June 10, 2022

The Weekly Gist: The Back to Back to the Future Edition

by Chas Roades and Lisa Bielamowicz MD

Lots of political hay is being made these days by pointing out similarities between the current state of the economy and conditions in the 1970s. Talk of “stagflation” and “malaise” abounds, along with any photo editors can dig up of Joe Biden and Jimmy Carter in the same frame. If the 70s are back, we sure hope disco makes a resurgence! But it hasn’t escaped our attention that Tom Cruise is back in a flight suit, we’re fighting a proxy war with the Russians, and Kate Bush’s new wave masterpiece “Running Up That Hill” is back in the Billboard charts. Someone call Marty McFly, and fire up the DeLorean…maybe we’re back in 1985! (Oh, if only…)

THIS WEEK IN HEALTHCARE

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

  1. First hospitals penalized for failing to comply with price transparency requirements. The Centers for Medicare and Medicaid Services (CMS) fined two of Atlanta-based Northside Hospital’s five facilities a total of $1.1M for failing to disclose their prices. Though only six percent of hospitals are fully in compliance with the federal rules that went into effect in January 2021, CMS has only sent 352 warning letters to date, and this week’s fines are the first the agency has issued.

The Gist: While these first fines are notable, it remains an open question whether the financial penalties for not complying with price transparency are stiff enough to motivate hospitals to submit their data. While more substantial than those under the Trump Administration, the current fines remain a rounding error for many hospitals, as they represent less than one percent of net patient revenue on average. Market dynamics may be more of a factor in compliance than monetary penalties: a recent JAMA study found that hospitals in more competitive, urban markets were more likely to share prices.

  1. Federal Trade Commission (FTC) to investigate pharmacy benefit managers (PBMs). The FTC is requesting information from six PBMs, including the largest three that, when combined, control 80 percent of the market: UnitedHealth Group’s OptumRx, CVS Health’s Caremark, and Cigna’s Express Scripts. PBMs act as third-party administrators, operating prescription drug plans for employers and insurers. The inquiry is focused on how vertical integration in the PBM sector impacts consumer access to drugs, as well as pricing in the prescription drug market.

The Gist: While critics accuse PBMs of raising drug prices for employers and consumers through opaque pricing and rebate models, PBMs blame drug manufacturers for the high prices. The details of how PBMs negotiate drug formularies and prices have been obscure, and it’s unclear what, if any, value these middlemen provide to consumers and employers. Regardless, they are incredibly profitable, accounting for significant portions of parent insurance companies’ revenue. It is worth keeping a close eye on the results of this investigation and the possible calls for PBM reform that may follow—this inquiry could be a harbinger of broader antitrust efforts to investigate the impact of vertical integration in the healthcare industry. 

  1. Oracle completes its $28B Cerner acquisition. Kansas City, MO-based electronic health record (EHR) company Cerner is now a business unit within Oracle, the Austin, TX-based software behemoth. Oracle, which already sells some software to insurers, hospitals, and public health departments, calledCerner the company’s “anchor asset”, and hopes to use it to expand its healthcare presence. Oracle co-founder and board chair Larry Ellison unveiled lofty plans to create a national health records database,but he didn’t detail how the company would get access to health records from non-Cerner systems, as interoperability standards haven’t been fully implemented.

The Gist: In addition to the challenge of entering the complex EHR and healthcare data market, Oracle now faces the challenge of rebuilding Cerner’s growth, and its clients’ confidence.Cerner lags Epic in terms of hospital market share: Epic holds about a third of the US hospital market, compared to Cerner’s 24 percent. Epic gained an additional 74 hospitals last year, compared to Cerner’s five. Anecdotally, we know of several long-term Cerner health system clients who are either in the middle of, or planning for, a transition to Epic, which is seen by health system leaders as the superior EMR option. (In the words of one executive, “No CEO ever got fired for choosing Epic.”) If a stronger Cerner product emerges as a result of the acquisition, it could help to stem this tide.   

Pluswhat we’ve been reading.

  1. Insurer carve-outs hampering mental healthcare access. Health insurance companies have been contracting out mental health coverage to specialized providers since the 1980s, but the boom in demand for behavioral health support unleashed by the pandemic has exposed problems in this patchwork system. A recent Kaiser Health News story highlights the difficulties that many patients and their primary care physicians (PCPs) face when trying to address behavioral care needs. Many PCPs find that they are limited in their ability to bill for these services, as they are “out-of-network” for mental health treatment.

The Gist: The pandemic has heightened the call for PCPs to provide increased mental health support within their practices. Not only is there a national shortage of mental health providers, but research shows PCPs can treat mild to moderate depression as well as psychiatrists. PCPs already cover 40 percent of all visits for depression and anxiety, and prescribe half of all antidepressant and anti-anxiety medications. Unfortunately, the way many insurers cover mental health is preventing further integration of mental health into primary care. Patients, often unaware of these carve-outs, suffer most, finding it harder to receive holistic care, and possibly being hit with unexpected bills for out-of-network care provided by their own primary care doctor. As demand for mental healthcare increases, employers and other purchasers—who often rank mental health as one of the most important needs—must assess their health plan offerings, scrutinizing behavioral health carve-outs in particular.


GRAPHIC OF THE WEEK

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

Anticipating the end of the public health emergency

The Biden administration recently signaled that it will extend the federal COVID-19 public health emergency (PHE), which has been in place for nearly two-and-a-half years, beyond its current July 15 expiration date. As shown in the graphic below, a number of key pandemic-era policies would end if the PHE were discontinued. Hospitals, already experiencing financial challenges, would face an immediate 20 percent reduction in Medicare reimbursement for each hospitalized COVID patient. Combined with the end of funding for treating uninsured COVID patients, and with millions of Americans expected to lose Medicaid coverage when eligibility checks restart, the cost of treating COVID patients will fall more heavily on providers. More treatment costs will also be passed on to patients, as most private insurers no longer waive cost-sharing for COVID care. On the telemedicine front, Congress has temporarily extended some Medicare telehealth flexibilities (including current payment codes and coverage for non-rural beneficiaries) for five months after the PHE ends, while CMS studies permanent coverage options. But further Congressional action will be required to keep current Medicare telehealth coverage in place, and these decisions will surely influence private insurers’ telehealth reimbursement policies. Although the Biden administration promises that it will provide sixty days’ notice before terminating the PHE or letting it expire, providers must prepare for the inevitable financial hit when the PHE ends.


INTERMISSION

A recommendation from our weekly diet of music, movies, TV, and other good stuff.

Cruel Country by Wilco—On their 12th studio release, Jeff Tweedy and company reach back to their Uncle Tupelo roots to produce a double album that fully embraces the country music influences they first explored in the 1990s. Across 21 tracks, Tweedy explores life in today’s America, and how to live it, using the most traditional of American sound palettes. (Extra credit for including the lyric, “This is the gist/It goes/Like this”.) A glorious, languorous listen.


THIS WEEK AT GIST—ON THE ROAD

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

What the “org chart” can reveal about physician culture 

A consultant colleague recently recounted a call from a health system looking for support in physician alignment. He mused, “It’s never a good sign when I hear that the medical group reports to the system CFO [chief financial officer].” We agree. It’s not that CFOs are necessarily bad managers of physician networks, or aren’t collaborative with doctors—as you’d expect from any group of leaders, there are CFOs who excel at these capabilities, and ones that don’t. The reporting relationship reveals less about the individual executive, and more about how the system views its medical group: less as a strategic partner, and more as “an asset to feed the [hospital] mothership.” Or worse, as a high-cost asset that is underperforming, with the CFO brought in as a “fixer”, taking over management of the physician group to “stop the bleed.”

Ideally the medical group would be led by a senior physician leader, often with the title of chief clinical officer or chief physician executive, who has oversight of all of the system’s physician network relationships, and can coordinate work across all these entities, sitting at the highest level of the executive team, reporting to the CEO. Of course, these kinds of physician leaders—with executive presence, management acumen, respected by physician and executive peers—can be difficult to find. Having a respected physician leader at the helm is even more important in a time of crisis, whether they lead alone or are paired with the CFO or another executive. Systems should have a plan to build the leadership talent needed to guide doctors through the coming clinical, generational, and strategic shifts in practice.


THIS WEEK AT GIST—ON THE PODCAST

All the headlines in healthcare policy, business, and more, in ten minutes or less every weekday morning.

On last Tuesday’s episode, we heard from Laura Kwako, PhD, a clinical psychologist at the National Institute on Alcohol Abuse and Alcoholism (NIAAA), and Katharine Bradley, MD, a senior investigator at the Kaiser Washington Health Research Institute. They discussed newly released NIAAA tools that help providers implement more comprehensive screening and streamline follow-up care for alcohol use disorder, which has risen sharply during the pandemic.

Coming up on Monday, we’ll hear from Vijay Yanamadala, MD, a neurosurgeon at Hartford HealthCare and Chief Medical Officer of SWORD Health, who estimates 90 percent of patients referred for physical therapy could benefit from receiving support virtually.

[Subscribe on Apple, Spotify, Google, or wherever fine podcasts are available.]


Another week in the books! Thanks once again for taking time to read our work, and for sharing your feedback and suggestions—we always enjoy hearing from our readers! Don’t forget to share the Weekly Gist (and our daily podcast) with your friends and colleagues, and tell them to subscribe too!

And please let us know if we can be of assistance in your 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