November 9, 2018

The Weekly Gist: The Elections Have Consequences Edition

by Chas Roades and Lisa Bielamowicz MD

Thanks to a laptop malfunction, a good portion of last week’s edition had to be written on an alarmingly ancient iPad. Having invested many hours this week watching network political analysts manipulate their own “magic screens”, all we can say is, we feel their pain. Thankfully the trusty laptop is back in business, just in time to share our thoughts on what may prove to be one of the more consequential weeks in American healthcare.

Let’s get right to the big story.


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

The midterm elections have major consequences for healthcare

Voters delivered a mixed result in the midterm elections on Tuesday, returning control of the House and several key governorships to Democrats while preserving Republicans’ hold on the Senate. While the election was widely viewed as a referendum on the first two years of the Trump administration, healthcare topped the list of concerns cited by voters in exit polls. Democratic candidates campaigned heavily on preserving the coverage protections in the Affordable Care Act (ACA), and their victory in the House means that repeal of the health law is off the table, at least for the next two years. Rep. Nancy Pelosi (D-CA), who will likely return to her role as Speaker of the House, told supporters on election night that her party’s objective was “stopping the GOP and Mitch McConnell’s assault on Medicare, Medicaid and the Affordable Care Act”. House Democrats will take charge of appropriations and oversight activities in January, and are expected to try to put the brakes on the Trump administration’s ongoing efforts to chip away at the ACA through regulatory rule-making, such as attempts to limit coverage of contraception and women’s health services, and waivers to allow states to reduce mandatory insurance benefits.

Meanwhile, the midterm elections had major implications for healthcare at the state level as well. Voters in Utah, Nebraska and Idaho voted in favor of Medicaid expansion, clearing the path for more than 300,000 residents to gain access to Medicaid coverage. Maine’s Governor-elect Janet Mills vowed to find funding to go ahead with Medicaid expansion, Kansas’s Governor-elect Laura Kelly promised to make expansion a top priority, and the ousting of Wisconsin Governor Scott Walker opened the door to possible Medicaid expansion there as well (although the conservative-leaning legislature will surely block the attempt). At the same time, election results in Alaska and Montana threatened to unwind Medicaid expansions in those states. If the Democrats’ recapture of the House ruled out further efforts to reduce Federal spending on Medicaid and turn the program into a block grant (a centerpiece of Republican legislative plans), then the state-level results further bolstered what has quickly become the most popular component of the Obama-era coverage expansion.

Voters delivered verdicts on other closely-watched healthcare issues on the ballot across the country. In California, where Governor-elect Gavin Newsom cruised to victory in part on the promise to pursue single-payer healthcare, a hotly-contested ballot initiative to limit the profits of dialysis companies was defeated, after record spending by providers DaVita and Fresenius. Mandatory nurse staffing ratios were rejected by voters in Massachusetts, after a bitter fight between the hospital industry and nursing unions. In general, election news was favorable for healthcare industry players, and was reflected in stock market gains for hospital, insurer, and other related equities. Even pharma stocks were up, despite concerns that a bipartisan consensus on reducing drug prices might emerge early in the new Congress.

With the midterm elections behind us, attention will now turn to the 2020 Presidential campaign, in which healthcare is shaping up to be a centerpiece issue as well. As we wrote this week in our piece on implications of the midterm elections, the coming debate on healthcare is likely to shift from a debate about “repeal and replace” and entitlement reform to one centered around affordability of care for individuals, and the financial burden of healthcare on American households. Democrats seem to have discovered their own slogan to rally their base on this issue: “Medicare for All”. Both sides will spend the next two years attempting to define that concept to their advantage and as the debate unfolds, we’ll have a better sense of whether the idea has legs. As a vague concept however,“Medicare for All” is overwhelmingly popular with voters, which will allow Democrats in Washington, coming off their electoral victory this week, to fight the battle on their “home court” of universal coverage.

[Click here to read our in-depth analysis of what the 2018 midterms mean for healthcare]

Mandatory bundled payments make a comeback

Speaking at the Patient-Centered Primary Care Collaborative conference yesterday, Secretary of Health and Human Services (HHS) Alex Azar announced that the Trump administration plans to reimplement mandatory bundled payment programs, reversing a decision made by previous HHS Secretary Tom Price. “We need results,” Azar said, “American patients need change, and when we need mandatory models to deliver it, mandatory models are going to see a comeback.” The move follows last week’s announcement of a new, mandatory pilot to test changing the way Medicare reimburses physicians for drugs administered in outpatient clinics. The new bundled payment pilot would target radiation oncology, an area of high spending highlighted in an HHS report to Congress last year. According to that report, Medicare Part B spending for radiation treatments increased by 217 percent over the last decade and is expected to increase even more rapidly as the Medicare population grows. The report highlighted the explosive growth in use of intensity-modulated radiation therapy (IMRT) and suggested that existing fee-for-service incentives lead physicians to self-refer to their own radiation services, particularly for patients with prostate cancer. HHS proposed the implementation of a 90-day episode for radiation oncology.

Reaction from the cancer community was predictably wary. In a statement responding to Azar’s comments, the American Society of Radiation Oncology (ASTRO) pointed to its collaboration with HHS in developing alternative payment approaches for radiation treatments, but expressed concern about making the change mandatory, even for a pilot group. “Care must be taken to protect access to treatments for all radiation oncology patients and not disadvantage certain types of practices,” said the statement. Azar did not disclose when proposed rule-making would be released, or when the administration would begin to gather industry comments. We expect pushback against this proposal to be fierce, as radiation treatments are very profitable for providers in the current model, and health systems have made huge investments in oncology as a growth area. This new proposal, coupled with the earlier announcement targeting Part B drug spending (which will also disproportionately impact oncology providers), is sure to create controversy. It’s another indication of a more aggressive posture at HHS toward reining in high healthcare spending—we’d anticipate other mandatory bundled payment models to be developed in the coming years.

[Click here to read our advice to providers on participating in bundled payment programs.]

CVS talks up its new care model

In an earnings call with Wall Street analysts this week, CVS Health CEO Larry Merlo announced plans to launch a handful of “Health Hub” concept stores across the coming year. The stores will bring together pharmacy operations, clinic services, and an expanded range of care management offerings for consumers. According to Merlo, the Health Hubs will offer “new services to better address the cost-quality-access challenges of consumers and identify the most effective and scalable solutions, so they can be rolled out more broadly across our footprint.” The announcement comes as CVS nears completion of its $69B acquisition of health insurer Aetna, which it said was expected to close later this month. Although Merlo noted that the new Health Hubs would not be restricted to Aetna enrollees, the combination of Aetna’s risk model with CVS’s growing suite of care management services is clearly at the center of the retailer’s strategy moving forward. Said Merlo, “Medical cost savings will come from new programs that are only made possible through the combination and close integration of our two companies…One example is the better management of five common chronic conditions: diabetes, cardiovascular disease, hypertension, asthma and behavioral health…Another example is the optimization and extension of primary care, by expanding the scope of services available at MinuteClinics to help with the early identification and ongoing management of chronic disease.”

Merlo suggested that CVS was planning a “hub and spoke” approach to rolling out this new vision, with broader care services only available at a subset of retail locations. “We would have [Health Hubs] in a set number of stores within a given market, and the balance of the stores would have a core set of offerings that would serve as a referral source to those hub stores.” As we’ve suggested beforeCVS will need to significantly improve the consumer experience of its care services if it expects to lure customers away from traditional providers. The hub-and-spoke model could allow them to do that, by focusing investment in new services and a higher-skilled labor force in a select number of locations—an upgrade from the “broom closet-card table” experience it now offers in its MinuteClinics. The newly-integrated care services of CVS-Aetna could prove to be a formidable competitor to traditional primary care providers, with an access-forward approach to serving consumers. As CVS begins to kick the tires on new ways to deliver care, now would be an ideal time for health systems to seek partnership opportunities with the retaileras many have already done. The risk for incumbents of being displaced by CVS, Walmart, and other disruptors is growing by the day.

[Click here to read our thoughts on what to watch for as CVS-Aetna begins to transform care delivery.]


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

The never-ending search for the perfect physician pay model

Physician compensation plans are one of the hottest topics among providers. Everyone wants to know what everyone else is doing, likely because almost every health system or medical group believes their comp model is underperforming. We hear the same questions everywhere. Are we seeing a move toward salary and away from productivity-based compensation? Yes, but some of the groups with longstanding salary models are now looking to add some productivity incentives. Will doctors ever be able to succeed under “value” if they’re paid on productivity? Probably not. Straight productivity-based pay rewards a ten-minute visit, treadmill-style practice where doctors are penalized for spending more time with sicker patients.

The mandate for health system and physician group leaders is to align physician compensation with the larger health system business model—and most critically, to remove barriers that impede doctors from delivering value-based care. In the graphic below, we outline a framework for moving incentives in this direction. Most doctors today are paid primarily on productivity with a small bonus for performance goals like quality or patient satisfaction. We argue that both sides of this model need to evolve. For primary care physicians, productivity needs to take into account team-based care and adjustments to panel size that support a focus on value. And the “non-productivity” component of pay must grow to be more significant—in the words of one medical group leader, to “the size of college tuition or a car payment” to get doctors’ attention. And it should be based on a small number of meaningful goals, not a laundry list of dozens of performance metrics.

While this describes a starting point for moving to value-based compensation, it’s worth remembering that the search for a perfect pay model will prove futile—we should move past the idea of a “model” altogether. While pay will always need to be market-competitive, a culture of practice aligned with delivering value to consumers will be much more important than endless incentive tweaks meant to motivate specific behavior changes.


What we’ve been writing about this week on the Gist Blog.

“What the 2018 Midterms Mean for Healthcare”

Following this week’s midterm elections, we take a look at the path forward for healthcare and share our thoughts on some of the main implications for our industry. We discuss five key takeaways from the results:

  1. The ACA is (probably) safe for the foreseeable future.
  2. Significant restructuring of Medicare and Medicaid is off the table.
  3. The 2020 Presidential campaign will change the politics of healthcare.
  4. The Trump administration will turn its attention to regulatory reforms.
  5. Any significant innovation must now come from the private sector.

Visit the Gist Blog to read our in-depth analysis, and let us know what you think!


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

Does Member Health apply to the Medicaid population?

This week I delivered the keynote address at the annual summit of the WMCHealth Performing Provider System (PPS), which brought together 300 healthcare leaders from across New York’s Hudson Valley who are working together on a collaborative platform for care management and healthcare delivery, with a focus on the region’s Medicaid population. The PPS was formed almost five years ago as part of New York’s Delivery System Reform Incentive Payment (DSRIP) Program, which used a federal 1115 waiver to redesign Medicaid care delivery around population health goals and reinvest savings into ongoing community care improvement.

We strongly believe that health systems need to reorient around consumer value—and that goal should apply to all patients they serve, not merely those who have commercial insurance or the ability to pay out-of-pocket. This meeting was the first time that I had the chance to talk through our Member Health model to an audience specifically focused on the safety-net population, and I was very interested to hear their reaction. The model resonated strongly. The group noted that creating loyalty through better access and experience could deepen relationships with Medicaid patients, making it easier to address ongoing challenges like chronic disease management and substance abuse. The stories they shared demonstrated that addressing both social and clinical needs not only improves outcomes but creates real patient loyalty. They also emphasized the importance of approaching Member Health with an eye towards partnerships, particularly between traditional healthcare providers and the many community organizations that serve social needs.

Several leaders raised questions about whether a focus on consumer value would deepen disparities and access to care for disadvantaged patients, or even lead to rationing. My response was that they need to run to this issue and view it through the lens of customer segmentation. The idea of consumer segments in healthcare delivery is often a challenge for many providers, especially not-for-profit providers who believe that giving the same level of care to all is mission-critical. As consumerism takes hold in healthcare, the emergence of segments of patients willing to pay more for added benefits is inevitable. Providers must ensure they are delivering a baseline of accessible, affordable, reliable care to all patients, even as they develop segmented offerings for different kinds of consumers. Every service must deliver high-quality care that meets a patient’s clinical needs. The New York DSRIP program is in its last year, and leaders there are looking to to expand the mission of the network in its next phase. Given their success so far, I’m confident this group will continue to deliver value to those patients most in need.

Channeling physician angst into problem-solving

This week I once again found myself in front of a large group of doctors, talking about burnout. By now you’ve probably heard our perspective on the topic, which continues to rise to the top of concerns physicians share with us. (Lisa provided a good summary of our thoughts earlier this year on the Gist Blog.) In short, our view is that physician burnout isn’t a symptom of a work-life balance problem, it’s caused by workflow challenges. The good news is that there seems to be a growing recognition of that insight among healthcare leaders, and that organizations are starting to address the real root causes of physicians’ complaints. Smart systems are mounting an effort to “stop doing stupid stuff”, to paraphrase one of the pieces we discuss below in our “What We’re Reading” section. Among those systems is the one I was with this week, at a retreat for their physician leaders across several markets spanning a multi-state geography. In addition to coming together to network and share updates on their work, these docs carved out a full half-day of their busy agenda to dive deep on the burnout issue. Their assignment: come up with a list of suggested changes to workflow design and process to alleviate some of the pressures they’re feeling.

At the outset I shared our perspective on the larger forces at work in healthcare. In my experience, it’s much easier to have a productive conversation about this topic if the group can connect it to the broader context of changes in our industry. This helps address some of the “why is this happening to us” anxieties that clinicians often have these days, helping move their mindset away from a victim mentality to a problem-solving posture. We then talked through some of the specific workflow challenges that we’ve found in our work—excessive administrative and non-clinical time, over-measurement and burdensome reporting, a lack of insight and input into decision-making. To help address the physicians’ sense of being kept in the dark, the regional COO then joined to share updated profitability, cost, and quality information on a service-line basis—a level of visibility the doctors seemed to really appreciate. Finally, I led the group in an interactive exercise built around populating three lists: “Things to Stop Doing”, “Things to Start Doing”, and “Constraints”. The first two are self-explanatory: what specific things are we doing now that we should stop, and what do we wish we were doing that we aren’t? For both lists, I asked them to imagine a perfect world with no limitations on their ability to make change. Then—as you’ve guessed—we filled the third list with the constraints that are keeping these docs from accomplishing their other two wish lists.

That part of the exercise was particularly productive, and I’d recommend it highly. What was helpful was sorting the “Constraints” into things the health system and its physician executives (who were in the room) could actually do something about (changing decision rights, providing specific pieces of data, reallocating work) versus limitations that were beyond the system’s ability to solve (the malpractice environment, the reimbursement system). System leaders took away the first group of constraints as “to do” items, which provided a level of assurance to the doctors that their concerns were being taken seriously. And the second group—the things beyond our control—we acknowledged as such and agreed to stop “shouting at the weather”. There are enough real problems to solve without obsessing about those kinds of things. In general, the session reinforced a piece of advice that I’d give every doctor struggling with burnout: solve the problems you can, seek assistance in making it possible to solve those problems, and let the other stuff go. (Let’s call that the Physician’s Serenity Prayer.) Don’t do stupid stuff—yes. But don’t fret about stupid stuff either.


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

We’re so excited for this week’s recommendation, because today marks the launch of the second season of Patriot, and we’re gigantic fans. What’s that you say? Never heard of it? That’s OK, we don’t know anyone else that has either. One of those experimental “pilot” shows buried deep on the site and barely advertised by Amazon, it’s a black comedy whose 10-episode first season tells the story of American intelligence officer John Tavner, assigned by his father (who’s also his boss) to a black-ops project to avert an Iranian nuclear crisis by going under “non-official cover” as an industrial engineer at a Milwaukee-based piping company. It just gets more absurd from there.

Imagine a Tom Clancy movie made by Wes Anderson with lyrics by the morose dad-rock band The National, and you’re pretty close to the aesthetic of Patriot. Tavner, played by New Zealand actor Michael Dorman (“The Secret Life of Us”), is a pot-smoking, shoe-gazing assassin turned folk singer who can’t quite keep up with the role he’s been asked to play in Milwaukee. His brother, a track-suit wearing, Beastie Boy wannabe, is a serving US Congressman on leave to help his hapless brother stay one step ahead of the bad guys. And the father, veteran character actor Terry O’Quinn (“Lost”) is nearly unhinged by how wrong the whole operation is going. There’s an intrepid Luxembourger female detective, a posse of Brazilian wrestlers, and a whole lot of information about fluid dynamics and piping. In short, it’s incredible. Season two adds Debra Winger (“An Officer and a Gentleman”) as Tavner’s mother, to this already amazing cast. Do yourself a favor and get caught up on Patriot…it might be the best show you’ve never heard of.


Stuff we read this week that made us think.

To fix burnout, stop doing the stupid stuff 

How does he do it? Between running the Amazon-Berkshire-JP Morgan Health Venture, serving as chairman of Ariadne Labs, and continuing to operate on patients, Dr. Atul Gawande somehow found the time to write an excellent article in the most recent New Yorker delving into the reasons why doctors hate their computers. In writing about the connection between the number of rote clerical tasks engendered by electronic medical records (EMRs) and the rising rates of physician burnout, Gawande is doing what he does best: taking a complex problem and using human anecdotes and eloquent storytelling to draw out the key insights and make them understandable to readers with limited knowledge of medical practice.

Gawande shares two insights that don’t often get mentioned in conversations about EMRs. He recounts a conversation with Dr. Gregg Meyer, Chief Clinical Officer of Partners HealthCare in Boston, that underscores the meaningful patient benefits made possible by EMRs: “’We think of this as a system for us and it’s not,’ he said. ‘It is for the patients.’”  While 60,000 clinicians use the Partners’ EMR, ten times as many patients have used the system to look up labs or communicate with providers. Care has been improved using insights from sorted and aggregated patient data. Gawande also reminds us that medicine is far from the first profession to struggle with the impact of new technology on workflow. One of his patients, a construction-site supervisor, had been in the same situation, using new project management tools that aggregate data and highlight safety lapses—at times impeding his ability to interact with colleagues. But he was also able to find a way to work around the tensions between old and new workflow, a conflict that Gawande says will never fully be resolved, either for the construction supervisor or for doctors.

While Gawande doesn’t delve into solutions to address those tensions, a Perspectives piece in this week’s NEJM highlights a brilliantly simple and effective initiative undertaken at Hawaii Pacific Health, which leaders there call “Getting Rid of Stupid Stuff”. They asked all staff to examine their daily documentation experience and nominate tasks that were poorly designed, unnecessary or “just plain stupid”. End users had many ideas for simple fixes to time-consuming and often absurd problems. One example: removing a field for NICU patients that required nurses to waste time documenting fecal and urine incontinence for neonates. The initiative highlights the importance of engaging frontline clinicians in improving the system, creating a sense of purpose and confidence that leaders are listening. Rather than suffer while waiting for the perfect system, there is power in small solutions that help us all stop doing the “stupid stuff”.

More Hawkeye, less Winchester. Please? 

Disruptive physician behavior has been shown to affect patient safety, care quality and performance of care teams, not to mention physician engagement. But until recently there has been little research into the demographics of disruptive behavior. In a new study in Academic Medicine, researchers from Stanford performed a retrospective analysis of four years’ worth of the system’s reported events of “disrespectful physician behavior”, searching for correlations with gender and specialty. We’re sorry to report that the results match the stereotypes: male physicians were almost twice as likely as female doctors to demonstrate disruptive behavior. And proceduralists were a whopping 3.7 times more likely to have a disruptive behavior event than non-proceduralists. The most likely location for disruptive behavior? Yep, the operating room.

There’s good news in the article: disruptive physicians, grumpy old men or otherwise, were few and far between, with events concentrated in a small number of doctors. To our minds, the greatest takeaway from the study was a strong correlation in rates of disruptive behavior between faculty and trainees within a specialty. Gruff and disrespectful behavior appears to be perpetuated within specialties across generations, probably due to a combination of selection, training environment, and tolerance of bad behavior. In this case, the mantra of “see one, do one, teach one” is doing a disservice to both patients and learners.

North Carolina looks to reference pricing to control costs

North Carolina may soon become the second state to implement reference-based pricing for hospital and physician services, according to an article this week in the Wall Street Journal. State Treasurer Dale Falwell has put forth a proposal to benchmark rates for the state’s employee health plan to Medicare pricing, stating that the targeted price would be around 177 percent of Medicare rates, compared to an average price of 213 percent today. The state estimates this could save its employee health plan $300M annually. Employees and families could save an additional $66M in out-of-pocket costs. The proposal is similar to one implemented by Montana in 2016, which we recently covered. Both adopt a “you’re in or you’re out” approach, excluding providers from the network who refuse to accept the prices. Publicly, both signal that the state is focused on transparency, ending the “secret negotiations” between providers and insurers over rates. The main difference is scale: Montana’s employee plan covers 30,000 individuals, whereas North Carolina’s insures 727,000.

This isn’t the first time that North Carolina’s Treasurer has suggested sweeping measures to control state healthcare costs. In May he ordered Blue Cross Blue Shield of North Carolina (BCBS-NC), the state plan’s third-party administrator, to cut hospital rates by a minimum of fifteen percent. This year BCBS-NC has also moved to shift all of its hospital contracts to total-cost risk, with CEO Patrick Conway sending a strong message that this path is not optional for hospitals: “I will never give you a fee-for-service rate increase if you don’t go on the value-based healthcare journey with us.” The state’s move toward reference pricing may indicate that it doubts BCBS-NC’s ability to control costs on its own, or is skeptical that the payer’s proposed value-based payment model will deliver results fast enough to meet state budgetary needs. Many hospitals have already begun to lobby against the reference-pricing proposal. While the potential economic downside to providers is real, hospitals risk being labelled the villain in public coverageIt’s worth watching North Carolina closely to see how rate-setting and value-based payment will work together in the commercial market. Should reference pricing prove successful, we’d expect other states to quickly follow suit.

What a week! Whatever your political persuasion or vested interest in the events of the day, we’re so grateful that you’ve taken time to read our thoughts. And we’d love to hear yours! Send us your input, feedback and suggestions, and if you’ve found our work interesting, please share it with a friend or colleague. We love new subscribers, and we love hearing from our readers.

In the meantime, if there’s anything we can do to be of assistance in your work, please get in touch. You’re making healthcare better—we want to help!

Best regards,

Chas Roades
Co-Founder and CEO

Lisa Bielamowicz, MD
Co-Founder and President