January 25, 2019

The Weekly Gist: The Baby Shark Edition

by Chas Roades and Lisa Bielamowicz MD

Some good news to end the week, as it appears the political logjam has broken, at least temporarily, and the Federal government is set to reopen while negotiations over funding continue. Now we can turn our full attention to the other critical issues of the day: who got robbed in the Oscar nominations, how to fix our nation’s broken pass interference rules, and most importantly, what’s the next move for the creative geniuses behind “Baby Shark”?

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

Trump vows to end “surprise billing” practices

On Wednesday, President Trump convened a roundtable of administration leaders, policy experts and patients who have been affected by “surprise” medical bills, instructing Health and Human Services (HHS) Secretary Alex Azar and Labor Secretary Alex Acosta to jointly investigate the phenomenon and develop a solution. Stories of patients facing large medical bills incurred when receiving care from an out-of-network provider have been a focus of the media across the past year, and some of these patients (remember the family hit with a $18K bill for a urine test?) met with the President to share their stories.

Research shows that surprise medical bills are widespread, with 18 percent of commercially-insured patients receiving a surprise bill for out-of-network charges following an inpatient stay, often when a portion of their of their care was provided by a physician who was out-of-network even though the admitting hospital was in-network. While states such as California and New York have passed legislation to mitigate the practice, self-funded plans—which now cover over 60 percent of all commercially-insured Americans—are often exempt from state regulation, and new Federal policy would be required to make changes. While no details were given about the Administration’s plans, the issue could present a rare opportunity for political compromise. Case in point: last September a bipartisan group of senators led by Senator Bill Cassidy (R-LA) unveiled draft legislation to prohibit “balance billing”, or the practice of billing patients for the balance of a bill not paid by an insurer when patients receive emergency care from an out-of-network facility or provider, or when patients are treated by an out-of-network doctor practicing at a hospital that is in-network. Complete legislation is likely to be introduced later this year. In the meantime, health systems who want to increase consumer value should view avoiding surprise billing as a part of their mandate: ensuring in-network coverage of all hospital-based providers will be a critical part of “curating” the provider network and delivering a consumer-focused patient financial experience.

More evidence on the popularity of Medicare for All

This week the Kaiser Family Foundation (KFF) released findings from their January tracking poll on public opinions about the Affordable Care Act (ACA) and recent proposals to expand coverage. According to poll results, 56 percent of the public is in favor of single-payer, Medicare-for-All (M4A) coverage, while 42 percent oppose such an approach. Even larger majorities of Americans support more incremental approaches to expanding coverage, with 77 percent in favor of allowing Americans between the ages of 50 and 64 to buy Medicare coverage, 75 percent supporting the idea of allowing buy-in to Medicaid plans for those without insurance, and 74 percent in favor of a “public option” similar to Medicare being made available to everyone. Yet when given details about the possible implications of such plans, public support drops significantly. While 71 percent would support M4A if it “guaranteed health insurance as a right for all Americans”, only 37 percent would favor it if it meant the elimination of private health insurance companies or required higher taxes to pay for expanded coverage.

The latest polling results come at a pivotal moment in the national healthcare reform debate, as Democrats take the reins in the House and the 2020 Presidential campaign begins to kick into gear. A range of coverage expansion bills have already been introduced by Democrats in Congress, and most of the current or likely contenders for the party’s Presidential nomination have explicitly come out in favor of M4A. Only 11 percent of the public in the KFF poll put “repeal and replace” of the ACA at the top of their list of healthcare priorities, and sizeable majorities express support for expanded public coverage—it’s clear the political debate over healthcare is now being waged on the Democrats’ terms. Yet the KFF poll highlights the fact that the public is still largely unaware of the details or implications of the leading reform proposals. With government divided and campaign fever setting in, we’re unlikely to see any major action on coverage expansion in the next two years. But given the results of recent polling, it’s becoming clear that what the public really wants is more choice and more affordable coverage—not necessarily “Medicare for All”, but “Medicare for More”. We continue to believe that the most likely outcome of this debate will be “Medicare Advantage for More”, with some kind of buy-in option for younger Americans to access private Medicare coverage.

Get ready, here come the ads

Regardless of the eventual outcome of the debate over M4A, there’s sure to be one clear victor: advertising agencies. This week, the Partnership for America’s Health Care Future—an industry coalition that includes insurance, pharmaceutical, hospital and physician lobbying groups—fired the first salvo in the battle for public opinion, launching a new digital ad that’s now popping up on Facebook, Twitter and YouTube. The two-minute spot, entitled “Working Together”, is reportedly part of a six-figure advertising buy that the group is planning for this year. While highlighting some of the key successes of the ACA, such as protection for consumers with pre-existing conditions and allowing young adults to stay on their parents’ health policies, the ad targets precisely those concerns surfaced in the KFF tracking poll. Claiming that a “one size fits all” M4A plan would result in higher taxes, lower quality, and longer wait times, the ad raises the specter of “politicians and bureaucrats” deciding how care is delivered, rather than patients and doctors. It’s only a matter of time before Harry and Louise, or their Internet-era descendants, make their triumphant return to the airwaves, taking up the pro-M4A mantle. We’re going to hear a lot of rhetoric on both sides of the debate over the next couple of years, much of it oversimplified and alarmist. Keep an eye out for more ads to come.


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

Investing in system-wide clinical enablement

For the past few weeks, we’ve been sharing our framework for helping health systems create a new approach for investing in delivery assets. We’ve encouraged the health systems we work with to take a different approach to planning, starting by asking what consumers need, and working backward to what services, programs and facilities are required to meet those needs. This approach led us to break the enterprise into component parts that perform different “jobs” for the people they serve. We think of each of those parts as a “business”, located at either the market, regional or national level depending on where the best returns to scale are found (and on the geographic scale of any particular system). We began by describing how a consumer-oriented health system should be organized at the market level, with expanded access and senior-care businesses providing lower-cost care in an outpatient setting for many services that were previously delivered in an acute-care hospital, and how the profile of the local hospital needs to change in response. We then described the health system services that can be scaled at the regional level, starting with specialty care, the medical and surgical specialty services that comprise much of hospital service lines, and the physician business, the owned and aligned clinical network, comprised of the physician practices and allied providers, responsible for delivering care.

This week we shift our attention to health system services that can be scaled to a super-regional or national level, describing what we call the health system’s clinical enablement platform. Shown below, it’s a set of services focused on making care delivery more effective across the system. The platform centers on two key functions, neither of which are tied to any particular geographic boundary. First, the system must develop the ability to define and disseminate best-practice care across the organization. Fueled by system-level data and analytics which help to identify its own internal clinical best practices, clinical leaders can build system-wide clinical guidelines and standards, which can then be implemented locally, tailored to market needs and practice dynamics. Combined, these enable the creation of a “system way” of delivering care, with consistency in outcomes, cost and experience for patients and consumers that is central to the health system’s brand promise. The second component of the clinical enablement platform is built around virtual care delivery. This includes telemedicine, both direct-to-patient delivery and consultations between clinicians, as well as other elements of digital medicine such as remote patient monitoring and even virtual care management. Creating a system hub for digital medicine allows the knowledge of key providers to be distributed across the organization, and for the limited supply of clinical labor to be better leveraged.

For the clinical enablement platform to be effective, it must increase the value provided to consumers receiving care locally, making those services lower-cost or more effective—a critical litmus test for any service scaled to a national level. Second, the clinical enablement platform should be adaptable to the local care environment and physician practice dynamics, identifying and standardizing only those elements of care that are critical to best outcomes. Sometimes this will mean defining one system-level care standard (e.g., this is the “system standard” protocol for management of patients on ventilators in our system). But more often it will mean setting system standards for outcomes and experience, and giving local or regional operators leeway to define and implement them in their markets (for example, a system determines that every market must offer after-hours primary care access, but how that is implemented is decided locally).

Most large health systems are still in the early stages of developing these capabilities—and some of the leaders in creating effective clinical enablement platforms are not the biggest systems, but rather strong regional systems who have built organized provider networks across geographically-concentrated clinical networks. This led us to initially conclude that there was advantage to a regionally-focused organization. As we analyzed these systems further, it became clear that success in effective clinical enablement is not dependent on geography but on strong, centralized clinical governance across a tightly-aligned provider network with a common culture, and health system leadership that invests in the resources needed to assist clinicians in identifying and implementing system best practice. Continued success for those leading regional systems may depend on their ability to scale their local and regional clinical enablement platforms further as they expand into new markets.


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

Is there an “order of operations” for building physician governance? 

We were recently asked by the chief physician of a large health system to assist with what seemed like a simple request: “We’re looking to reorganize and grow our medical group. Could you help us figure out how to do that?”Our first visit with physician leaders revealed that this seemingly straightforward question had many layers of complexity. In addition to their own employed medical group, the health system has three vehicles to employ physicians within the region, with no method to coordinate decisions across them. This has led to internal competition in physician recruitment, with two of the system’s employed medical groups vying for the same surgeon, essentially engaging in an internal bidding war. Employed physicians comprise only a small portion of the system’s aligned medical staff, with hospital leaders relying on key independent groups for talent, and worried that growing the employed group will cause friction. To top it off, the health system has a large residency program, and any plans to grow the employed medical group, where many faculty members reside, will have to take into account training and research, and the needs (and egos) of department chairs.

After interviewing physician stakeholders and system leaders, we concluded that the greater challenge for this system was the lack of a coherent physician alignment strategy for the larger market, and a way to make decisions about network growth and investment that were in the best interest of the system’s larger goals. We determined that before any plans could be made to grow the employed medical group (or any other part of the physician enterprise), the system needed to create a forum to align decision-making for physicians across the market. The system agreed to launch a physician leadership council, led by the chief clinical officer and bringing together senior leaders from the employed groups, academic enterprise, and key independent and hospital stakeholders. This group will set market-level physician strategy and work to resolve any conflicts between groups in the system.

The leadership council will also lead the development of a new system-wide physician governance structure. We recommended a service-line structure, given the number of stakeholders and the demands of academic medicine. Critical to the success of this effort will be the ability of the system to align both clinical decision-making and business strategy within those service lines. It’s a tall effort to be sure—one well beyond the initial question of the medical group leader who made the call to us. But it’s necessary to be able to address the challenges faced by the employed medical group, and foundational for the system as they look to create an aligned network that delivers consistent, coordinated care and experience to customers across the market.

Being explicit about decision-making

Recently we facilitated a day-long meeting for one of our clients who is looking to build a new governance model for their regional clinical enterprise. It’s a complex undertaking, requiring them to bring together a broad spectrum of stakeholders—their own employed medical group, a handful of independent groups with whom they’ve built partnerships over the years, a joint venture partner, the leaders of the system’s hospitals, and their academic affiliate. All of these relationships—each with its own decision-making structure and incentive model—have accreted over time but have not operated as a cohesive whole. Now, faced with an increasingly competitive marketplace, the system wants to build an overarching structure to coordinate the activities of the disparate constituents, and to allow them to go to market with a unified platform capable of delivering better value to consumers and purchasers.

In preparing for the meeting, we quickly realized that the crux of the problem is decision rights. Every initiative or major decision that the system wants to make is getting bogged down in an endless process of discussion, second-guessing, and turf battles between the constituent groups. In our session with the group, we shared our perspective that the most important part of designing any organizational structure is being very explicit about how decisions are going to get made. To that end, we provided with them a decision-making framework that we’ve seen implemented in other organizations, a variation on the RACI responsibility assignment matrix that’s been a mainstay in organizational science for decades.

At its heart, it’s a role-based decision process, in which different stakeholders are assigned discrete parts to play in coming to a decision. RACI is an acronym for four of the pivotal roles: Responsible, Accountable, Consulted, and Informed. There’s no magic to the specific framework—indeed, there’s a multitude of different flavors of RACI. (We like the Bain & Company notion of asking “Who has the ‘D’”, or—to paraphrase George W. Bush—who’s the Decider?) Across the day, we introduced the framework, role-played making a specific decision using it, and then began to evaluate a strawman model for the unified clinical enterprise using the framework. We’ll keep you posted as the model moves from evaluation to implementation, but we were struck by the power of having an explicit, concrete discussion around decision rights. Given the complexity and organizational inertia that characterize many healthcare organizations, taking the time to clarify who gets to make which decisions, and how, seems like a worthwhile endeavor.


Give this a spin, you might like it.

There’s something so exciting in watching an artist make a creative leap, moving beyond the terrain they’ve mastered to take a risk on producing something new and different. Particularly on today’s algorithmically-produced, niche-marketed music scene, it’s rare to see a successful “swerve”, a genuine evolution. But that’s just what indie singer-songwriter Sharon Van Etten has pulled off, delivering the first great album of the new year. Remind Me Tomorrow, her fifth studio release, sees Van Etten breaking free from the confines of her Joni Mitchell-cum-Patti Smith comfort zone, exploring a whole new sonic layer of beats, synths, and edge that, combined with her already strong lyrical abilities, puts her on an altogether new level. In the five years since her last, more typically folk-influenced release, she’s developed a wiser, more musically-fluent approach, working with St. Vincent producer John Congleton to push the boundaries of her landscape. The new tracks share a worldly-wise perspective but showcase a range of aural atmospherics that add new depth to the stories she’s telling, bringing new power to her economical lyrics. Album highlights include the sparse, Siouxie-inspired “Comeback Kid”, the nostalgic self-portrait “Seventeen”, and the trippy “Memorial Day”—none of which would have found a place on her earlier albums. The ideal January record release: out with the old, in with the new.


Stuff we read this week that made us think.

Questioning the ethics of pursuing “grateful patients”

Naming a wing, unit or hospital building after a wealthy donor is nothing new, and hospital executives have long had programs to build relationships with “grateful patients” who wish to make a contribution. A piece this week in the New York Times challenges this practice, and in particular, the ethics of analyzing patient financial data and public records to identify likely donors. A 2013 change to privacy laws made it easier for hospitals to share information with fundraisers. Now many hospitals have built automated systems to perform “wealth screenings”, combining patient medical records, financial information and publicly-available information such as property records, and political and charitable contributions to identify patients with the means and likelihood of making a large donation. Target patients may receive nicer amenities or a visit from a hospital executive, and follow-up from the hospital’s development staff.

Medical ethicists are split on the practice, with one calling it “unseemly but not illegal or unethical”, but another saying that the practice, and particularly getting physicians involved in the process, is “fraught with danger”. Previous research has shown that half of oncologists reported being trained to identify potential donors, and a third had been directly asked to solicit donations from patients. The reactions of physicians and patients profiled are mixed. Many doctors feel uncomfortable about the practice but recognize the importance of philanthropy. Some patients want to express their gratitude through donation—but others expressed concerns about misleading connections between their doctors’ needs and where their donations would be spent. They also questioned whether large health systems with billions in revenue and millions in profits should be routinely pursuing large donors. Rising public scrutiny around billing practices also highlights the dissonance between asking for philanthropic donations while at the same time aggressively pursuing a schoolteacher or bus driver for thousands of dollars in out-of-network claims. We’d expect these tensions to continue to grow, as rising margin pressures make philanthropic income even more critical for hospitals—but transparency and a growing healthcare consumer marketplace raise questions of how much of a nonprofit health system’s work truly is “charitable”.

Verticals gonna vertical

As we wrote last week, the recent dust-up between CVS’s pharmacy benefit management (PBM) subsidiary Caremark and Walmart, during which the retail giant threatened to sever its relationship with CVS over a dispute regarding reimbursement levels before finally coming to a settlement, is a harbinger of things to come as the healthcare landscape becomes dominated by massive, vertically-integrated competitors. A new investigative piece from The Columbus Dispatch this week seems to confirm this view. Examining previously-undisclosed data about CVS’s drug plan pricing practices as part of Ohio’s Medicaid program, the article reveals that CVS paid its own retail pharmacies much higher reimbursement rates than it offered to key competitors Walmart and Kroger to provide generic drugs to Medicaid beneficiaries. According to the article, CVS would have had to pay Walmart pharmacies 46 percent more, and Kroger pharmacies 25 percent more, to match the levels of reimbursement it paid its own retail pharmacies, data that are cited in a state report on the Medicaid pharmacy program that CVS is engaged in a court battle to keep secret. The reimbursement differential is “startling information”, according to a former Justice Department antitrust official quoted in the article. A spokesman for CVS maintained that the PBM’s payment rates are “competitive” and influenced by a complex range of factors. Underscoring the opaque and complicated methodology drug plans use to determine payments to retail pharmacies, independent pharmacy operators were paid more than CVS stores, as were Walgreens stores. A separate analysis of PBM pricing behavior in New York uncovered similar evidence, according to Bloomberg.

The Ohio and New York pharmacy stories are yet more evidence that, as healthcare companies continue to expand their control over greater segments of the “value chain”—combining, for example, insurance, distribution, and care delivery—they are able to flex their market power in ways that look increasingly anti-competitive. Hospitals that “own” their referral sources, insurers that “own” the delivery of care, and pharmacies that “own” drug benefit managers all edge closer to creating closed, proprietary platforms that can lock out competitors in any one segment. That’s a feature, not a bug—indeed, much of the logic of population health is predicated on “network integrity”: keeping consumers inside a fully-controlled ecosystem of care to enable better coordination and reduce duplication and inefficiencies. Yet as giant healthcare corporations turn themselves into Amazon-style “everything stores”, we need to keep a watchful eye on competition. Red flags to watch for: using the courts to maintain secret agreements or block the free flow of talent or information, “vertical tying” behavior that requires all-or-nothing contracting, and pricing strategies that leverage market power in one segment to raise prices in another. The biggest flaw in using “market competition” to lower the cost of care: most companies hate actually competing in the marketplace—a problem made even more vexing by vertical integration.

Veterinarians in the midst of a suicide crisis

A piece this week in the Washington Post caught our eye, drawing attention to the rising rates of burnout and suicide among veterinarians—and the many parallels to these issues in the physician community. A study published this month by the American Veterinary Medical Association (AVMA) showed male and female veterinarians are between 2 and 3.5 times more likely to commit suicide than the general population. The numbers are particularly striking for female veterinarians, given that women are generally less likely than men to commit suicide—and amplify the effect on the profession, as 60 percent of practicing veterinarians and 80 percent of vet students are women. Experts point to the financial and personal challenges of running a veterinary practice. Most vet students graduate with medical-school level debt, averaging $143K, but have much lower starting salaries. The average veterinarian works in a small or solo practice with little outside support, and many struggle to meet the rising emotional and service needs of their customers. Compounding the crisis is easy access to lethal pharmaceuticals: as most vets handle pet euthanasia, they have life-ending drugs on hand and know how to administer them.

Veterinary medicine has long been a consumer-focused industry, with most pet owners paying out-of-pocket for treatment, thus demanding a higher level of access and service. Veterinarians are working longer hours but have seen their incomes stagnate amid rising market competition. Many have also been pressured by social media, with disgruntled customers second-guessing their vets online and expressing their dissatisfaction—several of the suicides profiled were the direct result of online harassment. AVMA and other professional organizations are working to publicize the problem and provide support and build social connections between small-practice vets. As consumerism takes hold in medicine, physician practices will likely see the challenges affecting veterinary medicine today mirrored within their own profession—and should anticipate the need to build resources to support doctors as consumer expectations rise and social media pressures grow.

Thanks for joining us for the Weekly Gist! We really appreciate your time and readership, and it means so much to us to hear your feedback, guidance and words of support every week. If you’ve found this worthwhile, please don’t forget to forward it to a friend or colleague and encourage them to subscribe!

Most importantly, please let us know if there’s anything we can do to be of assistance in your daily work. You’re making healthcare better—we want to help!

Best regards,

Chas Roades
Co-Founder and CEO

Lisa Bielamowicz, MD
Co-Founder and President