July 26, 2019

The Weekly Gist: The Blonde Leading the Blonde Edition

by Chas Roades and Lisa Bielamowicz MD

The long-standing “special relationship” between the US and Great Britain just got a little more…special this week, with the ascension of Boris Johnson to the post of UK Prime Minister. Whatever your political views regarding our nations’ leaders, you have to marvel at their dueling coiffures. No future transatlantic summit will be possible without special arrangements for the army of hairdressers needed to maintain those monumental mops. One imagines two new grim-faced, uniformed bearers of heavy suitcases lined up next to the officers charged with the nuclear “footballs”, bearing bags full of peroxide, volumizer, and hairspray. Not since the colonial-era rivalry between our two bewigged Georges have our two countries seen such a spectacularly shaggy show.

THIS WEEK IN HEALTHCARE

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

Expansion plans for two insurance upstarts

Health insurance startup Bright Health, founded in 2016, announced aggressive 2020 expansion plans this week. The Minneapolis, MN-based insurer plans to nearly double its footprint next year, bringing its narrow-network plans to a total of a dozen states. At the center of Bright’s approach to individual, family, and Medicare Advantage (MA) plans is its “Care Partner” model, in which it selects one health system as its network partner in each market it serves. For next year, Bright plans to move into markets in Florida, Illinois, North Carolina, Nebraska, Oklahoma and South Carolina for the first time, mostly targeting medium-sized urban markets in those states. It also plans to extend its product offerings in all of its existing markets, including Phoenix, Denver and Nashville. For next year, Bright will offer MA plans in 14 markets across its 12-state footprint. Bright’s aggressive expansion plans are in contrast to the more incremental approach of Oscar Health, another well-funded insurance startup based in New York City. Last week, Oscar announced the first two target markets for its initial foray into the Medicare Advantage business: its home market of New York City, and Houston, TX. Like Bright, Oscar will partner with a single provider—Montefiore Health System in New York—for its MA plan. By contrast, Oscar’s Houston MA offering will include the Houston Methodist system, Privia Medical Group, and VillageMD. Oscar views Houston as an attractive market because it already has a large membership base in four other cities in Texas. The two startup insurers are worth watching as they expand their presence in the booming Medicare Advantage segment, aiming to bring their consumer-friendly platforms to seniors in a bid to compete with the national insurance giants that dominate that business.

More news on the CVS front

We’re considering starting a new section in the Weekly Gist called “CVS Watch”, given how frequently we find ourselves reporting new developments in the pharmacy giant’s fast-moving strategy for transforming healthcare in the US. This week, there are three new wrinkles to add to the story. First, CVS announced a new collaboration with Unite Us, which runs a care coordination software platform aimed at linking together resources to help address social determinants of health. The partnership is part of CVS’s recently-announced $100M campaign aimed at addressing community health issues. The new collaboration will give Aetna’s Medicaid members in Louisville, KY, and some of Aetna’s Medicare/Medicaid dual-eligible enrollees in Florida and Louisiana access to the social care network assembled by Unite Us, who also recently partnered with Kaiser Permanente around the same issues. Second, CVS CEO Larry Merlo announced at a Medicare Advantage conference this week that the company will begin testing a pilot program to coordinate care for Aetna enrollees who require knee replacement surgery. The model will provide patients with in-store and at-home assistance in preparing for and recovering from knee surgery, with the goal of reducing readmissions for post-surgical complications. It’s another example of how the company is pulling together its physical, virtual and insurance assets to reshape care delivery for patients—one targeted beyond the chronic disease management approach that’s been the focus of its HealthHUB rollout. Finally, Kaiser Permanente announced a new partnership with CVS that will allow Kaiser members to access CVS Minute Clinics outside Kaiser’s service areas, without the complication of filing additional claims for reimbursement. The partnership extends the existing relationship between Kaiser and CVS, which already jointly operate retail clinics in some Target stores. The extended partnership with Kaiser is another indication that CVS is setting its sights beyond just Aetna enrollees to widen access to convenience care for other payers as well. Just eight months after its acquisition of one of the nation’s largest insurers, CVS shows no signs of slowing down as it continues to look for ways to reconfigure its portfolio of assets to create a healthcare company that extends well beyond the pharmacy space.

Advocate Aurora drops the co-CEO model 

The Illinois- and Wisconsin-based Advocate-Aurora Health announced this week it would end the co-CEO leadership model in place since the combined health system was formed in April 2018. Jim Skogsbergh, former CEO of Advocate Health Care, will be the system’s sole President and CEO; co-CEO Nick Turkal will pursue other interests. The co-CEO model has been adopted by a number of health systems in the wake of large mergers but is rare in other industries. While supporters contend that a co-leadership model can accelerate board approval of a merger and ease cultural transition, critics argue that it creates confusion and ambiguity around decision-making and slows integration. The model may also be drawing scrutiny from ratings agencies. Moody’s cited CommonSpirit Health’s co-CEO arrangement, which it described as “atypical and…cumbersome, potentially [a]ffecting the rate of organizational and cultural change,” as a reason for its recent Baa1 bond rating. Turkal and Skogsbergh are both well-respected leaders with complementary skill sets, and even so, found the relationship only of temporary value. Given rising pressure to show returns from integration, systems should approach co-CEO roles with caution, and must lay out specific goals and milestones to evaluate the success of the model.


GRAPHIC OF THE WEEK

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

Examining the variation in hospital consolidation in the US

In last week’s edition we shared a graphic displaying the degree of hospital consolidation, with a particular focus on the volume of discharges controlled by a small subset of massive health systems. Continuing our analysis of the underlying data set from the Agency for Healthcare Quality and Research (AHRQ), this week we take a look at the variability across states in consolidation. Updating AHRQ’s 2016 data to reflect significant mergers across the past two years, we found that 31 states now have more than 60 percent of their hospitals operating as part of a larger health system, with especially heavy consolidation in those states highlighted in orange. In general, most states east of the Mississippi River now have heavily consolidated hospital markets, while hospital markets across the southern tier of the country and into the Plains states are relatively less consolidated. We also show the number of remaining independent hospitals in each state, excluding hospitals run by the Veterans Administration and those which are part of correctional systems. It’s striking how few are left, even in states with relatively large populations. Nationally, the data set shows 0.49 independent hospitals per 100,000 population—in 11 states, there are even fewer independent hospitals per capita. Among those are some of the most populous states in the country, including California, Florida, New York, North Carolina, New Jersey and Virginia. North Carolina in particular bears attention: it’s the fourth most concentrated hospital market in the country, and has the fourth fewest hospitals per 100,000 residents, despite being the nation’s ninth largest state. With more consolidation in the works in the Tar Heel State, it’s worth asking whether this degree of consolidation has led to better care or lower costs for state residents.


THIS WEEK AT GIST—ON THE ROAD

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

The rapid evolution of a primary care disruptor 

Lisa:
I recently met Dr. Jeremy Gabrysch, founder and CEO of Remedy, an Austin, TX-based urgent care and primary care provider that offers a combination of in-person and telemedicine visits. Initially I wanted to know more about Remedy’s work with Whole Foods Market and other self-funded employers but came away from the conversation most intrigued by how quickly the company has evolved their value proposition. Gabrysch, an emergency medicine physician, started Remedy in 2015. While the company has opened a handful of clinics, including a flagship location in Whole Foods’s corporate headquarters, it found many employers and patients prefer to engage with Remedy’s telemedicine and “house call” platforms. Virtual visits, clinic-based care, and house calls each account for a third of visits today, but Gabrysch predicts that two-thirds of visits will be virtual in just a few years. He sees parallels to the shift away from physical space use in banking: “As tech has changed the way customers interact with their bank, we just don’t need all that retail space anymore. I feel like we are on the verge of a dramatic reduction in healthcare square footage as well. Not only telehealth, but home-based care combined with wearables and other tech, will drive better outcomes at lower cost, and without all the physical infrastructure.” Building on his experience in home visits and technology-based communication, Gabrysch is now looking to support patients after surgery or hospital discharge and evaluate hospital-at-home capabilities—a unique path for a primary care start-up. In just four years, Remedy has refined their primary care value proposition and is expanding into higher-acuity services, all while growing quickly, emblematic of the nimbleness of a disruptor. Traditional providers may view Remedy as a greater threat than first thought—but I’m hoping progressive systems see a company like this as an attractive partner to support moving care toward lower-cost and more consumer-friendly settings.

Healthcare’s new up-at-night issue: pricing strategy

Chas:
I’m five for five in conversations with health system executives this week in which the topic of pricing strategy has come up. Given the recent attention on surprise billing, and the broader push for more transparency of prices from federal and state regulators, hospital leaders now seem to be on high alert about the prices they charge for their services. Once the purview of specialists in the managed care department who were responsible for the arcana of hospital chargemasters, pricing policy is now a CEO-level issue, and there’s an active debate going on in many systems about whether, when, and how much to lower prices in response to external scrutiny. I’ve been trying to make three key points in my discussions with executives. First, pricing isn’t a tactical question, or a matter of simply choosing where and how much to give on price. It’s a strategic issue—how systems price their services goes to the heart of their value proposition: what bundle of benefits are we providing to purchasers and what’s the worth of those benefits? That’s well beyond just trading off one line-item for another in payer negotiations, which leads to my second observation: rethinking pricing strategy will require rethinking the relationship between the payer and the provider. What’s needed is a shared view of the value the health system provides, and a comprehensive discussion of how that value is reflected in the economic relationship between employers, insurers, and hospitals. And at the heart of that vision should be the end user of healthcare—the patient. Thus, the third point I’ve tried to make with executives worried about pricing strategy: how we price services should reflect how we want patients to engage with the care system. If we want better patient engagement, greater consumer loyalty, and healthier individual behavior, perhaps we should price our services in a way that makes that possible. Including—a heretical thought—providing some services (perhaps virtual access to simple primary care?) for free.


BINGE WATCH ALERT

We would’ve worked harder, but we watched this instead.

Historical drama, check. High production value, check. Focus on the history of one of the world’s premier hospitals, check. Streaming on Netflix, check. The only thing the twin series Charité and Charité at War don’t have going for them: they’re German-language shows. But on every other dimension, the shows have been an absolute delight to watch, especially for people (like us) interested in the history of healthcare, who don’t mind dealing with a few subtitles. The show centers on the Charité-Universitätsmedizin hospital in Berlin (founded in 1710), with the first six-episode run covering the late 1800s, and the second set during World War II. Not just a foreign-language hospital drama, the show delivers more than just soap-opera plotlines (though there are those, and they are pretty soapy). We’re treated to accurate (and graphic) medical procedures and discoveries-in-action, performed by major figures in the history of modern medicine (Robert Koch, a pioneer of bacteriology; Emil Behring, who discovered the diphtheria antitoxin; Rudolf Ludwig Carl Virchow, the father of modern pathology, and a host of others). We get a glimpse into the complex interplay between medicine and politics, both during the Wilhelmine Period and especially under the Third Reich. And we get a human sense of just how significant it was for medical innovators to, for example, discover a cure for syphilis or invent a functioning prosthesis. The series is particularly good on the moral compromises made by healers under the Nazi regime, which viewed physical infirmity as a moral and political failing—the tale of surgical titan Ferdinand Sauerbruch is quite moving on that score. If you’ve any interest in medical history, and a reasonably strong stomach, we’d highly recommend you check this series out. A wonderful antidote to the Grey’s Anatomy-style dreck we’re accustomed to.


WHAT WE’RE READING

Stuff we read this week that made us think.

A resident “drowning in debt” examines where the tuition dollars go

Daniel Barron, a resident physician at Yale, and his wife collectively owe over $300K in medical school debt—and were understandably a little jealous after New York University announced last year that the medical school will be tuition-free for all current and future medical students. In a quest to understand why medical school is so expensive, Barron interviewed Dr. Robert Grossman, Dean of NYU Medical School, to find out why he worked to make medical school free, and whether other schools might follow suit—and ended up having a surprisingly frank conversation. So where does the tuition money go? “Well, where do you think?” replies Grossman. “It supports underproductive faculty.” But the two ultimately agreed that the $24M that NYU medical students used to pay annually in tuition was “a rounding error” compared to NYU’s $10B total budget. Barron’s conversations with policy experts suggest it costs much less to educate a student than the price of tuition—but “most schools simply don’t spend the effort to sort out their cost structure”. The conclusion: medical school is expensive not because it costs a lot to train physicians, but because there are scores of students willing to pay any price the schools set. Programs to remove or reduce the tuition burden like NYU’s are laudable but appear unlikely to expand quickly. (Grossman commented that he’s had zero requests from other medical school deans for his “playbook” to cut tuition.) Moreover, they do little to address the underlying question of whether a high debt burden drives doctors to high-paying specialties or raises the cost of healthcare. Larger policy solutions, such as increasing public support for medical school tuition and embracing undergraduate medical education, are likely needed to reduce debt burden and create a level playing field for doctors who want to serve lower-income populations—and will be critical to longer-term efforts to lower the cost of the clinical workforce.

HHS report finds ACO success is all about execution

This week the Department of Health and Human Services (HHS) Office of Inspector General released the results of a study to understand what makes high-performing accountable care organizations (ACOs) successful. Researchers conducted onsite visits and interviews with leaders of 20 ACOs which generated significant shared savings and earned top-decile quality scores. They found an array of strategies that read like a consultant’s playbook on how to set up a successful ACO: engage physicians, share information with partners, curate a network of high-performing skilled nursing facilities (SNFs), target frequent emergency room users, use care coordinators to manage complex patients, and so forth. Frustratingly, the report provides a laundry list of common things that successful ACOs do, without providing much guidance on which strategies generate the greatest savings or return on investment (although we’d bet on developing a network of high-value postacute providers). Pulling up, the findings suggest that ACOs should spend more time on execution rather than chasing novel solutions or untapped buckets of costs, as success to date has been based on implementation of a well-understood set of tactics.

Who are the top 5 percent of healthcare spenders?

Most of us are familiar with the oft-reported statistic that five percent of people account for half of the healthcare spending each year. But the composition of that five percent in any year is a changeable, a mix of patients with isolated high-cost events, like trauma or an acute illness, and those with ongoing costly chronic conditions, making the population difficult to target with care management strategies. A new analysis from the Petersen-Kaiser Health System Tracker uses claims data from individuals with employer-sponsored insurance to compare the patients who are highest-cost in one year to those who are persistently high-cost and fall into the top five percent for three years or more. Healthcare spending on persistently high-cost patients is $87,870 annually, 58 percent higher than spending on those who are high-cost in one year—and a whopping 15 times higher than average spend for all employees. Most interesting is where care dollars are spent. Single-year high cost patients spend much more on inpatient care, whereas persistently high-cost patients run up over 80 percent of their costs on outpatient care and drugs. Patients with a small set of conditions, namely HIV, certain cancers, autoimmune conditions like rheumatoid arthritis and multiple sclerosis, and congenital diseases like cystic fibrosis, are highly likely to be persistently high-cost, suggesting that specialized care and pharmaceutical management will be critical to managing costs in the younger population covered by employer insurance—a key difference from the Medicare population in which patients with multiple common chronic conditions like diabetes and heart failure comprise a large portion of high-cost beneficiaries.


Here endeth another edition of the Weekly Gist. Thanks so much for joining us this week, and for sharing your feedback, comments and guidance for future writing. We love hearing from you, and we’re so appreciative of your sharing our work with friends and colleagues and encouraging them to subscribe.

Most of all, we’re excited to be of assistance in your work. Please let us know how we can play a role to support your team. 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