March 19, 2021

The Weekly Gist: The Mascot Versus Virus Edition

by Chas Roades and Lisa Bielamowicz MD

How’s your bracket holding up so far? The NCAA men’s basketball tournament got underway this afternoon, and we couldn’t be more excited to welcome back this annual tradition. With all the games being played in a compacted format in Indianapolis, there’s an extra opponent in each round: if a team is reduced to fewer than five eligible players due to COVID, they’ll be forced to forfeit. We’re definitely rooting against the virus, but it got us thinking—which team’s mascot stands the best chance against the disease? You can probably eliminate all the cat and bird related mascots immediately (Cougars, Tigers, Jayhawks, Ducks, etc.), as well as most of the human ones (Spartans, Trojans, Raiders, and so forth). Wichita State’s bizarre wheat-human hybrid (Shockers!) seemed a good bet, but they got knocked out in the play-in round. That leaves two obvious candidates: the supernatural Drexel Dragons, and the juicy Syracuse Orange. We’ll take our chances with vitamin C.

THIS WEEK IN HEALTHCARE

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

Becerra confirmed at a pivotal moment

On Thursday, the Senate narrowly confirmed the appointment of California Attorney General Xavier Becerra to serve as US Secretary of Health and Human Services (HHS), by a 50-49 vote that saw only one Republican, Sen. Susan Collins (ME), vote in favor of the nomination. Although Becerra’s candidacy was supported widely among health industry groups, the nominee drew criticism from Senate Republicans for his lack of healthcare experience, his views on abortion rights, and his track record of legal opposition to the Trump administration. Becerra takes the helm of the Biden administration’s healthcare team as it hits a key milestonereaching the promised 100M vaccines administered well ahead of schedule—on day 58 of Biden’s presidency. A new vaccine goal is expected to be announced next week, as more states move to open up vaccine eligibility beyond the elderly and high-risk categories that have been the focus of the campaign to date. The accelerating pace of vaccinations—this week reaching 2.5M shots per day on average—is welcome news, given the emergence of new virus hot spots in Michigan and New York, which have raised concerns among public health experts about a variant-fueled “fourth surge” of COVID. Much of Europe is now contending with just such a surge, although vaccine rollout across much of the continent has lagged the US pace, with European regulators struggling to boost confidence in the AstraZeneca shot after concerns it was linked to a small number of blood clotting problems. The next few months of the pandemic will likely play out as a battle of vaccine versus variants, with hope that growing vaccination rates can outpace new surges as states continue to loosen restrictions.

Another big merger in the virtual care space

The virtual care space continued to heat up this week, with the announcement that Doctor on Demand, the telemedicine company founded in part by Phil McGraw (“Dr. Phil” of TV fame), and Grand Rounds, a patient navigation service targeted to the employee benefits market, planned to merge. The two venture-backed companies were most recently valued at $820M and $1.34B respectively, and the all-stock merger will not entail a new valuation of the combined entity. Doctor on Demand competes with other telemedicine companies like Teladoc (which acquired disease management platform Livongo last year for $18.5B), Amwell (which went public last year and is valued at $5B), and MDLive (which was acquired by insurer Cigna last month). Grand Rounds competes with Accolade, which went public last year and is valued at $2.5B, to provide concierge navigation services to help employees find the right care. The newly combined company describes itself as an “integrated virtual care company”, which is a moniker of increasing interest to a range of incumbents and disruptors in the wake of the COVID crisis, when patients increasingly turned to telemedicine to substitute for or supplement in-person visits. While telemedicine visit volume has declined since its mid-pandemic peak, the popularity of virtual care is likely not lost on employers, many of whom will look to add lower-cost virtual offerings to their employee benefit packages. The ability to provide convenient, online doctor visits—for both physical and mental health needs—is almost certain to become a must-have element of any health benefits package, and will be a key tool for insurers and providers who hope to lock in purchaser loyalty. The ability to link virtual visits to a broader care ecosystem, whether through vertical integration (as insurers and health systems can) or by managing referrals (as Grand Rounds and Accolade do), will be central to success. Expect more acquisition activity in this hot space as the battle for virtual hearts and minds intensifies.

Amazon reveals its next step in healthcare

Now add America’s second largest private employer to the list of companies vying for those employee hearts and minds. In an announcement that was surprising only in its tardiness, Amazon revealed plans this week to roll out its virtual care offering, Amazon Care, to all of its US employees this summer. The company has been developing the telehealth service for the past two years as a pilot program for its Seattle-based employees, in partnership with local provider Care Medical (formerly known as Oasis Medical). Earlier this month it was reported that Care Medical had filed to expand its services across 17 additional states, foreshadowing this week’s launch of Amazon Care as a nationwide platform. In addition to virtual care, the company provides in-home visits for Seattle area employees, and plans to do the same in the Washington, DC area—home to its new “HQ2”—later this year. More significantly, the company also previewed plans to sell virtual care services to other employers starting this fall.

The Amazon Care venture is separate from Amazon’s recently acquired PillPack online pharmacy business, and from its 17-clinic primary care partnership with Crossover Health (available only to Amazon employees in key markets)—although the company is surely evaluating an eventual integration of all its healthcare services into a more comprehensive offeringThe question is, for whom? For a company best known for its consumer-centricity, it’s interesting that Amazon has chosen to target Amazon Care at the employer market, a crowded space in which it will have to contend with existing broker relationships, insurance networks, and HR managers. That choice likely signals a decision to grow the offering slowly, climbing the healthcare learning curve gradually, rather than diving in the deep end by, for instance, offering telemedicine as an add-on to its Prime membership. Perhaps the long-awaited Amazon play in healthcare will be more like Amazon Web Services—a B2B offering that sells something to other companies that Amazon originally built to meet its own internal needs. Time will tell, but one thing’s for sure: it’s never safe to bet against Amazon. Their entry into the telemedicine space—even with baby steps—is a big moment for healthcare, and will force other players to quicken pace to expand their own digital offerings.


GRAPHIC OF THE WEEK

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

Selling Medicaid expansion to the holdout states

The American Rescue Plan stimulus package just sweetened the deal for the twelve holdout states that haven’t yet expanded Medicaid. In exchange for expanding eligibility to the roughly four million adults with incomes up to 133 percent of the federal poverty level, new expansion states will also be eligible for a five percent increase in the federal matching rate for their entire traditional Medicaid population for a two-year period. The graphic below shows the cumulative fiscal impact for holdout states, should all Medicaid-eligible individuals enroll. Since the traditional Medicaid population is so much larger than the expansion population, the temporary increase more than offsets states’ cost to cover their share of the expansion, resulting in an estimated net fiscal benefit of almost $10B. While the net benefit would vary from state to state, a Kaiser Family Foundation analysis found the two most populous non-expansion states, Texas and Florida, could net up to $1.9B and $1.8B respectively across the two-year period.

Medicaid expansion has had a significant positive financial impact on hospitals, reducing uncompensated care and increasing overall operating margin by an average of 1.7 percent. A recent analysis by the Center on Budget and Policy Priorities found uncompensated care costs as a share of hospital expenses fell an average of 45 percent in Medicaid expansion states between 2013 and 2017. So far, only two states eligible for the enhanced expansion, Alabama and Wyoming, have signaled interest in taking advantage of the new deal. Convincing the remaining ten to follow suit will require intense and coordinated advocacy efforts from the healthcare and business communities. Making the financial case for expansion should prove straightforward, compared to overcoming long-entrenched political opposition.


THIS WEEK AT GIST—ON THE ROAD PHONE

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

Primary care—Ex uno plures

We had occasion this week, when asked to weigh in on a health system’s “primary care strategy”, to assert once again that primary care is not a thing. We were being intentionally provocative to make a point: what we traditionally refer to as “primary care” is actually a collection of different services, or “jobs to be done” for a patient (to borrow a Clayton Christensen term). These include a range of things: urgent care, chronic disease management, medication management, virtual care, women’s health services, pediatrics, routine maintenance, and on and on. What they have in common is that they’re a patient’s “first call”: the initial point of contact in the healthcare system for most things that most patients need. It’s a distinction with a difference, in our view. If you set out to address “primary care strategy”, you’re going to end up in a discussion about physician manpower, practices, and economics at a level of generalization that often misses what patients really need. Rather than the traditional E pluribus unum (out of many, one) approach that many take, we’d advise an Ex uno plures (out of one, many) perspective. Ask the question “What problems do patients have when they first contact the healthcare system?” and then strategize around and resource each of those problems in the way that best solves them. That doesn’t mean taking a completely fragmented approach—it’s essential to link each of those solutions together in a coherent ecosystem of care that helps with navigation and information flow (and reimbursement). But continuing to perpetuate an entity called “primary care” increasingly seems like an antiquated endeavor, particularly as technology, payment, and consumer preferences all point to a more distributed and easily accessible model of care delivery.

Are new moms really the key to health system loyalty?

It’s long been accepted as a truism that “moms” make most of a family’s healthcare choices. This has led many health systems to invest in high-end women’s services, especially labor and delivery facilities, with the hope of winning the entire family’s long-term healthcare loyalty. This conventional wisdom has existed since the middle of the last century, when the postwar Baby Boom coincided with the rise of commercial insurance. But it’s hard to find real evidence that these investments deliver on their intent—and we think the argument deserves to be reexamined. An expectant mother is likely years away from her family’s major healthcare spending events. Giving her a fantastic virtual care experience, or taking great care of her teenager who blows out a knee playing soccer, is likely to engender greater loyalty to the health system when she’s looking for her first mammogram, than her labor and delivery experience from a decade earlier. That’s not to say that top-notch obstetrics isn’t important—but market-leading labor and delivery facilities are likely more critical for wholesale purchasers, such as an employer considering a narrow network, or for physicians choosing where to build an OB practice. Direct-to-consumer strategies should be built on more sophisticated consumer research that takes into account the preferences of a new generation of consumers, for whom not all healthcare choices are equal—that same consumer will be in different “segments” and make different choices for different problems over time, not all pre-determined by one memorable birthing experience.


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 profiled two former competitors in North Dakota, a rural hospital and a community health center, who have now teamed up to better serve their community, and we explored how other rural providers are seeking innovations to make care delivery more sustainable.

Next Monday, Lisa and Chas will be joining Alex in studio to discuss how scale strategies in healthcare have evolved over the course of the pandemic—and how payers and disruptors are doubling down on virtual and home-based care as they shift toward vertical integration. Make sure to tune in for a fun discussion!

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


ON THE GIST TURNTABLE

Give this a spin—you might like it.

Legendary jazz-fusion guitarist Pat Metheny is the only person ever to have won Grammys in ten different categories, and he just might add an 11th next year—in contemporary classical composition—for his latest release, Road to the Sun. A step back from his central project, The Pat Metheny Group, the new album comprises two original compositions, both written for (and performed by) other musicians. The first is a four-part solo suite, “The Four Paths of Light”, performed by Jason Vieaux, one of the foremost classical guitarists of his generation. It’s a more formal piece than Metheny is known for, although his melodic sense shines through in several passages, and Vieaux’s command of the instrument is obvious. The title composition, a six-part piece written for four guitars, is performed by the venerable Los Angeles Guitar Quartet, who have worked with Metheny before. It’s a rhythmic marvel, with long, strummed sections interspersed with virtuosic arpeggios and intriguing sound effects, glissandi, and string-scratching. Metheny joins the group in the fifth movement, adding a recognizable jazz-fusion element that recalls his more mainstream work. He then takes a solo turn for the album closer, performing his own arrangement of a piece by Estonian composer Arvo Pärt, using his famous, custom-built 42-string Pikasso guitar (a marvel to behold) to deliver a haunting finale to what will surely be one of the best contemporary classical releases of the year. Breathtaking. Best tracks: “Four Paths of Light: Pt. 3”; “Road to the Sun: Pt. 5”; “Pärt: Für Alina (arr. Pat Metheny for 42 string guitar)”.


WHAT WE’RE READING

Stuff we read this week that made us think.

No, children are not “basically vaccinated”

A new piece in the Atlantic sparked debate this week about the risk of ongoing COVID exposure to children as the country navigates toward the end of the pandemic. Brown University economist Emily Oster equated a child’s risk of serious illness from the coronavirus to that of their vaccinated grandmother. If grandma receives the Pfizer vaccine, her risk of serious illness is decreased by 95 percent. According to Oster, the condition of “being a child” aged 0-17 is 98 percent protective against hospitalization—so go ahead, plan that family summer vacation! Oster cites no clinical or scientific experts in her piece, but some doctors were quick to respond that the comparisons are not equivalent (and also provide ready-made scripting for the “anti-vaxx” movement, which could claim that kids are already “basically vaccinated”). But the article does bring up a real question that millions of families will soon face: what can we do when grandma and grandpa (and hopefully mom and dad) are vaccinated, but the kids are not? Given the pace of clinical trials, teens could be eligible for vaccination as soon as late summer, but COVID vaccines might not be approved for younger children until months later—and this generational vaccine divide will likely linger into 2022. Undoubtedly children are at lower risk from COVID than adults, and likely transmit the disease less frequently (although much of the data supporting the latter comes from studies in schools, where social distancing and masking are enforced). And we’re not out of the woods yet: as COVID cases surge again in Michigan, schools there have seen a spike in outbreaks as well. As families look at conflicting data and messages in the media, they need clear, coordinated guidance from state and federal officials to help them gauge safety as they navigate their second “pandemic summer”.

Making British healthcare more expensive, one specialist at a time

Cleveland Clinic’s leap across the pond to London is nearly complete, with a large outpatient center opening in September, and a hospital near Buckingham Palace following early next year. According to a recent piece in the Times of London, the Clinic’s plans to hire 1,250 medical staff are sending shockwaves through the physician community there. England has long had a blended public-private system, with a small number of private hospitals providing fee-for-service care beyond the nation’s vast National Health Service (NHS). The country’s doctors are now employed by the NHS, and practice in private facilities in their spare time; in contrast, Cleveland Clinic is looking to bring their own employed staff model to the UK, creating concerns that competition in the private market for specialist talent will become intense. One healthcare consultant noted that “busy [specialists] are being poached with substantial financial offers, a bit like rainmakers in investment banking”. These new practice alternatives hit the NHS at a particularly vulnerable moment, with the pandemic exacerbating longstanding workforce challenges. If the Clinic’s model proves successful, and is replicated, an exodus of top physician talent could further stress the national system. It will be interesting to see how the NHS reacts to the kind of competition in the physician marketplace that is familiar to all of us here, where doctors can often be tempted to shift their practice by the offer of more money.


Thus endeth another week in healthcare. Thanks again for taking time to read the Weekly Gist, and for getting in touch with your feedback and suggestions—we love hearing from you. As always, please remember to forward this to a friend or colleague and encourage them to subscribe, and to listen to our daily podcast. (And if they’re a rockstar, tell them to consider joining our team!)

Most of all, we hope you’ll 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
chas@gisthealthcare.com

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