February 21, 2020

The Weekly Gist: The Billion Dollar Pillows Edition

by Chas Roades and Lisa Bielamowicz MD

Bet you’ve had the same nightmare we sometimes have: you’ve got a big test to take, or you find yourself onstage in front of a large crowd, and you don’t remember studying or preparing, or why you’re there, or what to do or say. The words all come out wrong. And then you wake up in a cold sweat in the grips of overwhelming anxiety. It happens to the best of us. Unlike Mike Bloomberg after this week’s Democratic debate, however, most of us don’t have $65B to spend on sleep therapy and pillows stuffed with money (and maybe some debate prep). Such is life! Better luck next time, Mr. Mayor.

Note to readers: We won’t be publishing the Weekly Gist next week, due to an upcoming confluence of member events that’ll be keeping us occupied during normal writing and production time. We’ll be back on Friday, March 6th with a full wrap-up of Super Tuesday, its implications for healthcare, and all the other crazy stuff that happens between now and then. (And if things get too crazy, we’ll send along a Gist Alert in the interim with calming thoughts and analysis.)


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

Amazon Care goes live for Seattle employees

Amazon Care, the new telehealth and home visit service for the company’s Seattle employees, is now open for business, according to CNBC. The service, announced last September, offers no-charge telemedicine visits, in-home follow up care from a nurse practitioner, and free home delivery of prescription drugs for area employees who get their health coverage from the company (except, interestingly, those who are covered by Kaiser Permanente plans). Although it appears on the surface to be little more than a new virtual care and home visit benefit (something that many companies offer) and is only available to a portion of Seattle-based workers, Amazon’s launch of a public-facing website touting the service could signal an intention to expand the offering to the public at large. We continue to believe that Amazon is less interested in directly providing clinical care (clinical services for Amazon Care are provided by Seattle-based Oasis Medical Group, about which little information can be found) than being a consumer channel to services—something like an online marketplace of telemedicine providers. Regardless, it will bear watching how the company expands Amazon Care. Should Amazon connect care delivery and navigation to its ubiquitous Alexa devices for the 60+ percent of American households who are members of Amazon Prime, it could prove a formidable competitor to health systems who are developing their own digital care platforms.

Few employers taking advantage of new insurance regulations

The Trump administration had hoped that fundamental changes in insurance regulations finalized last June would entice large numbers of employers—particularly small businesses—to change the way they provide health benefits. But early results indicate that few companies are taking advantage of the flexibility. The rule, which went into effect January 1st, would allow workers to use employer funds deposited in health reimbursement arrangements (HRAs) to purchase insurance coverage on the health insurance exchanges established by the Affordable Care Act (ACA). According to Modern Healthcare, just a few hundred employers have made the switch so far, falling well short of the Trump administration’s expectation that 800,000 companies would take advantage of the rule this year, enrolling 1.1M workers. A quiet rollout of the changes by the Internal Revenue Service across the second half of last year likely limited brokers’ familiarity with the rule, leading few companies to take advantage of it during open enrollment last fall. We’d bet that the strong economy and record-low levels of unemployment continue to make employers reluctant to radically change health benefits. But should the economy take a turn for the worse, these rules provide a foundation for employers to quickly embrace “defined contribution” health benefits.

Mednax-UHC contract dispute could mean more surprise bills

Mednax announced on an earnings call this week that insurer UnitedHealthcare (UHC) is ending contracts with the national physician staffing company in four states. If the two parties are unable to reach agreement, Mednax’s anesthesiologists, neonatologists, and high-risk obstetricians will be out-of-network for UHC beneficiaries in Arkansas, Georgia, North Carolina, and South Carolina beginning as early as next month. Mednax CEO Roger Medel told investors the terminations were “unilateral, without warning and unprecedented”. A UHC spokesperson asserted that Mednax physicians are too expensive, charging rates 60 percent higher than average. UHC says it is offering Mednax rates in line with those of other providers. This contracting dispute could prove tricky for the insurer, as cutting Mednax’s physicians out of its networks will likely result in increases in surprise medical bills for UHC beneficiaries in the four impacted states when they receive care at in-network facilities. In 2018, UHC had a similar dispute with physician staffing firm Envision over the rates charged by Envision’s emergency room doctors. The two eventually agreed to a contract extensionUnitedHealthcare appears to be leveraging the lightning-rod issue of surprise billing to exert pressure in its physician contracting negotiations. Despite multiple bills on the table, Congress has not yet passed any measure to protect consumers from surprise bills, leaving them to bear the financial brunt of this kind of payer-provider dispute.


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

The problem is healthcare, the solution is in dispute

As the election season heats up, recent polling data—illustrated in the graphic below—shows Democrats and Republicans are more aligned on healthcare problems than solutions. According to a late January Politico-Harvard poll, the vast majority of Americans in both parties rank lowering healthcare costs and reducing prescription drug costs as their top two domestic priorities among 22 choices. But when it comes to views on a public option and Medicare for All (M4A)—two of the key policy proposals being touted by Democratic candidates on the campaign trail—a January Kaiser Family Foundation survey found a much wider partisan gap. That said, respondents of both political persuasions are more in favor of a public option, support for which has grown over time as compared to M4A. Fully 42 percent of Republicans either “strongly favor” or “somewhat favor” the introduction of a public option. As caucus-goers in Nevada prepare to make their preferences known this weekend, it’ll be worth watching how M4A’s advocates fare, particularly given the union-heavy makeup of the Democratic party in that tourism-dependent state. As we reported last week, even the Sanders campaign has begun to soft-peddle its support for M4A in the face of union concerns that the proposal would eliminate hard-won (and very generous) private health benefits for union members.


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

Healthcare has a Walmart “blind spot”

Assessing the impact of retail disruptors remains the top topic of conversation when we meet with groups of physician leaders, health system executives and board members. As part of the discussion, we’ve been informally surveying the room to understand how many leaders have personally interacted with the retailers who are making moves into the traditional healthcare space. When you ask who’s a member of Amazon Prime, over 90 percent of the room raises their hands. Almost everyone has picked up a prescription at CVS or Walgreens. But when you ask a room of healthcare executives if they’ve recently visited a Walmart, you’re lucky to find even one who has stepped foot in a store in the past couple of months. It’s a stark contrast to the average consumer: 95 percent of Americans shop at Walmart each year—and half of us visit Walmart once a week or more. The company is deeply ingrained into the lives of average Americans. Over 90 percent of us live within ten miles of a Walmart store. The average family of four spends over $4,000 a year at Walmart—and the company captures one in four dollars spent on groceries. (This may not be good news for the health of their customers. Researchers found the presence of an additional Walmart Supercenter per 100,000 residents was associated with a 2.3 percent rise in the obesity rate.) It’s worth asking whether lack of familiarity with the most important retailer in America creates a huge blind spot for healthcare executives and physician leaders in terms of understanding their customers, and in estimating the potential impact Walmart could have on incumbent providers. As health systems build consumer strategies, every leader would be wise to take a field trip to Walmart to see for themselves how the company has built loyalty among hundreds of millions of Americans by helping them “Save money. Live better”—and what it might mean if they brought “Everyday Low Prices” to healthcare.

The tension between segmentation and healthcare equity

As we work with our members to help think through the strategic implications of the shift to a more consumer-focused healthcare industry, one of the most frequent issues that arises is the importance of segmentation. Again this week, I had a lengthy exchange with a senior clinical leader who was grappling with the idea that different segments of consumers might have different preferences, and need different kinds of service offerings. On one level, it’s an obvious insight—we all have different needs and want to relate to our healthcare providers in different ways. Some consumers are seeking an ongoing personal relationship with a doctor, others would prefer only to text or email with a doctor when needed. And our preferences change as our care needs change. I might be more interested in convenience and a low out-of-pocket price for urgent care, but would seek out top clinical talent offering access to cutting-edge clinical technology if I had a serious health need. But while the physician I was talking to acknowledged that reality, he raised a deeper concern: how to square the need to offer different levels of service to different consumers with medicine’s long-ingrained bias toward health equity, and making the same care available to all? If the system “picks” some consumers to target, is it implicitly leaving others out? Shouldn’t they continue striving to be “all things to all people”? I’m not sure there’s a great answer to this question, other than to pay close and constant attention to make sure that whatever the system provides to any particular consumer segment delivers the greatest value possible—or to send the patient elsewhere if that’s not the case. And even the most basic, low-cost care has to be great quality care. The temptation will be to focus on the affluent at the expense of those who rely on safety net services—but ensuring that patients in the latter category are well taken care of shouldn’t preclude offering services to the former segment.


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

On last Tuesday’s episode we heard about public option plans in Washington and Colorado from former Senate staffer and health policy expert Billy Wynne. Wynne established the Public Option Institute to track and analyze the rollout of such plans. He told us it will be important to watch the implementation of public option proposals at the state level closely, as Democratic Presidential candidates are proposing versions of those plans as the cornerstone of their healthcare platforms.

In next Monday’s episode, we’ll will hear from Dr. Genevra Murray from the Dartmouth Institute for Health Policy and Clinical Practice. She has studied how accountable care organizations integrated spending on social determinants of health into practice. Murray says ACO providers have told her that connecting patients to the right social services has been like trying to move upstream with a small paddle. Make sure to tune in!

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Give this a spin—you might like it.

The London jazz scene is on fire right now, with a new generation of artists who aren’t afraid to cross traditional genre boundaries, bring influences from Afrobeat, electronica, dubstep, and a host of other sounds, and blend them into a vital, new music that’s redefining jazz for a new century. At the vanguard of this movement are young musicians like saxophonists Shabaka Hutchings (The Comet is Coming, Shabaka and the Ancestors, Sons of Kemet) and Nubya Garcia (Nerija), trumpeter Sheila Maurice-Grey (Kokoroko), and drummer Moses Boyd, who’s out this month with his debut full-length, Dark Matter. It’s a vital, propulsive album, bringing in rhythmic samples from South Africa and the Caribbean, vocals from Nigeria’s Obongjayar and British jazz singer Poppy Ajudah, and contributions from a host of other collaborators. The cross-pollination that makes the London jazz landscape so lush is on full display on Boyd’s album, replete with references to grime, Afrofuturism, and 2-step garage. Having broken through with his 2016 chart-topping record “Rye Lane Shuffle”, Boyd’s latest is sure to provide a pulsating soundtrack in dancehalls across the UK and beyond. Worth a listen for jazz fans and the jazz-curious alike! Best tracks: “Y.O.Y.O”; “Only You”; “Stranger Than Fiction”.


Stuff we read this week that made us think.

New scrutiny on nonprofit hospitals’ tax-exempt status

The healthcare industry was abuzz this week with reactions to a new study published in JAMA, which showed that the most profitable hospitals spend the least on charity care. Researchers from Johns Hopkins evaluated charity care practices at over 2,500 nonprofit hospitals, finding that, cumulatively, hospitals spent 29 percent of their $47.9B in income on charity care in 2017. Digging into the relationship between spend and profitability, investigators found that the most profitable quartile of hospitals spent $11 of every $100 of profit on charity care, compared to $72 of every $100 of profit for hospitals in the third quartile. Hospitals in states with Medicaid expansion also spent less.

The study has sparked a new wave of criticism of not-for-profit hospitals’ charity care practices, including a scathing New York Times editorial, which makes an argument against hospital nonprofit status that will likely be quite compelling to many readers. The author notes the drop in charity care in the wake of coverage expansion after passage of the ACA, but more damning are questions raised about whether marketing-adjacent activities like community health fairs should count as charity spend, and whether taxpayers should have a say in how hospitals spend tax dollars directed to community benefit. Surely health system CEOs who run complex enterprises with billions in revenue should be well compensated—but data showing that average chief executive compensation in nonprofit hospitals increased by 93 percent from 2005 to 2015, while nurses got only a three percent raise over the decade, will not help public perception. Record profits, combined with coverage of aggressive collections practices, have already raised the attention of regulators, with Senate Finance Committee Chairman Chuck Grassley renewing his probe into hospital nonprofit status last year. Nonprofit health systems should expect even more pressure to come from state governmentswhich face increasing budget pressure as Medicaid costs continue to rise—and they would be wise to reevaluate charity care practices to demonstrate concrete and meaningful impact on community health.

A warning cry about primary care innovation

Just on the heels of our discussion of consumer segmentation this week (see above), a new thought piece appeared in our news feed, from the feminist blog Jezebel. Written by healthcare reporter Molly Osberg, the piece takes a critical view of the emerging trend of “direct primary care”, the membership-based approach to physician practice that’s become increasingly popular as a way to target specific patient populations. There’s One Medical and Forward for busy professionals, ChenMed and Iora for high-risk seniors in Medicare Advantage plans, Maven for prenatal care, and a raft of other mostly venture-backed startups. It’s concierge care for the “masses”—with membership fees that are either paid by employers (or MA insurers) or upper-middle income patients, typically at prices well below the “VIP” services of the early 2000s, which often charged thousands of dollars for on-demand, personal access to a doctor.

Osberg takes a dim view of this trend, worrying (as we pointed out above) that the temptation is to create a “caste system” in medicine, allowing the affluent to buy their way out of the dysfunctional, inefficient, and often highly variable healthcare system the rest of us must deal with. She also raises important questions about the health benefits claimed for some of the added perks (genetic testing, “energy healing”, nutritional supplements) offered by the new practices. It’s a well-written polemic, definitely worth a read if only to get a clearer picture of the perils of consumer segmentation in healthcare that loom ahead if “consumerism” is not balanced with health equity. We talk a lot about disruptors in our industry, and these new-style practices are darlings of the industry press and investors alike. But Osberg’s jeremiad is a helpful counterbalance to that enthusiasm. What countless doctors have told us over the years remains true: healthcare isn’t like other services, it’s not as simple as selling coffee or shipping books or streaming TV shows. Attention must be paid to every consumer segment—and innovators must focus on making care better for everyone, not just Silicon Valley’s legion of “tech bros”. A useful warning from a talented writer.

Are our brains wired for medical errors?

We all suffer from “left digit bias”. It’s why we’re much more likely to purchase an item priced at $7.99 rather than $8. A new study in NEJM demonstrates that doctors may have the same bias when recommending care. It turns out doctors are sensitive to the “left digit” of a patient’s age and are more likely to recommend bypass surgery for patients who are 79 years old than those just a few weeks past their 80th birthday. Physicians unintentionally “assign” patients to an age cohort, with patients “in their 70s” seeming much younger than those in their 80s—to the detriment of 80 year-olds. A New York Times piece expands on the ways common mental shortcuts can lead to medical errors. Like all of us, doctors “overreact” to recent events: if a patient recently experienced a side effect from a drug, doctors are much less likely to order it for the next patient, regardless of the evidence. Obstetricians are inclined to switch “delivery modes” (vaginal delivery versus C-section) based on the experience of recent patients, regardless of indication. Awareness of these biases, for both patients and providers, is the first step toward preventing errors. But the findings also highlight a possible area of focus for artificial intelligence in supporting clinical decision-making, by calling out instances in which human brains are wired to act irrationally against evidence.

That’s all for now! Thanks for reading the Weekly Gist, and for sharing your comments and suggestions with us. Every week we hear from old friends and new, and we really appreciate all the kind words and input you provide. We’d love it if you’d share this with a friend or colleague and encourage them to subscribe, and to check out our daily podcast as well.

Of course, what we really hope is that you’ll let us know if we can be of assistance with your 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