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Every now and then I come across some interesting opposing forces that just so happen to align with my personal interests…and today that is the University of Miami’s Health System and college football.
If you’re a ‘Canes fan, here’s why you should care deeply about 340B reform and the extension of ACA subsidies for the sake of your football program rising from the ashes (#4 in the AP Poll!).
Why Miami Hurricanes Football Fans should Care Deeply about ACA Expansion
Back in 2021, the Athletic (NY Times paywall) reported that the University of Miami is funding its football program through the success of…drumroll please…its health system!!
What’s happening here isn’t necessarily super nefarious. The health system is performing better financially, so Miami as a whole doesn’t have to subsidize it anymore, so they can move funds elsewhere. Colleges allocate non-sports related $$$ to sports often, from what I understand.
What it DOES bring into question is what’s the best use of funds for an academic institution receiving a boatload of money from public sources and tuition. And sure - you could argue college football IS a good use of that money. Having a good football team is great from a perception standpoint. When a football team performs better, it bolsters the brand. More students want to attend, and there are generally high spirits all around the school. And Miami is a historic, prestigious program, of course. As a raving, lunatic-level Texas Longhorns fan, I get it. I personally suffered and was victimized by the Charlie Strong years at Texas. But as a healthcare creator I still have to raise my eyebrows at seeing money being reallocated from Miami University’s general budget to fund football related endeavors.
There’s a broader conversation to be had about general fund reallocation, so I’ll leave that to the policy experts and folks smarter than me. But take, for instance, one ‘small’ example - the article brings into question the 2021 buyout of then-Oregon-head-coach Mario Cristobal from Oregon for $9M along with buying out Manny Diaz, Miami’s then-current head coach, for $8M - a collective $17M at a time when millions of Floridians are uninsured or on Medicaid. Then you think about the funding Miami-affiliated hospitals and health systems receive from state directed payment and disproportionate share programs, and the questions around appropriate usage of funds compound.
But what might be interesting to keep an eye on…are the LARGE, looming potential headwinds for Miami’s health system we’ve been discussing within Hospitalogy that may affect UHealth’s future profitability...and may hamper the football team’s success. The same dynamics at play across the country will affect Miami’s health system too - and academic medical centers across the nation. But Miami will feel it much more acutely. Pun intended. Here are a few examples:
UHealth received $175M from NIH, and we all know how NIH stuff is going.
Florida in general has the highest number of people enrolled in the ACA marketplace - now nearly 5 million individuals or about 1 in 5 Floridians. Miami as one of the most populous cities in Florida is one of the most exposed from an ACA subsidy expiration standpoint. 54% of Miamians depend on ACA marketplace plans, and roughly a third use tax credits to pay for healthcare. This dynamic holds both political (mid-term) and profitability implications. As an aside, already we’re seeing some House Republicans introduce legislation on subsidy extension. See the phase-in analysis from Bank of America original research below. The fewer people on ACA plans, the worse UHealth’s payor mix, and therefore the lower profitability overall. This is a good overview of Miami’s exposure from an opinion piece within the Miami Herald.
Jackson Health, which in my understanding is affiliated with UHealth, received $1.8B in state directed supplemental Medicaid payments
Decreases in Medicaid enrollment will increase the number of uninsured, further squeezing profitability at UHealth
Here’s the UHealth financial breakdown from ProPublica. Its hospital and clinic operations also saw a huge jump in Medicare and Commercial revenues, both increasing on a % of patient revenue basis when looking at the combined payor mix:
When looking at sensitivity to current hospital headwinds, Ardent Health was a decent proxy / comp. Ardent is a player similarly exposed to ACA subsidy headwinds. Back in Q2, Bank of America estimated a significant headwind for Ardent.
Think of how much greater in magnitude this affect is for Miami and how specifically exposed the city is to ACA enrollment. Then add on supplemental payment cuts on top of that and you’re looking at a substantially different margin profile by 2030 than you’re experiencing today.
Today, Miami is #4 in the nation in college football, its health system is highly profitable, and the program is building new football facilities, paying key coaches, and allocating funding for the football program in a big way.
I have no idea how closely this ties into the university’s overall budget or the specific funding mechanisms.
But what I can tell you is that if Congress doesn’t extend subsidies and UHealth’s operating margin dips red - significantly - it’s possible the U is in for a rude awakening. And that may have significant ramifications for the win column.
“What we know today is the institution we call the University of Miami cannot be successful if the health system isn’t successful,” President of UM and CEO of UHealth Joe Echevarria said in a roundtable with student media on Nov. 20, 2024.
The University’s dependence on UHealth is possible because of its financial success. This is ensured by bringing UHealth to its full potential before working on other projects for the University.
“So there was an early focus on the health system because it needed some development, but now it’s humming,” Echevarria said. “Because it’s humming, we now can do more things.”
Maybe Miami’s representatives can distract them with football, and maybe they’ll see better performance than a Pop-Tarts bowl loss in 2025.
Incentive Misalignment: An Example from College Football Conferences
I couldn’t pass up an opportunity to talk about incentives and college football without bringing up conference realignment! Here’s an example of how incentives (e.g., TV markets) drive outcomes: First, I’ll show you how college football conferences ought to be aligned geographically…
…Versus how they’re actually aligned: Taking a peek at the Big 10 first - coast to coast representation!
ACC - more of the same.
And…the Big 12 (You get the picture here right!)
Now imagine the incentives at play in healthcare - a $4.9T industry and 17.6% of GDP - projected up to 20.3% in 2033 growing at a 5.8% clip.
PS - If I’m a college student and have to fly from Southern California to Rutgers or Cal to Boston College on a weekday… I would highly consider quitting. I guess they get paid now, at least!
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MISCELLANEOUS MADDENINGS
Random personal anecdotes and musings from me
The Hospitalogy VBC retreat is Thursday! For the 50 folks who are attending, see you there!
Thanks for the read! Let me know what you thought by replying back to this email.
— Blake
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