January 2021 Letter
Light at the End of the Tunnel
Thank You, Healthcare Professionals!
As we sit down to write another quarterly letter from home, we do so heartened by the fact that the first Americans are receiving Covid-19 vaccinations. While all of us were impacted by the pandemic, some tragically, others annoyingly, it was our nation’s healthcare professionals that lived with the virus 24-7 for the past 10 months and counting. Now, as we see a light at the end of the tunnel, the December surge in Covid-19 cases is stretching our nation’s healthcare system to its breaking point once again. This quarter, we want to recognize everyone in our healthcare system, from the front lines, to the supply lines, to the labs developing vaccines and treatments, for their efforts to see us all through to that light at the end of the tunnel.
Out of the Blue
Covid-19 arrived on our shores last February and immediately went after our most vulnerable, our seniors. Approximately 1.5 million people reside in nearly 16,000 nursing homes across the country with over one million more in nearly 30,000 assisted living facilities. According to the U.S. Bureau of Labor Statistics (BLS), over three million people work in long-term care settings, including care providers, administrators, cooks, and custodians. They were first on the front line. By mid-March, long-term care facilities were generally on lockdown and the scramble was on for virus testing and personal protective equipment (PPE). As of early December, according to the Centers for Medicare & Medicaid Services (CMS) over 400,000 long-term care residents had been infected with Covid-19 and over 80,000 had succumbed to the virus, a staggering mortality rate of 20%. As for those who care for our seniors, the CMS reports that as of early December over 350,000 had been infected and over 1,200 have lost their battle. Sobering numbers, indeed, but just the tip of the iceberg for our overall healthcare sector.
As the virus went mainstream in the spring, it did so in waves of regional hotspots, starting in New York City. In early April, NYC hospitals were quickly filling up with many area hospitals converting under-utilized wards into Covid treatment wards. Additionally, field hospitals were being set up in alternative locations, including convention centers, transportation terminals, and even a horse racing facility. Meanwhile, hospital professionals, dealing with shortages of PPE, Covid tests, and support staff, were working 12, 24, even 36-hour shifts. And when shifts were over, many were afraid to return home and risk spreading the virus to loved ones. Scenes like these would soon play out throughout other parts of the country as the virus spread.
Closer to home, Los Angeles County saw a surge in hospitalizations develop in November that dwarfed earlier spikes and now resembles the exponential wave seen in New York City at the start of the pandemic. A week before Christmas, the county had nearly run out of ICU beds, primarily due to shortages of care providers to tend to those beds.
The gravity of the situation can best be explained by looking at the country’s overall care capacity. According to the Kaiser Family Foundation, there are approximately 2.8 hospital beds and 2.6 physicians per 1,000 residents in the U.S. Overall, the BLS estimates 6.6 million people are employed in hospitals, including nearly four million nurses. Considering every one of us is susceptible to the virus and it spreads rapidly and easily, it’s easy to see how parts of the healthcare system can be overrun in a short amount of time. As the virus spreads at varying rates regionally, healthcare professionals have volunteered to relocate to hard hit hotspots and many have come off the sidelines to pitch in as well. For instance, back in March, New York State reported that over 76,000 healthcare professionals who were otherwise retired or pursuing other interests volunteered to help, including 30,000 nurses. The mobilization of healthcare professionals and the hours committed to caring for Covid-19 patients has truly been remarkable and inspiring.
Not long after the initial Covid-19 cases were discovered, scientists had mapped a complete genome sequence for the virus, paving the way for vaccine development. Undeterred by skeptics who pointed out vaccine development can take many years, several pharmaceutical companies set out to find and test an effective vaccine in approximately a year’s time. Multiple approaches would be deployed, some new and experimental and some tried and true based on existing vaccine platforms. Collaborating with governmental entities, not only would these companies research multiple shots on goal, they would also take the unusual step of mass producing doses while vaccines were still in trial phases knowing that a failure at trial would result in useless doses being tossed out.
Pfizer and Moderna both pursued a new vaccine technology called Messenger RNA, or mRNA. mRNA vaccines instruct our cells to create a harmless spike protein. Our immune system recognizes the new spike protein and triggers an immune response and the making of antibodies. In addition to the scientists who brought this new approach to fruition, we must also recognize the trial volunteers as true heroes. Between Pfizer and Moderna over 70,000 people volunteered for a phase 3, two-dose trial of this heretofore experimental vaccine. Half received the actual vaccine and half received a placebo. For these trials to succeed trial participants needed to be exposed to the virus. Again, over 70,000 signed up for this, not knowing if they were protected or not. Thanks to the rapid spread of the virus both trials were able to gather the needed data relatively quickly. Fortunately, both trials were successful with an efficacy rate exceeding 90%. Trials are ongoing at other pharmaceutical companies using more traditional vaccine platforms and data are expected to be seen early in 2021 with the potential to add billions more doses.
As of early January, approximately 5 million shots have been administered, short of initial expectations highlighting the immense logistical challenges. Healthcare professionals have been among the early recipients. For almost the past year now these professionals have been exposed to the virus, some on a daily basis. Many have been infected by the virus and unknown numbers have suffered other emotional tolls and family hardships. Hopefully, these vaccines will help protect them now and the rest of us down the road.
We now believe there is a light at the end of the tunnel and for this we can thank the millions of people who keep our healthcare systems working. The road to re-opening, however, could still be a long and bumpy one for our physical, mental, and financial health. The start of any new year is the perfect time to make sure your personal affairs are in order. In the past we’ve written about the importance of reviewing and updating important documents.
A medical power of attorney is also known as a health care proxy. This allows you to name another person, such as your spouse or adult child, to make medical decisions for you if you are unable to do so. A medical power of attorney is not the same as a power of attorney that allows another person to handle your financial or legal affairs. Choosing the right person to act on your behalf regarding important medical decisions is vital since not every situation can be anticipated.
Medical directives also help others know exactly what type of medical care you want. An advance directive allows you to express your values and desires related to end-of-life care and helps loved ones and medical personnel make important decisions during a crisis. Having an advance directive in place ensures that your wishes regarding your health care are carried out, even when you're unable to make your wishes known. States regulate advance directives differently and having an attorney prepare your advance directive is a wise choice. Individuals with residences in multiple states may wish to have advance directives in each state. Importantly, ensure your health care proxy has updated copies of your advance directive and give your advance directive to your doctor and other relevant medical care providers.
Lastly, if you’ve deferred or been unable to tend to any health issues over the past year PLEASE address those as soon as possible.
We will continue to monitor the economic implications of the reopening and we encourage you to look at our updated investment outlook for 2021 included with this letter. We welcome your feedback and wish all of you good health, happiness, togetherness and a resumption of normal daily life in 2021. Happy New Year!
COVINGTON CAPITAL MANAGEMENT
601 South Figueroa Street, Suite 2000
Los Angeles, CA 90017 | 213.629.7500