May 13, 2022

The Weekly Gist: The Chin Diaper Voters Edition

by Christy Davis

In the weeks since a Florida judge struck down the federal mask mandate for airlines and other forms of public transportation, we’ve had the “opportunity” to fly several times. The level of voluntary masking varies widely—on some flights, no more than 25 percent of passengers are still masking. On others—especially between “blue” hubs—it’s been closer to 75 percent. But one kind of post-mandate traveler has us particularly flummoxed. We’re still seeing people in airports and on airplanes with their masks underneath their noses, or in the traditional “chin-diaper” position. To paraphrase Jerry Seinfeld…who are these people? Just take the masks off, dummies! Why are you still bothering to half-wear your masks? Maybe we’ve finally identified the mythical “undecided voters” we’ve heard so much about. Nitwits.


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

1. Charlotte, NC-based Atrium Health and Illinois- and Wisconsin-based Advocate Aurora Health announce plans to merge. The combined health system will become the sixth largest nationwide, with $27B in revenue and 67 hospitals across six Midwest and Southeast states. The system will be based in Charlotte, and known as Advocate Health, though Atrium will continue to use its name in its markets. Atrium CEO Eugene Woods is slated to ultimately lead the combined entity, after an 18-month co-CEO arrangement with Advocate Aurora CEO James Skogsbergh. While the cross-market merger is unlikely to create antitrust concerns about increased pricing leverage, the Biden administration has been making noises about applying stricter scrutiny to the impact of health system consolidation on labor market competition.

The Gist: Earlier this year, Utah-based Intermountain Healthcare and Colorado-based SCL Health combined to create a 33-hospital, $14B health system, which became the 11th largest nationwide. While these mega-mergers of regional systems can realize cost savings from back-office synergies, there is a significant opportunity to create larger “platforms” of care to win consumer loyalty, deploy digital capabilities, attract talent, and become more desirable partners for nontraditional players like Amazon, Walmart, and One Medical. It will be critical to watch whether the governance and cultural challenges that often hinder health system mergers come into play here. Advocate Aurora has had two prospective mergers fall apart in recent years, the first with Chicago-based NorthShore University HealthSystem, and the second with Michigan-based Beaumont Health (who subsequently finalized a merger with Spectrum Health earlier this year). But the combination with Atrium is structured as a joint operating agreement, essentially creating a new superstructure atop the two legacy systems. This may allow the combined entity more flexibility in local decision-making, but the ultimate question will be how the combined entity will create value for consumers. Time will tell.

2. Hospitals and imaging centers forced to limit scans amid IV contrast shortage. Due to global shortages of iohexol and iodixanol, contrast media products injected into patients during CT scans and other commonly used diagnostic imaging studies, some providers are having to postpone non-emergency imaging. GE Healthcare, one of two major suppliers of contrast media in the US, has experienced manufacturing disruptions at its Shanghai facility amid China’s COVID lockdowns, and the company estimates the shortages could last through June. It is increasing production at an Ireland factory, and shipping via air cargo to the US, to speed up delivery.

The Gist: This shortage will have wider ranging impacts than just delayed imaging procedures, as so many treatment decisions rely on the results of imaging tests. Contrast fluids are also used for vascular imaging, heart catheterization, and spinal interventions. A prolonged shortage could have far-reaching implications, limiting doctors’ ability to plan surgeries, monitor cancer progression, and perform imaging-guided treatments. Like so many recent supply shortages, this latest one shines a spotlight on providers’ “just-in-time” supply chain, and their over-reliance on single-source vendors. (Check out our latest Gist Insights piece for more on the supply chain crisis.)

3. Physician residents and fellows unionize at two major California health systems. Seeking stronger workplace protections, physician residents and fellows at both Stanford Health Care and the University of Southern California’s (USC) Keck School of Medicine have voted to join the Committee of Interns and Residents, a chapter of the Service Employees International Union (SEIU). Despite being frontline healthcare workers, most Stanford residents were excluded from the first round of the health system’s COVID vaccine rollout in December 2020. The system ultimately revised its plan to include residents, but the delay damaged Stanford’s relationship with residents, adding momentum to the unionization movement. Meanwhile, Keck’s residents unanimously voted in favor of joining the union, aiming for higher compensation and greater workplace representation.

The Gist: While nurses and other healthcare workers in California, as in many other parts of the country, have been increasingly banding together for higher pay and better working conditions, physician residents and fellows contemplating unionization is a newer trend. Physicians-in-training have historically accepted long work hours and low pay as a rite of passage, and have shied away from organizing. But pandemic working conditions, the growing trend of physician employment, and generational shifts in the physician workforce have changed the profession in a multitude of ways. Health systems and training programs must actively engage in understanding and supporting the needs of younger doctors, who will soon comprise a majority of the physician workforce.

Pluswhat we’ve been reading.


4. Will disruption force businesses to find “second growth engines”? With the pace of change accelerating, a recent Harvard Business Review article drives home how important it is for incumbents to explore areas of profitable growth outside their traditional core businesses. The authors identify four factors that are essential to developing a successful second growth engine, which they call “engine twos”. Amazon Web Services (AWS) is a classic example of an engine two, targeting an adjacent market to Amazon’s existing business, cloud computing. AWS has a 30 percent operating margin, and now brings in more profit than the entire rest of the Amazon organization.

The Gist: As healthcare delivery shifts further toward outpatient, virtual, and home-based settings, and the use rates for core inpatient hospitals begin to decline, health systems face an imperative to find these “second growth engines”While some health systems are beginning to diversify their businesses by developing insurance capabilities or care management products, provider organizations lag vertically integrated health insurers in this regard. The care delivery and integrated health services divisions of large insurers are now growing at a much faster rate than legacy insurance segments, intensifying competition for direct patient care services. Whether the reverse is true remains to be seen: can care providers turn “risk”, or insurance coverage, into a successful “engine two”?


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


The domino effect of missed cancer screenings

From delayed check-ups to postponed elective procedures, missed or deferred care during the pandemic will continue to strain the healthcare delivery system for the foreseeable future. The graphic below shows the impact on cancer care: both cancer screenings and new diagnoses are still down from pre-COVID levels. Screenings for breast, colon, and cervical cancers were significantly lower in 2020, and patients missed about 10M total screenings in the pandemic’s first year alone. While cancer screenings rebounded somewhat in 2021, they were still below pre-pandemic levels. Unsurprisingly, the downstream impact has been a similar decline in new cancer diagnoses. The negative effects of care delays have become increasingly obvious: there has been an increase in the number of patients presenting with later-stage cancersThere was a six percent increase in Stage 4 breast cancer diagnoses, and a 16 percent increase in Stage 2 and 3 cancer diagnoses in 2021, compared to 2019. With no reason to believe that either cancer incidence or acuity has actually changed, oncology providers must increase their screening capacity and double down on reaching out to patients who are overdue for screenings. But as providers continue to work through the backlog of missed exams, they must prepare to treat more complex, higher-acuity cancer patients than ever before.


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

Searching for value in a sea of health apps

The explosion of apps, wearables, and other health tech solutions targeted at employers has overwhelmed and frustrated many HR executives who make decisions about employee health benefits. At a recent convening of health insurance brokers we participated in, several bemoaned the challenge of helping their clients understand which solutions might bring real value. One shared, “For the past few years, it’s felt like ‘App-apalooza’ out there. CHROs [chief human resource officers] get pitches for new apps every day…there are literally thousands out there saying they’ll reduce costs and improve employee health, but it’s next to impossible to tell which ones of them actually work.” Brokers expressed surprise at how little evidence, or in some cases, actual patient and client experience, some health tech companies brought to the table: “We have startups coming to our clients talking about their millions of dollars in funding, but when you dig into what they’re actually doing, not only can they not show outcomes data, you find out they’ve only worked with a few dozen patients!”

But among the sea of apps purporting to manage any and every employee health need, from chronic disease to fertility to sleep quality, brokers reported their clients were finding value in a few distinct areas. Technology-based mental health solutions received high marks for increasing access to care, with the prediction that “tele-behavioral health could become a standard part of most benefits packages very quickly”. More surprisingly, employers shared positive feedback on the impact of virtual physical therapy solutions: “I was skeptical that it would work, but people like being able to rehab at home. And not only is it cheaper, we’re seeing higher adherence rates.” But even the best apps are often challenged by a lack of connectivity to the rest of a patient’s healthcare. The technologies that will have the greatest staying power will be those that not only deliver results, but are able to move beyond point solutions to become part of an integrated care experience, meaningfully connected to other providers involved in a patient’s care.


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

As more cardiovascular procedures shift to outpatient settings, private equity (PE) firms are starting to roll up cardiology groups. Last Monday, we heard from consultant Anthony D’Eredita, Founder and CEO of TrustWorks Collective, and Dan Blumenthal, MD, CEO of PE-backed cardiovascular care delivery platform Novocardia, about the trend, and how some hospitals are rethinking cardiology strategy as a result.

Coming up on Monday, we’ll hear from Elaine Batchlor, MD, CEO of Martin Luther King Jr. Community Hospital in South Los Angeles, about the challenges the safety net hospital is facing as it emerges from the COVID pandemic.

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Chas Roades
Co-Founder and CEO

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Co-Founder and President