BISBEE'S BRIEF:  Annual GDP Growth on the Rise

The Department of Commerce reported Friday that the U.S. economy grew at 2.6 percent in the fourth quarter. 

The Q4 number was down from 3.2% in Q3.  The twin downward contributors were declining inventories and a widening trade deficit.  Most economists forecasted 3% growth or higher which would have marked the first time in 13 years that the economy had delivered three consecutive quarters of growth greater than 3%.   

Notwithstanding the statistical shortfall, President Trump touted an improving economy and pro-business posture at the World Economic Forum in Davos, Switzerland.  He cited the U.S. tax code overhaul coupled with material regulatory relief.   “America is,” said Trump, “open for business.”

Beyond the bluster, the data are as follows:  For the full year, the U.S. economy expanded 2.3% vs. 1.6% in 2016.  Trump has said his GDP target is 3% or higher.  2018 appears, for the moment, to have a positive trend.

As one analyst noted in his critique of the numbers this week, it is not where we have been but where we will be.  The economy under the Trump administration is just a year old.  Its ongoing performance will be an important storyline for Leading Health Systems as 2018 unfolds. 

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THE WEEK THAT WAS, January 22, 2018

Following a three-day shutdown, lawmakers reached a deal to reopen the government on Monday, passing legislation to fund the federal government through February 8. The deal was reached after Senate Majority Leader Mitch McConnell (R-KY) announced he would allow a vote on a legislative fix for the Deferred Action for Childhood Arrivals (“DACA”) program. Included in the agreement was a six year reauthorization of the Children’s Health Insurance Program (“CHIP”), which provides healthcare coverage to 9 million children. Funding for the program expired in September and several states were near the bottom of their reserve funding. Federal funds will pay $124 billion over 6 years, or roughly 88 percent of the program’s costs (states are responsible for the rest). The deal also included a two year delay of several Affordable Care Act (“ACA”) taxes, including the medical device tax and “Cadillac” tax on high cost health insurance.;

On Wednesday the Senate confirmed Alex Azar as the 24th Secretary of Health and Human Services (“HHS”) by a 55-43 vote. Six Democrats voted in favor of Azar, the former President of Eli Lilly USA, while one Republican voted against him. Peter Urbanowicz, who served as HHS deputy general counsel under Azar from 2001-2003 and also served as Tenet Healthcare’s General Counsel, is expected to be Azar’s Chief of Staff. During his testimony before the Senate Committee on Health, Education, Labor and Pensions and the Senate Committee on Finance, Azar spoke of four priority areas as HHS Secretary; lowering drug prices, continuing towards value-based care, improving interoperability, and solving the opioid epidemic.

Johnson and Johnson announced this week it will repatriate billions in overseas cash, becoming the latest U.S. based company to bring back cash held overseas following the passage of the Tax Cuts and Jobs Act last month. The company has $16 billion in cash outside of the U.S. and said it will bring $12 billion of it to the U.S. immediately, largely to pay down debt. The tax law has a one-time repatriation tax rate of 15.5 percent. Multiple U.S.-based pharmaceutical companies are expected to repatriate cash held overseas for uses including paying down debt and to fund deal making opportunities. Amgen, one of seven U.S. based pharmaceutical companies who collectively have more than $150 billion in overseas cash, said it would repatriate its overseas cash after the tax legislation was signed into law. Repatriation is likely to be viewed favorably by lawmakers and comes as pharmaceutical companies continue to push back against Congressional efforts to control drug price increases and as they support Congressional efforts to reform the 340B Drug Pricing Program.

On Wednesday Apple announced it is rolling out a new feature to allow customers to view their medical records on its Health app. The feature is called Health Records, and will work by collecting medical data and sending alerts and updates to consumers on lab results, medications, procedures, vitals, etc. The data is encrypted and protected with a password. Eleven healthcare providers, including Ochsner Health System, Dignity Health, Johns Hopkins Medicine and MedStar Health plan to participate in the Health Records feature. Electronic health records companies athenahealth, Cerner and Epic have also agreed to participate. Both Google and Microsoft have previously attempted to move into the personal health records space, though each was unsuccessful; however, polling data over the past few years suggests consumers increasingly expect access to their medical records.

On Tuesday voters in Oregon approved a new tax on hospitals and health insurers to cover the cost of Medicaid expansion. Measure 101, which increases an existing hospital tax on revenues by 0.7 and managed care premiums by 1.5 percent for 2018 and 2019, passed with more than 60 percent in support. The move comes as the 32 states who voted to expand the Medicaid program bear increasing responsibility for expansion costs. The Affordable Care Act stipulated the federal government would cover 100 percent of the cost of expansion for the first few years, followed by a scheduled adjustment to shift a portion of the cost to states. Currently, the federal government pays for 94 percent of the expansion while states cover the rest. By 2020, states will be responsible for 10 percent of expansion costs.

The Health Management Academy would like to offer congratulations to one of our member health systems, Yale New Haven Health System, who was named the winner of the Foster G. McGaw award this week. The Foster G. McGaw award recognizes hospitals that distinguish themselves through efforts to improve the health and well-being of everyone in their communities.

THE WEEK AHEAD, January 29, 2018 

President Donald Trump’s first State of The Union address to Congress will receive the majority of attention in Washington during the first half of the week. New HHS Secretary Alex Azar officially takes office.

  • Tuesday: The House Budget Committee will hold a hearing entitled “CBO Oversight: Organizational And Operational Structure”
  • Tuesday: The Subcommittee on Health of The House Committee on Energy and Commerce will hold a hearing entitled “Examining Implementation of the Compounding Quality Act”
  • Tuesday: The Subcommittee on Primary Health and Retirement Security of the Senate Committee on Health, Education, Labor and Pensions will hold a hearing entitled “Roundtable on Small Business Health Plans”
  • Tuesday: President Donald Trump will deliver the annual State of The Union Address
  • Wednesday: The Academy Advisors and Crowell & Moring will host a Congressional Fly-In for a coalition of providers working to reform the Stark law