June 21, 2019

The Weekly Gist: The Horny Teenagers Edition

by Chas Roades and Lisa Bielamowicz MD

Summertime! Here’s a fun fact for the first day of summer: that classic Gershwin tune from 1935’s Porgy and Bess has been recorded more than 25,000 times, including classic renditions by Billy Holliday, Ella Fitzgerald, Miles Davis, The Zombies, and Janis Joplin. There was even a popular (if unfortunate) version by the 90’s ska-punk band Sublime. But for our money, nothing sets the tone for the season better than the classic 1991 track from DJ Jazzy Jeff & The Fresh Prince. Yep, that’s our music. Drums please!

THIS WEEK IN HEALTHCARE

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

Uncovering a fractious healthcare “team of rivals”

Fans of inside-the-Beltway gossip and political intrigue were treated to new reporting this week from Politico, citing multiple anonymous sources inside the Trump administration who described turmoil and infighting among key members of the healthcare policy team. According to the article, the main axis of disagreement is between Health and Human Services (HHS) Secretary Alex Azar and White House domestic policy chief Joe Grogan. While both hail from the pharmaceutical industry, Grogan has evidently staked out a much more conservative, hawkish approach to policy reform, while Azar favors more moderate, bipartisan approaches. The two have clashed on a range of health policy issues, including drug pricing reforms, Medicaid waiver proposals, restrictions on fetal tissue research, and measures to increase price transparency for healthcare consumers. The Politico report comes a week after the leak of an internal memo from Seema Verma, head of the Centers for Medicare and Medicaid Services (CMS), in which she cautioned against White House policies to retool the Affordable Care Act (ACA). Verma’s memo cited concerns that the proposed changes might undermine the stability of health insurance markets. Meanwhile, the White House is charging ahead with plans to issue an executive order, as early as next week, to force hospitals and insurers to publicly disclose negotiated, discounted rates, according to new reporting from the Wall Street Journal. And in a recent interview with ABC News, President Trump again promised a “phenomenal” new healthcare plan within the next two months. As the 2020 Presidential campaign heats up, we’d expect even more back-and-forth over healthcare policy, with the President and his Democratic rivals jockeying to take advantage of voters’ concerns over the rising cost of care. What’s clear from this week’s reports is the lack of policy consensus—even within the Administration—on how to address those concerns.

Settling on an approach to address “surprise billing”

A key policy dispute between hospitals and insurers over how to address the problem of “surprise billing” was decided in insurers’ favor this week, as Senators Lamar Alexander (R-TN) and Patty Murray (D-WA) formally introduced the “Lower Health Care Costs Act” in the Senate Health, Education, Labor and Pensions (HELP) Committee. As part of a broader set of reforms aimed at addressing high healthcare costs, the proposed legislation would protect consumers from unexpected, out-of-network bills for emergency hospital care. These “surprise” bills, which about one in six Americans have received, according to a new study, occur when fees for an emergency physician or other clinical services are not covered by a patient’s insurance plan, even though the hospital itself is “in-network”. The hospital industry favored settling these disputes through arbitration, while insurance lobbyists advocated using benchmark rates based on similar services contracted by the patient’s plan at other facilities in the same market. The Alexander-Murray bill adopts this latter, “median in-network benchmark” approach, which early CBO projections say could mean $25B in savings over the next decade, and result in a 0.5 percent reduction in commercial insurance rates. This puts the proposed legislation in line with a similar bill being considered by the House Energy and Commerce Committee, making it more likely to be adopted as part of a final law. Eliminating surprise billing has emerged as one of a handful of areas of bipartisan consensus over the past few months, along with increasing price transparency and addressing pharmaceutical costs. Even in the midst of a charged political environment, we’d expect these pocketbook issues to continue to gain traction as lawmakers look to address public concerns over out-of-pocket spending for care.

Building the nation’s largest army of physicians

This week the Federal Trade Commission approved UnitedHealth Group’s $4.3B acquisition of DaVita Medical Group (DMG), after the insurer agreed to sell the Las Vegas operations of DMG to Salt Lake City, UT-based Intermountain Healthcare to address market power concerns raised by the combination of DMG with United’s existing physician practices in Nevada. DMG was formed from DaVita’s 2012 acquisition of HealthCare Partners, which was the largest operator of physician groups at the time and was purchased by the kidney-care company for $4.9B. This week’s acquisition makes Optum, the division of UnitedHealth Group (UHG) that will operate the new medical group, the largest owner of physician practices in the US, with tens of thousands of physicians employed or under exclusive contract. Through its OptumCare unit, UHG also owns a large ambulatory surgery chain and a large urgent care clinic provider, along with sizeable physician groups in Texas, Florida, California, and Washington state. UHG appears to be banking on its ability to manage patient care in lower-cost settings and reap the rewards of those savings through its commercial and Medicare insurance products. That strategy mirrors the approaches of other large insurers: Aetna is now part of pharmacy giant CVS Health; Humana now owns physician and post-acute assets; and Anthem recently invested in behavioral health services. All of these firms will face the same challenge: integrating a wide array of provider and payer assets into a coordinated, functioning care platform that can win the loyalty of patients and consumers, and effectively lower the cost of care. That’s easier said than done, and it will be worth watching as UHG attempts to assemble the pieces it’s acquired into a coherent whole.


GRAPHIC OF THE WEEK

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

Sizing up the largest competitors in healthcare

Mergers and acquisitions are on everyone’s minds in healthcare—whether it’s hospital systems joining together to form larger entities or cross-sector combinations that create new, integrated players. We work with many organizations who are weighing the pros and cons of consolidation and trying to figure out how to create value from mergers and not just build ever larger, more inefficient organizations. One factor to consider is just how consolidated healthcare already is—especially the further you get from direct provision of care. There are a handful of large insurance companies that matter, a couple of giant distributors, a few pharmaceutical companies. And then there are 5,000 hospitals and almost a million doctors in the US. The graphic below compares the largest health systems to the largest healthcare companies. Even the largest of the “giant” health systems pale in comparison to other firms up and down the value chain. At least one argument for consolidation is relevance—are we big enough to set the terms of the discussion? But a glance at what the largest healthcare companies—CVS, UnitedHealth Group, and others—have been up to points the way toward a new dynamic in the consolidation trend. The emphasis now seems to be on vertical integration, putting related but not overlapping services together in new configurations to deliver new kinds of value for consumers. To remain “relevant”, health systems will need to turn attention to that strategy as well, moving beyond their traditional focus on the hospital business to assemble the right capabilities for a marketplace driven by value.


THIS WEEK AT GIST—ON THE ROAD

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

“Digital” is not a strategy

Lisa:
Recently we were asked by a health system Chief Strategy Officer to “pressure test” his system’s digital strategy. Initially we questioned whether we had the right skill set for the job—neither of us run deep in information technology or digital platform development. But the CSO assured us he wasn’t looking for tech experts, but rather guidance on how their digital strategy compared to that of other leading systems, and how to create a unifying vision for “digital” across the system. “I’m not sure we’re focusing on the right things, or have the right people leading it and involved in decisions. And no matter what, we’re moving too slowly,” he worried.

Our observations began with the insight that digital health is not a strategy in itself, but a set of tools that enable providers to achieve their strategic goals around access, cost management, patient experience, connectivity and relationship development. Second, building a successful digital process goes way beyond the consumer “app”. Even something as simple as online visit scheduling requires open-access schedules and templates, operational coordination with phone-based scheduling, follow-up for questions around coverage, billing, pre-visit prep and more. Finding a balance between inclusiveness and speed in decision-making is difficult. Clinical leaders must be involved at all levels, but not every physician can have a vote—decisions on digital cannot all be made by consensus. And the bar for a good online healthcare experience will be set by consumers’ broader digital lives. Scheduling my doctor’s appointment online will be compared to the ease of booking an airline ticket or restaurant reservation, not the mediocre scheduling platform of the health system down the street. Healthcare is late to the digital game: health systems need to look beyond their peers to measure success.

A tale of two healthcare marketplaces

Chas:
Over the past few weeks I’ve experienced the best and the worst of the Affordable Care Act (ACA)—in particular, the health insurance marketplaces created by the 2010 law. As my COBRA continuation coverage from my previous employer ran out, I had to purchase family coverage on the Virginia exchange. Or more accurately, I had to purchase coverage on HealthCare.gov, since Virginia is one of the states that opted not to set up its own, state-based exchange. In Northern Virginia, where I live, only three carriers offer plans on the individual marketplace for the current year: Cigna; Kaiser Permanente; and CareFirst (a regional Blues plan). I selected a nationwide PPO network offered by one of the plans, at an exorbitant price—nearly three times what my COBRA coverage cost. Rate increases coupled with dwindling competition on the Virginia marketplace meant that 2019 coverage is very expensive in my part of the state.

But just as I was about to bite the bullet and purchase coverage, Gist Healthcare became eligible to enter the small group market, because of recent hiring. Since we’re a DC-based small business, we’re required to purchase coverage on DC Health Link, which is Washington DC’s “state-based” exchange. DC is one of two states, along with Vermont, that requires small businesses who want coverage to purchase it through the online SHOP (Small Business Health Options Program) exchange. The experience was night-and-day from Virginia. There was a wider array of carriers and plans to choose from. Premiums were significantly lower, both because we could access group coverage and because DC combines the individual and small group risk pools and has a functioning individual mandate. We were able to set a “reference plan” for our company’s coverage, meaning we could pick a metal-tier with a maximum premium and let our employees choose among carriers and plans, rather than choosing a single carrier for the whole company. We were able to offer competitive, affordable coverage for our employees, and my own family’s plan turned out to be more than 60 percent cheaper than the identical plan on the Virginia marketplace. The contrast between buying coverage in DC, which has worked to bolster and extend the ACA, versus in Virginia, where Obamacare has received less support, was striking. But my larger takeaway is just how complicated, and often financially untenable, it is to navigate the health insurance landscape at the small-purchaser end of the market.


BINGE WATCH ALERT

We would’ve worked harder, but we watched this instead.

Karl Marx famously said history repeats itself, first as tragedy, then as farce. To that, we might add a third, 21st-century refrain: and then as a prestige television miniseries. This month, HBO is treating us to yet another big-budget period piece, retelling the story of the April 1986 nuclear disaster at Chernobyl. The eponymous, five-episode series pulls out all the stops—meticulous recreation of the atmospherics of life in the Soviet Union, heart-in-your-mouth pacing as nuclear meltdown threatens to kill thousands and make most of Europe uninhabitable, heroic actions in the midst of incredible tension, and a Hollywood ending built around courtroom drama. Of course, things didn’t play out quite that way in reality, and the show has gotten mixed reviews from historians and those close to the events. But while it’s not perfect history, it’s fantastic television—absorbing, gut-wrenching and thought-provoking. And for many who were born and grew up after Chernobyl, and the subsequent unravelling of the Soviet Union, it’s a great education in just how close we came to an unimaginable planetary catastrophe—important context for today’s environmentally-woke young people. But the biggest lesson of Chernobyl for today, and one the HBO miniseries helpfully depicts, is what Hannah Arendt described as the “banality of evil”. Rather than Hollywood-style villains, what we most need to be on guard against are lies and deceit made routine, bureaucratic, and systemic. Highly recommended viewing.


WHAT WE’RE READING

Stuff we read this week that made us think 

Are AMCs too big for their own good? 

piece out this week in JAMA takes a look at the growth of the average academic medical center, and asserts this growth—with its reliance on fee-for-service revenue—is dampening the move to value in US healthcare. Click through to the article to take a look at the excellent graphic, which shows growth in the average annual revenue of the country’s 141 AMCs over the past forty years. Average AMC revenue grew from $139M to $930M from 1977 to 2017—with nearly all of that growth coming from huge increases in the provision of clinical services. Growth in clinical revenue does not appear to drive increases in teaching and research, since both fell as a proportion of total AMC revenue. Given that AMCs are usually successful at negotiating higher fee-for-service rates, the article posits growth in clinical services provided in AMCs has contributed to the rising cost of US healthcare, and this increased reliance on clinical revenue makes academic centers resistant to the move toward value, and reluctant to research and lead change that might be in the best interest of society but could put the organization’s bottom line at risk.

There’s an argument to be made that the increased diversity of care settings within AMCs is valuable for teaching and research. But this raises the question of whether society would be better served by fewer, larger AMCs, rather than growing the number of academic centers, all of which will feel pressure to expand their clinical revenue streams—a critical consideration as more systems and states look to launch medical schools. Care and payment model innovation has disproportionately come from outside academic medicine. If AMCs choose to remain on the sidelines of transformation, we risk training the next generation of clinicians to practice in an outdated, expensive care model, slowing progress even further.

Unwelcome callers bombard hospital phone lines

Are you sick of robocalls? There’s a good chance at some point in the last month, you’ve received one of these annoying, automated calls on your cell phone, from a number that looks familiar enough to lure you into picking up, only to hear a recorded voice offering to sell you health insurance or a vacation rental. Well, according to a troubling piece from the Washington Post this week, you’re not alone. Robocalls have become a major source of concern in healthcare as well. The article describes the chaotic scene at Tufts Medical Center in Boston last year, when on one April morning phones across the facility were bombarded with more than 4,500 calls in the space of just two hours. Other hospitals report similar attacks, which can tie up switchboards and block access to phone services for potentially critical emergency needs. Another common robocall tactic involves dialing patients from numbers resembling physician or hospital phone lines, only to offer scam services or attempt to elicit sensitive patient information. And physician practices have been targeted as well, with scams aimed at gathering drug prescribing data. Healthcare providers appear to be as vulnerable to robocalls as the rest of us, with little help coming from Federal telecom regulators. The only difference? We can put our phones on mute or choose to ignore the calls, but for healthcare providers, answering the phone could be a matter of life or death.

A new symptom worthy of Dante’s Inferno

On the other hand, maybe it’s best to put that phone down anyway. A flurry of media reports this week picked up on research published last year in Australia, indicating that young people are developing horn-like bone spurs on the backs of their skulls at an unusual rate, and speculating that mobile phones might be the culprit. As parents everywhere rushed to share the news with their teenagers, texting (naturally) pictures showing the 30mm spike protrusions, along with the inevitable “I told u so” admonishments, other articles cropped up debunking the research. You know it’s a good week when “No, Your Kids’ Evil Cellphone Won’t Give Them Horns” pops up as a notification on your iPhone. The research is intriguing, however, highlighting just one of the myriad ways we might be changed by the incorporation of new technologies into our lives. We slouch, we squint, our hands cramp around tiny keyboards, our sleep patterns change—all thanks to the miracle of smartphones. Whether the tendons and ligaments in our necks are getting so bent out of shape as to cause bone spurs to develop remains an open question, but horns or not, there’s no question that for all of technology’s blessings, there’s more than a little that’s devilish about our electronic existence. (If we find out electronic health records cause physicians to grow tails, we’ll be the first to let you know.)


Thanks for joining us for this week’s edition. Time to crank up the tunes, fire up the grill, and enjoy the summertime heat. But first, don’t forget to forward this along to a friend or colleague, and encourage them to subscribe as well. And take a moment to share your feedback and suggestions. We love hearing from you!

Most importantly, please let us know if there’s anything we can do to 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