March 9, 2018

The Weekly Gist: The Inaugural Edition

by Chas Roades and Lisa Bielamowicz MD

Welcome to the first edition of the Weekly Gist!

Each Friday, we’ll be sending along these emails with our thoughts on what happened across the week in healthcare and updates on what we’ve been working on and thinking about at Gist Healthcare. We realize the burden is high for a weekly email—your inbox is already cluttered with lots of other stuff to read. We’ll keep it brief, and true to our name we’ll try to focus on the “gist” of what’s going on each week in our industry.

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THIS WEEK IN HEALTHCARE

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

Cigna-Express Scripts—putting all the pieces together

Like UnitedHealthcare (with its OptumRx division) and Aetna (as part of CVS/Caremark), Cigna has decided that owning a pharmacy benefits manager (PBM) will solve a key problem with the PBM model—the opacity of negotiated prices with drug companies. The move is emblematic of a new era in which health plans increasingly believe they must own a full complement of healthcare assets, not just the insurance function, in order to remain relevant in a changing marketplace. We’d expect payers to continue to expand their ownership of outpatient centers, retail clinics and physician practices, and to seek to control as many other pieces of the care continuum as possible, in order to position themselves to capture any downstream savings from better management of care.

Azar gets aggressive on payment reform, but may not have the arms and legs to execute

In a speech to the Federation of American Hospitals HHS Secretary Alex Azar delivered a shot across the bow to providers, expressing frustration with the pace of payment reform. He indicated that the Trump administration is seeking a faster path to cost reduction and value in healthcare and may not be willing to wait for pilots and demonstrations to slowly unfold. Despite this intent, Azar may find an critical obstacle inside CMS: a drain of talent away from the agency. Many key positions in the agency, including the directorship of the Innovation Center, are still unfilled. Providers will likely be expected to move faster to show real progress against savings targets, but Azar will need to move quickly to put in place the team needed to hold providers accountable.

United Healthcare cracks down on ED visits—with a twist

United announced a policy of increased scrutiny of high-acuity (level 4 or 5) ED visits, warning hospitals that they could see claims denied or adjusted if the visits are deemed inappropriate. This follows Anthem’s earlier attempt to ratchet down on unnecessary emergency visits. But Anthem’s approach was different: they proposed denying coverage for patients should their condition be deemed non-emergent after review. While Anthem’s policy spurred lawsuits and Congressional scrutiny for placing an excessive burden on patients, it’s likely UHC’s approach—which targets hospitals not patients—will come under far less criticism.


GRAPHIC OF THE WEEK

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

Demographics is destiny for the healthcare industry. We serve a population that’s getting older and sicker each year, making them more expensive to care for. But the problem is that our population is an upside-down pyramid—as more people reach the age where they need the most services, there are fewer working-age people to fund the payment and delivery of those services. In short—there aren’t enough Gen X’ers to pay for Baby Boomer healthcare.


THIS WEEK AT GIST—ON THE BLOG

What we’ve been writing about this week on the Gist Blog.

How to Think About the Big, New Mergers in Healthcare
With the government signaling a preference for private market solutions to reducing healthcare spending growth, the recent merger announcements are just the first in a coming wave of fundamental realignments designed to disrupt expensive incumbent providers

Still Waiting for IT to Create Value in Healthcare
We will only fully capture the vast promise of information technology in healthcare when we use it to solve the needs of consumers, not just the needs of payers and providers of care

Want to Be a Successful ACO? Look to Medicare Advantage
Accountable care organizations are a transitional model at best, and providers looking to generate sustainable savings for Medicare are already looking toward a longer-term strategy—getting into the Medicare Advantage business


THIS WEEK AT GIST—ON THE ROAD

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

How should AMCs position for a value and consumer-driven market?

Lisa:
“I spent a day with an academic medical center (AMC) moving toward population health. The strategy puts cost management front and center for this organization, whose cost structure bears the hallmarks of traditionally-expensive academic medicine. As an ACO, academic centers will likely have a higher benchmark to perform against in the program, but they may lag behind in the coding and documentation needed to get credit for high-acuity patients. Importantly, AMCs will have to reckon with how consumers and payers will view the ‘value’ of their services. Every AMC wants to think that they’re ‘must have’ in networks, but it’s hubris to think that consumers will opt to get care at AMCs once they’re confronted with higher monthly premiums in order to get access to them.”

Chas:
“I had the chance to deliver the keynote address at a specialty pharmacy conference this week—not my usual stomping ground. The audience was primarily pharmacists, and owners of specialty pharmacy businesses who sell into provider organizations across the continuum—particularly in the postacute space. What struck me was their view of the healthcare cost dilemma from the other end of the telescope—they’re feeling whip-sawed by the double pressure to reduce expensive pharmacy spending and to reduce unnecessary postacute utilization. Across healthcare, each constituency seems to be pursuing a strategy of shifting the blame down the line to someone else as the driver of excessive spending. At all levels, we’re going through a period in which everyone’s preferred response is to ‘network’ someone further down the food chain in order to generate savings.”


WHAT WE’RE READING

Stuff we read this week that made us think.

Whose ACO is it really?

A recent study from Health Affairs showed that over a third of ACOs rely on management partners. These third parties provide a wide range of services—risk sharing, analytics, care management, physician recruitment, even ACO leadership. But it turns out there’s no difference in performance between ACOs that work with management partners and those that don’t. It’s worth asking: are ACOs really a provider-driven approach, when so many ACOs lean heavily on outside management companies that provide questionable value?

Is shifting care away from hospitals a good thing or a bad thing?

In a widely-cited New York Times op-ed, Dr. Zeke Emanuel asked the question “Are Hospitals Becoming Obsolete?” Citing declining use rates, the rising cost of hospitalization, and the shift of care from inpatient to outpatient settings, Emanuel joined the chorus of industry observers cheering on the “post-hospital” era of healthcare.

Just days later, a deeply-researched piece from KHN/USA Today described a “trail of death” caused by the performing procedures in outpatient surgical centers rather than hospitals. It’s an interesting juxtaposition, and one that will grow more urgent as consumers seek “cheaper” providers of care. How far can we push care away from traditional settings before quality issues become serious, and how do we put in place guardrails to make sure we don’t go too far?


Again, thanks for reading our first Weekly Gist! Please do share your thoughts with us about what you’d like to see us cover here and on our blog. And of course, if there’s anything we can do to be helpful in your weekly work, let us know. You’re making healthcare better—we want to help!

Best regards,

Chas Roades
Co-Founder and CEO
chas@gisthealthcare.com

Lisa Bielamowicz
Co-Founder and President
lisa@gisthealthcare.com