October 12, 2018

The Weekly Gist: The End of Days Edition

by Chas Roades and Lisa Bielamowicz MD

As the week draws to a close and we settle in to watch two very promising baseball championship series (Go Astros! Go Dodgers!), we’d like to take a moment to express concern for those affected by this week’s devastating hurricane. The scenes of residents in Florida, Georgia, Alabama and elsewhere struggling to recover from catastrophe are disturbingly familiar, as the number and severity of natural disasters continue to grow. Please consider donating to the American Red Cross to help people affected by this latest storm.

THIS WEEK IN HEALTHCARE

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

Florida hospitals grapple with the impact of Hurricane Michael

Bearing the brunt of one of the most powerful storms ever to hit the mainland US, four hospitals in Florida were forced to close down this week and dozens of others were without electricity and operating on generator power. Panama City, FL-based Bay Medical Center, a 323-bed hospital operated by Sacred Heart Health System, evacuated 200 patients to hospitals in Pensacola, Jacksonville, and Mobile, AL, including nearly 40 patients from its intensive care unit. The hospital sustained significant damage from the storm, but as of Friday afternoon its emergency department was open and accepting patients, according to a Twitter update from the facility. HCA’s 238-bed Gulf Coast Regional Medical Center, also in Panama City, was forced to evacuate patients as well, although its emergency department also remained open as of Friday. Personnel at the hospitals most impacted by the storm described widespread damage, rapidly-deteriorating conditions, and a scramble to address the needs of the most critically-ill patients as the situation worsened. At Bay Medical Center, 1,500 local residents sought shelter at the hospital even as patients were being evacuated.

As the communities affected by Hurricane Michael continue to dig out from the wreckage of the storm, and recovery and cleanup operations get underway, the bravery and commitment of medical personnel who rode out the storm at these hospitals and other facilities provides yet another example of how critical their work is. At a time when healthcare providers are often vilified by pundits for delivering expensive, inefficient, and questionable care, it’s important to remember how much we rely on hospitals, doctors, nurses and other healthcare professionals to be there in times of need. We expect emergency departments to remain open and accessible at all times, and to provide care to all regardless of ability to pay. That service comes at a cost, both financial and personal, and we owe a debt of gratitude to those who shoulder it.

The healthcare “Deal of the Year” nears its conclusion

The Department of Justice (DOJ) this week gave conditional approval to the proposed $69B merger between CVS Health and Aetna, clearing the way for the deal to close by the end of this year. The merger still faces state-level regulatory hurdles in New York and Connecticut, but the DOJ’s approval was viewed by industry analysts as the most significant step in finalizing the deal. Having recently green-lighted the merger between Cigna and Express Scripts, the DOJ was widely expected to approve the CVS-Aetna deal as well, signaling that the Trump administration is taking a more favorable view of “vertical”, cross-sector mergers in the wake of the landmark AT&T-Time Warner case earlier this year. The combination brings together the retail pharmacy and drug plan operations of CVS, with about $185B in revenue, and the insurance platform of Aetna, which covers around 22M people and reported revenue of $60B last year. In recent weeks, Aetna agreed to sell its Medicare Part D drug plan to WellCare Health, eliminating an area of overlap that had caused concern for DOJ lawyers reviewing the CVS-Aetna merger. This week’s approval is contingent on the completion of the earlier deal with WellCare.

Once the deal-making is completed, the new organization must align operations into a single entity, a process that lurched forward this week with the unexpected announcement that Aetna’s CFO Shawn Guertin planned to step down in 2019, which followed earlier news that CVS’s CFO David Denton had been hired away by Lowe’s Companies. The combined company’s new CFO (current CVS controller Eva Boratto) will have to move quickly in concert with the rest of the CVS executive team to bring the lofty vision of the merger’s value to fruition. As we’ve written elsewhere, putting the pieces of the two companies together to create a platform that can manage the cost of care for a growing Medicare population will be the main challenge facing the new company. If the combined entity can harness the combination of its pharmacy plans, retail clinics, pharmacists and nurse practitioners, and Medicare Advantage networks, it will pose a formidable threat to incumbent healthcare providers and insurers. Much work lies ahead for the new company.

Nearly 1,300 providers join Medicare’s bundled payment program

This week the Centers for Medicare & Medicaid Services (CMS) announced that nearly 1,300 hospitals and physician groups have signed agreements to participate in the Bundled Payments for Care Improvement Advanced program (BPCI-Advanced). Representing a mix of hospitals and physician practices, these providers will take risk for managing care across a 90-day episode for 32 eligible clinical episodes, including three outpatient episodes. Providers who agreed to a three percent discount off a benchmark episode price have the potential to share in savings for care delivered below the target price, but could be penalized up to 20 percent of the benchmark price should costs go over the target.

Participation in Medicare’s first bundled payment program, or “BPCI-Classic” was initially robust, but over 75 percent of participants dropped out of the program when downside risk kicked inThe strong interest in BPCI-Advanced, which includes downside risk from the start, shows a change in provider risk posture, and will be a critical test of the Trump administration’s theory that increasing downside risk will increase savings to Medicare. We continue to believe that while bundled payments—which are paid at a discounted rate—provide a guaranteed cost savings for CMS, the impact for providers will be mixed. Bundled payments provide an opportunity to align with key specialists, which may provide a springboard to broader service line performance improvement. However, few participants have seen a direct correlation with volume growth.

Moreover, we question whether bundled payments are easily scaled. Our conversations with providers suggest fewer than expected economies of scale in expanding bundles across different service lines and physician groups. Providers would be wise to use bundled payment programs like BPCI-Advanced as a platform to build the relationships, data and expertise needed to deliver consumer-focused care episodes focused on addressing patients’ core problems, which will be critically important in a healthcare marketplace where patients are choosing—and paying for—a growing proportion of their care needs.


GRAPHIC OF THE WEEK

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

Managing across conflicting business models

Recall that over the past few weeks, we’ve been sharing our framework for thinking through the path forward for traditional health systems, as they look to drive value for consumers. We began by describing today’s typical health system as “Event Health”, built around a fee-for-service model of delivering discrete, single-serve interactions with patients. We then proposed the concept of “Episode Health”, which would ask the health system to play a coordinating role, curating and managing a range of care interactions to address broader episodic needs. Finally, last week we shared our vision for “Member Health”, in which the system would re-orient around the goal of building long-term, loyalty-based relationships with consumers, helping them manage health over time. In this broader conception, the health system would “curate” a network of providers of episodes, and events within those episodes, and ensure that the consumer (and their information) moves seamlessly across care interactions.

As we mentioned earlier, most successful health systems will play a combination of these roles at the same time, pursuing strategies that allow them to manage episodes while moving closer to a risk-based model that gives them the ability to create a member value proposition for consumers. As the graphic below illustrates, however, that pluralistic approach will create some important tensions for the health system. Episode Health is fundamentally a fee-for-service approach—these systems will become specialists in delivering specific episodes (e.g., joint replacement), and will seek to drive increased volume through their model. That may not be an ideal outcome on the Member Health side of the business, however, where more episode volume could mean lower profitability, given the capitation-like incentives of “owning lives”. That’s a tension that faces every health system with its own health plan—even systems that have been pursuing both strategies for years still find it challenging to manage across conflicting incentive models. (Witness Intermountain Healthcare, long a pioneer of the Member Health model, which is in the midst of a structural overhaul to allow it to better manage across the two businesses.) Recognizing the tensions inherent in shifting away from Event Health toward more comprehensive approaches is critical for organizations looking to make the leap forward. Health systems run the risk of being doomed by their own success if they don’t take steps to realign operating structures, administrative and clinical incentive schemes, and even market-facing branding to navigate the complexity inherent in running parallel business models.


THIS WEEK AT GIST—ON THE ROAD

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

Redesigning care without regard to “how we get paid today”

Lisa:
Most efforts to transform clinical practice have boundaries set by the current payment system. A prime example: the innumerable conversations we’ve had about “win-win” strategies that allow physicians and care teams to develop care management capabilities but not undermine fee-for-service economics. The resulting ideas (like providing “complete” care for chronic disease and making sure you bill for all of it) aren’t wrong, but it’s hard to argue they are truly transformative. And the question arises, is this how clinicians would choose to do it they were guided solely by the mandate to provide the right care in the right setting?

It was a refreshing change to spend two days this week with a group of regional physician leaders of a large health system, to dig into the question of how they would change clinical practice if they were freed of the constraints of the payment system. These sessions were a part of an ongoing project we’re working on for the system, which has asked us to refine their strategic planning process, helping them make trade-offs between investing in expensive inpatient capacity and allocating dollars toward less-intensive sites of care. We met with doctors from across a half-dozen service lines to understand how they would manage “setting-sensitive” admissions, focusing on cases treated in the hospital today that could be cared for in a less-intensive setting.

A few key insights emerged across the two days. The link between payment and care design runs deep, and it was challenging at first for doctors to shake the reflex of considering whether a proposed service would be adequately reimbursed. But once they did, it was clear that true care redesign would have a profound effect on hospital volumes. Example: a conversation with a tenured general surgeon that dove deep into ambulatory surgery center design. He described how his colleagues are performing complex surgeries like colon resection using minimally-invasive techniques, reducing length of stay to one or two days. He shared his vision for an ambulatory surgery center where patients could be observed for a short stay, coupled with enhanced home-based monitoring. Within that model, he asserted that nearly all elective surgeries (short of bypass or Whipple) could move to a lower-acuity setting, meaning that the outmigration of surgery away from the hospital is far from over.

Taking on the very hardest topic in healthcare

Chas:
This week’s stop on the Fall 2018 Board Meeting-Palooza Tour took me to a health system in the southeast which serves a community popular with retirees, many of whom settle in the region from other parts of the country to take advantage of the warmer climate. As you might expect, this system is on the leading edge of the mix shift that will pose a challenge to traditional health system economics for decades to come, as the Baby Boom generation transitions from a commercially-insured, surgery-heavy patient population to a government-insured, chronic disease care population. In short, the challenge faced by the system is simple: how can we survive on Medicare margins?

The board meeting included key members of the physician community as well as community board members and the system’s executive team. As we discussed the challenges ahead, and strategies for taking on more Medicare risk, one of the doctors chimed in with a question we hear a lot: What about end-of-life care? We know that a huge proportion of spending takes place in the last weeks and months of life, and a lot of the expensive care we deliver in those months happens because patients and their families demand that doctors do “everything possible” to prolong life (and doctors worry about legal liability if they don’t meet those demands). The question posed was a good one: How can we lower cost of care and take on Medicare risk if we spend so much money on futile care? And how will this situation ever change without a “national conversation” about the end of life?

My answer: we’re never going to have that mythical “national conversation” about end-of-life care. No politician, no insurer, no court or government agency is ever going to take on the third-rail topic of rationing. Getting to a more rational approach to end-of-life care can only happen if doctors and patients start to work together on planning for the end of life, years before the critical decisions have to be made. And that requires time and space to have those conversations, in the context of a long-term relationship between doctor and patient. Creating that relationship means moving toward a Member Health model, in which primary care doctors have the ability to work with patients over time, building trust and familiarity so that they can guide patients and their families to the best choices. And pulling that off will require moving away from the churn-and-burn, productivity-driven, fee-for-service approach we’ve got in medicine today. High end-of-life spending shouldn’t scare systems away from taking on risk, it should motivate them to seek more accountability for the cost of the Medicare patient’s care. Systems need to change the economic model of care for seniors in a way that enables the right approach to end-of-life care to take place.


ON THE GIST TURNTABLE

Give this a spin, you might like it.

The Crossing is the 12th studio album from Mexican-American punk rock godfather Alejandro Escovedo, and at age 67 he’s delivered a concept project that feels tailor-made for the immigration debate we’re having today. Recorded with the Italian rock ensemble Don Antonio, this cinematic album tells the story of Diego and Salvo, two punk-minded teens (one Mexican, the other Italian) that decide to chase their musical dreams across the Rio Grande, making “the crossing”. The pair struggle with homesickness, racism, and an America that falls short of their expectations. Escovedo brings his alt-country storytelling chops to the project, along with a range of influences from Kerouac and Ginsburg to the New York Dolls and Joey Ramone. The album feels urgent and raw, bringing to life the ordeal of newcomers seeking a better life but forced to keep one eye over their shoulders, facing tragedy after tragedy. Along the way, Escovedo vents his anger at the plight of today’s immigrants: “A man came to gamble on a better life/The TV says that they’re gonna run us out/Call us rapists, go and build a bigger wall/We’re gonna tear it down, we’re gonna tear it down,” he proclaims on “Fury and Fire”—the track’s title itself a play on the recent Michael Wolff tell-all book on the Trump administration. Yet Escovedo is undeterred in his belief in the promise of America, saying to his companion on “Texas is My Mother”: “I would carry you on my shoulders/Across the muddy river/Texas feels like Mexico/She reminds me of my mother.” Escovedo has long been a hidden but pivotal figure on the rock, punk and alternative scenes, and with this latest offering he again offers an opportunity for listeners to discover the power of his vision. Highly recommended.


WHAT WE’RE READING

Stuff we read this week that made us think.

Millennials are dumping primary care physicians

A new article from Kaiser Health News puts numbers to the conventional wisdom that a growing number of millennial patients don’t feel the need to choose a primary care physician (PCP): according to a recent Kaiser Family Foundation poll, 45 percent of patients aged 18 to 29 report having no primary care provider, versus just 18 percent of their parents, consumers aged 50 to 64. The reasons cited are consistent with everything you think you know about a generation of younger consumers used to getting whatever service they desire at a moment’s notice, often online or via their phone rather than visiting in person. Turned off by weeks-long wait times to schedule a doctor’s appointment (as well as the hour-long wait for the doctor when they do), millennials are using a suite of retail clinics, urgent care and telemedicine services to meet their minor acute care needs—you might say, they’re assembling their own networks of affordable, convenient care providers.

This information is not surprising but raises the question of whether a patchwork of primary care services provides “quality” care compared to consistent care received in a PCP practice. Every doctor can share her anecdotes of fragmented retail care leading to serious consequences: for instance, the patient who visits five different convenient care providers complaining of a bladder infection, and without longitudinal coordination, a cancer diagnosis is missed. Research on outcomes is equivocal. A JAMAstudy earlier this year showed significantly higher antibiotic prescription rates for upper respiratory infection symptoms in urgent care centers, nearly triple that of standard medical office visits (46 versus 17 percent). While it’s easy to blame the episodic, disconnected nature of an UCC visit, the lowest rate of inappropriate prescription—just 14 percent—was found in retail clinics. Other research suggests that visits to retail clinics may not substitute for, but be additive to traditional primary care services, thus raising costs—but does not address whether this additional primary care improves outcomes or patient satisfaction.

Regardless of actual outcomes, the implication for doctors and health systems is clear: while every patient should have the choice of primary care centered in a PCP’s practice, there’s no going back to the doctor’s office as the sole source of access. It’s incumbent on those who practice in urgent or retail care settings to adhere to evidence-based care standards. Will millennials seek the doctor’s office as they age and develop chronic conditions? Perhaps, but we predict they’ll expect the same level of convenient access for care management that they seek for minor acute care today. The business imperative for traditional providers is clear: through combining convenient access and efficiency with management and coordination, health systems can create consumer loyalty to the system and competitive advantage over disconnected point solutions. 

Putting nursing home residents on a costly treadmill of care

An alarming study recently released by researchers at the University of Rochester suggests that for-profit nursing home providers may be pushing residents into “ultrahigh” rehab therapy during the last weeks of life in order to garner higher reimbursement from Medicare. According to coverage by Bloomberg, the study looked at data from more than 600 nursing homes in New York state, covering the experiences of nearly 56,000 deceased residents during their last 30 days of life. Researchers found that between 2012 and 2016, the proportion of residents who received “ultrahigh” intensity therapy (defined as more than 12 hours per week of physical, occupational and speech therapy) increased by 65 percent. According to the lead author of the study, for-profit nursing homes were more than twice as likely to use ultrahigh levels of therapy during the last 30 days of a resident’s life than were not-for-profit providers. A retrospective study like this one suffers from a built-in bias—one can retrospectively define the last 30 days of life, but the providers involved presumably don’t know ahead of time which patients are at that stage. However, the pronounced difference in practice patterns based on the for-profit status of the nursing homes is a strong indicator that financial considerations drove the decision to provide more intensive rehab. Such therapy earns much higher payment for skilled nursing facilities (SNFs), and the study’s findings point to the perverse incentives created by Medicare’s current reimbursement system for nursing care.

That payment model is due to change in a year’s time, when Medicare will transition to a new case-mix model built around SNF patient care needs and not around intensity of services provided. The new payment approach will reduce incentives to overload residents with costly care. That change is praiseworthy, and long overdue. It comes, however, at a time when nursing homes are on the decline nationally; occupancy rates at nursing homes are at a seven-year low, and continuing to fall, with 200-300 nursing homes closing every year. Although some observers expect utilization to pick up as the Baby Boom generation ages, it’s worth asking whether Boomers will want to spend their final years living in institutional care. 30 percent of Americans still die in nursing homes, and those are mostly the Boomers’ parents—will the preferences of Boomers be different having watched their parents age and die in nursing homes? Certainly, troubling data like those uncovered by the Rochester study only reinforce the notion that something has gone terribly wrong with our current approach to nursing home care—and to end-of-life care generally. Perhaps the Boomers will have the same transformational impact on the process of aging and dying that they’ve had on nearly every aspect of life in the US for the last 60 years. 

The rise of “teledentistry”

Who is more consumer-focused, your primary care physician or your dentist? We’d vote dentists. (Ask yourself this question: are you more likely to get a reminder to get your flu shot or your teeth cleaned?) Given that a quarter of Americans lack dental insurance, and many dental plans have low caps on coverage, much of dentistry is a cash business—which is why we were intrigued, but not surprised, by a piece in the Minneapolis Star-Tribune describing the use of “teledentistry” to expand access to preventive dental care across the state.

Teledentistry takes advantage of a cornerstone of population health tactics, using team-based care and technology to deliver a lower-cost solution to patients with poor access to services. Dental hygienists evaluate and treat patients, supported by dentists through a video link to the exam and patient’s record. While patients still visit a dentist for some fillings and complex treatment, most preventive care and some interventions can be delivered directly by hygienists. Practices in Minnesota are deploying teledentistry to expand access in rural areas, co-locating in schools and other community sites and accommodating Medicaid patients who have difficulty finding a practice that will take their insurance. Given that hygienists make one-third the salary of dentists, costs are lower, allowing practices to offer memberships covering all preventive care and biannual cleanings for as little as $12.95 a month. As deductibles rise and consumer cost sharing grows, medical groups might look to dentists for a model that delivers value by combining insurance design with lower-cost, cash-based services to cover gaps in coverage. 


That brings us to the end of another edition of the Weekly Gist. Thanks so much for taking time to read, comment, share and subscribe. We’re so grateful for your support and encouragement, and we look forward to seeing you on our travels around the country.

Please remember: if there’s anything we can do to be helpful in your daily work, let us know. 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