|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
Bankruptcy judge approves sale of Hahnemann residency slots
This week a Federal judge ruled that the owner of Hahnemann University Hospital could move forward with the sale of the system’s more than 550 residency slots as part of a plan to pay off creditors. The training slots will be sold to a consortium of health systems led by Thomas Jefferson University Hospitals for $55M. Hahnemann had previously agreed to sell the positions to Reading, PA-based Tower Health before they were outbid by the Jefferson consortium, who will keep the majority of the positions—and new physician labor—in the Philadelphia area. The judge noted the difficulty of the decision, saying it was the kind of case that would “cause a judge to lie awake at night”. The ruling is huge win for debtors, and a blow to the Federal government, which strongly opposed the sale and has seven days to appeal. Should it stand, the case could set the precedent that residents and the positions they hold are an asset that can be negotiated for and sold. Interns and residents provide low-cost labor that is essential for 24/7 coverage in many large hospitals, and the complex system of allocating and funding of residency training slots is a funds transfer from the Federal government to health systems. Allowing hospitals to sell those slots to the highest bidder could undermine the stability of urban hospitals, particularly those who are investor-owned, as owners look to maximize short-term profits.
Walmart makes its next healthcare move
Late last week CNBC reported that Walmart will launch a new standalone primary care clinic, offering a comprehensive array of services including behavioral health, audiology, dental, and vision care. The first clinic is set to open next week in Dallas, Georgia, a 45-minute drive from downtown Atlanta, and will be located in a separate building next door to the existing Walmart store. On the company’s website, the new clinic is branded Walmart Health, and differentiated from the retailer’s Care Clinics, which offer a range of healthcare services inside twenty Walmart Stores in Georgia, Texas and South Carolina. Appointments for the new clinic can now be scheduled online for visits starting September 13th. The clinic accepts a range of insurance plans, and visits are priced from $59 to $99 for patients without coverage.
Walmart has not commented on future locations or plans to scale the new model, but the design and service profile provide a window into how the company may be thinking about its healthcare strategy. Success of a freestanding clinic is less likely to depend on retail cross-sales, and the location would not need to be adjacent to or integrated with Walmart retail stores. The service profile is squarely targeted toward Medicare Advantage beneficiaries with comprehensive plans that cover services like dental and vision. And the launch of a separate website with simple, easy-to-use online scheduling suggests Walmart may be looking to create a “digital front door” for healthcare services. While last year’s buzz of a potential merger with insurer Humana has quieted, it’s likely Walmart will follow rival CVS Health into the insurance business, and profit from connecting it to a consumer-friendly, low-cost care model. As we’ve tracked Walmart over the years, the pace of their moves into healthcare seems to wax and wane. But conversations with them indicate that even when the news dies down, the company is still working diligently behind the scenes to build a commanding healthcare strategy—and remains a “sleeping giant” which could prove massively disruptive to traditional providers.
Another round of debate over hospital consolidation
Are hospital mergers a good thing or a bad thing? Much of the answer to that question depends on what happens after the merger—does the combined organization provide better, more efficient care, or does it use its increased leverage to raise prices? Yet another round of back and forth on this issue took place this week, as the American Hospital Association (AHA) released the results of a study it commissioned from economic analysis firm Charles River Associates (CRA), while a group of academic antitrust specialists countered with their own briefing in response. The AHA study, based on interviews with select health system leaders and econometric analysis by CRA, shows (surprise, surprise) that consolidation decreases hospital expenses by 2.3 percent, reduces mortality and readmissions, and reduces revenue per admission by 3.5 percent—indicating that the “savings” from consolidation are being passed along to purchasers. The economists, including Martin Gaynor at Carnegie Mellon, Zack Cooper at Yale, and Leemore Dafny at Harvard, countered in their briefing (surprise, surprise) that CRA’s research was biased in favor of hospitals, and cited numerous academic studies that indicate that hospital consolidation drives overall healthcare costs higher. Beyond the predictable debate, our view is that consolidation can and should lead to better quality and lower prices—but that it largely hasn’t delivered on that promise. The prospect of “integrated care” that’s often touted by consolidation advocates hasn’t materialized in most places, both because hospital executives haven’t pushed hard enough on strategies to produce it, and because the market lacks sufficient incentives to encourage it.