In case you missed it, the Saturday edition of the Wall Street Journal reported that there is a potential hiccup brewing for the healthcare industry that could negatively impact that executive employment market and the broader economy.
From the WSJ:
“The healthcare sector is emerging as a surprising trouble spot in the corporate debt market, dragged down by threats to what investors have long viewed as a stable part of the economy.
“The share of junk-rated corporate loans issued by healthcare companies that were priced at under 80 cents on the dollar – a metric known as the distress ratio – spiked last month to 6.9 percent, the highest level since May 2009,” during the midst of the Great Recession.
“The amount of loans in the oil and gas industry and retail sectors rose last month, pushing the overall loan distress ratio to 4 percent…”
The Journal explained that insofar as the healthcare sector goes, two separate developments “played outsized roles in dragging down bonds and loans – the push to hold some drug companies accountable for the opioid crisis and a bi-partisan bill in Congress that would curb surprise medical bills”, which can occur, the Journal reported, when patients undergo treatment at hospitals that are in their insurance network but get care from out-of-network doctors. Many hospitals do not inform patients of this issue at the time they are registering for care.
Physician service companies such as TeamHealth Holdings and Envision Healthcare, as well as the air ambulance companies Air Medical Group Holdings and Air Methods Corp, are attracting investor scrutiny. Both TeamHealth and Envision are deep in debt, the result of private equity buyouts.
In the boom and bust oil industry, infamous for its business cycles, talent layoffs in Houston, the energy capital, are on the rise. In the retail sector, layoffs are continuing as merchants, dealing with customers who are shifting more of their buying to on-line outlets, are closing hundreds of unprofitable or marginally profitable stores. Forever 21 is the latest victim. Just this week they announced they would close more than 170 stores in the US, 350 globally, and seek Chapter 11 protection from the bankruptcy courts.
So how does this impact your career as a healthcare executive? There will be no immediate, widespread impact, so take a deep breath and then step back and begin to prepare for other economic shifts that will effect the executive job market like the bi-partisan “surprise billing” legislation, initially sponsored by Republican Senator Lamar Alexander and Democratic Senator Patty Murray. The House now has a version of this bill as well.
Needless to say there are plenty of hospitals, physicians and private equity firms who oppose this legislation because it will cut reimbursement. Even though it is facing strident opposition, just the threat of the measure is impacting capital markets.
This is not a one-and-done legislative effort by Congress to fix what some members feel is a serious healthcare cost problem. There will be more, and they will snowball, the result of inevitable economics
While physician staffing corporations, health systems and hospitals will wait to implement staffing and overhead strategies to deal with future declines in revenue, healthcare executives should not.
The same career management advice certainly applies to executives in the oil and gas and retail sectors. Develop a revised career management plan that includes the potentiality of a layoff.
© 2020 John Gregory Self