September 6, 2019

The Weekly Gist: The Help Wanted Edition

by Chas Roades and Lisa Bielamowicz MD

It’s September! Back to school, back to work, and back to the Weekly Gist! Here’s hoping your Labor Day weekend was restful and relaxing, and that your return to work has been smooth. We spent much of the past two weeks out on the road with our members, but we did manage to get some vacation time in too…mostly filled with back-to-school shopping. But we’re glad to be back and delighted to share some exciting news—we’re hiring!

As our membership expands, we’re looking to add to our growing team. We’re on the hunt for smart, passionate, curious people to join us as we work with some of the nation’s leading organizations to build a new vision for healthcare—oriented around creating value for patients and consumers. We help healthcare executives think about their greatest strategic challenges, and translate national trends into actionable advice on direction, timing, and priorities for change. If that sounds like your kind of thing, we’d love to talk to you!

At the moment we’re interviewing for three pivotal roles to help us build Gist Healthcare. One will help us develop our thinking, analyze what’s going on in the industry, and discover great ideas to drive change. A second will help us deliver advice and counsel to healthcare leaders, translating great ideas into action and implementation. And the third will help us build our cohort of member organizations, expanding our reach among leading healthcare executives. Click through to learn more and explore whether one of these roles might be right for you (or a colleague). And if you’re more of a round peg looking at those square holes, but still think Gist sounds like a fun place to work, just send a cover letter and resume to careers@gisthealthcare.com. We can’t wait to hear from you!

And now, back to our regularly scheduled programming…


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.


GRAPHIC OF THE WEEK

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

Gearing up for the new healthcare consumer

We talk a lot about rising consumer expectations in healthcare (and in the economy beyond). As providers think about how to prepare for the coming wave of Millennial patients, they’ll need to come to grips with this generation’s very different attitudes about how to access care and relate to the delivery system. This is a generation of Americans that’s grown accustomed to “frictionless”, convenient, and often digital access to services—they’ve learned their purchasing preferences from the likes of Amazon and Apple. And, as the data below (from a recent Accenture survey) indicate, they’re much more likely to be dissatisfied if their healthcare experiences don’t chin the bar set by the rest of the “Amazon economy”. Compared to Baby Boomers, Millennials are much more likely to be turned off by long waits, inconvenient locations, scheduling difficulties, and services that don’t solve their problems. And they’re much more likely to want digital access to care—the ability to email or text their doctor, schedule online, and engage in video visits. Without question, these consumers are going to be underwhelmed by what passes for state-of-the-art care delivery today. But the good news is we have time to prepare; today the median Millennial is only 30 years old and hasn’t really hit the healthcare system (outside of pediatrics, where they’ve already shown themselves to be demanding consumers on behalf of their children). Now is the time to start retooling delivery approaches and building new models of access that can win the loyalty of this historically large generation, as they begin to develop set preferences for how and where to seek care.


THIS WEEK AT GIST—ON THE ROAD

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

Measuring performance in a consumer-focused marketplace

Lisa:
I recently met with the Chief Strategy Officer of one of our member health systems to help her evaluate progress on their strategic plan. The system is three years into a five-year plan, and so far, they’ve hit nearly all of their goals and performance metrics. But rather than feel encouraged by this success, she and the system CEO have a growing sense of unease: “We’re patting ourselves on the back because the numbers look great. But I don’t even know if we’re measuring the right things.” In particular, traditional growth metrics, focused on volume growth and weighted toward inpatient services, seem to fall short. These inward-focused metrics do little to help systems understand their relationships with consumers or answer questions about where patients find value, or whether they are creating ongoing loyalty. We’re seeing a handful of systems begin to track a range of new metrics—new to healthcare, if not the rest of the economy—to begin to understand how they measure up in delivering consumer value. At baseline, many are beginning to measure net promoter score, comparing performance not just to peers but other consumer-focused industries. Rather than looking at volume growth, a handful of systems are trying to measure their share of healthcare wallet, aiming to capture more business from current patients across a range of services. And the most forward-thinking are looking to measure the value of deeper consumer loyalty over time, calculating the lifetime value of healthcare consumer, using it to inform strategy and investments in customer acquisition and retention. While these metrics may be unfamiliar and benchmarks hard to find, creating a methodology to measure and understand consumer loyalty should be central to any health system’s strategy.

Board turnover as a constraint on strategic flexibility

Chas:
I’ve often thought that one advantage not-for-profit health systems have over their investor-owned brethren is the ability to take a longer view and invest in strategies whose success is better measured in years, not quarters. After all, it takes time to effect change in a large, complex organization, and shareholders and other public investors may not have the patience or tolerance for near-term losses in the pursuit of longer-term gain. But a conversation with a member CEO last week got me thinking about this distinction in a more nuanced way. He leads an organization that has invested heavily in the “transition to value”—pushing to assume risk for population health, launching new care management initiatives intended to shift care patterns, and opening new access points to build a broader and more loyal patient base. His not-for-profit board was completely aligned when he brought the strategy to them five years ago. But not all of the initiatives have paid off yet, and there have been stumbles along the way. And now, because of turnover among board members, he faces a much more skeptical board, asking questions about whether the strategy was a good idea in the first place. I hadn’t thought about board rotation and fixed term-limits for nonprofit board members as a strategic constraint on health systems, but of course that’s the case. Given how many health system boards are structured, the implication is that the board has to be continually re-sold on big strategic decisions, often years after they are taken. That’s a good thing—leaders should continually pressure-test their approaches and submit to tough questions. But the risk of the board reversing course before a long-term initiative has the chance to come to fruition is a real one, especially for nonprofit systems.


ON THE GIST TURNTABLE

Give this a spin, you might like it.

September is the perfect month for that rich, sun-dappled Laurel Canyon sound, with its warm, major key melodies and cool, nearly (but not quite) yacht-rock rhythms. If you have a hankering for that vibe, or maybe you just like 70s soft rock, look no further than the latest release from Whitney. The two-man team that emerged from the breakup of Smith Westerns is out with their second LP, Forever Turned Around. They’re not actually a Southern California act, instead hailing from Chicago, which just designated August 30th “Whitney Day” in honor of the album’s release. And they bring an indie folk sensibility to their work, with vocalist Julien Ehrlich working in a light falsetto that’s reminiscent of Justin Vernon’s style in Bon Iver. There’s no single on the collection to rival their breakthrough “No Woman” from 2016; instead, the album works better as an atmospheric whole, sauntering through its ten tracks in just a half hour, with daydream-inspiring compositions weaving together guitars, keyboards, horns, and gentle percussion. The perfect soundtrack for September’s sunny afternoons and crisp evenings. Best tracks: “Used to Be Lonely”; “Valleys (My Love)”; “Giving Up”.


WHAT WE’RE READING

Stuff we read this week that made us think.

Debunking a healthcare urban legend

You’ve seen it. That infamous graphic that shows the growth in the number of administrators versus the growth in the number of physicians since 1970. The one that every consultant slips in their slide deck to shock provider audiences with the stunning statistic that there’s been a 3000 percent increase in administrators and only a 150 percent increase in doctors over the past 50 years. (Reader: we’ve used it too.) Guess what? It’s bunk—which we always suspected. Thanks to some statistical sleuthing by blogger Kevin Drum, published recently in Mother Jones, we can now shed some more light on the topic. It’s an excellent read, and a helpful antidote to that absurd piece of healthcare lore. First of all, any good analyst will tell you to beware whenever people start tossing around percentage increases instead of absolute numbers. The actual numbers for 2018? There are somewhere around 5M “administrators” working in healthcare, compared to 13M clinical workers. But that’s a tricky number to determine, because as Drum says, “there is no remotely reliable measure of the number of healthcare administrators in America.” Nevertheless, to the best of his ability to deduce the correct numbers, the portion of the healthcare workforce represented by administrators has increased between 50-100 percent since 1970. That’s still a lot: think of all those coders, scribes, and so forth. It’s way more than other countries, and way more than we had in 1970 (lending credence to the notion that the past is a foreign country). But it’s not astronomical, and it’s commensurate with the complex, byzantine tangle our industry has become. We promise, we’ll never use that dastardly slide again.

Inside the German Apotheke

Over the years we’ve had the chance to work with healthcare delivery systems across Europe, Australia and Canada. So we’re always intrigued by articles that provide insight into care in other countries, like this recent piece from Kaiser Health News (KHN) which takes a look at German pharmacies, and compares Die Apotheke to the experience at our local Walgreens or CVS. KHN’s reporter was intrigued by the healthcare-forward value proposition of the Apotheke—no hairbrushes, lipstick or Doritos in sight—and visited three Hamburg-area pharmacies to understand their offerings. Purchase of medications that are over-the-counter in the US requires a conversation with the pharmacist, ostensibly to educate the consumer about use and safety. But that conversation can also provide access to medications, including some antibiotics, that require a doctor’s visit here. In either case, the discussion takes less than a minute. German pharmacies must be owned by a pharmacist, and they have a monopoly on dispensing medications, eliminating the motive for price competition. Regardless, the country’s national health system limits annual medical copays to 2% of household income. At a high level, German pharmacies are oriented around protecting the consumer, but doing so with a great deal of regulatory oversight. They have been effective in controlling prices, but largely have done that by limiting local innovation (integrating retail clinic-level care would require a change of law). But the Apotheke is still a business at heart, and more are aiming to expand into skin care, gourmet chocolate and other high-end retail offerings. American and German pharmacies are both in the midst of a collision of retail, clinical and financial elements of healthcare in serving a more demanding consumer. Despite differences in the structure of our healthcare systems, we have much to learn by comparing how these services come together to impact healthcare costs and consumer experience.


That’s it for this week. It’s great to be back! Stay tuned for more exciting news in the weeks to come and let us know if you or someone you know would be a good fit for the Gist team. We appreciate your suggestions and feedback, and we’re always grateful when you share our work with a friend or colleague and encourage them to subscribe.

Most of all, we hope you’ll let us know if we can be of assistance in your work. 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