|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
A dust-up over data reporting in the COVID era
As coronavirus infections continued to rage nationwide, with a record 75,600 new cases recorded Thursday alone, and COVID-related hospitalizations and deaths mounting across Sun Belt states, a controversy emerged this week over the way key data about the impact of the virus is collected, reported and disseminated. The Department of Health and Human Services (HHS) instructed hospitals to stop reporting data on admissions, supplies, and bed availability to the Centers for Disease Control and Prevention (CDC), in favor of reporting directly to HHS using a new collection tool developed by two private companies, TeleTracking and Palantir. That change came as part of an initiative—known as “HHS Protect”—to address concerns about the cumbersome process for collecting and reporting data using the CDC’s National Healthcare Safety Network. The switch in reporting requirements came as a surprise to many hospital leaders: hospitals were previously able to report much of the required data directly to state health officials, who then transmitted the data to the CDC. Under the new process, hospitals would more frequently need to do the data reporting themselves, adding to what we’ve been told is an already hefty COVID data reporting burden. (Hospitals’ struggles to report timely data have become such a concern that the Trump administration this week floated the idea of deploying the National Guard to assist.)
The change in process garnered a wave of media and political criticism, sparking concerns that the CDC was being “cut out” of collecting data on the nation’s response to the virus, and being shut out of the larger national COVID-19 response effort. Those concerns were exacerbated further when a widely used dashboard of key COVID statistics was removed from the CDC’s website, only to be restored a day later. By week’s end, it appeared that the entire episode was yet another example of poor communication and coordination among the nation’s various public health agencies—a further unwelcome wrinkle in a difficult week as the nation contends with the pandemic. US coronavirus update: 3.7M cases; 140K deaths; 43.4M tests conducted.
Two health systems join forces in Washington State
On Thursday, two Washington State-based health systems announced plans to merge into a new joint operating company. Seattle’s Virginia Mason, long renowned for its pioneering work on adapting lean manufacturing principles to healthcare delivery, will combine with CHI Franciscan, the Tacoma, WA-based subsidiary of CommonSpirit Health, a nationwide Catholic hospital system that runs 137 hospitals across 21 states. The new 50-50 venture will have a combined 12 hospitals and 250 care sites in Washington, with the CEOs of the two organizations jointly leading the new company. The co-equal structure is similar to one in Colorado and Kansas, where CommonSpirit is partnered with Florida-based AdventHealth to run Denver’s Centura Health. (Centura Health is a member of Gist Healthcare.) Virginia Mason and CHI Franciscan have previously collaborated on a clinical affiliation in oncology and have been working toward the launch of a jointly-run obstetrics program as well. As reported by Modern Healthcare, CHI Franciscan’s $2.5B in revenue accounts for about 10 percent of CommonSpirit’s national revenue, and Virginia Mason will bring around $1.2B of additional revenue to that total. More importantly, CHI Franciscan and the broader CommonSpirit system could benefit by learning from the success Virginia Mason has had over the years in standardizing and streamlining operational and clinical processes—a critical need given the economic pressures hospitals now face. The ability of the newly combined company to capture that opportunity will come down to execution, which could prove challenging given the complexities of its proposed ownership structure. We’ll be watching this story closely as it develops.
Primary care provider Oak Street Health files to go public
Chicago-based Oak Street Health, which runs consumer-centered primary care centers mainly for the Medicare Advantage (MA) population, filed for an initial public offering (IPO) of its shares late last week, hoping to raise up to $100M in capital. If all proceeds as planned, it will be the second primary care clinic operator to go public in 2020, after One Medical, whose stock price has surged since its market debut in January. Founded in 2012, Oak Street employs 260 primary care physicians in its 54 centers across eight states, and currently serves about 85,000 patients, mostly under capitated contracts with MA payers. The company’s S-1 filing shows the benefit of those contracts, especially in the COVID era: the 35 percent of patients Oak Street serves through fee-for-service contracts accounted for less than one percent of its revenue in the first quarter of 2020, with the rest in more lucrative capitated contracts. While Oak Street had invested little in telemedicine prior to the pandemic, focusing instead on providing senior and lower-income patients transportation to clinic visits, they have now pivoted sharply toward virtual care. As of May they provided 85 percent of all visits virtually, down from a COVID peak of 93 percent. Oak Street also benefits from close ties with Humana, the second-largest seller of MA plans: Humana accounts for nearly half of Oak Street’s capitated revenue, leases a number of center locations to the company, and is also a main investor in the company. Oak Street’s IPO seems well-timed to take advantage of the current surge in investor interest in primary care during the pandemic. The economic recession will likely accelerate seniors’ interest in MA plans, driving more growth opportunities for in current and new markets. The ultimate question—as always in this space—is whether the model can scale quickly enough to meet public market expectations.