April 8, 2022

The Weekly Gist: The Lime in the Coconut Edition

by Chas Roades and Lisa Bielamowicz MD

Apart from a thrilling series of basketball matchups, the other thing we took away from March Madness was a dramatically heightened awareness—thanks to an in-game advertising blitz—of a beverage monstrosity called “Coke with Coffee”. Apparently, this hideous product has been in the US market for more than a year, having previously flopped in France, Slovakia, and Lithuania. According to a Coke spokesperson, “Coca‑Cola with Coffee is the perfect choice for those who want the uplifting and refreshing taste of a Coke with the familiar flavor of coffee.” Count us out! We don’t want our foods to touch, we don’t want two great tastes that taste great together, we don’t want the lime in the coconut. What will they think of next…doctors employed by insurance companies? Oh, wait.


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

  1. Optum looks to acquire Houston-based Kelsey-Seybold Clinic. According to unnamed Axios sources, UnitedHealth Group’s Optum has signed a deal to acquire the independent 500-physician multispecialty group, which operates more than 30 clinic locations and one of the largest ambulatory surgery centers in Texas. With more than 41,000 enrollees, Kelsey-Seybold controls 8 percent of the lucrative Medicare Advantage market in the Houston metro area. In January 2020, private equity firm TPG Capital made a minority investment in the 73-year-old group, valuing it at $1.3B, to help expand its footprint. Should the current deal come to fruition, Kelsey-Seybold’s physicians would join the ranks of over 60K physicians owned by, or exclusively affiliated with, Optum.

The Gist: Fresh off last year’s acquisition of 700-physician, Boston-based Atrius Health, Optum is continuing its buying spree of large physician groups with a history of managing risk. It will be interesting to see how quickly UnitedHealth Group can combine its Optum-owned physician assets with its commercial insurance platform to create a compelling, lower-cost option for employers and Medicare Advantage enrollees—building on the model of its Harmony network in Southern California. Of note, Kelsey-Seybold and United Healthcare have offered a co-branded insurance product for years, and UHG executives have said they plan to roll out Harmony in Texas and Seattle next. Kelsey-Seybold is one a dwindling number of very large, independent multispecialty groups, and its sale to Optum may have other groups wondering about their ability to remain independent in an increasingly concentrated healthcare market.

  1. Walmart Health expands into Florida with five new clinics. Walmart has now opened its first health center in the Sunshine State, next to a Supercenter in Jacksonville. Four more clinics in the Orlando and Tampa areas are due to open soon. As in Walmart’s 20 other health centers in Georgia, Arkansas, and Illinois, the Florida clinics will offer a range of primary care services, including imaging and counseling, along with dental, vision, and hearing care. Walmart plans to roll out its Epic electronic health record (EHR) technology in the Florida clinics, as well as telehealth services, following its acquisition of MeMD last year.

The Gist:  These Florida health centers represent the latest iteration of Walmart Health. Rather than coming in with disruptively low prices as it did in Georgia, where its strategy has been to appeal to uninsured customers, Walmart’s Florida clinics are pricing services closer to competitors’ rates in the markets, and expect to serve many insured patients. As ever, the retail behemoth’s every move in healthcare is worth watching carefully, given the enormous installed base of Walmart customers—more than half of Americans visit a Walmart store every week.

  1. Intermountain Healthcare completes its merger with SCL Health. Salt Lake City-based Intermountain and Broomfield, CO-based SCL Health have now formed a 33-hospital, $14B nonprofit health system, which immediately becomes the 11th largest nationwide. The system will operate across seven states under the Intermountain brand, although the SCL hospitals will keep their legacy names and Catholic affiliation. Regulators signed off on the interstate merger after the systems agreed not to close any locations or services.

The Gist:  Intermountain has been trying to build scale across the Mountain West in the last few years, having recently come up short in an attempt to merge with South Dakota-based Sanford Health. The SCL deal will allow Intermountain to expand its SelectHealth insurance plan and integrated care model into the fast-growing Denver metro area, as well as into Kansas and Montana. As with any merger, the difficult work of combining cultures and demonstrating meaningful value for patients and consumers lies ahead. 

Pluswhat we’ve been reading.

  1. Adult caregiving depresses labor force participation rate. As opposed to caring for young children at home during the pandemic, caring for adult family members at home has received far less media attention as a significant—and sharply gendered—drag on labor force participation. A piece in the Washington Post highlights the substantial demands on a growing number of individuals who care for an adult spouse or relative at home; four times as many people report being out of the workforce to care for another family member, compared to those who left to care for children. In the absence of affordable care options or government support, family members, most often women, have been forced to scale back work hours or even exit the workforce entirely. And these caregiving absences are more likely to be permanent.

The Gist: Schools and daycares reopening have lessened caregiving burdens for many parents. But sick and elderly adults only grow more dependent on caregivers as they age, or as their disease progresses. And as the population ages, the economic impact of adult caregiving will only increase. Given persistent staff shortages, our nation’s long-term care facilities and home care agencies are unprepared for this increased demand. While there has been discussion of federal support for caregivers, as well as increasing investment in in-home care, home-based care providers remain unaffordable for most families.


A recommendation from our weekly diet of music, movies, TV, and other good stuff.

Wet Leg by Wet Leg—Eagerly awaited ever since the release of their 2021 viral hit “Chaise Longue”, the debut LP from this Isle of Wight post-punk duo more than lives up to expectations, combining the too-cool-for-the-rooms sneer of 2000s forefathers Arctic Monkeys and Franz Ferdinand with the oblique, spiky motorik of the new wave of indie ironists. Get wet!


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

Investment gains masking health system operating margin difficulties

The combination of the Omicron surge, lackluster volume recovery, and rising expenses have contributed to a poor financial start of the year for most health systems. The graphic below shows that, after a healthier-than-expected 2021, the average hospital’s operating margin fell back into the red in early 2022, clocking in more than four percent lower than pre-pandemic levels. Despite operational challenges, however, many of the largest health systems continue to garner headlines for their sizable profits, thanks to significant returns on their investment portfolios in 2021. While CommonSpirit and Providence each posted negative operating margins for the second half of 2021, and Ascension managed a small operating profit, all three were able to use investment income to cushion their performance. A growing number of health systems are doubling down on investment strategies in an effort to diversify revenue streams, and capture the kind of returns from investments generated by venture capital firms. However, it is unlikely that revenue diversification will be a sustainable long-term strategy. To succeed, health systems must look to reconfigure elements of the legacy business model that are proving financially unsustainable amid rising expenses, shifts of care to lower-cost settings, and an evolving, consumer-centric landscape.        


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

Don’t pin your hopes on the “Great Regret”

Businesses who suffered from the Great Resignation, in which large numbers of workers voluntarily resigned during the pandemic looking for more fulfilling work or higher wages, are now hoping the “Great Regret” might bring workers back. According to recent surveys, over 70 percent of workers who switched employment during the pandemic found that their new jobs didn’t live up to their expectations, and nearly half wish they had their old job back. After scores of nurses left hospital positions for travel roles, health system leaders are seeing some nurses return. One physician told us about a favorite nurse on his oncology unit who returned from over a year as a traveler, ready to settle down and be closer to family. A chief nursing officer relayed that her system was seeing nurses who took agency positions to work toward personal financial goals, like earning a down payment for a house, wanting to come back now that they’ve reached it: “Travel roles are intense, and most nurses can’t do them forever”. But other nursing leaders caution that they’re preparing for agency nurses to become a permanent fixture in the workforce: “More nurses will see travel as an option for different points in their career, when they have personal flexibility or need the extra money”. The “Great Regret” might help some hospitals lessen their reliance on agency nursing in the short-term. But building a stable clinical workforce will require addressing underlying structural challenges, through changes in education, rethinking job roles and care models, and finding ways to build individualized job flexibility and customization.


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 Matthew Mitchell, a senior research fellow with the Mercatus Center at George Mason University, about the resurgence of state interest in reforming or repealing Certificate of Need laws.

Coming up this Monday, we’ll bring you a conversation with Dan Mendelson, CEO of Morgan Health. He tells us that the new JPMorgan Chase venture is focused on investing in scalable businesses to improve employer-sponsored healthcare.

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That’s all for this week. Thanks for taking time to read the Weekly Gist, and for sharing our work with friends and colleagues. Please encourage them to subscribe, and to listen to our daily podcast. We’ll be off next week—it’s Spring Break!—but we’ll see you back here soon.

In the meantime, please let us know if 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

Lisa Bielamowicz, MD
Co-Founder and President