreciate that we're talking about finance and volume as a recovery, and I think you can actually point to that in the data, but psychologically where I think a lot of health systems and their boards and teams are, they're just not there.

Rae Woods (20:27):
Yes.

(21:58):
While we're talking about recovery, we also can't forget about the external forces that come in to help businesses and to help the healthcare business specifically recover. So I'm thinking about the pandemic for a moment. There was a ton of actual money coming in the door from the Biden administration to help hospitals, help medical groups, and I can't ignore that literal money as something that helped our industry survive the last recession.

(22:30):
Not to mention the fact that, to Shay's point, the healthcare safety net in 2020 was much more expansive if we think about Medicaid expansion, the existence of the exchanges. The fact that when folks lost jobs, they tended to be in jobs that weren't necessarily tied to insurance anyway, so there was just a lessening of the impact when it came to unemployment and underinsurance because of the structures that had been built up around healthcare business.

(22:58):
And we're having this conversation in a moment where all of those structures are at least under threat. What might that mean about the future?

Vidal Seegobin (23:07):
Rae, what you're describing, for the one or two economic wonks that are listening to this podcast, Rae described when Biden's terms was like Keynesian economics, right? There was a moment where demand was really, really shaky, the economy was uncertain, and so the federal government mobilized to move a lot of resources through multiple channels to protect the safety net and to allow for people to maintain their employment.

(23:35):
You remember also what happened at that point in time is wages increased pretty considerably. People were job shifting. They're making more money. Also contributed to inflation obviously in retrospect. But what ended up happening is we took the full force of the government, we stepped in, and we protected a lot of individuals.

(23:51):
And I think if you look at the data, that had a protective impact in terms of people's coverage. Now, people didn't seek out a lot of care because we were also managing a pathogen that we didn't know the impact on, and so people were staying away from care.

(24:06):
And in certain jurisdictions we said, "Hey, we need to protect valuable bed capacity so all electives are off," but that is going to be different than I think, Rae, where you're taking us, which is a lot of changes in terms of the safety net that didn't exist in the global financial crisis, existed during the pandemic, and now as we head into 2025 may also get pulled away from us again, which is going to have really sizable impact in terms of how people access care, how they pay for care, how they could afford care, and that's new different again and probably pretty concerning for all of us.

Rae Woods (24:39):
The reason why I initially brought you to Radio Advisory is to interrogate the question, is healthcare recession-proof or at least recession-resilient? And we've been going back and forth comparing the last two recessions. But as you're talking about all of these vulnerabilities, all of these market shocks, all of these headwinds they may hit whether there is a recession or not. So as academically helpful and for nerds like us entertaining as this conversation has been, if I argue with myself, I'm not sure is healthcare recession-proof even the right question to ask?

Vidal Seegobin (25:18):
So I think the thing all of us who track healthcare are worried about is what's happening in the wider ecosystem and operating environment going to negatively impact either the resources available to deliver care, the resources available to households to pay for care, the availability of access points to seek out care, and the ability to make plans into the future in order to expand our availability and be able to treat the patients both now and to the future.

(25:49):
I think it's probably fair to say that in 2025, we may not have in their traditional definition of the word recession see two consecutive quarters of negative GDP growth, but still see all of those dynamics around higher costs of input, self-rationing of care, sluggish consumer confidence, not because of the macroeconomic environment, but because of a lot of uncertainty that's coming out of, let's just say it, the executive branch of the government.

Rae Woods (26:19):
Yes.

Shay Pratt (26:20):
The difference I'm thinking about is in 2008 and during COVID you had a very big focus point for each of those events. You had a housing crisis that caused an economic meltdown. COVID, you obviously had this brand new virus that was wreaking havoc across the world. Actually, it's in some ways easier to confront those things than what we're talking about, what looking at right now, which is multiple things that could or couldn't happen that would impact a healthcare business of some kind.

(26:51):
When I'm comparing 2008 or COVID to the near term or long term, I'm kind of worried about several successive things happening across time that will actually be a protracted series of disruptions. That's going to be a really challenging, potentially long moment for healthcare systems writ large.

Rae Woods (27:11):
And then it makes sense that the word that keeps coming up in our conversations with health leaders is uncertainty. I guess I'd like to know from you, what is the right question you want health leaders to be asking if what they will ultimately have to deal with may hit them whether there is a recession or not?

Shay Pratt (27:30):
Well, I think the advice we always give is making sure you have full stock of all the different external things that are looming, they could or couldn't happen, and diagnose them, root cause them, get into, if this did happen, what would the impacts be? And you have to do that work across every single one of them to really understand the potential scenarios you could be looking at. And so that's strategic planning 101. It's also very difficult work.

Rae Woods (27:58):
Yeah, it sounds easy when you say it, when you say do strategic planning 101. But if you actually think about all of the variables that are changing in the current environment or may change and how they will impact your financial picture, it actually gets quite messy quite quickly.

Shay Pratt (28:13):
Yes, very messy. There are six, seven, eight things, depending on how you count, that organizations should be taking stock of now and trying to game plan their potential ripple effects. Those are things like changes to Medicaid enrollment, any changes to Medicare reimbursement rates caused by things like site-neutral payments or 340B pricing changes. There are lots of different types of things that are up in the air right now, and it's important to isolate them and then examine their potential impacts. It's not easy at all.

Rae Woods (28:47):
What I keep coming back to is that there's no single source this time around, unless you say the source are the express goals from the executive branch. And that is why uncertainty keeps coming up because we don't know how far they're going to go or they're going to get in some of the goals that have at least been laid out in the budget. My question is how do we square that intention with the ramifications of those actions, those actions?

Vidal Seegobin (29:13):
I think the economic calamities that we've navigated so far, the first being the global financial crisis, there was an intention to expand offerings and resources to prop up the banks. We propped up a lot of structurally important businesses because we weren't sure what was going to happen to the future and we felt it was important to do so. During the pandemic, similar fashion, new ways of doing it, but we mobilized a lot of resources to create a cushion and a safety net.

(29:42):
And we expanded what was available to the public to offset the contraction in the economy because people were not even leaving their houses during the pandemic. Now we're at a point where the narrative coming out of the executive branch and is co-signed by the legislative branch is what we have done is we have overextended ourselves in multiple areas. We need to pull back in those areas.

(30:05):
And what that is going to result almost invariably if the math maths is that we're going to have to pull back in healthcare services or paying for healthcare services. And that is diametrically different than where we were in 2012 when we expanded access through the ACA. And I'm going to argue that was a net positive at least in terms of maintaining financial ability to pay for healthcare services during COVID-19. So if we're pulling back on the social safety net in 2025, that is different than how we behaved in 2008 and it is different than how we behaved in 2020.

Rae Woods (30:40):
So bottom line, what financial picture can health leaders expect moving forward?

Vidal Seegobin (30:49):
So the story right now when you're talking about health system performance, you talk about hospital operating margin. As of recording right now, we're, what, a 7% median operating margin. You add in the Fuller Health System, you're talking about 1.2%.

Rae Woods (31:03):
Yes.

Vidal Seegobin (31:04):
Big portion of the overall health system business is fixed cost and we've already gone through a moment where wages and supplies and all that skyrocketed upwards of double digits in terms of price increase. I don't necessarily think that there's any appetite, willingness, or even cushion to absorb another set of shocks, either slowing demand or increasing cost of inputs.

(31:29):
And so interestingly enough, even if we don't end up in the academically defined recession, we still may see all of the negative things we are afraid of when it comes to healthcare and recession. That is costs of inputs are higher than we want them to be. We stockpile because we don't know what the future price is going to be and we think it might be more expensive.

(31:50):
We have people rationing care or self rationing care because they don't have enough money to pay for their deductible. They don't think that the future outlook of the economy is super strong. And there's just generally, as we've said before, a lot of costs and uncertainty percolating in the environment. And what you do is you just retrench. You stop, you hold, and everything grinds to a halt. And that is what a recession oftentimes looks like, even if it's not called a recession.

Rae Woods (32:15):
And if that's the end point that we may get to and there is no single source this time around, what kinds of variables are you watching as healthcare researchers and what do you want to push our listeners to make sure they're paying attention to understand what might happen next for their organization?

Shay Pratt (32:33):
We've been categorizing these vectors of change, if you will, into a couple of big areas. Medicaid cuts, Medicare cuts, so any kind of cuts to public payment systems or models. Then third, any kind of changes to the ACA legislation, and that could range of different issues to track. Fourth would be tariffs. Then there's grant funding cuts. Research dollars are very important to healthcare organizations and that's a big area of change.

(33:01):
And then there are other I would say nuances within the payment systems like 340B pricing and the like. By my account, there's at least six, if not more, things that organizations should be tracking. And those will have different impacts depending on what type of provider you are, where you're located, what your population looks like, and so on. It's not going to be the same for everybody, but I think everybody will feel the change.

(33:26):
It is possible to model these things and that's what our team has been working on for the last several weeks. And we hope to share our thinking and approach with everybody in the next episode.

Rae Woods (33:39):
In order to do that, we need another voice because Vidal, as good as you are, and Shay, as good as you are, you are not the modeling expert here. So let's have another conversation where we get deeper onto this. Sound fair?

Shay Pratt (33:54):
Smart move.

Rae Woods (33:56):
Well, Shay, Vidal, thanks for coming on Radio Advisory.

Vidal Seegobin (34:00):
Thanks for letting me nerd out a little bit by saying Keynesian economics again.

Rae Woods (34:09):
I understand the desire to ask whether or not healthcare is recession-resistant, and I think we've concluded that that's perhaps not the right question to ask. I see a subtle, but ultimately productive difference between I am recession-proof and I am resilient to market shocks specific to my industry. It's actually hard to determine how resilient you will be to those shocks.

(34:36):
The only way you can do that is to actually understand all of them at once in context with your organization, which is the conversation we're going to have next week. That's the hard work. But remember, as always, we are here to help. Here's what our Advisory Board research team is watching this week. In recent weeks, HHS has started taking action on RFK Jr's health care priorities.

(35:04):
Most recently, we've seen vaccine rhetoric turn into action. Secretary Kennedy recently fired all 17 sitting members of the committee that advises the CDC about vaccine recommendations and replaced them with eight new appointees. Today, I want to talk about why this committee that you've probably never heard of matters and how the impacts of the shakeup will affect your business.

(35:26):
Let's start with some quick background. The Advisory Committee on Immunization Practices or ACIP is an appointed panel within the CDC that reviews vaccine evidence and efficacy and makes recommendations about which vaccines people should get and when. And the recommendation carries weight. For one, it directly informs the public guidance that CDC issues around vaccines, which is the same guidance physicians look to as the latest standard of care.

(35:53):
But ACIP's recommendation plays another role. Under the ACA, health plans are required to cover vaccines recommended by ACIP. So this committee actually plays quite a big role in influencing vaccine access in the United States, which has obvious public health implications. For one, it means plans might be revisiting their vaccine coverage. ACIP doesn't only issue guidance around new vaccines, it also reviews and can revise existing guidance.

(36:20):
If the new members of ACIP vote to roll back any existing recommendations, plans could choose not to cover those vaccines in future years, which means a lot of patients likely wouldn't receive them. The other thing to keep an eye on is the way this shakeup could exacerbate the erosion of trust in our public health institutions. Physicians rely on ACIP to be an impartial panel of vaccine experts.

(36:44):
If this shakeup casts doubt on the panel itself and therefore on its recommendations, providers might feel like they're not getting the best clinical evidence to inform their care decisions. That can lead to burnout and even moral injury. And on top of that, they'll have to explain changes they may or may not trust directly to their patients. Which brings me to the other group we need to think about, patients themselves.

(37:08):
The risk here is that the latest changes to ACIP combined with other recent moves from HHS, like supporting the idea of vaccines going through placebo trials, that it undermines already low patient and consumer trust in CDC and even in physician recommendations. It also means a wider net of which consumers we're talking about, not just vaccine skeptics, but pro-vaccine consumers skeptical of the decision-making body orchestrating vaccine access.

(37:36):
Here's where the public health implications come in. If physicians and patients no longer feel confident in the CDC's recommendations, we might see vaccination rates go down. And we know that even a moderate change here can have considerable downstream results. Let me put some numbers behind this. In 2024, there were 285 confirmed cases of measles.

(37:57):
Modeling in a recent JAMA study projects that a 10% decline in MMR vaccination rates would increase the annual incidence of measles to an average of 440,000 cases per year over the next 25 years. What does that mean for you? Higher rates of communicable disease presenting in the ED, greater need for isolation and containment procedures to keep staff and other patients safe. For plans, higher utilization.

(38:24):
But in the much nearer term, this on the ground change could mean confusion for providers and patients around vaccine schedules. And the best thing to do in the face of that confusion, support your providers, especially your PCPs, pediatricians, family medicine providers, and of course, infectious disease providers. They will be the ones responsible for carrying out changes to patient care and communicating them directly to patients and families themselves.

(39:08):
New episodes drop every Tuesday. If you like Radio Advisory, please share it with your networks. Subscribe wherever you get your podcasts and leave a rating and a review. Radio Advisory is a production of Advisory Board. This episode was produced by me, Rae Woods, as well as Abby Burns, Chloe Bakst, and Atticus Raasch.

(39:27):
The episode was edited by Katy Anderson, with technical support provided by Dan Tayag, Chris Phelps, and Joe Shrum. Additional support was provided by Leanne Elston and Erin Collins. Special thanks to Natalie Trebes, Max Hakanson and Sebastian Beckmann. We'll see you next week.