June 22, 2018

The Weekly Gist: The Atul Gawande Edition

by Chas Roades and Lisa Bielamowicz MD

It’s been an exciting week of World Cup action, with tournament favorites Brazil snatching a late brace today to stay in the hunt after wobbling in their opener, and Lionel Messi finally running into the one team that could slow him down—his own Argentina side. With no US team to root for, we’ve been tracking progress through our own lens—healthcare. Our Healthcare World Cup bracket is holding up pretty well so far, but we’ll see how long that lasts!

Meanwhile, since neither of us got the call from Jeff Bezos and Warren Buffett to come rescue the US healthcare system, we’ve been busy out on the road with clients this week, while keeping an eye on happenings in our industry. Here’s what’s up.


THIS WEEK IN HEALTHCARE

What happened in healthcare this week—and what we think about it.

Offering our advice to a superstar selection

Unless you’ve spent this week vacationing on a remote island with no internet access (and we hope you have!), you’ve likely heard that Harvard surgeon and frequent New Yorker contributor Dr. Atul Gawande was announced as CEO of the recently launched joint venture between industry giants Amazon, Berkshire Hathaway, and JPMorgan Chase to reduce employee healthcare costs. Gawande was one of a list of prominent candidates interviewed to lead the venture, which will be based in Boston and run as an independent non-profit company.

As we’ve discussed, we’ve been a little skeptical of the likely impact of the “ABC venture”, given the lack of detail on focus or structure, and muted success of previous employer coalitions—not to mention JP Morgan Chase CEO Jamie Dimon’s quick backtrack on the ambition when his banking clients expressed concern. However, the power of these three companies, combined with Gawande’s leadership, has the potential to shake up the healthcare marketplace. Here’s our list of five things to watch to see if they’re serious: 

  1. Will the “ABC venture” quickly get specific about how they propose to impact healthcare? We know little about the focus of the venture. Is the goal to simply reduce costs or to create a better care product that drives consumer value? Are they solely focused on their employees, or healthcare consumers broadly? Is this a real area of focus for the three companies, or merely a side show?
  2. Can they avoid the path of previous “employer coalitions” that launched with big aspirations but have delivered little impact? Witness the Health Transformation Alliance, which includes 40 of the largest companies in America. Two years after their launch, they’ve only made it as far as creating narrow networks in three markets and signing moderately-discounted contracts with a couple of PBMs and a health plan.
  3. Can they move beyond the usual (and vague) goals of “population health” and “decreasing total cost”? Our discussions with employers suggest that cost drivers in the commercial population are varied and often tied to high-cost episodes and pharmaceuticals, very different from the chronic disease focus of most population health work.
  4. Will this be Gawande’s full-time job? Gawande will reportedly continue his work as a surgeon, Harvard faculty member, writer and leader of his start-up research firm, Ariadne Labs. There’s a real question whether he will have the bandwidth and focus to lead the growth of a new company. At minimum he’ll need a strong team with business and operations experience.
  5. Can they draw on the strengths of the three parent companies to create something truly unique? All three bring unique assets and capabilities that could create an unparalleled consumer-focused healthcare solution. Imagine using the technology, analytics and customer obsession of Amazon to create “Amazon Prime for Healthcare”. Berkshire’s Geico could underwrite the solution and disrupt traditional health insurers, and JPMorgan Chase could re-engineer the complex finances of healthcare.

Medicare moves one step further toward rolling back Stark rules

Hospitals have long complained that Stark regulations have hampered their ability to develop value-based care models with non-employed physician partners. This week the Center for Medicare & Medicaid Services (CMS) went one step further on previous promises to relieve provider regulatory burdens, issuing a Request for Information asking stakeholders to respond to twenty questions on how enforcement of Stark laws should change.

Stark regulations prevent doctors from referring Medicare patients to hospitals, labs, diagnostics and other facilities in which they have a financial interest, apart from a handful of specific situations. The laws have been moderately effective in preventing self-referral. Physicians can still own diagnostic services in their offices, and hospitals and doctors have used loopholes to share ownership (witness “creative” relationships like jointly-owned CT scanner suites with separate entrances for Medicare and commercial patients). Loosening Stark regulations could create needed channels for health systems to share cost savings with physicians, pay differentially for quality, and share more data on referral patterns and performance. However, Stark laws exist for a reason—and regulators must be careful to avoid avenues that allow providers to pay solely for in-network referrals. Many health system ACOs will admit that increasing “referral keepage” was a primary motive for entering the program—any new avenues for physician incentives must be directly tied to improved performance.

(An aside: some hope rolling back Stark could stem the rising tide of physician employment. We think that’s highly unlikely. The larger forces of deteriorating practice economics, rising technology needs and reporting complexity, and changing workforce demographics will continue to drive doctors to larger, integrated practice models.)

Oscar continues to scale up, expanding to six new markets

Insurance start-up Oscar announced the company will bring its consumer-focused insurance platform to six new markets for 2019. Oscar hopes to serve “hundreds of thousands” of new members, adding three new states (Florida, Arizona and Michigan) and three additional large markets in Ohio, Tennessee and Texas. With these additions, the company will offer coverage in 14 markets in nine states.

Oscar has grown rapidly—they enrolled 250,000 members in 2018, doubling their presence in the individual market—but has yet to turn a profit. Oscar’s 2017 medical loss ratio was 95%, far exceeding that of most major commercial insurers. Adding new markets quickly could easily increase costs and strain infrastructure. However, evolution in Oscar’s technology and market strategy makes us cautiously optimistic. With recent expansions, Oscar has entered into exclusive provider agreements with health systems, and in Tennessee with Humana, lessening the burden of aggregating a new network. By designing and owning the “full insurance stack” of technology, from claims processing to the consumer app, the company has a unique opportunity to scale care management and patient engagement nationally, and in turn lower their cost of care. Oscar has built a consumer-focused insurance offering that is gaining traction—with these aggressive expansions, their 2019 performance may determine whether the company can be a national player despite disparate markets and regulatory uncertainty.


THIS WEEK AT GIST—ON THE BLOG

What we’ve been writing about this week on the Gist Blog.

Should My Health System Launch a Health Insurance Plan?
In our inaugural guest blog post, Michael Dudley, President and CEO emeritus of Optima Health and SVP of Sentara Healthcare in Virginia, shares his insights from four decades leading health plans for Sentara and Kaiser Permanente. Michael provides guidance for health systems looking to launch or grow their own health plans, as well as cautionary notes for those considering an integrated payer-provider strategy. He urges health system executives to be courageous in pursuing the opportunity, without overestimating the time and commitment needed to build a successful payer capability.

It’s a terrific piece and has already garnered the attention of the industry press. We’re honored to have Michael contributing to our blog! Look for more guest posts and interviews with leading industry lights in coming weeks and let us know if you’d be interested in contributing to the Gist Blog.


GRAPHIC OF THE WEEK

A key insight or teaching point from our work with clients, illustrated in infographic form.

Sizing the impact of Medicaid work requirements

Waivers approved in Kentucky, Indiana, and Arkansas, as well as those pending for seven other states, require eligible, able-bodied, non-elderly adults to work at least part time, to be actively seeking a job, or to participate in community service.  Those who do not comply would lose eligibility or benefits.

Logically, cutting coverage for non-working beneficiaries should decrease Medicaid spending. But as we’ve written elsewhere, there’s one small problem—the eligible population that would likely be subject to work requirements is small. Research from the Kaiser Family Foundation estimates only one in five non-working Medicaid enrollees—1.7M nationwide—will fall under work requirements once exemptions are taken into account, as shown in the graphic below. Balanced against that, the cost of implementing processes to confirm work status will likely be high and may even offset any savings in reduced Medicaid spending. Further, the burden of having to report working status may be onerous for Medicaid enrollees, discouraging them from seeking coverage in the first place. That will likely mean larger numbers of low-income patients with no coverage—a persistent challenge for providers, who will be put in the position of delivering even more uncompensated care.


THIS WEEK AT GIST—ON THE ROAD

What we learned this week from our work in the real world.

Weighing the benefits of freestanding EDs versus microhospitals

Lisa:
I spent some time this week with a regional health system discussing their access expansion plans. This system, located in a state with few restrictions on freestanding ED operations, was feeling pressure from physicians to “upgrade” plans for two new freestanding EDs (FEDs) to microhospitals. Doctors argued that the expanded offerings of a microhospital, which include a small number of staffed inpatient beds and optional surgical and labor suites, were worth the additional investment in facility capital—and delays in changing construction plans. We looked at how these two options compared and found most microhospitals open today essentially operate as freestanding EDs, rarely performing procedures or keeping patients overnight. Moreover, there is little to no research comparing them to each other, or to care in a hospital ED (one study did find acceptable door-to-balloon times for heart attack patients treated at an FED).

Regardless of which asset the system chooses to build, price transparency and patient education are critical to deliver consumer value. Few patients know what a microhospital is or how to use it. And as we’ve discussed on the blog, most care delivered in FEDs could be managed in urgent care. Patients are often shocked to find they’re paying a hospital-sized bill for care received in a strip mall. Success will be measured by how well this system can integrate a FED or microhospital into a larger access portfolio that easily navigates patients to the most appropriate, affordable and accessible care for their needs

Engaging the broader team in hard discussions

Chas:
This morning I participated in an offsite leadership retreat for a health system we work with—bringing together the top 150 leaders from across their system for a day of learning and networking. This sort of event is always interesting to witness, often with a “fun” theme (today was Aloha-themed, complete with Hawaiian shirts), and often featuring “light” content: sharing achievements from the past year, honoring key contributors, and so on. We often feel like the ants at the picnic: “Who invited these people with their depressing presentation on industry trends?” It’s always gratifying when the group really engages in the discussion, as they did today.

Despite my rather un-Aloha talk on the future reimbursement and the need to contain costs, I was struck by how quickly participants pivoted to implications for their daily work and started brainstorming solutions. It’s a sign of a well-led, highly-motivated leadership team—a point the CEO emphasized when I remarked on the quality of the discussion afterward. It’s tempting to reserve “tough” conversations about industry economics and strategic challenges for executive team meetings, but (as today’s retreat demonstrated) there’s so much power in bringing the broader leadership group in on the dialogue, rather than trying to shelter them from the hard questions and keeping them heads-down on their own work. Not only are there great ideas to be found deeper in the organization, but that’s where the system leaders of the future will come from.


GIST IN THE NEWS

We said it, they quoted it.

“Amazon, Berkshire Hathaway and JPMorgan Name C.E.O. for Health Initiative”
New York Times; June 21, 2018.

“The choice of Dr. Gawande, a highly respected doctor and writer on health care, was met with surprise because he has little hands-on experience running a large health care organization, unlike some of the boldface names that have been floated as possible candidates.

‘He’s such a well-known health care luminary and keen observer, but this is a big leap,’ said Dr. Lisa Bielamowicz, a co-founder of Gist Healthcare, a consultancy in Washington. “He hasn’t led a huge team or company.’”

“‘How do you create an Amazon Prime for health care?’ and other challenges for head of effort to reinvent medical care”
Boston Globe; June 22, 2018.

“‘The lack of details makes it a little bit of a shot in the dark,’ said Dr. Lisa Bielamowicz, cofounder and president of Gist Healthcare, a health care consultancy in Washington, D.C. It ‘doesn’t point to a lot of meat there yet.’

Bielamowicz said that employer health care coalitions have made only incremental progress in the past—using group purchasing to negotiate lower prices on prescription drugs, for example—but have failed to produce transformative ideas.

‘But one of the things Amazon has done very well is they view consumer value as the guiding light for every decision they make,’ she said.

A case in point: Free shipping. It seemed counterintuitive at first but has ‘been core to developing a deep relationship with customers. How do you create an Amazon Prime for health care? How do you deliver so much value that people want to be a member?’ she asked.”

“When a Health Insurer Also Wants to Be a Hospice Company”
New York Times, June 22, 2018

“Home health care, including hospice, is a critical component of Humana’s strategy, analysts say, which is to offer an array of services for people as they age. The insurer may also be betting that hospice care in the home eventually becomes a part of what private Medicare plans must cover in the future.

‘Humana wants to own the home,’ said Chas Roades, a founder of Gist Healthcare, a consultant, even at the end.”


ON THE GIST TURNTABLE

Give this a spin, you might like it.

Two new releases to recommend this week for your summertime listening pleasure, both from the new jazz scene that’s been building over the past few years. Thanks to the expansive musical palette of Kendrick Lamar, probably the greatest rap artist of his generation, a cadre of exciting young musicians have re-energized the relative backwater of American jazz, many of them featured on Lamar’s 2015 masterpiece To Pimp a Butterfly. At the forefront of this group is the one-of-a-kind Afrofuturist saxophonist and band leader Kamasi Washington, who set the jazz world on fire with his 2015 debut double LP The Epic, and who returns this week with an equally-grand follow-up entitled Heaven and Earth.

Blending raw horn-playing with gigantic orchestral sound and a full chorus, Washington has created a new kind of jazz, combining influences ranging from Blaxploitation soundtracks to video game music, and delivering a message as political as it is musical. Check out the ode to Jackie Chan’s kung-fu flick, “Fists of Fury”, or “Street Fighter Mas”, rooted in the arcade classic. Washington is at the height of his power as a composer and musician, and he’s assembled a crew of collaborators (the otherworldly bassist Thundercat, the virtuoso drummer Ronald Bruner, Jr. and the multi-instrumentalist Terrace Martin, among others) who are all at the cutting edge of their craft. We’re very far from the privileged jazz of black turtlenecks and NPR listeners. Kamasi Washington and his band of brothers (and sisters) is producing the jazz of tomorrow. Even if you’re not a jazz aficionado, you shouldn’t miss this landmark release.

(Bonus pick: Check out the new collaboration R+R=NOW, another jazz supergroup that’s pushing the boundaries of the genre. Their new release, Collagically Speaking, led by pianist Robert Glasper, is a fusion of jazz, R&B, soul, and hip hop that lends further credence to the idea that jazz is as relevant as it’s ever been, right now.)


WHAT WE’RE READING

Stuff we read this week that made us think.

Worksite clinics—done well—can dramatically lower healthcare costs

Nearly a quarter of large employers now offer worksite clinics. New research published this week details just how large an impact a well-designed worksite clinic program can have on employee healthcare costs.  In what may be the most comprehensive study of worksite clinics to date, a group of researchers led by the RAND Corporation examined the seven-year impact of worksite clinics established for teachers in Metro Nashville Public Schools. In partnership with Vanderbilt University Medical Center, five “near-site” clinics were strategically placed in the Nashville market so that nearly all teachers could access care in a 15-minute drive. Staffed by nurse practitioners and health coaches, teachers had access to same-day primary care visits as well as a range of chronic disease management programs.

Results were striking: using a school-based primary care provider reduced an employee’s average annual healthcare costs by a whopping 15 percent ($4298 vs $5043), largely from lower hospital inpatient and outpatient costs, and reduced prescription drug spending. Teacher absenteeism was also reduced for the worksite clinic group, but there was no impact on self-reported health status or student performance. Counterintuitively, teachers who used worksite primary care had fewer primary care visits than those use used a community PCP—suggesting that immediate, convenient access, versus simply more primary care utilization, may be key to lowering costs for this population (importantly, health status among the groups was the same). While a doctor supported NPs remotely, nearly all care was delivered by non-physician providers.

Across this year six states have seen teacher demonstrations and walkouts as wage growth has stagnated. Teachers have been willing to trade lower salaries for rich benefits, but in recent years teacher benefit costs have skyrocketed with employee out-of-pocket spending consuming a larger portion of pay. This study shows that a well-designed, relatively low-cost near-site clinic program can lower healthcare costs while increasing access for teachers. We hope more cash-strapped states and school districts, as well as the broader employer community, look to these kind of solutions as a way to provide better healthcare at lower cost.

A related gripe: does a “publishing oligopoly” limit the impact of important research?

To give you our take on the RAND study, we went beyond the trade press reporting and press release to the original sourceand were surprised to find that online access to a single article in the Journal of Occupational and Environmental Medicine cost a whopping $51.49! This led us to question whether access costs may be limiting how important research findings are distributed. A quick search revealed that after a string of mergers, the business of academic publishing is now dominated by an oligopoly of highly-profitable publishing companies. Five companies now control over half of all papers published—and make an average profit margin of 40 percent! (For comparison, the same five controlled just 20 percent of publishing in 1973.)

Rising costs to both researchers and those who access their work are leading many to question what value traditional publishers add. In addition to printing and mailing hard copies of journals, publishers assert they manage the peer review process; however, the vast majority of reviewing scientists contribute their time for free. Open-source journals are capturing a growing portion of solid research, and making it available at a much lower cost. New publishing models that disintermediate traditional publishing houses are another example of how eliminating costly “middlemen” who add little value can increase access and lower costs for consumers.

Examining the impact of the Indiana experiment in Medicaid

We’ve closely observed the performance of Healthy Indiana 2.0 (HIP 2.0), since the state used an 1115 waiver to expand Medicaid in 2015, and became the first to create consumer-focused incentives and health savings accounts for Medicaid beneficiaries. An important new study in Health Affairs provides the first detailed look at how Indiana’s Medicaid compares to other midwestern states, finding that the process and cost-sharing burdens dampen the impact of Medicaid expansion.

HIP 2.0 requires Medicaid enrollees to sign up for an HSA-like “POWER” account and pay small income-adjusted monthly premiums. Beneficiaries then “pay” for healthcare services from the account. Those who make regular payments receive an expanded set of benefits, and failure to pay can result in lockout from the program. Prior research showed that only 73 percent of eligible beneficiaries enroll and make their initial payment, and 8 percent of members were disenrolled for failing to make payments. This new study finds that Indiana’s plan design generated smaller coverage gains from expansion than neighboring states like Ohio, which placed fewer restrictions on access.  Medicaid cost-sharing and work requirements (which we’ve discussed on the blog) will likely impact beneficiaries beyond the target population, with eligible members losing coverage due to process and reporting challenges. Keeping an eye on the results of early adopters (and the impact on providers in those states) is critical as more state legislatures use waivers to move toward Medicaid expansion.


That brings us to the end of another Weekly Gist—thanks for reading! Every week we’ve been blessed with new readers and new subscribers, and we’re so grateful for the gift of your time. If you’ve found it interesting, please don’t forget to pass it along to a colleague or friend and encourage them to subscribe as well. And definitely let us know what you think—we love getting your feedback.

Most importantly, let us know if there’s any way we can be helpful in your daily work—you’re making healthcare better…we want to help!

Best regards,

Chas Roades
Co-Founder and CEO
chas@gisthealthcare.com

Lisa Bielamowicz, MD
Co-Founder and President
lisa@gisthealthcare.com