February 7, 2020

The Weekly Gist: The J.Lo for President Edition

by Chas Roades and Lisa Bielamowicz MD

Oh, Iowa. Not only did we have to endure months and months of listening to politicians praise your plain-folks wisdom and your down-to-earth charm, and sit through hours of pundits trying to explain your arcane and outdated approach for assigning delegates, but now it turns out you can’t even count? Reality check: the New Hampshire debate is tonight and we still don’t know who won your convoluted caucuses. (Did you hire the HealthCare.gov guys to build that app, or what?) How about this—let’s wipe the slate clean and just declare Jennifer Lopez the winner of the Iowa caucuses. Because if J.Lo can do that at age 50…she can be our President any day.

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.


GRAPHIC OF THE WEEK

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

The growth of private equity investment in physician practice

Private equity (PE) investment in US healthcare has ballooned over the past decade—2018 and 2019 saw record numbers of deals, representing more than $100 billion in total value. As we show below, in 2018 just under a fifth of these transactions were in the physician practice space, with the largest number of deals in dermatology and ophthalmology. While these two specialties remain active areas of PE investment, a growing number of recent deals have focused on women’s health, gastroenterology, and urology practices. Across all these areas, PE firms see an opportunity to grow revenue from high-margin ancillary services, cash procedures, and retail products. Physician groups are pursuing PE investment as an alternative to joining health systems or large payer-owned physician organizations to access capital and fund buyouts of legacy partners. Doctors’ heads are increasingly being turned by the current sky-high multiples PE firms are offering, often up to 10 or even 12 times EBITA. Private equity roll-ups of physician practices are far from over. Recent activity suggests that the behavioral health market is heating up, as it remains very fragmented in a time of increasing consumer demand. And we predict a rush for further investment in cardiology and orthopedic practices, as investors look to profit from the shift of lucrative joint and heart valve replacement procedures to outpatient facilities.


THIS WEEK AT GIST—ON THE ROAD

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

The health system “black market” for care

Lisa:
Recently we’ve been working with one of our member health systems to build a comprehensive plan for ambulatory access. As we were brainstorming a list of success metrics, one physician leader made an interesting comment: “I’ll know we’re successful at improving access when people stop calling me asking to get their mom or husband or friend into a specialist.” The other leaders in the room all nodded in agreement. While we’re all happy to assist friends and family with finding the best doctor for their problem, or getting in more quickly, these leaders recognized that these informal channels represent yet another level of inequality in our healthcare system: patients and families who can tap into “insider” provider connections have access to a “black market” of enhanced access and information that can expedite treatment, assuage worry, and potentially provide better outcomes. Thinking about eliminating the need for the healthcare black market broadened our discussion of a successful access solution. Getting a quick appointment doesn’t fully solve the problem, patients want to be assured they’re seeing the “best” doctor for their problem—meaning the system needs to have a better process for matching new patients to the most appropriate provider. One call to tap into the “black market” can eliminate a dozen frustrating calls and dead ends; any solution must also address the many friction points in finding the right care. A tall order for sure, but one that could address one large inequity in our healthcare system: the difference between people who know someone on the inside and those who don’t.

What’s next after EHRs? Think CRM.

Chas:
As traditional healthcare providers face a widening array of new competitors looking to disrupt the status quo by taking a much more consumer-friendly approach to care, we’re beginning to see a recognition among incumbents that they need to build up their “consumer muscles”—fast. I’ve been in three separate conversations in the past month with health system executive teams in which the topic of customer relationship management (CRM) systems has come up—namely, why don’t we have one, and do we need one? And who in the system should “own” it? It’s another example of healthcare lagging other industries. In case you haven’t noticed, Salesforce has become a $170B market cap company over the past several years based on the ubiquity of their tools for understanding customers and managing consumer data for businesses. Yet healthcare organizations have been so absorbed in electronic health record (EHR) implementation over the past several years (with good reason—they were lagging behind there, too) that this aspect of “digitization” has largely passed them by. Traditionally, health system CRM has been the domain of marketing, or business development (read: physician recruitment), but it’s increasingly clear that the real value of CRM will lie in the ability to tie together consumer intelligence with clinical intelligence, with the aim of identifying and capturing opportunities to generate greater consumer loyalty to the system. One important learning from the EHR experience: start thinking about investments in and applications for consumer analytics, even before the core CRM systems are in place. Otherwise there’s a risk of even further delay before providers have the kind of insights they need to compete with new, consumer-oriented disruptors.


THIS WEEK AT GIST—ON THE PODCAST

All the headlines in healthcare policy, business, and more, in ten minutes or less every weekday morning.

On last Monday’s episode we heard from Anne Karl, a partner at the firm Manatt Health, about the proposed Medicaid Fiscal Accountability Regulation. That regulation would put limits on how states manage the finances of their Medicaid programs, with new restrictions on supplemental payments. Karl explained that, if enacted in the current form, these changes would have the potential to cost hospitals and states billions of dollars of federal funding. Give it a listen!

In this Monday’s episode, health policy veteran Julie Barnes, founder of Maverick Health Policy, breaks down the Trump administration’s proposed health information rules regarding interoperability and information blocking. She says these rules represent a sea change and will have wide-ranging implications beyond traditional healthcare players. Make sure to tune in Monday!

[Subscribe on Apple, Spotify, Google, or wherever fine podcasts are available.]


ON THE GIST TURNTABLE

Give this a spin—you might like it.

If you were trying to put a label on the dark times we’re living through, you could do worse than The Unraveling, which is what southern-rock stalwarts Drive-By Truckers have titled their just-released 12th studio album. Never afraid to mix the personal and political, the Alabama-gothic band has produced a landscape portrait of our current moment, bringing their indie-Skynard sensibility to topics ranging from gun violence (“Thoughts and Prayers”) to immigration (“Babies in Cages”) to the opioid epidemic (“Heroin Again”). Rather than preaching a progressive gospel, however, the singer-songwriter duo of Patterson Hood and Mike Cooley zoom in on the ways these larger social issues intersect with the personal lives of men and women just trying to make it through the daily grind. What do we tell our children when they see kids locked up at the border? How do we keep our less fortunate friends from succumbing to substance abuse, or violent racism, or worse? These are the questions the DBTs are asking here, weaved into a narrative about a young man emerging from the deep South, driving into the heartland to look a better future. Oh, and the album flat-out rocks, with all of the country-fried guitars riffs and howling harmonica, strings, and piano arrangements that make the DBTs who they are. These are elder statesmen making important observations about the ways our country is coming apart at the seams—a timely album indeed. Best tracks: “Thoughts and Prayers”; “Grievance Merchants”; “21st Century USA”.


WHAT WE’RE READING

Stuff we read this week that made us think.

A refreshing dose of healthcare moderation

Remember bipartisanship? The good old days, when smart, well-meaning leaders reached across party divides to craft policy solutions with the best interest of the country at heart? That flame still burns at the Bipartisan Policy Center (BPC), a brilliant organization we’ve had the privilege of working with in the past. And this week, a who’s who of healthcare policy leaders came together at BPC to release a new blueprint for reform—one that takes a more level-headed approach than either “repeal and replace” or “Medicare for All”. The group, which includes former Senate Majority Leader (and BPC Co-Founder) Tom Daschle, former Senate Majority Leader Bill Frist, MD, and policy leaders ranging from Andy Slavitt to Chris Jennings to Avik Roy, has put forward a range of middle-of-the-road policy proposals to address some of the most vexing problems in healthcare. These include approaches to stabilize the individual and employer-sponsored insurance markets, solutions to reform Medicare and Medicaid payment, and measures to lower the cost of prescription drugs. Addressing one of the most contentious issues facing the industry, the group proposes specific steps to rein in the high prices for care that have been driven by rapid consolidation in healthcare delivery, by requiring monopolistic providers to either negotiate with the government to reduce market concentration, or accept capped payments for their services. Not all of the group’s proposals will please every partisan or entrenched interest, but there’s plenty of ideas here to refocus the healthcare debate on substantive issues, rather than political talking points. Now imagine a world where such a debate is possible.

Artificial intelligence may be ready for the GI suite

The first randomized, controlled, double-blinded study of artificial intelligence (AI) in clinical medicine did not evaluate the technology’s impact on the usual suspects of radiology, dermatology, or pathology. Rather, results from a new trial make the case that AI may be ready to make its first major clinical impact in gastroenterology. Researchers from Boston, MA-based Beth Israel Deaconess Medical Center, along with colleagues from China, evaluated the efficacy of a novel, computer-aided detection system in improving the detection rate of adenomatous polyps (which carry a risk of pre-cancer) in screening colonoscopy in over 1,000 Chinese patients, finding that AI detected significantly more concerning polyps, especially “flat” polyps that are more difficult to spot visually. The study design was both novel and important: investigators designed a “sham” AI system to act as a control so that physicians’ behavior would not be altered by knowing whether AI was looking over their shoulder. While the results need to be validated in other screening populations, an accompanying editorial recommends moving quickly to evaluate how the technology could be broadly implemented. In addition to the groundbreaking design and results, this study highlights the impact of deep learning for physicians: AI will augment and improve the diagnostic capability of doctors, and the only physicians who will be made extinct by the technology are the ones who refuse to work with it.


That’s all, folks! Many thanks for joining us for another edition of the Weekly Gist. We really appreciate it, and we hope you’ll share your thoughts and comments with us—we love hearing from you! And we’d be grateful if you’d share this with a friend or colleague and encourage them to subscribe—and to listen to our podcast, too!

As always, our most earnest desire is for you to let us know how we can 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