August 11, 2023

The Weekly Gist: The Hank the Tank Redux Edition

by Chas Roades and Lisa Bielamowicz MD

Bear with us, we’ve got another ursine update to share. Back in February of last year we shared the story of Hank the Tank, a 500 lb. black bear in South Lake Tahoe, CA who had been acquitted of a rash of food-stealing allegations by local residents, after DNA evidence let him off the hook. The story has, well, grown hair since then—it transpired that Hank was not one but three bears, one of whom was a 400 lb. female responsible for at least 20 of the home invasions. “She-Hank” was captured this week by state wildlife workers and has now been exiled to a wildlife reserve in Colorado, where she will live out the rest of her days. Sadly, it appears that her three cubs will not travel with her, instead being released back into the wild in California. No word on the status of the bear’s co-conspirators. “I guess they are all technically ‘Hank the Tank’”, said a spokeswoman for the California Department of Fish and Wildlife. You can count on us to keep a close watch on this developing situation.


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

1. Weight loss drug Wegovy cuts risk of heart problems by 20 percent. On Tuesday, Novo Nordisk released the headline results of a large clinical trial demonstrating that its popular GLP-1 inhibitor Wegovy reduced the risk of heart attacks, strokes, and cardiovascular deaths by 20 percent. The SELECT trial enrolled roughly 17,600 non-diabetic adults aged 45 and older who were overweight or obese with established cardiovascular disease. It compared people in this population treated with the drug to those given a placebo, and tracked them for up to five years. The drugmaker said it plans to release the full trial results at a conference later this year. These results are similar to a previous study that found Wegovy sister drug Ozempic, also made by Novo Nordisk, reduced the risk of adverse cardiac events by 26 percent in adults with type 2 diabetes.

The Gist: The cardioprotective effects demonstrated in this study far exceeded researchers’ expectations. Though concerns still abound about the high costs of Wegovy (nearly $1,350 per month) and similar drugs, these results will certainly put pressure on Medicare and other insurers to provide coverage. Questions remain around how the drug actually improves cardiovascular outcomes, and whether patients with cardiac disease who are not overweight or obese might also benefit from taking it. Despite the fact that the data are still preliminary, the argument that obesity medications are solely “lifestyle” or “vanity drugs”—which some insurers and employers have been using to deny coverage—will now be much harder to defend.

2. Babylon Health to end US business as proposed go-private deal falls through. The beleaguered digital health company announced on Monday that its previously proposed arrangement to go private via a deal with Swiss-based neurotechnology company MindMaze will not happen, offering no further details. That deal was arranged by AlbaCore Capital Group, which had secured a loan for Babylon in May to implement the transaction. Babylon said that it will now exit its core US businesses, which consist mostly of value-based agreements with health plans, and will continue to seek a buyer for its Meritage Medical Network, a California-based independent practice association (IPA) comprised of approximately 1,800 physicians. Babylon said it may have to file for bankruptcy if it can’t secure additional funding or reach another deal to divest.

The Gist: Babylon is one of the starkest digital health “boom-and-bust” stories thus far. Despite the fact that the company overpromised and under-delivered in both the US and abroad, it was able to raise—and then lose—billions of dollars in just a few short years after going public in October 2021 via a special purpose acquisition corporation (SPAC) merger. It remains to be seen who will buy Babylon’s attractive IPA asset. Presumably insurers, retailers, health systems and other players are evaluating a purchase, either to enter or expand their provider footprint into Northern and Central California.

3. Latest court order pauses No Surprises Act’s Independent Dispute Resolution (IDR) process once again. This week, the Centers for Medicare and Medicaid Services (CMS) for the second time suspended the arbitration process, outlined in the No Surprises Act, for new out-of-network payment disputes between providers and payers. Federal judge Jeremy Kernodle in the Eastern District of Texas once again sided with the Texas Medical Association (TMA) in the lawsuit, which challenged CMS’s 2023 increase in administrative fees for arbitration (from $50 to $350), as well as restrictions on batching claims, which require providers to go through a separate IDR process for each claim related to an individual’s care episode. While CMS said that it made these changes to increase arbitration efficiency, TMA argued that the changes made the IDR process cost-prohibitive for providers, particularly smaller practices.

The Gist: Implementing the No Surprises Act has been a huge headache for CMS. Since it went into effect last spring, the IDR has seen a case load nearly 14 times greater than initially estimated, and has been hampered with delays. Insurers have blamed providers for overloading the system with frivolous claims, while providers have accused insurers of ignoring payment decisions determined by third-party arbiters or declining to pay in full. The silver lining amid all this infighting is that the No Surprises Act is successfully preventing surprise bills for many consumers, despite the intra-industry turf war over its implementation.

Plus—what we’ve been reading.

4. Are American doctors overpaid? A recent National Bureau of Economic Research (NBER) working paper analyzed the individual income tax records of 965,000 US physicians between 2005 through 2017 to provide a comprehensive look at physician earnings. As doctors’ incomes are often a combination of wage and business income, earnings are commonly underestimated in survey data. Researchers found that the average physician earned $350K per year, which rose to $405K annually during the prime earning years of ages 40-55. However, researchers found a large gap between the lowest and highest earners: the top ten percent of physicians in that age band averaged $1.3M per year, with those in the top one percent averaging over $4M (and 85 percent of that income coming from business income or capital gains versus wages).

The Gist: Many policymakers long believed that increasing the number physicians nationally would drive higher medical spending, and worked to constrain supply by freezing funding for residencies in the late 1990s, a move that has yet to be fully unwound. Recent research, however, has found that the impact of physician supply on excess treatment is small or nonexistent. Meanwhile, the imbalance in supply and demand has led to relatively high prices for physician laborCompared to other western countries, the US has far fewer physicians per capita, and we pay our doctors significantly more. Case in point: Germany has 69 percent more physicians per capita, and American doctors are paid roughly 50 percent more than their German counterparts.


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

Spotting a “skills mismatch” in the nursing pipeline

While last week’s graphic looked at how a wave of retirements has hit the nursing workforce, this week we take a look at the pipeline of nurses in training to fill that gap. In recent years, there has been a consistent stream of qualified applicants who want to become BSN nurses, but schools don’t have the capacity to admit them. One reason: an ongoing shortage of nursing faculty, which recent retirements have exacerbated. The percentage of nursing schools with at least one full-time faculty vacancy grew from 53 percent in 2019 to 62 percent in 2022. Looking at registered nurses (RNs), the number with active licenses has continued to grow at a much higher rate than the supply of licensed practice nurses (LPNs) with active licenses. The relatively small LPN workforce is especially significant, given rising interest in team-based nursing care, which aims to utilize a higher number of LPNs, supervised by RNs and BSNs. Expanding training programs with an eye toward the skills and mix needed to deliver team-based care will be critical to ensuring a stable, efficient nursing workforce for future decades.


A recommendation from our weekly diet of music, movies, TV, and other good stuff.

Radio Red by Laura Groves—A generous helping of soulful, synth-driven chamber pop tunes from this London-based singer/songwriter, whose voice has rightly earned her comparisons to Laura Nyro, Stevie Nicks, and even Kate Bush. It’s her debut album recording under her own name, a name we’ll hope to hear a lot more as her exposure grows. The perfectly matched Sampha features on “D 4 N”, the album’s dreamy standout track.


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

How to convince the board that it’s time to merge

This week we had a conversation with a health system executive who has been wondering how to make the case to his board for expansion beyond the existing markets where the organization operates. Like many, he’s confronting declining margin performance, and feeling pressure to combine with another system—joining the wave of cross-market consolidation that’s been dominating discussion among system CEOs recently. His concern was that his locally governed board may be putting an artificial brake on growth, not seeing value of expansion beyond their market for the community they serve.

That’s a valid point—how does it help a Busytown resident if the local health system expands to operate in Pleasantville? Shouldn’t Busytown Health System just focus its resources and time on improving performance at home, and wouldn’t it represent a loss to Busytown if Pleasantville got investment dollars that could have been spent locally? That’s a question raised by the “super-regional” or national strategies being pursued by many large systems today, and one worth thinking about. Whenever a system grows outside its geography, there should be a solid argument that additional scale will reap returns for its existing operations, from better efficiency, better access to innovation and talent, better access to capital, or the like. Those are legitimate reasons for out-of-market growth and consolidation, as long as the systems involved are diligent in pursuing them. But local boards are right to hold executives accountable for making the case for growth, and ensuring that growth creates value for local patients and purchasers.


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

Last Monday, JC was joined by attorney Stuart Vogelsmeier, EVP and Chair of the Healthcare and Business practices at St. Louis-based law firm Lashly & Baer, to discuss the impact that the recently proposed federal antitrust changes could have on health system deals.

This Monday, we’ll hear the second part of their conversation, in which they focus on the potential impact of these changes on cross-market health system mergers, as well as on health insurers and private equity groups.

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Thanks for joining us for the Weekly Gist. Keep sharing your feedback and suggestions—we love hearing from you! And if you’re really digging it, go ahead and share this with a friend or colleague, and encourage them to subscribe too!

We’ll be back next week with another edition. In the meantime, if there’s anything we can do to be of assistance in your work, please don’t hesitate to let us know. You’re making healthcare better—we want to help!

Best regards,

Chas Roades
Co-President and Managing Director

Lisa Bielamowicz, MD
Co-President and Managing Director