November 4, 2022

The Weekly Gist: The Blue Checkmark Edition

by Chas Roades and Lisa Bielamowicz MD

Hey, did you hear that Elon Musk bought Twitter? We’ll admit it, we log an embarrassing amount of time on that app—it’s a great source of news and dialogue in the healthcare business and policy space. Now on top of the terrible news about mass layoffs of staff comes word that the world’s richest man wants us to pay $8 per month for the privilege of getting a little blue checkmark next to our names to become “verified”. Verified what, suckers? Um, no thanks. But it does give us an idea: stay tuned for our new Weekly Gist Blue Checkmark program, where you can pay $8/month for a version of the newsletter that doesn’t include all the dumb dad jokes and puns. Sign up now! (Just kidding, we could never pull that off…)

THIS WEEK IN HEALTHCARE

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

  1. CMS finalizes 2023 payment rules this week, including a 4.5 percent physician pay cut. Physicians are set to see a 4.5 percent decrease in Medicare payment next year, in part due to the expiration of a temporary payment boost that was passed by Congress in December 2021 to avert scheduled sequester cuts. Physician groups are expected to lobby lawmakers heavily in the final months of the year, hoping to secure a reprieve, especially as inflation and labor costs continue to rise. Other changes in the 2023 rules include advance payments to new participants in the Medicare Shared Savings Program, intended to boost participation of providers in rural and underserved areas. Some pandemic-era telehealth flexibilities that are set to expire with the end of the federal COVID public health emergency were also extended.

The Gist: We do not expect the full Medicare physician reimbursement cut to physicians to go into effect, as a bipartisan group of Senators has already asked leadership to address it in the upcoming lame-duck session. However, the cut serves the important purpose of rebasing negotiations between physician lobbies and Congress, such that keeping rates flat or obtaining a small boost would feel like a win for both groups—even if it falls far short of the rate increases needed to meet the rising cost of running a practice. If Congress continues to intervene to push off or mitigate Medicare’s sequestration payment reductions, we could find ourselves back in a Sustainable Growth Rate (SGR)-type situation where a payment cut constantly looms, physicians continually lobby for yet another reprieve, and the delayed cuts balloon in size.

  1. Tenth year of Affordable Care Act (ACA) marketplace enrollment begins. Tuesday marked the start of the tenth season of open enrollment in the ACA’s health insurance exchanges. Last year, a record 14.5M Americans obtained coverage through the exchanges, and this year’s total is expected to surpass that. That’s thanks to the extended subsidies included in the Inflation Reduction Act, a fix to the “family glitch” that prevented up to 1M low-income families from accessing premium assistance, and expanded offerings by most major insurers, who have been enticed by the exchanges’ recent stability. The average unsubsidized premium for benchmark silver plans in 2023 is expected to rise by about four percent, but the enhanced financial assistance will lower net premiums for most enrollees.

The Gist: ACA marketplace enrollment has grown nearly 80 percent since opening in 2014, and exchange plans now cover 4.5 percent of Americans. After enrollment lagged during the Trump administration, the combination of policy fixes and improved risk pools are attracting insurers back into the exchanges, where enrollees are finding more affordable plans than ever before. We consider this a commendable first decade, but the success of the exchanges over the next ten years remains subject to political winds. Congress must revisit the extended subsidies by 2025, and a different administration might deprioritize marketplace advertising and navigation support, policies have which proven crucial to the exchanges’ recent growth.

  1. Walgreens-backed VillageMD rumored to be exploring Summit Health purchase. According to reporting from Bloomberg, primary care company VillageMD, which is majority-owned by Walgreens, is engaged in talks to merge with New Jersey-based Summit Health, a large medical group network and urgent care chain backed by private equity firm Warburg Pincus. In 2019, Summit merged with CityMD, a New York City-based urgent care chain, and operates over 370 clinic locations based in and around New York City, as well as in central Oregon. The combined entity would be valued between $5B and $10B.

The Gist: Should this deal go through, it would epitomize recent trends in healthcare M&A: a well-established independent medical group using private equity funding to rapidly expand its operations before selling off to an industry giant. If that industry giant ends up being VillageMD, Walgreens would finally have a physician practice with deep experience in managing risk, on which they can anchor their larger ambitions in care provision. And if the deal with Walgreens falls through, Summit, with its combination of mostly suburban value-based care practices and largely urban urgent care chains, is sure to attract plenty of other suitors, including any of the major national insurers.

Pluswhat we’ve been reading.

  1. The ethics and legality of private equity (PE) once again in the spotlight. In a recent STAT News article, reporters Tara Bannow and Bob Herman took an in-depth look at private-equity firm Welsh, Carson, Anderson & Stowe, examining the performance of four of its healthcare portfolio companies. They show how the firm’s A-list partners, clients, and board members have promoted controversial business practices—often at the expense of publicly funded healthcare programs—that conflict with its well-curated public image.

The Gist: This article emphasizes how the complex and opaque regulatory structure of American healthcare allows motivated parties like PE firms to find technically legal, though ethically suspect, business models, which can easily tip over into outright illegality. It highlights the “revolving door” flow of executives between industry and government, which allows investment firms to play a long game by actively shaping the regulatory landscape and lobbying to create business opportunities where none previously existed. Justified backlash at “gotcha” business models and profit-seeking at the expense of vulnerable patients may swamp any positive contribution that PE investment and rollups may make to the business of healthcare.


GRAPHIC OF THE WEEK

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

Who is still dying of COVID?

While we have mercifully moved beyond the crisis phase of the pandemic, COVID remains a leading cause of US deaths, taking the lives of hundreds of Americans each day. In the graphic below, we analyzed COVID mortality data, finding the defining characteristic of Americans still dying of COVID is age. As death rates have dropped, the percentage of COVID deaths accounted for by individuals 65 years or older has risen to an all-time high of 88 percent. Notably, a majority of people dying of COVID today are vaccinated, due to the high rate of vaccination in the 65+ population. While the near-universal vaccination of seniors, including the fact that one in five have received the most recent bivalent booster, is not sufficient to save all of their lives, unvaccinated seniors are still dying at higher rates than vaccinated ones. In August 2022, vaccinated individuals over age 80, who represent about four percent of the total US population, made up 31 percent of COVID deaths, while unvaccinated individuals in the same age group, who represent less than one percent of the total population, made up 19 percent of COVID deaths. We entered 2020 with about 55M Americans ages 65 and older, and have since lost 790K, or nearly 1.5 percent of the senior population, to COVID. Meanwhile, reports of the new, immune-evasive BQ variant sweeping New York and California remind us that COVID’s not done with us yet, even if we think we’re done with it.


INTERMISSION

A recommendation from our weekly diet of music, movies, TV, and other good stuff.

The Peripheral (Amazon Prime Video)—Based on the 2014 novel by cyberpunk godfather William Gibson, this sci-fi thriller is equal parts Ozarkand Westworld, chock full of mind-bending, futuristic action and stylish production elements. This is how speculative fiction should look on the small screen—don’t miss it.


THIS WEEK AT GIST—ON THE ROAD

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

What should employers look for in a health system partner? 

This week we took part in a session convened by a coalition of employers who have come together to combine health benefits purchasing power, aggregate data, and share strategies to improve the cost and quality of healthcare in the local market. Central to the group’s work has been the creation of a narrow network product created in partnership with local health systems, aggregating the region’s highest-performing physicians. Given the depth of collaboration needed to make this kind of partnership work, it’s not surprising that we were asked how to define the characteristics of a strong health system partner. As one human resource executive expressed, “Every health system will tell you that they want to be your partner. But how do we tell which ones are truly in it to change what benefits and care look like for our employees?”

First on our list: how has the health system performed in managing benefits for their own workforce? Have they successfully deployed similar solutions for their own employees? We’d be wary of a partner who wasn’t willing to “eat their own cooking”, so to speak. Second, how has the system approached value over the past decade? Have they worked to move much of their business to risk-based contracts? Given that cost drivers, benefits structures, and member needs are different in commercial and Medicare populations, it’s critical that a provider partner understand the nuances between the populations, and not just try to sell the resources they’ve built for their Medicare ACO lock, stock, and barrel to employers. Does the health system recognize their own weaknesses and strengths, and are they willing to make tough choices based on that data? For example, would they be willing to exclude a small number of their lowest-performing doctors from a network? Finally, are the senior-most executives directly engaged in the partnership? Case in point: it was a great sign that the CEO of the anchor health system partner was there to meet with the group, and talk about how the work aligns with the system’s strategy. We continue to believe that there’s value to be created by health systems partnering directly with local employers to work on lowering the cost of care for employee populations.


That’s all for this week—thanks for being an unverified reader of our free newsletter…no blue checkmark for you! Kidding aside, we always appreciate your readership, and we’d be delighted if you’d share the Weekly Gist with friends and colleagues and encourage them to subscribe. And don’t forget to check out our awesome daily podcast!

As always, please let us know if we can be of assistance 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