March 15, 2019

The Weekly Gist: The Bomb Cyclone Edition

by Chas Roades and Lisa Bielamowicz MD

Hello from Washington, where the weather has finally turned warmer and the buds have begun to emerge—it’s almost spring! While much of the country contends with the impact of the terrifyingly named “bomb cyclone”, triggering blizzards and high winds, we’ve at least had the pleasure of enjoying our extra hour each day in a milder climate. But we’d trade anything to get that hour of sleep back.

THIS WEEK IN HEALTHCARE

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

White House proposes big healthcare cuts in its 2020 budget

In an annual Washington ritual as time-honored as the emergence of the cherry blossoms, the White House this week released its budget proposal for the coming fiscal year, which was promptly declared “dead on arrival” in Congress. The 2020 “Budget for a Better America”, weighing in at $4.75T, garnered immediate headlines for its sweeping cuts to domestic programs and increased defense and national security spending. As always, the President’s budget is a statement of priorities rather than a legislative document, and with Congress now divided, the proposal will almost certainly not be adopted. However, the budget does outline the Administration’s priorities on healthcare, proposing $845B in Medicare spending reduction and $1.5T in reduced Medicaid spending over the next decade, relative to baseline. In addition to a continued focus on combating fraud and abuse in Medicare, and clamping down on rising drug prices, the budget’s Medicare cuts include a more aggressive push toward site-neutral payment, eliminating the differential in reimbursement between hospitals and independent physicians for similar services. The White House proposes to use waiver authority to shift the Medicaid program to a system of block grants, with individual spending caps for beneficiaries and a national work requirement for eligibility. A similar approach to Medicaid reform was rejected by the Senate in 2017, as part of Republicans’ effort to “repeal and replace” the Affordable Care Act (ACA).

Whether or not the President’s healthcare spending proposals are adopted, the budget will surely become a key talking point in the 2020 Presidential campaign, and the growing debate over “Medicare for All” (M4A) and related Democratic policy priorities. Presidential hopeful Sen. Kamala Harris (D-CA) was one of several 2020 candidates quick to weigh in, saying “This budget says a lot about the President’s priorities: cut $845B from Medicare while spending billions on his vanity project, the wall…This would hurt our seniors.” Industry lobbyists also blasted the budget, warning of potential harm to Medicare and Medicaid patients. The White House defended its approach, pointing out that only a small portion of the proposed Medicare cuts would impact beneficiaries directly, a view supported by the non-partisan Committee for a Responsible Budget, which found that only 10% of the Medicare reductions would affect program enrollees. Others observed that the Obama administration proposed similar cuts to Medicare spending, and that there could be bipartisan support for a continued focus on controlling drug costs as well. As to the idea that the White House could move to Medicaid block grants via a waiver-granting approach, Rep. G.K. Butterfield (D-NC) summed up House Democrats’ sentiment in a four-hour grilling of Health and Human Services (HHS) Secretary Alex Azar on Tuesday: “You just wait for the firestorm this will create.”

Two Blues plans join forces in strategic affiliation

Two major Blues plans, Oregon-based Cambia Health Solutions and Blue Cross Blue Shield of North Carolina (BCBS-NC) announced this week that they would join forces to create a combined entity managing 6M lives with nearly $16B in revenue. The companies already have an established working relationship, having partnered in 2016 to create Echo Health Ventures, a healthcare investment fund with holdings in an array of provider entities, healthcare technology and support services. BCBC-NC and the Regence BCBS plans operated by Cambia in Oregon, Washington, Idaho and Utah will remain separate nonprofit entities, and will enter into long-term management agreements with the revamped Cambia Health Solutions. Dr. Patrick Conway will become CEO of Cambia, while also maintaining his role as CEO of BCBS-NC, with current Cambia CEO Mark Ganz serving as Executive Chair of Cambia’s board. Conway will manage all health plan business and operations, and Ganz will oversee Echo Ventures and the development of Cambia’s consumer platform.

The affiliation enables the joint company to diversify not only within its insurance business, but to expand its reach into care- and consumer-focused assets. If Echo Venture’s portfolio is an indication, Cambia may pursue a strategy of more tightly integrating care delivery, healthcare analytics and insurance into a single entity, similar to national insurers UnitedHealth Group and CVS-Aetna. While Conway said the goal of the deal was to make healthcare “more affordable, easy to use, and more personal”, it’s unlikely that the venture will have an immediate impact on consumers enrolled in the company’s plans. As Conway’s leadership expands westward, providers should expect him to bring his bias toward mandatory value-based payment. Having stated last year that BCBS-NC “will never give you a fee-for-service rate increase if you don’t go on the value-based healthcare journey with us”, Conway appears to be doubling down on that strategy, with BCBS-NC announcing in January the launch of the Blue Premier program along with five North Carolina health systems that have entered into total-cost shared risk arrangements. With two respected leaders in Ganz and Conway, and a growing portfolio of assets to build on, it’s worth watching to see if this long-distance combination can generate value from scale.

A policy shift from a leading pharmacy middleman

UnitedHealth Group (UHG) announced this week that, starting next year, it plans to require employers who contract with its UnitedHealthcare insurance unit and also use its OptumRx pharmacy benefit management (PBM) service to pass along rebates the PBM garners from pharmaceutical companies directly to employees. Previously most employers used those savings from rebates to lower overall premium costs for all employees, or for other purposes. UHG said the policy will apply only to new UnitedHealthcare/OptumRx clients, including those who are self-insured, and that the approach would continue to be voluntary for existing employer clients. Although other insurers have offered clients the ability to voluntarily pass PBM rebates along to consumers, UHG will be the first to make the policy mandatory. The change mirrors a similar policy recently proposed by the Trump administration for Medicare and Medicaid drug plans, and comes at a time when drug companies, PBMs, and insurers are increasingly coming under fire for the high cost of prescription drugs borne by consumers, and the opaque nature of drug pricing and reimbursement. According to a National Business Group on Health survey cited by the Wall Street Journal, which first carried news of the UHG policy change, only one-fifth of large employers currently pass drug rebates directly to employees, although more are moving in that direction.

The price that consumers pay for a drug at the pharmacy counter—often out-of-pocket depending on their deductibles—is determined by a cost-sharing amount based on list price. As drug companies are believed to inflate list prices to offset the give-backs they offer PBMs to gain inclusion in drug plans, rebates may actually inflate the portion of drug costs paid directly by consumers, making them a key area of focus for policy makers. This week, Senate Finance Committee leaders Chuck Grassley (R-IA) and Ron Wyden (D-OR) announced that they are inviting representatives from five major PBMs to a hearing on the subject next month. The policy change by UHG could be an effort to position its OptumRx service more favorably in the midst of increasing scrutiny from Congress and the White House over industry practices. As addressing the high cost of prescription drugs emerges as a potential area of bipartisan compromise in a divided Congress, the move by UHG may be a harbinger of things to come from other industry players. As Sens. Grassley and Wyden said in announcing hearings this week, “Middlemen in the health care industry owe patients and taxpayers an explanation of their role. There’s far too much bureaucracy and too little transparency getting in the way of affordable, quality health care.”


GRAPHIC OF THE WEEK

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

A look at the nationwide adoption of bundled payments 

The Bundled Payments for Care Improvement (BPCI) program, run by the Centers for Medicare & Medicaid Services (CMS) from 2013 to 2016, was the first large-scale pilot to investigate the impact of episode-based payments on the cost and quality of care. With the program concluded, there is a trove of data now available. We recently connected with our colleagues at Ancore Health, a data strategy consulting firm, about their work to analyze the early adoption and outcomes of bundled payments. Ancore shared insights from their claims-based analytics, and we were quite surprised by the wide variability in the uptake of bundled payments across the country.

The graphic below shows the penetration of bundled payments for five common diagnosis groups in the BPCI program, as measured by the percent of admissions coming from BPCI participants. Some states barely register any BPCI activity, like Kansas and Nebraska, which were lowest in the nation, with just 14 percent of Medicare admissions for eligible conditions running through BPCI. At the opposite end of the spectrum, we were floored by the degree of participation in states like Delaware, Virginia and California, where over two-thirds of eligible claims were part of a bundled payment. There are a few explanations for this variability. Uptake of bundled payments is lower in states with larger rural populations, as constructing tight networks and managing patient handoffs is more difficult over larger distances. Ancore’s analysis shows that urban hospitals were twice as likely as rural hospitals to participate in BPCI. Markets with fewer choices of postacute partners, who are critical in managing inflectable costs, also saw lower uptake of bundlesAccording to Ancore’s CEO Eric Passon, there was “minimal inpatient cost and length-of-stay variance between BPCI and non-BPCI facilities, which suggests the opportunity and needed change in behavior is mainly post-discharge.”

We’d highly recommend taking a look at Ancore’s interactive (and publicly available) Bundled Payment Explainer, which lets users drill deeper into state-by-state results, and compares the costs of BPCI and fee-for-service discharges.  We plan to feature more of Ancore’s work in coming weeks as they look further into the implications of bundled payments for postacute care.


THIS WEEK AT GIST—ON THE ROAD

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

Continuing the price transparency conversation 

Lisa:
Last week we gave our take on the Trump administration’s proposal to force providers to reveal the prices they negotiate with insurance companies. Those two paragraphs have generated a number of comments from readers, and I’ve been speaking with several healthcare executives about the topic over the past week. We largely have a positive view of the proposal, as it would come several steps closer to putting meaningful price information in the hands of consumers. As we believe the top focus of the healthcare system should be delivering value directly to individual consumers, we are strongly in favor of true price transparency. But that doesn’t mean that this proposal is without real shortcomings, and simply sharing negotiated rates is far from guaranteed to give consumers an accurate price—even if it is much closer than the charges that hospitals are required to report today. Moreover, we fervently believe that other stakeholders, particularly insurers, should have the same regulations imposed on them. As middlemen in this process, insurers may have more to lose under transparent pricing than providers. Their central value proposition is the ability to assemble a lower-cost offering for employers and individuals, so it’s a bit of an indictment of their success that prices have continued to increase. Much of the discourse has centered on hospitals using leverage to drive prices higher. But in many states, insurers are even more consolidated than providers and have just as much, if not more, leverage. If insurers are getting a better deal thanks to their leverage, those savings don’t always seem to be getting passed to purchasers.

Yet the knee-jerk reaction among the provider lobby in opposition to transparent pricing just contributes further to the image of hospitals as bad guys. The American Hospital Association’s statement that revealing negotiated rates could “undermine the choices available in the private market” feels tone deaf, even if there is valid reasoning behind it. Many provider discussions on price transparency focus on the complexities of the system: contracting minutiae, charges versus prices, the challenge of uncompensated care. All these are legitimate concerns, but nearly impossible for the average consumer to understand. Rather than continuing to explain why the system doesn’t work, providers should own the creation of a price transparency solution. This week I’ve been inspired by a handful of health system leaders who want to tackle the challenge of meaningful transparency. They’ve shared their efforts to end surprise billing, deliver accurate price estimates, and a desire to engage with health plans to jointly address the problem. Transparency is an issue where providers should lead the charge and change the conversation, and squarely put themselves on the side of consumers. It’s refreshing to see leaders in the provider community embracing agency over excuses in working toward that goal.

Launching a new effort to reduce low-value care in Virginia

Chas:
Exciting news to share this week from the Virginia Center for Health Innovation (VCHI), the nonprofit, public-private partnership that acts as a convener and facilitator for payment and delivery system transformation in my home state, and where I’ve had the privilege of serving on the board for several years. VCHI was just awarded a $2.2M grant from Arnold Ventures to create a statewide pilot program aimed at reducing “low-value care” across the state. Working with six health systems and three clinically-integrated physician networks (Ballad Health, Carilion Clinic, HCA and Virginia Care Partners, Inova and Signature Partners, Sentara and Sentara Quality Care Network, and VCU Health System), the pilot will create a collaborative learning network to focus on the reduction of seven services identified as “low value” by the Choosing Wisely initiative. As part of the project, we will also be assembling a task force of Virginia’s leading employers to engage the purchaser community in the effort to reduce unnecessary and wasteful care delivery.

The project builds on earlier work done by VCHI to identify the costs associated with low-value care across the state. Using data from Virginia’s all-payer claims database and Milliman MedInsight’s Health Waste Calculator tool, we found that in 2016, just 42 of the 550 questionable tests and procedures identified by Choosing Wisely accounted for more than 2M unnecessary services being delivered across the state, costing nearly $750M. In this new pilot, we’ll begin by targeting an initiative that we’re calling “Drop the Pre-Op”, given that the top driver of low-value care in Virginia is unnecessary pre-operative testing and diagnostics for low-risk patients. Earlier analysis showed that this category of services alone accounted for $494M in unnecessary spending in Virginia in 2016. We’re excited to be collaborating with the University of Michigan’s Value-Based Insurance Design Center, along with Milliman, the Virginia Chamber of Commerce, and the Virginia Business Coalition on the project. I continue to be so impressed by the work of VCHI, and the power of bringing together stakeholders from across the state—health systems, physicians, insurers, employers, and others—to identify real opportunities to improve care and reduce cost. I’ll keep you posted on the project’s progress as it gets underway.


GIST IN THE NEWS

We said it, they quoted it.

Blue Cross Announces Deal with Cambia, Northwest Insurer
Alex Olgin; WFAE 90.7; March 12, 2019.

“Cambia isn’t just a health insurer. It’s made of 20 companies with 70 million customers in health care IT, medication pricing and chronic care. Its insurance business is a fraction of that with 2.6 million customers in Oregon, Utah, Idaho and Washington. This broadening into other portions of the health care market is what Lisa Bielamowicz with the health consulting group Gist Healthcare, expects to continue.

“‘These two organizations coming together gives them a size and a gravity that allows them to diversify not only across markets,’ Bielamowicz said. ‘But also gives them the ability to invest in different types of services similar to what [UnitedHealth Group] and Aetna have done.’”


ON THE GIST TURNTABLE

Give this a spin, you might like it.

Last year, just as the #MeToo movement was reaching critical mass, a new voice emerged on the indie scene with a message aimed like a precision-guided missile at the heart of the patriarchy. “Boys Will Be Boys”, a single from Australian newcomer Stella Donnelly, firmly but poignantly took on the phenomenon of blaming victims of rape. “Why was she all alone/Wearing her shirt that low?/They said ‘Boys will be boys’/Deaf to the word ‘no’”—that’s the well-worn excuse the song confronts, with Donnelly angrily promising the perpetrator of her friend’s rape: “Like a mower in the morning/I will never let you rest.” The song quickly became an anthem, and now the Perth-born singer is back with her debut full-length, Beware of the Dogs, a release that allows Donnelly to showcase her full range of lyrical and vocal abilities while staying true to her woke feminist message. “Old Man”, the album opener, returns to #MeToo themes, bolstering her earlier message: “Oh, are you scared of me, old man?/Or are you scared of what I’ll do?/You grabbed me with an open hand/The world is grabbin’ back at you.” Donnelly has a keen sense of humor and shares an eye for mundane and absurd details with fellow Aussie Courtney Barnett. Her jaunty indie-folk singing style gets a full workout, even while advancing serious arguments, as on tracks like “Watching Telly” (about the media’s objectification of women), and “Tricks” (a surprisingly joyful song about a woman dealing with an alcoholic partner). It’s an impressive collection from a songwriter still honing her craft, and there’s no doubt Donnelly will be an important presence on the indie stage for years to come. A welcome new voice.


WHAT WE’RE READING

Stuff we read this week that made us think.

New data on Walmart’s “Centers of Excellence” program

The venerable Harvard Business Review launched a five-part series on transforming healthcare this week, and we found the first installment to be quite interesting. It discusses the results of Walmart’s Centers of Excellence (COE) bundled payment program, and was jointly authored by the head of that program, a neurosurgeon at Danville, PA-based Geisinger Health (which participates in the program), and the third-party benefits administrator that designed and helps run it. Since 2013, Walmart has contracted directly with a handful of leading national health systems—Geisinger, Mayo Clinic, Virginia Mason, and others—to provide services for its employees across a growing number of high-cost clinical areas: heart surgery; spine surgery; hip and knee replacement; certain cancer evaluations; and bariatric surgery. (At the same time, Walmart has been contracting locally with health systems in accountable care arrangements to provide broader care management services.) The goal of the COE program is to address the wide variability in cost and quality of care Walmart pays for at a local level. (That variability can be worrying: in one example cited by the article, an employee with tremors and neck pain was diagnosed with spinal stenosis and recommended locally for surgery; upon being referred to Geisinger the patient was quickly diagnosed with Parkinson’s disease.) Under the COE program, Walmart picks up the tab for travel and all out-of-pocket expenses for employees to be treated at participating medical centers. It negotiates a discounted bundled rate (ranging from 10-15 percent off total fee-for-service rates) for all services related to the care episode, in exchange for the promise of increased case volumes for its network partners. According to the article, more than 5,000 employees (out of Walmart’s more than 1.5M US employees) have participated in the “travel program”, and the company believes results are encouraging.

Most interesting are the details on program design and outcomes shared by the article’s authors. For example, of the 2,300 employees who participated in the spine surgery travel program between 2015 and 2018, more than half were “guided into other forms of treatment” by the COE network provider, although only half of employees eligible for the spine program actually participated. (This confirms what we’ve heard from participating health systems, who have seen relatively little increase in surgical volumes to date from participating in the program.) Those patients who did end up getting spine surgery experienced shorter hospital stays, had dramatically lower readmission rates, and returned to work weeks earlier than those who did not participate. Although the per-patient cost was higher for spine surgery COE participants, overall the company saved money. But despite these strong results, only 18 percent of eligible joint replacement candidates elected to use the travel program between 2015 and 2018, and only 20 percent of those were steered away from surgery.

As a result, Walmart has begun to enforce COE network integrity: employees electing to receive spine surgery outside the program must now bear 100 percent of the total cost of care, and those receiving non-COE joint surgery are now liable for 50 percent of the total amount. The company has seen a dramatic increase in the number of program participants since implementing the high-dollar cost sharing requirements. We’d expect Walmart-style direct contracting programs to increase in popularity over the coming years, as employers continue to grapple with the high cost of care. Walmart’s COE program is a combination of a narrow-network and second-opinion approach to reducing cost, built around a collection of highly-regarded clinical brands, and now supported by large incentives for employees to stay in-network. It will be worth tracking other large employers as they seek out similar relationships with market-leading medical centers.

A public warning about a popular (and pricey) technology

recent safety warning from the Food and Drug Administration (FDA) was the subject of an article in the New York Times this week. The warning concerns the use of robotic surgery for treating cancer patients, and advises that the there is no evidence that the surgical technique results in greater longevity for patients, citing some evidence that women with cervical cancer may actually experience worse outcomes when their cancer surgeries are performed robotically. Although the FDA first allowed the sale of robotic surgery equipment using its 501k, or “premarket notification” process, it has never approved the device for cancer prevention or treatment, nor for radical mastectomy, which has recently become a prominent use case among cancer surgeons. The FDA’s assistant director for women’s health in its Center for Devices and Radiological Health, commenting on the new warning, said, “We want doctors and patients to be aware of the lack of evidence of safety and effectiveness for these uses, so they can make better informed decisions about their cancer treatment and care.” The FDA pointed to two recent studies, one examining the efficacy of minimally-invasive versus abdominal radical hysterectomy for treating cervical cancer, and the other comparing survival rates for women who underwent minimally-invasive hysterectomy to those who had traditional open-field surgery to treat their cervical cancer. Both studies raised serious questions about the robotically-assisted surgeries.

The FDA warning highlights a key tension between the desire of surgeons and hospitals to adopt robotic surgery techniques that allow them to attract patients by promising less-invasive procedures, reduced complications and shorter recovery times, and the scientific evidence for the efficacy of those techniques, which has been mixed at best. In particular, the warning calls attention to “off-label” uses of the technology, which the agency initially approved as a surgical tool, not a cancer-treatment device. The FDA gives wide latitude to doctors to determine the appropriateness of off-label uses, which has left the door open to specialists’ attempts to broaden the application of the robotic-assisted techniques. Indeed, across the past decade we have witnessed a veritable arms race among hospitals, who have purchased the robots in an attempt to attract surgeons and the profitable business they bring, forcing competitors to keep pace by investing in their own robotic surgery programs. This has fueled the rise of a multi-billion dollar industry, and the high costs of the equipment have gotten baked into higher prices paid by insurers and consumers for care. Surely there is great promise in the ability of surgery robots to enable safer, less-invasive procedures, but with mixed clinical results and the latest warning from the FDA, greater scrutiny of the use of this expensive approach may be warranted.

Comparing outcomes for home health and skilled nursing 

Despite the growing use of both skilled nursing facilities (SNFs) and home health across the past two decades, there has been surprisingly little research comparing which might be better for patients. Writing in JAMA this week, researchers published the first large-scale evaluation of the two settings, comparing outcomes for more than 17M Medicare patients discharged to SNFs and home health from 2010 to 2016. Quality, as measured by 30-day mortality and patient functional status, was equivalent. But patients discharged to home health had 30-day readmissions rates that were 5.6 percent higher than patients discharged to SNFs, although costs of home health care were substantially lower, saving Medicare over $4,500 per patient in the two months after discharge. Researchers noted that the costs of higher home health readmissions did not outweigh the savings: “Readmissions certainly are costs but the lower rates of readmissions (at SNFs) didn’t make up for the higher cost of sending patients to SNFs.”

This study provides lessons for providers who are looking to move more care into the home setting. SNFs likely have lower rates of readmissions due to their higher level of care and 24-hour monitoring. The best home care solutions should incorporate some of the additional capabilities available in SNFs, augmented by telemonitoring, particularly for patients with comorbidities or social needs. Hospital-at-home programs, growing in adoption among health systems, could strike the balance. Given equivalent outcomes across care settings, the study also provides strong support for payment changes that expand reimbursement for additional home health capabilities and (finally) cover hospital-at-home care.


Thanks for joining us for this week’s edition. We’re always excited to hear your feedback and guidance each week, and we’re so grateful for your willingness to share the Weekly Gist with friends and colleagues. Even better—encourage them to subscribe, too. We’ve had scores of new subscribers join us just this week, but there’s always room for more!

Most importantly, please let us know how we can be of assistance with the amazing things you’re working on. 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