August 16, 2019

The Weekly Gist: The Inverted Yield Curve Edition

by Chas Roades and Lisa Bielamowicz MD

Air raid sirens, hurricane warnings, tsunami alerts—as disturbing as those are, to observers of the US economy they don’t hold a candle to the three dreaded words that surfaced this week: inverted yield curve. Carefully crafted to induce sleepiness in any non-specialist, that term basically means trouble’s a’ brewin’ in the economy. Here’s the gist: investors now believe that lending money to the US government is riskier over the short-term (next two years), than the long-term (next 10 years). Why? Because they believe the economy is going to suffer a downturn in the near future. So, batten down the hatches, stuff the mattresses with cash, and get ready! (Unless the economic experts are wrong. In which case, nevermind.)

Note to readers: We’ll be off until after Labor Day, but back with a brand new Weekly Gist on September 6th. Stay tuned for some exciting announcements when we return, along with our usual roundup of the week’s happenings in healthcare. In the meantime, keep cool and enjoy the end of summer!


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

A disturbing new attempt to identify “public charges”

The Trump administration released a final rule this week that changes how the Department of Homeland Security (DHS) evaluates non-citizens looking to enter the country or obtain legal permanent resident (i.e., “green card”) status, expanding the scope of factors used to determine inadmissibility based on the likelihood the applicant will become a “public charge”. Beyond the ensuing public flap, which included Ken Cuccinelli (acting director of the Citizenship and Immigration Services office of DHS) making line edits to Emma Lazarus’ famous poem at the base of the Statue of Liberty, the rule is likely to have a significant impact on how—and whether—legal non-citizen residents of the US access healthcare. Modifying Clinton-era regulatory language that explicitly excluded Medicaid enrollment from the determination of whether a non-citizen would place an undue burden on the US as a public charge, the new Trump rule would count non-emergency Medicaid use by non-pregnant adults as a strike against the applicant. It would also add up the total number of months an applicant used public benefits (including Medicaid) over a 3-year period, and if that total exceeded one year, the department would consider that a “heavily-weighted negative factor”.

Most strikingly, the rule would push DHS to consider an applicant a “public charge” if he or she is uninsured but has a medical condition that requires extensive treatment without sufficient resources to pay associated medical costs—a test that even many native-born citizens would almost certainly not pass. Even if the rule is delayed or overturned in the face of expected legal opposition, it’s sure to have a chilling effect on the healthcare behaviors of the more than 22M non-naturalized, non-citizen residents of the US. The rule will surely increase the ranks of the uninsured, add to providers’ uncompensated care burden, and result in worsening living standards for some of America’s lowest-income residents.

Charting the ongoing “activation” of employers

This week the National Business Group on Health (NBGH) released its annual survey of large employers’ healthcare benefits and plan design. The unsurprising headline news: employers expect health benefit costs to rise 5 percent next year, exceeding $15,000 per employee. That’s consistent with a new Kaiser Family Foundation analysis that shows total health spending of more than $22,000 per employee, once employees’ out-of-pocket spending is taken into account. What’s more notable from the NBGH survey results is how many employers are now taking a more activist posture toward managing healthcare costs, moving beyond simply shifting costs to employees in the form of high deductibles. Half of employers surveyed are planning to implement at least one “advanced primary care” model in 2020, with 34 percent planning to deploy worksite or near-site clinics, and 24 percent intending to steer employees to physician-based accountable care organizations or networks next year. Further, 47 percent of those surveyed plan to roll out specialty “centers of excellence” in 2020, and almost 80 percent say they will use that approach to address high-cost specialty care within the next three years. It’s clear that many employers are dissatisfied with ability of “wellness” programs (which often amount to little more than window dressing) to inflect healthcare costs and are becoming much more aggressive in directing their employees to solutions that can actually lower the cost of care. Given the potential for an economic downturn in the not-too-distant future, it’ll be worth watching whether employers continue to pursue these “activist” approaches, or whether they instead opt to use the coming recession to restructure benefits entirely, and make the (long-predicted) move to defined-contribution healthcare.

New England health plans take a second run at merging 

On Wednesday Boston-area nonprofit insurers Tufts Health Plan and Harvard Pilgrim Health Care announced plans to merge, creating a regional insurance giant with nearly 2.4M members across five New England states. The two organizations first discussed, but then abandoned, a potential merger in 2011. Discussions were renewed after a proposed merger between Harvard Pilgrim and Boston-based health system Partners HealthCare fell through last year. The combined entity, which has yet to be named, would operate a range of products across the commercial, Medicaid and Medicare markets. The pace of consolidation has quickened across New England recently, with last year’s merger of Beth Israel Deaconess Medical Center and Lahey Health, and regional giant Partners’ failed attempt to combine with Rhode Island-based Care New England. The merger would give the combined health plans added leverage in negotiations with providers, and potentially allow them to better compete against the dominant Blues plans, who control the majority of the states’ large group markets. While the deal will require approval from state and federal regulators, including Massachusetts Attorney General Maura Healey, who has brought a skeptical eye to healthcare consolidation, it has drawn few comments from healthcare researchers and policy analysts who are usually quick to scrutinize provider mergers of similar scale. This combination bears watching to see if a larger-scale regional, nonprofit health plan can create a compelling value proposition tailored to the needs of local employers and consumers.


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

Saving money by “networking” postacute providers

One of the largest sources of savings that Medicare accountable care organizations (ACOs) have identified as they look to reduce total cost of care is the wide variability in quality and use of postacute care. While ACOs have been able to capture some of those savings, Medicare Advantage plans have been even more successful at reducing postacute spend. That’s because they can tighten referral networks and protocols for their enrollees. Look for growing enrollment in MA to have a measurable impact on the postacute landscape over the coming years.



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

“Let them have your way”

It’s a good rule to come to any meeting prepared with a clear argument and data to support any change you’re advocating, but I’ve found that to be even more important when working with physicians. By the nature of our training, we doctors approach decisions scientifically, and will surely ask for evidence. We also want to be in control. Physicians like to have input in shaping a decision, and to feel like any strategy was, at least in part, their idea. I was recently discussing this with a health system executive who enthusiastically agreed, and said she’s developed a similar philosophy in working with doctors, ever since she was a young unit nurse. “When calling a doctor to ask about a patient issue, things always ran smoother if I had a specific ask and identified course of action, and the reasons why,” she said. “Especially with residents. If I didn’t have a specific plan to start with, we’d be calling back and forth all night.” She said this approach has served her well throughout her career, from those days as a nurse to now working with physicians to standardize care and craft incentives, and she had a succinct way to describe it: “I approach the discussion with the motto of ‘Let them have your way’.” Sound advice for working with doctors, or really any decision-maker. A good idea is easier to move forward if stakeholders feel like it’s theirs, not a decision being imposed on them.

Welcome to the health system. Please take a number.

I was chatting with a hospital CEO this week whose organization recently became part of a larger health system based in another city. We were talking about the competitive landscape in her area, when she volunteered a humorous comment that revealed a larger truth. “In some ways,” she said, “my biggest competitive threat is our new owner.” When I asked her to elaborate, she shared that since the acquisition she’s been rebuffed several times in conversations with system executives when she suggested the need for more investment in access points and ambulatory services in her local market. As she watches local competitors launch new urgent care offerings and retail partnerships, she’s suddenly found that her hospital is competing for investment dollars with other parts of her larger health system, resulting in needed projects being put on the back burner. It’s ironic, because central to the logic of joining a larger system was to gain greater access to capital, but now the hospital has become just one more “mouth to feed” for the parent system. That’s resulted in less flexibility, longer decision cycles, and less responsiveness to local market conditions. I’d bet that’s a familiar story for many organizations that have yielded to the pressure to consolidate, only to find themselves dealing with a different, potentially more difficult, set of challenges, and positioned at the back of the line relative to legacy parts of the system. Seller, beware.


Give this a spin, you might like it.

Last week, legendary indie singer-songwriter David Berman took his own life at the age of 52, just weeks after releasing an extraordinary first album (eponymously titled) under his new band name, Purple Mountains. Berman released six highly regarded albums from 1989-2009 with the band Silver Jews, which he founded along with Pavement frontman Stephen Malkmus, after the two graduated from college. (A personal connection: I was a year behind Berman, Malkmus and Pavement co-founder Bob Nastanovich in school, where their work on the outstanding WTJU expanded my musical horizons.) He was best loved by fans for his penetrating, well-crafted and personal lyrics, reflecting his own personal struggles with depression and substance abuse. After the runaway success of Malkmus’ Pavement, Berman’s Silver Jews always seemed to operate in the shadows of the indie scene, garnering a cult-like following but never achieving the success he deserved. Having taken a decade off to deal with personal issues and pursue a writing career, Berman returned just this July with his new Purple Mountains project and was scheduled to launch a tour in support of the first album. There’s not a weak link anywhere in the 10-song collection, which now scans as the tragic last testament of a towering songwriting talent. If you don’t know Berman’s work, do yourself a favor and give it a listen, and then dip into the Silver Jews back catalog. He’ll be sorely missed, and his death is a difficult loss for those whose lives he touched with his music. Safe home, David. Best tracks: “Darkness and Cold”; “All My Happiness is Gone”; “Nights That Won’t Happen”.


Stuff we read this week that made us think.

A comprehensive look at the effects of Medicaid expansion

Anyone interested in understanding the impact of the Obama-era Medicaid expansion should read the review out yesterday from Kaiser Family Foundation, which provides the most comprehensive look yet at the effects of extending coverage to low-income Americans. Researchers evaluated 324 studies published since 2014 assessing clinical, economic, and access-related outcomes in states that adopted Medicaid expansion. The results are almost universally positive. States that expanded Medicaid saw sharp declines in their uninsured rates, particularly for vulnerable populations (although some waiver provisions dampened this effect). While some studies show that expansion led to longer wait times to access specialist appointments, it was broadly shown to increase access to care for low-income populations; in particular, access to cancer care, behavioral health and smoking cessation support improved. Medicaid expansion also appears to have led to improved health outcomes and quality of care, and lower health disparities. Individuals and states also fared better financially with expansion. Medicaid expansion was associated with improved individual healthcare affordability and fewer medical bankruptcies. It improved state budgets, offsetting state costs for services like substance abuse and behavioral health and may have stimulated broader economic growth. Providers also fared better in expansion states, with improved margins and lower rates of uncompensated care. Taken in full, the article highlights a growing health disparity between states which expanded Medicaid and those that did not. The 14 states that have yet to expand largely held out on ideological grounds—and will see the relative health status of their residents fall as their tax dollars support Medicaid expansion in other states.

Evaluating hospital quality evaluations

A welcome new study from a group of highly regarded researchers was published this week in NEJM Catalyst, attempting to evaluate the various (and often contradictory) hospital quality rating systems that have proliferated over the past several years. The evaluators constructed a rigorous process to identify the strengths and weaknesses of four different ratings services: the Leapfrog Group, Healthgrades, U.S. News & World Report, and the Star Ratings system used by the Centers for Medicare and Medicaid Services (CMS). Based on the review, none of the four ratings approaches received an “A” grade. U.S. News performed best, earning an overall grade of “B” for its “responsive[ness] to changes in measurement science”, its specialty- and procedure-specific rankings, and (controversially) its inclusion of “reputation” as a key criterion for evaluating hospitals. Leapfrog earned a “C-” grade, based on the self-reported nature of its surveys, its lack of formal audits, and the use of secondary sources of data for non-surveyed hospitals. Healthgrades was the worst performer, with a “D+” grade, based on methodological concerns about its use of outcomes metrics and the way it classifies and compares hospitals. And CMS’s Star Ratings were given a “C” based on their position as a neutral, non-commercial evaluation, despite concerns about the weighting of performance criteria and the comparison of vastly different kinds of institutions. The authors propose several measures to improve the evaluation of hospital quality but bemoan the lack of a “gold standard”, independent source of rankings. Perhaps the most entertaining part of the NEJM Catalyst piece is the comments section, in which some of those receiving poor grades weighed in with angry responses. Seems like no one likes being graded, even the graders.

Come fly with me (surgeon)

Stories of Americans seeking lower-cost surgeries at foreign hospitals are nothing new, but a recent New York Times piece profiles the sweetest “medical tourism” deal we’ve seen. In July, 56-year-old Donna Ferguson flew to Galenia Hospital in Cancún, Mexico, to undergo a total knee replacement. Not only did her husband’s employer pay all medical and travel expenses, she received a $5,000 cash bonus after the surgery. Ferguson’s surgeon, who traveled from Wisconsin to perform the procedure, got a pretty good deal as well. He was paid $2,700, three times the Medicare rate. The arrangement was constructed by Denver-based North American Surgical Hospital, who has managed treatment for a “couple dozen” patients at the Cancún hospital since 2017. These kinds of deals make for compelling stories but are unlikely to provide a scalable solution, and are a symptom of, not a cure for, our high-cost healthcare system. This approach, in which a surgeon is paid more to operate outside the US, and the patient gets a $5,000 bonus to travel, is ultimately an indictment of high hospital prices as the primary cost driver of surgical care.

And there you have it, our wrap-up of the week gone by. We hope you enjoyed it, and we’re so grateful for your readership, guidance, and feedback. Keep the cards and letters coming! And don’t forget to send this along to a friend or colleague and encourage them to subscribe as well. We’ll miss you the next two weeks, but we’re excited to get back to writing after Labor Day!

In the meantime, please remember to 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

Lisa Bielamowicz, MD
Co-Founder and President