|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
Amazon to send employees to California for destination cancer care
Add Amazon to the growing list of large employers covering employee travel costs to receive care at a national “center of excellence”. This week the company announced a partnership with City of Hope, a Los Angeles-based comprehensive cancer care center. Employees will have the opportunity to visit City of Hope for diagnosis or treatment evaluation for any cancer diagnosis or to meet with the system’s doctors via videoconference. A joint program run by the Pacific Business Group on Health and consultants Health Design Plus, who have worked with Walmart and other employers to design similar arrangements, assisted in creating the offering. Amazon’s decision to launch “destination care” with cancer is a contrast to other employers like Lowe’s and Walmart, which initially targeted conditions like spine, joint replacement and cardiac surgery, focused around a single, time-limited care episode. It remains to be seen whether employees will actually receive treatment at City of Hope, or primarily use the benefit as a “second opinion” service. (City of Hope reports that in another employer arrangement, 84 percent of complex cancer patients had a revision in their diagnosis or treatment plan.) Regardless, the complexity of cancer care ups the ante for Amazon and participating clinicians to invest in coordination with an employee’s local doctors to ensure a seamless care process. Like Amazon’s recently announced primary care offering for Seattle-based employees, the cancer care program is being developed independently of Haven, Amazon’s joint venture with Berkshire Hathaway and JP Morgan Chase, which was founded to lower employer health costs—again raising the question of whether that venture will be a key engine in Amazon’s healthcare strategy, or whether innovation will come from within the company.
UnitedHealth Group is building a new kind of health system
Insurance giant UnitedHealth Group (UHG) reported strong third quarter earnings this week, beating Wall Street expectations for revenue and profits. Third quarter revenue for the company reached $59.9B, fueled in part by growth in its Optum division, which grew revenue by more than 13 percent in the quarter. In a call with investors, UHG executives pointed to OptumHealth, which aggregates the company’s care delivery assets, as a particular driver of growth. Dave Wichmann, UHG’s CEO, said that the company is developing a “next-generation” health system in OptumHealth, and Optum CEO Andrew Witty pointed to the company’s efforts to bring together insurance, physician services, and analytics into an “accountable care platform” in the Southern California market as an example of how it plans to build a lower-cost delivery model aimed at keeping patients out of hospitals and other expensive settings of care.
United isn’t wasting time in executing against this strategy, announcing plans this week to aggressively shift surgeries from hospitals to outpatient surgery centers. Beginning in November, United will expand its surgical prior authorization policy, potentially denying claims for procedures where hospital-level care is deemed unnecessary, unless those cases are moved to an outpatient site. UnitedHealthcare CEO Dirk McMahon said on this week’s earnings call that the company sees an opportunity to shift 20 percent of its medical spend to lower-cost ambulatory settings: “For example, there is a significant opportunity for more hip and knee replacement procedures to be performed in ambulatory centers, with those settings often having a 50 percent cost advantage over traditional settings and with fully comparable if not better, safety and quality.” UnitedHealth Group also owns Surgical Care Affiliates, the nation’s second largest ambulatory surgical center chain—whose sites could stand to benefit from the policy change. Having spent several years aggregating a multitude of care assets, insurance plans, and service offerings at a relentless pace, UHG now seems to be pivoting to integration mode—putting those pieces together to remake American healthcare. Whether the company can pull off integration at scale—which has proven difficult for many other organizations of lesser size—remains a critical unanswered question. To that challenge, we’d add one more: how will patients feel about the country’s largest insurance company taking charge of the delivery of care?
Google adds to its all-star healthcare bench
Google confirmed a report by CNBC on Thursday that it had hired Dr. Karen DeSalvo to become the company’s first Chief Health Officer. DeSalvo was previously National Coordinator for Health Information Technology in the Obama administration, in addition to serving as Assistant Secretary of Health from 2014 to 2017. She is currently on the faculty at Dell Medical School at the University of Texas at Austin and serves as president of the Society of General Internal Medicine. At Google, she will oversee the company’s work with hospitals, physicians and other clinicians across its cloud computing unit, and the Verily healthcare subsidiary of parent company Alphabet. DeSalvo will report to former Geisinger Health CEO Dr. David Feinberg, who joined Google last year to lead health strategy. Also this week, Google confirmed the hire of former FDA Commissioner Robert Califf to lead health policy and strategy. Hiring DeSalvo to join an already impressive team of highly regarded healthcare leaders is yet another signal that Google is planning a serious run at becoming a major player in the healthcare industry, one powered by its massive data analytics and artificial intelligence investments. We think Google’s ultimate play is to become the “cloud layer” of healthcare, allowing information to flow freely across a wide array of patients, payers, and provider sites—surely a lucrative posture in an industry that increasingly runs on data. We’re big fans of Karen DeSalvo, having known her and followed her work for many years. Great hire!