|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
Humana doubles down on its primary care strategy
Humana, the nation’s second largest Medicare Advantage (MA) insurer, is partnering with a private equity (PE) firm to expand its senior-focused subsidiary medical group, Partners in Primary Care. The arrangement will be structured as a joint venture between Humana and Welsh, Carson, Anderson & Stowe, with a combined initial $600M investment that will give the PE firm majority ownership of the medical group. The new venture is likely to double the number of centers that Humana’s Partners in Primary Care operates—currently 47 throughout Texas, Kansas, Missouri, Florida and the Carolinas. While Humana has been looking to grow its MA membership, patients need not be Humana members to access care at the centers. Humana has established other partnerships in the physician practice space, including last fall’s announcement that it is teaming up with Iora Health to add 11 additional Iora-branded primary care practices to its MA networks in Arizona, Georgia, and Texas. Humana has previously partnered with private equity to acquire postacute providers Kindred Healthcare and Curo Health Services. These latest moves suggest the company is shifting its focus to the front end of the delivery system, looking to control costs of care for seniors by quickly building a primary care physician network focused on reducing high-cost referrals to hospitals and specialists.
Aetna’s former CEO forced to leave the CVS board
Troubling signs this week at CVS Health, which is still digesting its $70B merger with insurer Aetna, while moving aggressively forward with its new vision of healthcare delivery, rolling out revamped “HealthHUB” clinics in many of its retail locations. As reported by the Wall Street Journal, former Aetna CEO Mark Bertolini is leaving the CVS board of directors, evidently against his will. “I was willing to continue to serve on the board of directors in support of the most transformative effort in healthcare for our nation,” Bertolini said. “However, the board thought otherwise.” In an interview, Bertolini maintained that the integration of CVS and Aetna is far from complete, and signaled that ongoing tensions between him and CVS CEO Larry Merlo were an issue. As CEO, Bertolini was a strong advocate for the merger with CVS, viewing it as a way to enable better integrated, lower cost care for consumers, built around Aetna’s ability to manage population risk coupled with CVS’s broad retail footprint. Whether Bertolini’s ouster from the board means that the integration is not going well remains to be seen, but we’re not terribly surprised that the boardroom turned out to be too small for two CEOs to share comfortably—even if only one of them maintained the title. Count this as yet another example of the challenges that come with shared executive authority following a merger, recently seen in other healthcare organizations that have tried to make a “co-CEO” model work. Inevitably, in any merger, one organization’s culture, leadership, and vision will come to dominate—as will one CEO.
A new health system-employer partnership takes flight
This week, Dallas, TX-based Baylor Scott & White Health (BSWH) announced a new relationship with American Airlines, creating a lower-cost, narrow-network health plan option for American’s 55,000 employees based in the Dallas-Ft. Worth region. The new “DFW ConnectedCare” will provide employees access to over 5,000 doctors and 50 hospitals that are part of the Baylor Scott & White Quality Alliance (BSWQA), BSWH’s accountable care organization; participants will also have zero deductibles and receive priority access to network providers. The American Airlines contract builds on a decade of work to move as many of BSWH’s contracts to total cost-risk arrangements as possible, delivering cost savings for Medicare beneficiaries, the system’s own employees, and other DFW-area employers, including Dallas Area Rapid Transit, which re-upped its direct contract with the system this year. Whereas most accountable care organizations have focused on the Medicare population, three-quarters of the estimated 815,000 covered lives BSWQA will manage this year are in the commercial sector. With growing frustration with high deductibles and other forms of employee cost sharing, large employers like American Airlines, General Motors and others appear to be open to novel network arrangements that offer lower costs and other benefits in exchange for reduced choice—and are willing to work with regional health system partners for a subset of their employee population. Health systems have a window of opportunity to demonstrate that direct contract arrangements can generate sustainable cost savings and provide the levels of access and service required for a long-term relationship with large employers. But to truly change the commercial market, these arrangements must also be scalable across medium and small employers, who have much lower purchasing sophistication and risk tolerance in selecting health benefits.