February 22, 2019

The Weekly Gist: The Best Picture Edition

by Chas Roades and Lisa Bielamowicz MD

It’s Oscar weekend, our annual opportunity to watch Hollywood’s brightest stars gather in celebration of what they love the most—themselves. This year, there’s not even a host to provide snarky barbs and awkward banter. It’s just us, our screen icons, and a bunch of obscure awards for things like Best Gaffer, Best Foley Engineer, and Best Screen Adaptation of a Foreign Language Novel That No One Read. We’re keeping our fingers that our favorite movie of 2018 will win Best Picture—a fitting tribute to the national treasure we lost last year. What’s your pick?

Anticipating faster growth in healthcare spending 

This week, actuaries at the Centers for Medicare & Medicaid Services (CMS) released their annual National Health Expenditure (NHE) projections, covering the period 2017 to 2027. The report forecasts average annual growth of 5.5 percent in total health spending for the coming decade and predicts that healthcare will account for nearly 20 percent of US gross domestic product (GDP) by 2027. CMS actuaries anticipate a faster rate of growth for the next ten years than has been experienced in the years since the Great Recession (3.9 percent per year for 2008-13), and post-Affordable Care Act (ACA) coverage expansion (5.3 percent per year for 2014-16). The report cites higher prices for care, greater use of care, rising drug prices, and the aging Baby Boom generation as key drivers of the expected increase in health spending over the coming decade. Spending on Medicare is expected to grow fastest among payer categories, growing 7.7 percent per year as the Boomer generation enters the program.

The actuaries’ projections are likely to add ammunition to calls for more radical steps to overhaul the nation’s healthcare system, which are gaining steam as the 2020 Presidential campaign gets underway. Yet the forecast provides talking points for both sides: Republicans will point to the projected acceleration of Medicare and Medicaid spending as evidence of the need to restructure the public insurance programs, while Democrats will surely focus on healthcare’s growing share of GDP and the rise in household spending on care as reasons to expand government coverage programs that promise a greater ability to clamp down on rising prices. The projections are not uncontroversial; several policy experts point to past dire predictions of the imminent acceleration of health spending, which did not come to pass, as evidence that ACA payment reforms have had a permanent impact on the trajectory of health spending. A recent Urban Institute report, for example, makes the argument that private insurance, rather than Medicare and Medicaid, ought to be the primary focus of further payment reforms, given the relative success of the government programs in curbing spending growth. However accurate the latest forecasts prove to be, it’s clear that the growing burden of health spending on households, businesses, and the government have become an urgent problem to be addressed and will surely be at the center of the policy debate for years to come.

Free tuition for graduates of a new medical school

On Tuesday, Oakland, CA-based Kaiser Permanente announced that it planned to waive tuition for the first five classes to enroll in its planned medical school, slated to open in 2020 in Pasadena. According to Mark Schuster, the dean of the Kaiser Permanente School of Medicine, the annual tuition of $55,000 would be paid for using a portion of the money Kaiser sets aside for “community benefit” spending, which allows the company to operate under not-for-profit status. Beyond the first five classes, Kaiser plans to offer tuition assistance to enrollees. Each 48-student class at the new medical school, which the company first announced in 2015, will be schooled in Kaiser’s integrated model of care delivery, instead of following a traditional curriculum. Instruction will focus on team-based, technology-driven care, intended to teach a new model of care delivery for the next generation of doctors. Kaiser’s tuition-waiver announcement comes a year after New York University announced its own plans to offer free medical school enrollment, although that program is largely to be funded by a philanthropic donation from the founder of Home Depot, Kenneth G. Langone, for whom the school is named.

In announcing the tuition-free program, the dean of Kaiser’s medical school cited a desire to encourage graduates to pursue medical practice in whatever areas of specialty interest them, rather than seeking to specialize in lucrative sub-specialties in order to be able to pay down medical school debt. In particular, the Kaiser school has been touted as a “population health” program, which will produce graduates who will work in primary care settings that allow them to reduce patients’ use of high-cost care. That argument—that eliminating the burden of medical school debt will shift specialization patterns among graduates—encountered considerable skepticism among economists and policy analysts following the NYU announcement last year. It remains to be seen what the impact of such initiatives will be; surely Kaiser’s implicit argument that free tuition is a “community benefit” will hinge on evidence that its graduates truly are pursuing work in less-lucrative, more community-oriented settings.

More evidence of a crisis in rural healthcare

A new report from the consulting firm Navigant highlighted the dire state of rural healthcare in the US, estimating that 21 percent of rural hospitals across the 43 states researchers analyzed are at “high risk of closing”. Among those 430 high-risk hospitals, the report found that 64 percent provided “essential” services to their communities, either by providing trauma services, serving a high share of low-income patients, being the sole provider in an isolated region, or having an outsized impact on the economic status of the community. Plains states and states in the Southeast were found to be at highest risk for losing their rural hospitals. Among the factors cited by Navigant as most challenging for rural hospitals were poor payer mix, excess capacity, and difficulty in accessing innovative clinical and digital technologies. The study’s authors pointed to proposed legislation sponsored by Senators Chuck Grassley (R-IA), Amy Klobuchar (D-MN), and Cory Gardner (R-CO) as a promising remedy to the plight of rural hospitals, allowing them to streamline services and skirt regulatory requirements that require the hospitals to maintain unused capacity. The authors also suggested that rural hospitals may need to seek network affiliations with tertiary, academic centers, which could provide a lifeline to the struggling facilities.

There are surely no easy remedies for the problems plaguing rural healthcare in the US. While access to essential healthcare services must be maintained even in remote communities with declining populations, that access must be weighed against the safety and cost challenges of operating full-service hospitals with low volumes and difficult staffing situations. The Navigant consultants are spot-on: one promising path forward is for rural facilities to partner with larger regional referral centers and larger health systems that can improve access to technology and financial support. Telehealth providers should also play a much larger role in rural healthcare, as should scaled-down care models like microhospitals and rural freestanding emergency centers. We’d add one additional thought: is there a role in rural healthcare for retailers who have targeted rural, lower-income populations for their own service strategies? Walmart is an obvious candidate here, given their national footprint, but we wonder whether low-budget retailers like Dollar General and Dollar Tree might have a part to play as well. Often castigated for their focus on cheap, subsistence goods, these stores could be ideal locations for clinic and telemedicine offerings to fill the growing gaps in rural access to care.


GRAPHIC OF THE WEEK

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

Narrowing choice to curb rising employer spend

When Presbyterian Health System struck a deal with Intel to manage care for the firm’s Albuquerque employees, followed by Providence Health & Service’s ACO-like contract to provide care to Boeing employees in Seattle, we became optimistic about the potential of direct contracting between health systems and large employers. But five years after those landmark deals, we were still just talking about Boeing and Intel. Few other employers followed suit, instead preferring to control spend by shifting more of the cost of coverage onto their employees in the form of higher deductibles, larger co-pays, and greater co-insurance. In 2018 the average family deductible in employer-sponsored insurance hit $3,000, and in most markets deductibles of $5,000 or higher are not uncommon. Our recent conversations with employers suggest that they are now questioning the utility of shifting more costs onto employees. As deductibles rise, employers see diminishing returns. In contrast to instituting the first $1,000 deductible, moving an already high deductible from $3,000 to $4,000 does little to change employee behavior. And employers are genuinely worried about the impact of rising cost sharing on their employee’s financial and physical health.

Given the historically strong labor market, employers have been reticent to change benefit design in any way that could be perceived as narrowing choice. But the reluctance to push cost sharing further creates an opening for providers and innovators that offer alternative solutions to encourage employees to choose a “high-performance network”—the new term of art for a narrow network. Across the past year we’ve seen a range of strategies to create high-performance networks, described in the graphic below. The pace of direct contracting between health systems and employers has quickened. But other solutions challenge the premise that a single health system provides the best solution for every high-cost condition or procedure. Start-up insurer Bind aims to create bespoke networks for high-cost procedures by identifying the best doctors and hospitals regardless of affiliation, essentially “unbundling” the health system. Others, like health benefits solution provider Accolade, create a concierge-like service to support employee decision-making—while preferentially steering them to lower-cost providers.

It remains to be seen which of these solutions will produce the greatest returns, and whether the gains can be sustained over time. However, we wonder whether companies will really have the fortitude to engage employees in conversations about narrower networks. Many will likely prefer to shift the task of narrowing networks onto employees themselves; we still believe that defined contribution health benefits will be the ultimate solution for employers to manage spend. It’s likely employers will require the cover of a recession to make this dramatic switch in benefit design. In the interim, there seems to be a window of opportunity for high-performance network assemblers to demonstrate that they can be an attractive and effective solution to rising costs.


THIS WEEK AT GIST—ON THE ROAD

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

The noble aim of being a great subcontractor

Lisa:
Earlier this month I was at a health system board meeting in which we were discussing the transition from volume to value, and the shift to a population health model. One board member had the courage to ask a tough question: “What if we never get there?” Covering just a small slice of a large metropolitan area, this system has consistently ranked third in market share behind two larger competitors—and now they feel they are lagging those systems in moving toward risk. The most recent challenge: a large—and until recently, loyal—independent primary care group had just been acquired by one of their competitors. Yet the system prides itself, justifiably, on delivering low-cost hospital care and outstanding quality. I raised a heretical notion: suppose the system pursued a strategy focused solely on being the highest-performing inpatient and specialty care provider in the market, and abandoned the goal of bearing population risk? Could the system shift their focus to simply being the best “subcontractor” to other risk-bearing networks in the market?

The ensuing conversation was uncomfortable, to say the least. The notion challenged the system’s assumptions of the role they wanted to play in the market, and whether they could be a leader in population health. I encouraged them to think of being a “subcontractor” to other risk-bearing organizations not as a defeat, but as fulfillment of a vital role—healthcare in their community would be better if more hospital care were delivered at their level of cost and quality. Our view: for many smaller systems who are driven by a desire to remain independent, becoming a high-performing care subcontractor may be the best path forward, and the most realistic. (It will be interesting to watch the successful investor-owned chains on this front—organizations whose strategic advantage lies in running highly-efficient, low-cost hospitals.) It’s not as sexy as “population health”, but as any builder will tell you, there’s no substitute for a great subcontractor.

Moving beyond the “best practice” mindset

Chas:
Here’s a question we get all the time, and one that I heard again this week from one of our partner health systems: “We’re working on [initiative X]. What have other health systems like us done about that?” We hear it in any number of situations, from hospitals developing clinical protocols to strategic planners putting together business plans for service line growth. Sometimes the question comes in different forms: “Do you have a white paper on [topic X]?”; or “What research do you have on [issue X]?”; or our favorite, “What’s the best practice for [activity X]?” It’s not surprising, given our past history, that we’d frequently be asked to provide research or best practice information. But as we’ve grown our own business at Gist Healthcare and developed our own independent perspective on where our industry needs to go, we’ve become less and less impressed by “best practice” as a concept. In fact, I’d go so far as to say that “best practice” has become at best a crutch, and in many cases a hindrance, to real progress in healthcare. As we sometimes tell our clients now, healthcare has outgrown “best practice”, at least as we used to understand it.

Don’t get me wrong. Medicine should absolutely be evidence-driven, and clinical care should always be firmly grounded in proven practice. If anything, the actual clinical practice of medicine is one area where our industry must become more, not less, best-practice based. But as to system strategy, payment innovation, service improvement, and a host of other business and operational issues, simply imitating what other “successful” organizations are doing leads inevitably to reversion to the mean, groupthink, and (most troubling) fad-driven “bubbles” of activity. It’s no surprise, given the pervasive culture of “best practice”, when suddenly every health system’s top priority turns to creating a patient portal, or hiring a chief experience officer, or starting a proton beam center, or opening freestanding EDs. Healthcare delivery is a highly fragmented, insular business, with little visibility across markets and across institutions. That makes it very susceptible to white paper-driven trend chasing, which tends to outsource innovation to the “wisdom of the crowd”. It’s pretty rare to find mavericks, following their own innovation instincts without getting caught up in trying to mimic what other “leaders” are doing. That’s why when a delivery organization takes a risk on a truly new strategic innovation—Geisinger’s money-back guarantee, Cleveland Clinic’s promise of same-day access, Presbyterian’s direct contract to manage Intel employees’ health—it immediately sends shock waves across the industry. Those ideas didn’t come from a white paper. We’re often asked whether we’re building a “best-practice research” capability in our new company. While we’re not quite ready to talk about our upcoming service offerings, the answer to that question is a definitive “no”.


THIS WEEK AT GIST—ON THE BLOG

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

Over the past year, we’ve had the opportunity to get to know Ashok Subramanian, the CEO of health insurance startup Centivo, and to meet periodically with his team to provide informal advice as they build their business. Centivo is one of a new cadre of innovative companies looking to redesign health insurance; along with companies like OscarBright Health, and Bind, they’re working to address the inefficiencies and shortfalls of traditional health insurance. Centivo has focused primarily on the self-insured employer space, leveraging consumer engagement tools, customized network assembly, and an emphasis on primary care and prevention to help employers reduce the growth of healthcare spending. Last summer, Centivo raised $34M in Series A funding from Bain Capital Ventures and others to support their market launch. We recently talked to Ashok to learn more about Centivo’s future plans.

Gist Healthcare: Tell us about what you’re building with Centivo. How will the experience be different for employers and consumers?

Ashok Subramanian: Centivo is a new type of health plan administrator that allows self-funded employers and clinicians to join forces and deliver high quality, affordable healthcare to their employees. An alternative to traditional insurance carriers or third-party administrators, Centivo is a coordinated benefits platform that offers the technology, network, claims processing, and customer support to fully administer health benefits for all or a portion of an employee population.

The Centivo model emphasizes the partnership between individuals and their primary care team as the proper model to coordinate healthcare needs. Centivo’s clinical partners are dedicated to controlling costs and helping members navigate the healthcare system, aided by personalized patient-doctor matching tools. We find great clinicians, partner with them, and compensate them beyond the traditional fee for service model, with rewards tied to healthcare quality, total cost of care, and patient satisfaction.

Employers get lower and transparent costs, happier, healthier employees, and a better experience. What makes it better? A more proactive partner who’s facilitating great access to care and trusted relationships between employees and the clinicians in their community. We make it easy for the employer to integrate Centivo into the organization with a high-touch implementation process, simple employee communications, and concierge level support.

[Read more of our conversation with Ashok on the Gist Blog.]


ON THE GIST TURNTABLE

Give this a spin, you might like it.

When your cheering section includes legends like Eric Clapton and Buddy Guy, you’ve performed alongside B.B. King, your home base is the club that Stevie Ray Vaughan made famous, and the mayor of Austin dedicates a day in your honor when you’re just seventeen years old, then you’ve well and truly earned the title “guitar hero”. And that’s just what Gary Clark, Jr., now 35 and an established star in the blues firmament, is. Today sees the release of his third studio album, This Land, and with it, Clark launches an extensive national tour that will find him playing club dates and headlining festivals until autumn. Clark is known more as live act than a studio artist, with a raw energy and blow-the-roof-off guitar heroics, but his recorded body of work is thoughtful and well-assembled, and this latest album is no exception. Working across a range of influences from Ramones punk to Prince funk and showcasing some of the strongest songwriting he’s done to date, This Land makes an urgent argument for the relevance of the blues in today’s world.

The title track finds Clark planting his stake “in the middle of Trump country”, and fiercely refusing to be cowed by racist taunts: “I’m America’s son/This is where I come from/This land is mine.” The track pulses with a reggae beat and a hip-hop cadence, but has all the crackling electricity of guitar-driven blues. Clark’s writing here and on other tracks feels more mature and grounded than his dazzling but rough-hewn earlier work—on “Pearl Cadillac”, for instance, he brings what he’s learned in fatherhood to bear in a grateful appreciation of his mother: “Now I understand your sacrifice/Late nights, fussing and fighting at home.” All the while, Clark maintains contact with the classic blues of Guy, King, and other touchstones: try “Dirty Dishes Blues” for a dose of that old-school sound. The album is well worth spending time with—but don’t miss any opportunity to see Clark live. If he’s anywhere within a hundred miles of where you’ll be this summer, get to a show. And wear something flameproof.


WHAT WE’RE READING

Stuff we read this week that made us think.

Spotlighting yet another unhelpful middleman

There’s been a lot of media and policy attention in recent months focused on the dysfunctional role of middlemen—specifically pharmacy benefits managers—in driving up spending on prescription drugs. This week, a new investigative article from the nonprofit reporting team at ProPublica highlights evidence of the troubling role played by another healthcare middleman: the health insurance broker. Relied upon by employers to craft health benefits packages for their employees, the brokers provide a critical linkage between the insurance industry and businesses that purchase coverage. Ranging from behemoth national “consulting firms” like Aon, Mercer, and Willis Towers Watson to local “agencies” that work with small business owners, these intermediaries are typically paid on a commission basis, with their income based on the value of the health policies they sell to employers. The ProPublica piece reveals just how perverse this sellers-agent arrangement—in which the insurer pays the broker anywhere between three and six percent of the value of the policy sold—can be. The obvious result: the more a business pays for health insurance, the more the broker makes. That outcome is exacerbated by add-on commissions and bonuses for supplemental insurance coverage—dental, vision, and so forth—which can earn the broker as much as 40 to 50 percent of the premium paid. Brokers also get paid high fees for bringing insurers a new client. Some brokers can earn their entire six-figure annual salary by encouraging just two or three mid-sized companies to switch carriers. The brokers’ commissions, of course, are baked into the premium charged by insurers, meaning that employers—and ultimately individual consumers—bear the cost of these added fees.

In our work with providers over the years, we’ve come to understand that brokers, like many of the other middlemen endemic to healthcare, have largely been a hindrance to efforts to rein in rising health spending. Almost every health system or other provider organization we’ve worked with that has tried to pursue innovative relationships with employers has a story to tell about the local insurance broker whispering in the employer’s ear, encouraging them to stick with their tried-and-true insurance plan. Often these agents have long-standing personal relationships with employers, and exercise powerful influence over buying patterns, despite their obvious incentive to push the employer to higher-cost insurance products. One hopeful sign: the ProPublica piece highlights the fact that a small but growing number of brokers have repositioned themselves as neutral third parties, foregoing commission-based arrangements for flat-fee compensation models. But that’s the vast minority. Until we get a handle on the pernicious impact of brokers, and all of the other middlemen standing between providers and patients with palms thrust forward to take their “cut” of the healthcare dollar, it’s going to prove very difficult to make progress on reducing unsustainable spending growth.

Does having more primary care doctors lower mortality rates? 

Primary care physician networks have been the chassis for accountable care organizations (ACOs) and most of the payment models that aim to reduce the total cost of care. A new study in JAMA Internal Medicine examines a fundamental link between primary care and outcomes: does having more primary care doctors (PCPs) in a market decrease mortality of the population? Researchers used population data and individual-level claims data linked to mortality over a ten-year period and compared them to changes in primary care and specialist physician supply, and found that having more primary care doctors correlates with slightly longer life expectancy. For every 100,000 residents, an increase in ten PCPs resulted in a 51-day improvement in life expectancy; by comparison, ten additional specialists correlated with an additional 19 days. More PCPs also correlated with lower levels of mortality due to cancer, cardiovascular, and respiratory diseases.

A growing body of research has shown that enhanced access to primary care, as well as enhanced care management in primary care practices, can improve outcomes and lower costs. But this study raises fundamental questions about correlation and causation: is mortality lower because of greater access to PCPs, or do more PCPs choose to work in markets where residents are wealthier and have fewer socioeconomic barriers to better health? The authors conclude that “programs that direct more resources to primary care physician supply may be important for population health”. We agree—but would also push healthcare leaders to consider a broader definition of primary care services. A solution that incorporates a range of providers, from doctors to community health workers, may be the most cost-effective means to improve health and mortality, particularly for rural and urban communities which have lower access to PCPs today.  

Choose your own adventure—M4A edition

In the spirit of the recent Netflix special Black Mirror: Bandersnatch, which allowed viewers to shape the outcome of the story by selecting among several different plot twists, the always-worthwhile policy bloggers Austin Frakt and Aaron Carroll, who write for the New York Times column “The Upshot”, published a terrific interactive tool this week. Based on input from a superstar panel of health policy luminaries (Paul Starr, Don Berwick, Kate Baicker, Ashish Jha, and others), the tool allows readers to construct their own version of “Medicare for All” (M4A)—the topic du jour among Democratic legislators—and provides a detailed analysis of each of the design choices at the reader’s disposal. Frakt and Carroll outline five key M4A policy options: (1) providing automatic universal coverage; (2) ending employer-based coverage; (3) eliminating private insurance; (4) eliminating premiums in favor of tax-based financing; and (5) eliminating individual cost-sharing. For each, they provide expert consensus on the pros and cons, along with policy nuances and political considerations.

It’s a simple but very helpful guide to understanding all the ins-and-outs of the healthcare policy debate that’s likely to dominate the 2020 Presidential campaign and beyond. Tough choices abound, and the expert analysis makes clear that there are trade-offs to be made every step of the way. We’d like to think that dispassionate analysis like this will dominate the public discussion of M4A, but surely partisan political rhetoric will quickly drown out more rational dialogue and overwhelm the average consumer’s capacity for digesting policy details. In the meantime, give the tool a try for yourself—it’s well worth the time, and a good way to ensure that we don’t end up with a surprise ending to the M4A saga.


Thanks for taking time to read the Weekly Gist! We’re truly grateful for the opportunity to share our thoughts with you, and we love hearing your feedback, suggestions, and ideas for future stories—keep the emails coming! And don’t forget to forward this to a friend or colleague if you’ve found this worthwhile, and encourage them to subscribe as well.

As always, what we’d like best is for you to let us know how we can be helpful in your work, so let us know. 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