October 5, 2018

The Weekly Gist: The Race for the Pennant Edition

by Chas Roades and Lisa Bielamowicz MD

The first week of October is drawing to a close, and that can only mean one thing: October baseball! With two tiebreakers and the wild card games already under our belts, it’s time to settle in for one of the best traditions in America—the divisional and league series, leading up to the granddaddy of all sporting events. One of us is an Astros fan and the other roots for the Dodgers, but we’re pretty sure this year belongs to the Red Sox.

On that gloomy note…


THIS WEEK IN HEALTHCARE

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

Two titans announce plans to come together in Texas

This week Dallas, TX-based Baylor Scott & White Health (BSWH) and Houston, TX-based Memorial Hermann signed a letter of intent to merge, combining the largest health systems in two of the nation’s largest metropolitan areas into a state-wide system serving patients in over 30 counties across Texas. The system would be among the nation’s biggest, with over $14B in revenue and 68 hospitals. BSWH CEO Jim Hinton was announced as CEO of the combined organization, with Memorial Hermann CEO Chuck Stokes and BSWH President Pete McCanna joining Hinton in the proposed Office of the CEO.

While the systems aim to finalize the agreement in 2019, the merger must first pass regulatory approval. Given little-to-no overlap between the systems’ markets, pushback from Federal regulators is less likely than scrutiny from the Texas Attorney General’s office. Creating a platform for more consumer-centric care was cited by both systems as a key driver for the deal. The success of the merger may depend on the systems’ ability to integrate key business and clinical functions and deepen their health plan presence across the state. Less clear is whether a statewide network has an advantage in working with employers and other purchasers. Unlike other mega-mergers that have launched with “co-CEOs”, having clear leadership roles from the beginning could provide an advantage in integration. Having followed these systems closely, we are struck by their cultural similarities, and believe this combination is worth watching to see if consolidation of market-leading systems can create a lower-cost product that truly creates new value for consumers.

New data on the crisis facing employer-sponsored healthcare

Annual premiums and deductibles in employer-sponsored insurance continued their seven-year rise in 2018, according to the recently-released Kaiser Family Foundation (KFF) Employer Health Benefits Survey. Annual premiums for family coverage rose to $19,616, a five percent increase from last year, and individual deductibles rose 4.5 percent to $1,573. Both measures outpaced income growth and inflation, which rose 2.5 percent. The survey also shows that employers are becoming more interventionist in an attempt to control costs. One of five employers report collecting data from self-monitoring devices, while a whopping 70 percent offer employees the opportunity to complete health risk assessments, which are tied to wellness or management incentives. 74 percent of large employers (those with 200 or more employees) offer telemedicine coverage, up from 27 percent three years ago.

With broad employer participation across industries and years of benchmark data (plus a fully-independent perspective, unlike broker-sponsored surveys), the KFF survey is the industry gold standard. While the annual increases in this year’s report may seem modest, the cumulative rise in health benefit costs to patients and employers over the past decade is staggering. Since 2008 premiums have risen 55 percent and deductibles have doubled, while workers’ earnings have only grown 26 percent. Taken in full, the average company is buying each employee a new car’s worth of health benefits every year—spending that is clearly impacting wage increases, and economic growth broadly. This year we’ve seen a spike in activity among large employers aligning with health systems to create high-performing networkscreating their own health benefits platforms, and investing in a range of primary care services. Each of these tactics may provide the ability to keep cost growth in check in the short-term, but we question whether they will stem the ultimate shift to defined-contribution healthcare. Moreover, the KFF data show that fewer than half of Americans with insurance receive coverage through their employer, calling into question whether our insurance system can truly be considered “employer-driven”. Regardless, the message to providers is clear: growing employer cost pressure and shifting coverage dynamics are strong signals that the healthcare business model based on commercial cross-subsidy is nearing its end.

The Medicare Advantage juggernaut rolls on

With Medicare open enrollment just ten days away, the Centers for Medicare & Medicaid Services (CMS) released a new report this week projecting a continued rise in enrollment in Medicare Advantage (MA) plans, and a sizeable decrease in average premiums for those plans. The agency projected that MA enrollment would hit an all-time high of 22.6M beneficiaries next year, which would represent 36.7% of all Medicare enrollees, and would be an increase of more than 11 percent over this year’s enrollment level. Further, the agency forecasts that average MA premiums will hit a five-year low in 2019. Nationally, the number of MA plans on offer in 2019 is expected to rise to about 3,700 plans, an increase of nearly 20 percent. CMS also published state-by-state synopses of its projections for MA enrollment in 2019.

The continued growth in MA plans and enrollment projected by CMS reflects an ongoing trend in the Medicare market, which has become a central focus for insurance companies as the population ages and the commercially-insured population shrinks. All the major national insurers have targeted MA as a growth engine, and new entrants like Bright HealthOscar Health and Clover Health have recently made moves to enter the space. As Baby Boomers age into the Medicare program, they are proving to be more receptive to managed Medicare products, and commercial carriers are heavily encouraging them to transition into MA products. Those plans are becoming more comprehensive as well, as CMS looks to expand the range of benefits available to MA enrollees, even beyond traditional health services. And, as we’ve discussed elsewhere, the prospect of reaping rewards from managing down the cost of an MA enrollee’s care over the next few decades has sparked a realignment of healthcare competitors outside of traditional insurance as well. All of this competition should prove beneficial for enrollees, who can hope to see services expand and premiums continue to decline over the coming years. For traditional, high-cost provider organizations, however, the continued growth in MA may prove to be problematic, as more “managed Medicare” will lead to (further) downward pressure on price. If the Federal government can cut back on the heavy subsidies it provides to insurers to participate in MA, those savings might just accrue to taxpayers as well.


OUR READERS RESPOND

Here’s what we heard from you.

When the news broke this week about the proposed merger between two of Texas’s largest health systems, we reached out to Baylor Scott & White CEO Jim Hinton to hear his thoughts directly. An avid reader of the Weekly Gist and good friend, Jim was kind enough to engage in a quick email back-and-forth in the midst of a busy week in Dallas. Here’s what he had to say:

Gist Healthcare: Memorial Hermann and Baylor Scott & White Health (BSWH) are both strong regional systems, successful in their own markets. Describe the rationale for bringing these two systems together.

Jim Hinton: As you know, the national healthcare landscape continues to shift dramatically. It is being reshaped by the convergence of high costs, changing consumer and industry expectations, rapidly-evolving digital innovation, and a surge of new entrants. We are two mission-driven organizations with century-long legacies of service and innovation. Texas ranks 44th in the country in overall health, and there are more uninsured in this state than any other. It is critical that our organizations proactively drive change, while growing our commitment to all individuals in the communities we serve. Together, we believe we can make healthcare more convenient and affordable for all.

[Continue reading our Q&A with Baylor Scott & White’s CEO]


GRAPHIC OF THE WEEK

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

Understanding what consumers want from healthcare

Over the past few weeks, we’ve been sharing our framework for thinking through the path forward for traditional health systems, as they look to drive value for consumers. We began by describing today’s typical health system as “Event Health”, built around a fee-for-service model of delivering discrete, single-serve interactions with patients. We then proposed the concept of “Episode Health”, which would ask the health system to play a coordinating role, curating and managing a range of care interactions to address broader episodic needs. Finally, last week we shared our vision for “Member Health”, in which the system would reorient around the goal of building long-term, loyalty-based relationships with consumers, helping them manage health over time. In this broader conception, the health system would “curate” a network of providers of episodes, and events within those episodes, and ensure that the consumer (and their information) moves seamlessly across care interactions.

This week, we begin to bring this framework together with our core belief that the healthcare system of the future must be oriented around consumer value. In our view, consumer value is not just about “high quality” or “low price”—it’s about a bundle of benefits (including, but not limited to, clinical quality) that the consumer is willing and able to pay for. That view raises the question: what do consumers want? What benefits are of most value to individuals as they seek care delivery, and interact with the healthcare system?

The graphic below highlights our perspective. At all levels of care, whether the consumer is just looking for a quick visit for a minor issue or is seeking support to manage a long-term chronic condition, we believe that what consumers want is care that is accessible, affordable, reliable, and personal. Access to care must be widely available, convenient, and timely. Consumers want to understand what is happening to them, and what it’s going to cost. They don’t want unpleasant surprises, or inconsistent, variable quality, and most importantly they want the care to be effective—to solve the problem they are experiencing. As the health system grows into the roles we’ve been describing these last few weeks, consumers will expect even more: care that is coordinated across settings, with navigation and information flow that reduces their need to worry about things falling through the cracks. And most importantly they want to be at the center, and treated like people, not widgets. For all our talk about “patient-centered care”, look through the graphic below and recognize that actually putting consumers at the center would be a ground-breaking change from how we organize and deliver care today.


THIS WEEK AT GIST—ON THE ROAD

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

Where clinical quality intersects with consumer value 

Lisa:
This week I had the honor of delivering the keynote address at the annual meeting of the National Association of Medical Staff Services (NAMSS), which brought 1,400 medical staff professionals and other leaders in clinical quality together in Long Beach, CA. Partnering with physician leaders, medical staff service leaders are the engines behind credentialing, quality and risk management efforts in hospitals and a growing number of other care settings. My talk on the future of the industry and the need to organize care delivery around consumer value sparked several questions about where clinical quality fits into the average consumer’s decision of where to seek care.

At a high level, we believe that many consumers simply assume clinical quality when they choose a provider. The ways we measure and discuss quality inside the industry (readmission rates, post-op infections, core measures, and the like) are very hard for patients to understand, and less helpful in making tradeoffs compared to other factors like out-of-pocket costs. Think about the question that I posed to the group: You need routine surgery. How much more of your own money would you pay to go to a hospital with a five percent lower post-op infection rate? To be sure, patients with very serious problems will take clinical quality into account when selecting a provider. For routine needs, however, “quality” to patients is synonymous with service quality: access, convenience, and ease-of-use. Those of us in the industry know just how important—and how variable—clinical quality can be, but in the words of one CMO I met with recently, “Clinical quality is vitally important, but not differentiating.”

I was a little worried that a room of leaders who’d devoted their careers to supporting quality efforts might find this message dispiriting. Instead this group focused on the growth opportunities industry transformation and disruption afford their profession. How could they support broader measurement of quality, including patient-centered outcomes and experience? Could they be a bridge to communicating important outcomes to patients in clear terms? Could they have an impact in new settings of care, helping disrupters like Walmart or Amazon credential professionals and measure performance? After spending time with them I’m sure this motivated group of leaders will be an important force in ensuring quality care as it extends to settings far afield from the inpatient hospital.

A growing emphasis on healthcare in urban planning

Chas:
High season for board meetings continues, and this week I gave a talk to the board of a system-affiliated hospital located in a major metropolitan area. The city is in the midst of a decade-long revitalization project, and the hospital finds itself bound up in that effort. It’s an older facility, serving a lower-to-middle-income population with an inpatient-heavy mix of services delivered on its own campus. Its main competitor recently shuttered their nearby hospital, leaving our client with an even more urgent set of decisions to make about how to modernize and expand services for an economically-challenged patient base. We had a long discussion about the need to move away from a campus-centric model, and to rethink the hospital’s investment profile to reflect a more distributed, community-based model of care—one more appropriate for the patients they serve. In particular, as I talked through the trends shaping the industry over the next several years, the board recognized the challenge of reducing the cost of care while building a wider array of access and care management solutions tailored to meet the needs of city residents. At the top of the list of priorities: pursuing partnerships with other community organizations, to serve both as “distribution channels” for care as well as to address some of the non-clinical needs of their patients.

I was particularly intrigued by the speaker who preceded me on the agenda: the director of economic development from the mayor’s office. Although his traditional mandate had been to bring new business to the community, he shared that the city now approaches economic development differently. Rather than attracting businesses to the city to increase tax revenue, his focus is now on attracting residents—regardless of whether they work locally or commute long distances. That shift reflects a sea change in economic planning, driven by the ability of a more robust transportation network, telecommuting, and the “gig” economy, all of which have weakened the link between where we live and where we work. His office now views “live-ability” rather than “workability” as the most important driver of economic growth. One implication of that? Healthcare is much higher on the priority list for the economic development than it used to be. Ensuring wide access to convenient care, and investments that enable healthy living (green spaces, food access, recreational activities) is more important than ever. My takeaway: the city’s shift in focus reflects (and enhances) precisely the shift in strategy for the local hospital, a dove-tailing of interests likely to play out in many communities.


THIS WEEK AT GIST—ON THE BLOG

What we’ve been writing about this week on the Gist Blog.

We have known Dr. Joe Golbus, President of NorthShore Medical Group in the Chicago, IL area, for over a decade. With a cohesive culture and an innovative approach to practice, NorthShore has long been considered one of the highest-performing integrated medical groups in the country. However, their success has not made them immune to physician burnout. In a guest blog post this week, Dr. Golbus shared his thinking on physician fatigue, and how NorthShore is making meaningful improvements in practice sustainability.

“The NorthShore Way—How Our System Addresses Physician Burnout”
Since 1998 I have served as President of NorthShore Medical Group, a nearly-1000 physician group that is part of a four-hospital integrated delivery system in Chicago and Northern Illinois. I’ve had the pleasure of overseeing its evolution from 150 physicians with little infrastructure and no clear culture to a large interdependent, multidisciplinary group with defined values, support structures, and strategic direction.

Over that time, we have seen tremendous alterations in both our internal and external environments. The changing nature of physician practice has been the greatest challenge, with shifting generational expectations and significant changes to practice requirements and operational workflows. And it’s the pace and degree of change that has led to a growing sense of unease among physicians, ranging from increased stress, fatigue and disillusionment to “burnout” and depression. Even with strong foundational culture and support for change management, we have seen rates of fatigue and burnout rising among our doctors and have put in place a range of solutions—many of which are having a very positive, if early, impact.

[Continue reading Dr. Golbus’s piece on the Gist Blog]


ON THE GIST TURNTABLE

Give this a spin, you might like it.

Earlier this week, the London-based J-pop trio Kero Kero Bonito unexpectedly dropped their second studio album, Time ‘n’ Place, and it’s a gem. KKB came together four years ago when Sarah Midori Perry, a British-Japanese musician, responded to a message board post by two London producers looking for a bilingual vocalist in the Japanese expat community. The trio released their debut mixtape in 2014, and their first full-length album in 2016. Heavily influenced by the broader J-pop scene, Perry’s lyrics weave back and forth between Japanese and English, twisting around video game music and poppy beats with a shiny positivity that’s tooth-achingly sweet. (Try “Sick Beat” for an early example.) The new release takes a darker turn, however, with Perry giving up the J-pop aesthetic for a more fuzzed-up, indie pop sound that’s closer to Tracy Tracy of late-80’s The Primitives fame. “Only Acting”, at 3:50, is the album’s longest track, and also its best, while “Make Believe” maintains a more traditional pop song structure while leaving plenty of room for Perry’s delightful weirdness. It’s great to see Perry stepping out from behind the plastic veneer of J-pop, and finding a more assertive, confident voice, and her new album definitely holds up to repeated listens.


WHAT WE’RE READING

Stuff we read this week that made us think.

Taking an end-of-career run at battling healthcare costs

NPR ran a terrific piece this week from ProPublica, a nonprofit investigative news service, telling the story of Marilyn Bartlett, the head of Montana’s state employee health plan. Bartlett came to the job a few years ago after roles at a Blues plan and a benefits management company, and brought a no-holds-barred approach to addressing rising the rising cost of care for Montana’s employees. Nearing the end of her career, Bartlett viewed the Montana job as an opportunity to take on some of the root causes of high spending, without worrying about upsetting entrenched interests. “I’m 67, so I could give a s***,” the piece quotes her as saying. “What are they going to do, fire me? I’m packin’ a Medicare card.” (Call it a Montana-style “Granny Oakley” approach.) Her strategy to address benefits costs had two components: a shift to reference-based pricing for hospital services, and an attempt to eliminate spreads and capture rebates from pharmacy benefit managers.

Her crusade to move the Montana plan to reference-based pricing, in which the state would agree to pay hospitals a take-it-or-leave-it price for high-cost services, led to several confrontations with hospital executives, industry lobbyists, and even representatives from Cigna, the state’s insurance partner. Along the way, Bartlett was met with resistance to opening up secret contracts between hospitals and insurers, restrictions on her ability to show lawmakers the range of prices charged by various providers, and even unwillingness on the part of Cigna to share information on care costs with the state, even though the insurer was only serving as a third-party administrator to the state’s self-funded insurance plan. In the end, Bartlett was able to push through her reforms, and saved the state of Montana millions of dollars annually on health spending. We hear a lot about high healthcare costs, and there are myriad problems causing inefficiency and waste across the system. The ProPublica-NPR piece does a particularly good job of lifting the curtain to show some of the complicated dynamics driving cost growth. Well worth a read, and worth sharing with those who may not be as deeply versed in the day-to-day of healthcare as you are.

China’s health system in crisis

If you’re feeling frustrated with the pace of reform in US healthcare, check out this outstanding New York Times article describing China’s healthcare crisis, which puts our challenges into perspective. The piece provides a detailed look at problems that both patients and doctors face in ensuring even basic healthcare access to China’s aging population of 1.2B people. Primary care was once a strength of the Chinese healthcare system. In the 1960s, Maoist reforms created an army of “Barefoot Doctors”, sent into rural communities with limited equipment after a brief training period. The Barefoot Doctors proved effective, cutting China’s infant mortality rate by more than 90 percent, and supporting a dramatic increase in life expectancy.

In the 1980s, cuts in funding reduced doctors’ pay. In a society where income is highly correlated with social status, many doctors sought specialist positions at hospitals—and became vulnerable to kickbacks from wealthy patients and businesses. These shifts led to a pervasive lack of primary care services. Many patients now seek care at hospitals for simple issues like sore throats and headaches. Crowded emergency rooms, long wait times and poor service have frustrated patients and physicians alike—and sparked frequent episodes of violence against doctors.

These issues, coupled with declining outcomes and worsening health status, have led the government to launch “Healthy China 2030”, the first long-term healthcare blueprint since the country’s founding in 1949. Making the bold promise to increase both innovation, access and health equity, the plan includes top-down reforms to bolster the number of primary care physicians (PCPs)—and requires all citizens to sign up with one by 2020. The government is promising that channeling access through PCPs will improve the average patient’s ability to reach prominent specialists—echoing the promises of many managed care experiments around the world. China’s current system shows the challenges of an unregulated healthcare market, where the rich pay large sums for preferred treatment and crowd out access for average consumers. For reform to work, the government must not only create new access channels and safeguards for patients, but also put some limits on wealthier consumers’ ability to buy-up large portions of the system’s capacity.

A new wave of politically-active doctors

Physicians have long been considered a politically conservative (and if we’re honest, pretty politically inactive) profession. This may be changing, as a recent Kaiser Health News article suggests, pointing to a growing number of younger physicians who are taking up liberal political causes—and using their profession as a platform for political activism. The article highlights how the move toward political organizing is beginning in medical school, profiling a conference that attracted over 150 students early on a Saturday morning to teach them how to amplify their voice and connect with patients on key issues—and how to avoid politically-charged terms like “socialism”, and forget “decrepit old physicians only worried about money” whose “minds will never change”.

There is growing evidence that that younger, left-leaning doctors are changing the political gestalt of the profession. Case in point: the American Medical Association (which has had concerns about attracting younger members) dropped its opposition to single-payer healthcare, vowing instead to “study” the issue. More doctors, especially women and younger physicians, are running for office. We find these moves intriguing but not surprising, given demographic shifts and changes in the organization of physician practice away from entrepreneurship toward group practice. Regardless of political leaning, doctors generate an enormous amount of admiration from their patients. This relationship and respect will help to amplify the voice of any physician who chooses to become politically active. Who knows? Perhaps doctors could someday give lawyers a run for their money as the “political profession”.


That’ll do it! Thanks for reading the Weekly Gist. We’re so grateful that you’ve taken time out of your busy day to read it, and we’re genuinely touched by the feedback you send our way. (One reader wrote in last week to say that reading our work was “as much part of my Friday night winding down routine as playing with my six-month old son.” It got a little dusty in the office when we read that.) We’d love to hear your comments, suggestions, and guidance for future areas of focus. And we’d love for you to subscribe!

Most importantly, let us know if there’s anything we can do to be helpful 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