April 20, 2018

The Weekly Gist: The Big Brother Edition

by Chas Roades and Lisa Bielamowicz MD

It’s been a whirlwind week for us at Gist Healthcare—five cities in as many days, with lots of (blessedly safe) frequent flier miles earned. We’ve carved out time to put together this Weekly Gist for you, though, and we’re so grateful for all the positive feedback and suggestions we’re getting as our subscriber base grows. We know you have a lot to keep up with in healthcare these days, and we hope these mailings make that task easier, not harder.

This week we’ve got some thoughts on industry news, reading recommendations, takeaways from recent client work, and even a movie pick to share with you. If you enjoy reading the Weekly Gist, please consider forwarding this to a colleague, and if someone’s sent it along to you—we hope you’ll subscribe!

Let’s dive right in.


THIS WEEK IN HEALTHCARE

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

Physicians push back on quality reporting mandates

A new Perspective piece published in the New England Journal of Medicine this week delivered a sharp critique of the Merit-Based Incentive Payment System (MIPS), a key part of the Quality Payment Program (QPP) being implemented by Medicare to link physician payment to performance on key quality metrics. The article reported the findings of a review conducted by the American College of Physicians (ACP), which concluded that only 37% of the ambulatory, internal-medicine focused metrics included in MIPS are valid. The study calls into question the rigor and usefulness of MIPS as a means of holding physicians accountable for quality performance, while criticizing the administrative and financial burdens created by the program. As the authors point out, US physician practices spend over $15B every year—more than $40,000 per doctor—reporting on quality metrics.

Shortly after the release of the NEJM piece, a broad coalition of physician specialty societies released a public letter to CMS Administrator Seema Verma, calling for the implementation of the MIPS program to be dramatically scaled back for 2018. The letter, along with the ACP study, adds to the growing chorus of criticism of the MIPS program, which has roiled the physician community since the passage of the Medicare Access and CHIP Reauthorization Act (MACRA) in 2015. Just last year, the Medicare Payment Advisory Commission called for the scrapping of MIPS, and its replacement by a simplified program. Whatever the ultimate fate of MIPS, it’s clear that the more physicians learn about it and begin to feel its financial and operational impact, the greater their concern. MACRA has fundamentally changed the outlook for physician practice in the US, and has sparked a realignment among hospitals, doctors and insurers as the industry grapples with its implications. Look for the debate over physician quality reporting to continue to intensify.

Medicare expansion becomes a rallying cry for Democrats

Democratic Senators Chris Murphy (CT) and Jeff Merkley (OR) introduced a new bill to allow individuals and businesses to buy into the Medicare program. The “Choose Medicare Act” would give under-65s on the Obamacare exchanges and businesses the option of purchasing Medicare coverage, rather than private insurance. It would create a new “Medicare Part E” program, which would include pediatric coverage and would put in place out-of-pocket spending caps for enrollees (something the current Medicare program doesn’t have). The Murphy-Merkley bill would also substantially raise subsidies for individuals purchasing their own insurance in the Obamacare exchanges. Premiums for the new Medicare Part E coverage would likely be lower than for traditional private insurance plans, taking advantage of Medicare’s favorable provider rates. The bill has not yet been evaluated by the Congressional Budget Office, and it’s unclear what impact it would have on the Federal budget—although the new coverage for under-65s would have to be self-financed through premiums.

The Murphy-Merkley bill is just the latest in a series of proposals by Democratic lawmakers and policy centers to expand Medicare coverage to the under-65 population. Most notably, Sen. Bernie Sanders (D-VT) has proposed a Medicare-for-all plan, while several other Senators have put forward bills allowing Medicare buy-in for people under 65. The conventional wisdom is that none of these proposals is likely to become law anytime soon given the difficult political dynamics in Washington, particularly with regard to healthcare. But the Murphy-Merkley bill is the latest signal that Democrats are eager to make healthcare coverage a marquee issue heading into this fall’s midterm elections. Following the unsuccessful Republican effort to “repeal and replace” Obamacare, and with growing public concern about healthcare costs, Democrats see an opening to re-engage in the politics of health reform. With Republican reform standard-bearer Rep. Paul Ryan (R-WI) retiring this year, we may be headed into yet another round of political debate about healthcare.

Another healthcare merger in the antitrust spotlight

Bloomberg reported this week that the proposed acquisition of pharmacy benefit manager Express Scripts by insurer Cigna would be reviewed for antitrust implications by the Department of Justice (DOJ). The Cigna-Express Scripts deal itself was announced after Cigna’s merger with Anthem was scuttled due to antitrust scrutiny, and Express Scripts was cut loose from its relationship with Anthem (which then announced plans to create its own drug plan). The proposed Cigna-Express Scripts combination is one of a number of major realignments unfolding across healthcare, with UnitedHealth Group’s Optum unit moving even further into care delivery, and retail pharmacy chain CVS making a play for Aetna’s insurance portfolio. The CVS-Aetna deal may also be reviewed by the DOJ’s antitrust enforcers.

Antitrust scrutiny of “vertical mergers”—involving two entities that don’t compete directly in the same business but seek to combine their operations to work across a broader market—has been relatively rare. It has historically been much more difficult for the government to make the case that vertical mergers reduce competition or raise prices. However the Trump administration’s antitrust boss at DOJ, Makan Delrahim—himself a former lobbyist for Anthem—has been much more vocal than expected with regard to vertical mergers. In particular, Delrahim has taken an aggressive stance against the proposed merger between media giants AT&T and Time Warner, challenging the combination in a landmark court caseAs we’ve written elsewhere, the AT&T-Time Warner case—and the DOJ’s increasingly tough posture on vertical mergers—will have an enormous impact on the healthcare industry, either clearing the runway for more blockbuster deals, or chilling the current trend of big, cross-sector mergers.


GRAPHIC OF THE WEEK

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

Physician burnout is on everyone’s mind these days, and nearly every health system and physician group we work with is concerned about the sustainability of physician practice. Doctors face myriad demands on their time, and with continued pressure on performance and scrutiny over rising costs, the stress level of the average US physician is palpable. We often tell clients, however, that burnout isn’t an issue about work-life balance or doctors not wanting to work long hours—it’s about where a physician spends her time. No doctor chose to practice medicine because they like paperwork or were looking for a career in data entry. Yet as the data here shows, doctors spend most of their time engaged in tasks that take them away from their calling. We have a “27% problem” in healthcare—and to address physician burnout we need to change the workflow and time allocation of doctors to get them back to delivering care.


THIS WEEK AT GIST—ON THE BLOG

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

We launched our website at the beginning of March but started writing blog posts well in advance of that. Turns out you need a website to publish a blog—who knew? One of those early pieces from back in January was about Amazon’s announcement of its new healthcare venture with Berkshire Hathaway and JPMorgan Chase (“Here Come the Amazonians”). Our quick take was that the partnership was noteworthy mostly because of Amazon’s involvement, but that it would need to be about more than just cheaper care for the three companies’ employees for it to matter much.

Fast forward several weeks, and not only has JPMorgan CEO Jamie Dimon downplayed the scope of the venture, and Berkshire’s CEO Warren Buffett failed to even mention it in his vaunted annual investor letter, but now Amazon is backing away from healthcare as well. We’ll continue to keep an eye on the new venture, but for the time being we’re much more interested in Walmart’s healthcare intentions than Amazon’s.

Meanwhile, in case you’re interested in what else we’ve been writing about lately, here are our top five most-read blog posts thus far:

  1. “Telemedicine at a Tipping Point”—Our thoughts on the current state and future promise of telemedicine, in advance of Lisa’s upcoming keynote at ATA18.
  2. “How to Think About the Big New Mergers in Healthcare”—Our analysis of the recent cross-sector merger announcements, and why we think they’re mostly about Medicare.
  3. “Five Ways to Tell if CVS-Aetna is Really Going to Transform Care”—What we believe will be the hallmarks of the new care model envisioned by CVS and other retailers.
  4. “Still Waiting for IT to Create Value in Healthcare”—A critique of the disappointing track record of EHRs and other health IT thus far, and what we think needs to happen next.
  5. “Concierges and Cadillacs: To the Victors Go the Spoils?”—The rise of concierge medicine, direct primary care, and why we think consumerism means we’ll see a lot more of both.

We’ve got much more lined up for the weeks ahead, including some great guest bloggers and newsmaker interviews. Stay tuned to the Gist Blog!


QUICK GIST FLICK PICK 

Sometimes we work, sometimes we go to the movies.

If you’re on the hunt for something to do this weekend, you could do worse than spending 107 minutes in the company of Armando Iannucci’s new film “The Death of Stalin” (trailer). It’s a dark, dark comedy about the events immediately surrounding the death of the Soviet dictator in 1953, with an ensemble cast including Steve Buscemi as Nikita Khrushchev and Jeffrey Tambor as Georgii Malenkov. Iannucci brings the same rapid-fire dialogue and cynical outlook to the Stalin era that you’re familiar with from his HBO comedy Veep—with a dash of totalitarian politics added in. Brush up on your Soviet history before seeing it—as well as your sense of irony. Taking a page from the era it lampoons, the studio ended up airbrushing Jeffrey Tambor out of the movie posters after he was accused of sexual harassment earlier this year, just as many Stalin-era officials were excised from the official records of the time. An oddball pick—but we liked it.


THIS WEEK AT GIST—ON THE ROAD

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

Keeping a watchful eye on the disruptors

Lisa:
Three different health system CEOs reached out to me in just the last week to get my thoughts on the impact of disruptors like Walmart and CVS on traditional hospital companies. All three were looking for advice on how their systems’ strategies should shift in light of the potential entry of these new players. Should they view the retailers as competitors, or should they look for partnership opportunities? Is this week’s announcement of a new bundled payment partnership with Emory evidence that Walmart is ramping up its “center of excellence” strategy?

In particular, CEOs have been fielding questions from their board members—who are wondering whether the changing competitive landscape will require their systems to seek merger opportunities in order to keep pace. While the answers are likely different for each system and each market, there’s a common thread across these disruptors: all are looking to create a new “front end” of the delivery system, and manage care in a lower-cost, convenient setting. And none is looking to own hospitals. In fact, they will seek to reduce the use of costly specialist and hospital care for the patients they manage. Regardless of what the disruptors do, health systems and doctors should focus on building value-driven relationships with their customers that will be difficult to disintermediate.

Staying engaged with a savvy healthcare press corps

Chas:
I gave a talk this week at a conference of healthcare journalists, helping them make sense of the ongoing torrent of news in our industry and highlighting key trends to watch as they cover local and national events. I’m struck by the caliber of reporters covering healthcare these days, and the sophistication of the reporting they do. A decade ago, the media’s understanding of the complexities of the healthcare business—outside of a handful of national reporters covering the policy beat—was really basic. But as rising costs and ongoing healthcare reforms have become a bigger part of our national conversation, I’ve definitely noticed an improvement. We’re so fortunate to have an engaged, talented reporting corps on the healthcare beat these days—the need for the average American to understand what’s really going on in our industry has never been greater. Healthcare leaders should view reporters as important allies in the effort to engage with consumers of care—they play a vital role in advancing our national conversation.


WHAT WE’RE READING

Stuff we read this week that made us think.

New therapies make end-of-life decisions even harder

Bob Wachter, the highly-regarded hospitalist and chairman of the department of medicine at UCSF, wrote a timely and thoughtful piece for the New York Times discussing how breakthrough cancer drugs are changing the nature of end-of-life care. Wachter shares his experiences treating patients with advanced cancer who would previously have transitioned to hospice or palliative care in their final weeks, but are now potential candidates for immunotherapy drugs. The new therapies truly do hold the promise of radically altering the course of disease for very sick patients—but only a small, poorly-understood minority of them. Wachter and his colleagues find themselves grappling with how to approach conversations with patients and families, who are weighing the new options.

The piece highlights the tradeoffs that constantly face patients and their physicians in the end-of-life discussion, and the complicated impact of life-extending (but very expensive) drugs. Wachter suggests a need to reframe palliative care as a concurrent approach, rather than an alternative only available after other treatment is discontinued. As we mourn the loss of former First Lady Barbara Bush, whose personal choices about palliative care were made public before her death, we should pay close attention to voices like Wachter’s—as we hope to advance a needed national conversation about care at the end of life.

F**k the RUC, indeed

new study to be published in a forthcoming issue of the journal Health Services Research by a University of Chicago MD/PhD candidate caught our eye this week. In case the journal title doesn’t already have you reaching for the NoDoz, the study is entitled “Committee Representation and Medicare Reimbursements—An Examination of the Resource-Based Relative Value Scale”. But don’t let the opaque language lull you to sleep—you’d be falling into the same trap that policymakers have succumbed to for years. What it’s really about is the secretive committee that works to determine how much doctors get paid by Medicare: the Specialty Society Relative Value Scale Update Committee (RUC). The RUC is staffed by a rotating group of representatives from various medical specialties, and it recommends payment rates for Medicare Part B reimbursement across categories of physician work. (Here’s a good primer on the RUC.) Want to know why cardiac surgeons get paid so much more than primary care doctors? To a large extent, it’s because of the RUC, where primary care physicians have complained for years that they are poorly represented in comparison to their specialist colleagues. (We once met a fierce opponent of this shadowy group who showed us his homemade t-shirt, which bore the slogan “F**k the RUC”—he was a general internist.)

In the new study, the Chicago researcher examined the impact of RUC membership composition on reimbursement rates, and guess what? “An annual RUC rotating seat membership is associated with a statistically significant 3-5 percent increase in Medicare expenditures for codes billed to that specialty.” In other words, it turns out that if you get to set your own prices, your prices go up—significantly. We complain a lot in healthcare that fee-for-service incentives drive dysfunctional behavior, and that we spend too much money on expensive specialty care relative to primary care and prevention. This new study, tucked away in an obscure academic journal, should get a lot of attention—it points a damning finger at one of the root causes of our problems.

Big Data and Big Brother

The cover story of the latest edition of Bloomberg Businessweek is a long, terrifying article about the data mining company Palantir Technologies—you may not have heard of them, but they’ve definitely heard of you. Palantir is the digital surveillance company started by PayPal billionaire and Silicon Valley iconoclast Peter Thiel in 2004. Its origins lie in crunching big data sets and providing insights to the US military and intelligence community, but as it’s grown the firm has expanded its scope to serve corporate clients as well.

Palantir’s tools pull in billions of data points—phone records, emails, social media posts, financial records, and on and on—and creates diagrams that help identify linkages not readily evident to, say, counterterrorism agents or intelligence analysts. Recently, the firm has worked with financial services clients like JPMorgan Chase, and may have been implicated in the Facebook-Cambridge Analytica imbroglio during the 2016 Presidential campaign. The picture of Palantir painted by the article is worthy of consideration on its own by anyone concerned about privacy in the digital age. As healthcare adopts more and more of the tools and approaches of the Big Data advocates, Palantir’s story is a great cautionary tale about the need for boundaries and guardrails—particularly in the context of patients’ sensitive medical information.


That’s all for this week. Thanks again for taking the time to read our thoughts and recommendations, and for letting us be part of your busy week. Keep an eye out for more to come on the Gist Blog, and please consider sharing this Weekly Gist with a friend or colleague. We hope to see you out on the road soon…if there’s anything we can do to be helpful in your work, please 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