The Weekly Gist: The Frozen Tundra Edition

We’ve been keeping very busy here at Gist Healthcare, reconnecting with old friends and making new ones out in the market. It’s been gratifying to have such a great response to our work so far, including all the kind feedback on the Weekly Gist. We’d encourage you to share it with your colleagues if you haven’t already and subscribe for yourself if someone has forwarded this to you. (Shout out to one particularly avid group of subscribers at a certain online physician scheduling company—we’ve endowed a chair in your name.)

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

No Obamacare bailout in the omnibus

Continuing their tradition of staying up later than a college student writing a term paper, the Senate passed a $1.3T omnibus spending bill early Friday morning, sending it to the President for signature and narrowly avoiding yet another government shutdown. The legislation includes modestly-increased funding of the NIH and efforts to combat the opioid epidemic, but notably left out was funding to stabilize insurance company finances in the wake of the Trump administration ending the Obamacare cost-sharing reduction payments. Although a group of Senate Republicans put forward a stabilization package, it was opposed by Democrats who were wary of its impact on subsidies to ACA marketplace enrollees. The Obamacare exchanges are likely to be a political football at least through the rest of this President’s term, and the potential for dramatic premium increases is likely to feature prominently in the upcoming midterm elections.

The insurance companies will be just fine, says the White House

Meanwhile, the White House’s Council of Economic Advisers released a report this week saying that despite turmoil in the Obamacare markets, health insurer profits have increased. Citing rising premiums, growing enrollment in managed Medicaid, and Federal tax credits paid to carriers, the CEA report paints a rosy picture of insurer fortunes, and predicts even greater windfalls to come as a result of the new tax reform law. Indeed, (in case you’re looking to the White House for stock picking advice), the report points out that health insurance company stocks have risen 272% over the past four years, versus the 106% increase in the S&P over the same time period. The ranks of Medicare and Medicaid enrollees continue to swell, representing a key growth opportunity for insurers and bolstering their continued profitability for years to come.

HCA announced a noteworthy acquisition

The for-profit hospital chain HCA Healthcare announced an agreement to acquire Mission Health, a 7-hospital not-for-profit system in Asheville, NC, and the area’s largest employer and healthcare provider. Mission’s board and executive leadership cited demographic shifts, reimbursement pressures, the need to continue to generate cost savings, and the potential efficiencies to be gained from joining a large, national hospital company as the rationale behind the sale. If the deal goes forward, it will represent HCA’s most significant acquisition of a non-profit system in recent years. It will be worth watching how other non-profits in the state respond, especially with the announcement coming on the heels of Atrium Health and UNC Health Care calling off their proposed merger. More broadly, it’s likely executive teams and boards of directors at not-for-profits across the country will pay close attention to the deal, as they grapple with the same market forces that put Mission Health in play.

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

In doing some research on employment of physicians by hospitals, we kept seeing references to a recent report from the American Medical Association which made quite a splash by noting that, for the first time, more than half of all physicians in the US are employees. It’s the latest in a series of surveys AMA’s been doing with their members since 2012. When you dig into the numbers, though, the data aren’t nearly as stunning as the headline suggests. They’re counting docs employed by other docs as “employees”—fair enough. But if you thought the study would show a massive uptick in employment by hospitals, well…you’d be wrong. Have a look below. A good example of telling the story you want to tell with statistics.

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

Why the AT&T-Time Warner Case Matters for Healthcare
Vertical mergers such as the one between AT&T and Time Warner are rarely challenged on antitrust grounds, but vertical consolidation in healthcare raises real concerns about consumer impact which need to be addressed

Telemedicine at a Tipping Point
As the reimbursement system evolves to keep up with the expanding capabilities of telemedicine, providers and payers should view virtual care as a key tool to drive consumer loyalty and engagement

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

Weighing the move to downside risk

Lisa:
I’ve been spending time with a health system and their clinically-integrated network debating when the system should make the move to downside risk. They’ve been successful at upside-only risk, earning bonuses (helped by a healthy benchmark in a high-cost market) in their Track 1 MSSP ACO. And they have an upside-only arrangement with a commercial payer that’s off to a good start. Many signs point to readiness: physicians are motivated, analytics have improved, and they’ve networked high-performing post-acute providers. But this week’s news of seven Next-Generation ACOs pulling out of the program, largely due to changes in benchmarking and risk adjustment, sparked a flurry of questions. It’s an important reminder of just how fine the line can be between savings and bonus, and how many risk-capable systems want to move past the bureaucracy of shared savings toward full ownership of the premium dollar sooner than they ever expected.

Looking for the value created by scale

Chas:
This week I had the chance to spend time working with executives at the   regional level of a large, national health system. As many multi-hospital systems have, this organization has set the goal of becoming an “operating company” rather than just a “holding company.” It’s one thing to operate a health system in one geographic region, but for a national system like this one the question immediately arises: how can value be created by operating across many different markets? It’s true that “all healthcare is local,” but this system is exploring ways of bringing national-level clinical services (telemedicine, specialty centers of excellence, population health support) to bear for the benefit of each of the markets they serve. As systems grow in scale and scope, an important question will be: how do we maximize returns to scale for all of the different functions we perform, and what do we do at which level?

Stuff we read this week that made us think.

Huge hospital bills might not be the main problem after all

A perspective piece in the New England Journal of Medicine garnered a lot of attention this week, for suggesting that hospitalization causes far fewer medical bankruptcies than commonly assumed. But the more interesting read is a longer study conducted by the same authors, which looks at the overall economic impact of hospitalization on household finances. Based on analysis of hospital admissions data and household credit reports, the authors found that while hospitalization itself is a major expense, the real financial impact comes months and even years later—when many former patients continue to struggle with poor health and disability. It turns out that for many, hospitalization is the beginning of a lifelong downturn in household income and wealth. It’s an important finding—although we’ve expanded health insurance coverage to assist with medical bills, we’ve done much less than other countries to insure against the impact of poor health and disability during a person’s working years. It’s a common feature across our health care system—the focus is on managing discrete, acute health crises, but not an individual’s long-term health status and well-being.

A solitary journey at the bottom of the world

There was an incredible piece of writing in a recent issue of the New Yorker by David Grann, bestselling author of The Lost City of Z and Killers of the Flower Moon. Devotees of adventure tales will be familiar with the exploits of Ernest Shackleton, the early 20^th century polar explorer whose doomed expedition to the South Pole has become a legendary source of inspiration and leadership lessons. (If you haven’t read it, it’s well worth checking out Endurance: Shackleton’s Incredible Voyage, an classic account of the voyage written in the late-1950s.) Grann tells the story of Henry Worsley, a modern-day version of Shackleton (and descendant of a member of Shackleton’s expedition), who decided at the age of 55 to walk across Antarctica—alone. It’s an incredible story of ambition, planning, leadership and yes, endurance. Leadership can often feel like a solitary journey, and there are great insights to be gained from Grann’s tale.

Best regards,

Chas Roades
Co-Founder and CEO
chas@gisthealthcare.com

Lisa Bielamowicz, MD
Co-Founder and President
lisa@gisthealthcare.com