June 15, 2018

The Weekly Gist: The Beautiful Game Edition

by Chas Roades and Lisa Bielamowicz MD

Welcome to the World Cup Edition of the Weekly Gist! Once every four years, with the rest of the world, our attention turns to the spectacle of 90-minute (plus stoppage) dramas of passion and prowess, played out on emerald fields with a simple round ball. Two days into the tournament, we’ve already seen the best (a hard-fought draw between Spain and Portugal) and the worst (a dismal thrashing of Saudi Arabia by an anonymous Russian squad) that the sport has to offer. Here’s hoping for 28 more glorious days of soccer.

Meanwhile, it’s been a busy week on the road for us at Gist Healthcare, and an eventful one in our industry. Let’s review.


THIS WEEK IN HEALTHCARE

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

Clearing the way for vertical mergers in healthcare

This week, a federal judge gave the green light to telecommunications giant AT&T’s $85B merger with content provider Time Warner, in a ruling that’s expected to have broad implications for the future of M&A activity in the healthcare industry. The Trump administration had challenged the merger in court, arguing that despite being a “vertical merger”, involving two companies which don’t directly compete in the same market, the combined firm would be able to exercise unfair market power by bringing its content and distribution assets under one roof. Challenges to vertical mergers are rarely successful in court, and this case proved no exception to the rule—indeed, this was the first time the Department of Justice had taken a vertical merger to trial in nearly 40 years. AT&T closed the deal with Time Warner just days after the ruling, and almost immediately announced aggressive new plans to bring the power of the combined entity to bear—including offering free TV to its wireless customers.

As we’ve noted before, the AT&T-Time Warner case has clear implications for healthcare, given the number of sweeping new vertical combinations on the horizon in our industry. Share prices of several healthcare companies proposing vertical mergers shot up after the ruling was announced, including CVS, Aetna, Cigna, and Express Scripts. The ruling signals clear sailing for mergers among those companies, as it’s unlikely the government will pursue further challenges to the cross-sector deals they’re proposing. Facing pressure to reduce the total cost of care, many in healthcare will now look up and down the value chain to create new combinations that can capture savings by eliminating middlemen and shifting consumers to the “right” level of care. Such deals will likely remake the face of healthcare across the coming decade. 

The AMA wades into political battles on guns, immigration

A broad set of “common-sense measures” to prevent gun violence was part of a set of recommendations issued at the American Medical Association’s annual meeting, which wrapped up in Chicago on Wednesday. Key recommendations included banning assault weapons and bump stocks, raising the minimum legal age to 21 for purchase or unsupervised use of a firearm, and opposing requirements or incentives for teachers to carry weapons. After victims, their family members and law enforcement, physicians are arguably the closest witnesses to the effects of gun violence—their first-hand perspective is critical in informing national conversations on the issue. (As an example, radiologist Heather Sher’s piece dispassionately describing the internal damage inflicted by an AR-15 rifle she witnessed when reading CT scans of the Parkland victims should be required reading for anyone charged with legislating gun restrictions.)

The AMA waded into political controversies beyond gun control last week, also passing a resolution opposing the separation of children from caregivers at the border, and debating, but stopping short, of revising its policy on physician-assisted suicide (the association voted that it is still “incompatible with the physician’s role as healer”). The AMA has long been recognized as one of the most powerful lobbying forces in the country, and those outside the profession view the group as the leading unified voice of the physician community. Many physicians, however, have questioned whether the AMA’s influence is waning. A look at the data shows that across the past decade, AMA membership has continued to grow slowly, although overall dues paid have declined. More concerning for the organization is the profile of active participants. Delegates and leadership at all levels skew older than the average physician, and physicians in larger group practices are significantly less likely to participate. The AMA is at a pivotal moment in its history. It must evolve its processes and perspectives in step with changing demographics and needs of the profession in order to remain the leading voice of doctors. Moreover, the AMA can increase its relevance by leveraging its lobbying heft to amplify the physician perspective on important social and policy issues as we head into the midterm elections. 

Another delay and more doubts about hospital star ratings

This week, the Centers for Medicare & Medicaid Services (CMS) announced that it would delay a planned July update of its Hospital Compare star ratings. The ratings are intended to provide easy-to-use information about clinical quality, outcomes, and service at US hospitals, enabling comparison shopping and supporting patient choice. The ratings program has been controversial since its introduction in 2016, and hospital trade associations have repeatedly criticized the star rating methodology. This is not the first delay in the program’s history; last summer’s planned update was also postponed, to allow an expert panel to provide recommendations for the refinement of evaluation criteria. Critics claimed the previous approach unfairly punished larger, urban hospitals relative to smaller, less-crowded providers. The current methodology reduces emphasis on patient experience, in favor of more focus on wait times and readmissions rates. Once again, CMS will convene an expert panel, and seek public feedback before publishing a revised ratings scheme.

The delay comes after investigators at Rush University Medical Center called into question the weighting of safety metrics used in formulating the overall star rating. The Rush team undertook a closer analysis of the statistical model underlying the star ratings program after Rush’s rating fell from 5-star to 2-star in the last release of data. The statistical discrepancies and shortcomings in the ratings methodology are of real concern to providers—largely because payers often use CMS’s star ratings as a reference when crafting their reimbursement policies. But the continued debate over the reliability of the ratings program is most concerning for patients. As consumers spend more of their own money on care, and that care becomes ever more expensive, individuals are looking for any source of information to help guide their choice. Whether from the CMS website, from commercial evaluation sites like Healthgrades, or from crowdsourced reviews sites like Yelp, consumers are hungry for information that helps them make a better choice about where to receive care. Making sure that information is reliable and accurate should be a top priority for CMS.


THIS WEEK AT GIST—ON THE BLOG

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

Welcome to the World Cup…of Healthcare
With the start of the 2018 FIFA World Cup this week, we took the opportunity to construct our own fantasy World Cup for healthcare. We analyzed the structure, spending levels, and outcomes of the 32 teams competing in Russia across the next month, and evaluated their relative success at delivering value to the citizens who live there. Along the way, we learned quite a lot about the similarities and differences among national health systems and uncovered one important secret to success—reducing the out-of-pocket burden of spending on healthcare. Have a look and follow along to see if our winning team does as well in the actual World Cup as it did in our fantasy tournament!


GRAPHIC OF THE WEEK

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

Comparing the performance of national health systems

To accompany our World Cup of Healthcare simulation, we assembled a few graphics that provide details on the performance of the competitor countries. Below is a wall chart that sorts the 32 countries by their World Cup grouping and shows some of the key metrics we looked at: life expectancy; a measure of system performance called the Healthcare Access and Quality Index (which is tracked by the incredible Global Burden of Disease project); per-capita spending on healthcare; and share of healthcare spending that comes out of each citizen’s pocket.

We found a strong correlation between the quality of a country’s health system and the extent to which the system shares the burden of spending across its population, leveraging universal coverage schemes to pool costs and risk and subsidizing individual spending via taxation and redistribution.The countries that performed worst on quality and life expectancy were those that placed the highest burden for spending on individual citizens—thus, in our fantasy World Cup Group A was the so-called “Group of Death”, with the lowest average life expectancy. Conversely, Group C performed best on nearly every measure, given the advanced nature of their national healthcare systems. Check out our blog to see who ultimately won our inaugural Healthcare World Cup!


THIS WEEK AT GIST—ON THE ROAD

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

Do physician incentives drive strategy?

Lisa:
We were asked by the leadership of a large health system to lead a session discussing successful design of value-based physician compensation plans. Several key physician group contracts were up for renewal, and system leaders were hoping to integrate new performance-based incentives to increase physician engagement on system cost-management efforts. In a half-day meeting we shared our thinking on changes in the healthcare marketplace, and how we saw leading systems working to align provider incentives with care delivery to maximize consumer value.

It became clear in the discussion, however, that the system was many steps away from being able to align physician compensation with their goals, despite the burning platform of contract renegotiation. There were significant gaps in their ability to measure quality and productivity consistently across the system, and little sharing of performance data with doctors. Moreover, there had been little engagement of physician leaders on the proposed changes (no one from the medical group was part of our discussions). The session highlighted the danger of letting incentives drive strategy. Successful compensation redesign requires reversing the process: first defining common goals and strategy in partnership with physicians, then aligning incentives with those mutual goals. We advised caution in moving quickly to change compensation, focusing instead on laying a groundwork of education, collaboration, and performance transparency.

Leveraging postacute care to develop a “senior care” strategy

Chas:
We’re doing work for a health system that’s looking to streamline future capital investments by understanding the “Campus of the Future”. This week, we spent time digging deeper into the future of postacute care delivery. We’ve been conducting interviews, reviewing demographic data, and researching new technologies and care models for postacute care. As the population ages, hospitals will face a mix shift toward medicine and away from surgery, and inpatient beds will fill with patients suffering acute flare-ups of chronic disease. The median hospital patient of the future will be a 75-year old woman with congestive heart failure and several co-morbidities, who’s being admitted for nursing and pharmaceutical care, rather than a more profitable surgical intervention. That patient’s acute episode could be more safely, effectively and economically delivered in a lower-acuity setting—either in a skilled nursing facility or even in her own home.

Figuring out how to build a delivery model that redistributes care into postacute settings is going to be a survival skill for most hospitals—and for our national healthcare budget as well. It will require providers to reallocate capital away from the acute care campus toward lower-acuity assets (and telemedicine capabilities), to coordinate care across a distributed range of postacute sites (including the patient’s home), and to build partnerships with community organizations and other providers to bolster the “back end” of the delivery system. Perhaps most importantly, it will require a new revenue model—likely built around taking risk in the Medicare program (either via accountable care or Medicare Advantage programs)—that moves the hospital away from traditional fee-for-service incentives. We’re encouraging our client, and health systems generally, to think of all of this as a new “senior care strategy”—and we believe it merits just as much attention as the sexier “access strategy” investments in convenience and retail care.


THE BEAUTIFUL GAME IN BLACK AND WHITE

Read your way through the World Cup.

Soccer is a thinking-person’s sport, or at least that’s what soccer fans will tell you. Certainly, the beautiful game has attracted the attention of some of the greatest minds of the past century. The French philosopher Camus said, “All I know most surely about morality and obligations I owe to football,” and his pal Sartre added, “In a football match, everything is complicated by the presence of the other team.” (Deep, that Sartre.)

In keeping with our World Cup theme, we thought we’d recommend a few books on soccer to keep you occupied while you wait for the whistle to start the next match. Here are five excellent reads from our shelves (with links to purchase on Amazon), that’ll have you dropping Sartre-like wisdom no matter how familiar you are with the sport:

How Soccer Explains the World, by Franklin Foer. An analysis of soccer as part of the larger political economy, and the role it plays—for better and worse—in our new globalized world.

Soccer in Sun and Shadow, by Eduardo Galleano. Soccer as a reflection of the various societies that have embraced it over the years and expressed their national identities on the pitch.

The Ball is Round: A Global History of Soccer, by David Goldblatt. Just what it says on the cover, a definitive look at the history of the sport from earliest days to most recent incarnations—a long but rewarding read.

Fever Pitch, by Nick Hornby. A memoir of the quintessential kind of soccer fan—a die-hard Londoner suffering through the highs and lows of his team’s performance. Incredible, passionate writing about being a soccer addict.

Inverting the Pyramid: The History of Soccer Tactics, by Jonathan Wilson. From one of The Guardian’s best soccer writers, a person the British would call an “anorak” (and we’d call a geek), a detailed look at how the game actually works, on the ground.

Speaking of The Guardian, if you’re looking for the best coverage of the World Cup as it unfolds, look no further than their excellent reporting. And if you really want to impress your friends at the local soccer pub, dive into their absurdly detailed guide to all 736 players competing in the tournament this year. Game on!


WHAT WE’RE READING

Stuff we read this week that made us think.

Rethinking scope of practice could generate huge savings

The number of advanced practice providers (APPs) is growing in nearly every market we visit, but limits on their duties vary widely. Scope of practice is determined at the state level, and only 24 states allow full-scope practice for nurse practitioners (NPs). New research from Brookings’ Hamilton Project caught our eye, quantifying the value of removing anti-competitive barriers to APP practice. The authors cite a broad range of potential cost reductions, including 12 to 14 percent lower cost of care delivered by APPs for Medicaid patients, a 12 percent reduction in ED use for ambulatory-sensitive conditions, and lower rates of complications and C-sections in nurse midwife-led deliveries. In sum, they estimate that broadening scope of practice could save Medicare, Medicaid and the larger healthcare system billions of dollars annually.

Quality could also be improved by increasing scope of practice. A range of research (this systematic review is a good overview) demonstrates that the quality of care provided by APPs practicing at top of license is as good or better than care delivered by doctors. You have to search hard to find studies that show the opposite—we looked. Incentives in the billing system, however, favor keeping APPs underneath doctors. Medicare pays APPs who practice independently 85 percent of the physician rate. When practicing under direct supervision of a physician, APPs bill at the physician rate—these “incident-to billing” rules provide an incentive for doctors to keep scope of practice in check. (One study estimated that care for Medicare patients provided by NPs practicing independently was 29 percent lower than care provide by primary care doctors; only a portion of that difference can be explained by incident-to billing.)

The authors push for changes in policy at the federal level to eliminate incident-to billing, but recognize that scope of practice will, and should, remain regulated by states. Eliminating anti-competitive practice rules at the state level will increase access, reduce costs, and (at minimum) maintain quality of care; the effects will be magnified for the most at-risk patients, as APPs are more likely to practice in rural areas or treat vulnerable populations. State legislatures concerned about rising healthcare budgets would be wise to move toward increasing practice scope rather than succumbing to pressure from professional guilds to maintain the status quo. 

We are not ready for the next global pandemic

Gates Foundation simulations show that a severe flu pandemic could kill 33 million people in 250 days. And it’s just a matter of time, as researchers estimate that there are over 800K animal and avian viruses potentially capable of leaping to humans. A new article in The Atlantic examines the science, politics, and economics that drive our ability to manage the next flu, Ebola or other global health pandemic crisis. (Warning: don’t read this article right before going to bed, thinking about it may keep you up a while.)

Some of the factors increasing our risk of pandemic are well-known: a globalized economy and rapid, high-volume transportation means that infection can spread from a formerly-remote area to any corner of the globe in days. Low margins have made pharmaceutical companies slow to develop vaccines. But other elements of our healthcare economy also elevate risk. We operate with a “just-in-time” supply chain that leaves little room for rapidly-increasing supply or dealing with a disruptive event. Who knew before last year that most of the IV-fluid bags in this country are manufactured in Puerto Rico? Critical care assets are particularly hard to mobilize en masse: a Johns Hopkins biosecurity expert estimates his system would need “seven times as many critical-care beds and four times as many ventilators as we have on hand” to handle a 1918-style flu.

What is the answer? Contain potential pandemics close to their source. Nigeria created an expert-driven response system credited for preventing the mass spread of Ebola in that country four years ago. This was funded by investments from the US and other countries, which have been helping 49 developing countries increase their epidemic preparedness. (President Trump’s 2019 budget would cut this funding by 67 percent.) Healthcare leaders must not only increase their systems’ readiness to handle a pandemic event, but lobby to maintain funding and resources for management on the other side of the globe, to keep these events in check, as far from home as possible.

Casting a skeptical eye on Lasik surgery

disturbing piece in the New York Times this week raised questions about the safety and long-term outcomes of Lasik eye surgery, and caught our (glasses- and contacts-wearing) eyes. The article shares the stories of many Lasik patients who’ve been plagued by months or even years of painful after-effects from having the popular vision-correction surgery. These can include dryness, double or blurred vision, eye pain, and other vision problems, which according to the article are often downplayed by Lasik providers—eye surgeons who frequently have a financial stake in encouraging patients to have the procedure. Last year alone, more than 700K Lasik surgeries were performed in the US, and 9.5M Americans have had the procedure since it was first approved by the Food and Drug Administration in the 1990s. Now, there is a growing concern that Lasik might not be as safe as first assumed, and some researchers are calling for the FDA to re-examine the procedure.

Lasik is typically not covered by insurance because it is considered a cosmetic, elective surgery. Most consumers pay the full price of the surgery out of pocket, to the tune of around $4,000 per eye. And the Lasik market is typical of other consumer markets—with the same marketing, advertising, and pricing strategies common in other parts of the economy. As the broader healthcare industry begins to move toward consumerism—with greater patient cost-sharing driving a need to develop retail pricing and consumer engagement approaches—Lasik provides a useful case study of healthcare consumerism taken to the extreme. We often complain about the additional cost added by “middlemen” in our industry and bemoan the administrative complexity of our third-party payer system. But it’s interesting to think about how the Lasik business would have developed had the surgery been included in our traditional insurance framework. Would there have been more scrutiny of the safety and efficacy of Lasik surgery had insurance company budgets, and not just consumer wallets, been at stake? What might be the implications of moving toward a direct-to-consumer model in other parts of healthcare? Important questions raised by the stories in this piece.


Thanks again for reading the Weekly Gist, and all of the great feedback you’ve sent our way. It’s truly gratifying to hear so many positive comments and words of encouragement, along with your suggestions and advice. Please feel free to share this with a colleague or friend and consider subscribing if you haven’t already. Also, let us know who you’re rooting for in the World Cup!

And most importantly, please don’t hesitate to reach out if there’s anything we can do to be helpful 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