September 18, 2020

The Weekly Gist: The Renegade Civics Lesson Edition

by Chas Roades and Lisa Bielamowicz MD

With millions of kids back to school in virtual classrooms hosted by Zoom, Google, Microsoft, and other online services, students are about to get a real-time civics lesson thanks to a very different platform—TikTok. Today the Commerce Department followed through on an earlier executive order from President Trump, announcing plans to ban the viral video app on November 12th, unless national security concerns can be addressed. It’s probably no coincidence that TikTok just launched a voter registration drive called “Tok the Vote”—its users demonstrated their activism by disrupting plans for a GOP political rally in Tulsa earlier this year, and it’s thought that as many as 15 percent of TikTokers will vote for the first time in this year’s elections, just a week and a half before the ban takes effect.

We’re not sure about the threat to national security, but domestic tranquility will be in real jeopardy if we have to hear “Lottery” one more time. Fair warning: you’ve only got two months left to perfect your version of The Renegade!

Note to readers: It’s high season for health system board meetings, which means we’re asking for your understanding as we take the next couple of weeks off from the Weekly Gist to spend time with our members. We’ll be back on October 9th with a brand new edition. See you then!


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

Playing politics with the CDC’s guidance

Concern about the politicization of the Centers for Disease Control and Prevention (CDC) was heightened this week with new reporting from Politico that top appointees at the Department of Health and Human Services (HHS) repeatedly sought to modify the CDC’s Morbidity and Mortality Weekly Report (MMWR), a key public health document relied upon by healthcare providers and researchers nationwide. The officials, including HHS spokesman Michael Caputo and his science advisor, Paul Alexander, demanded to personally review and edit the MMWR in ways that would downplay the spread of COVID-19, claiming in an internal communication that CDC scientists were trying to use the reports to “hurt the President”. In a Facebook livestream on Sunday, Caputo claimed that CDC scientists were engaged in “sedition”, describing them as agents of a “deep state” conspiracy against the Trump administration. By midweek, it was announced that Caputo would be placed on temporary leave due to health concerns, and that Alexander’s contract would be terminated.

The controversy came the same week as reports that HHS officials had intervened last month, against the guidance of CDC scientists, to alter recommendations regarding COVID testing for asymptomatic individuals. Today, under pressure from the public health community, who warned that such testing was critical to control the spread of the virus, the CDC reversed those changesadding a note to its website that “further reinforces the need to test asymptomatic persons, including close contacts of a person with documented SARS-CoV-2 infection.” The credibility of the nation’s leading public health agency has increasingly come into question during the pandemic, and this week’s events risk further undermining public confidence in the government’s messaging about the virus. As development and testing of several COVID vaccines nears completion, it will be critical to reassure the public that the advice of government health officials can be trusted—otherwise, the drive to vaccinate hundreds of millions of Americans against the deadly virus may fall far short of its intended goal. US coronavirus update: 6.7M cases; 198K deaths.

CMS axes an unpopular change to Medicaid financing

State budgeteers and hospital executives breathed a sigh of relief this week when Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma announced her decision to withdraw a controversial new rule that would have made significant changes to the way states manage their Medicaid funding. The proposed Medicaid Fiscal Accountability Regulation (MFAR), first introduced late last year, would have made technical changes to supplemental payments and financing mechanisms used by states to maximize the money they receive in the form of federal matching dollars for Medicaid enrollees. In particular, the rule targeted the use of provider taxes and intergovernmental transfers of public funds, as well as proposing restrictions to “upper payment limit” reimbursement to providers and tighter scrutiny on the distribution of “disproportionate share” payments made to hospitals that care for a high percentage of Medicaid patients. (A more detailed analysis of MFAR is available here—please don’t operate heavy machinery after reading it.)

Hospitals and Medicaid program directors expressed deep concern about the unanticipated, and largely unknown, impact of MFAR, particularly if it were implemented amid the financial pressures caused by COVID. In thanking CMS for the decision to withdraw MFAR from its regulatory agenda, the American Hospital Association (AHA) pointed to a potential $50B hit to Medicaid payments, and said that the regulation would have “crippled state financing and limited access to care, especially in rural and underserved areas.” Hospital executives were surely grateful as well; as we reported in January, we were hearing health system finance executives bracing for massive margin hits as a result of MFAR. At the state level, Medicaid financing has always been a thicket of tangled monetary transfers and accounting hocus-pocus. Even though the withdrawal of MFAR is welcome short-term news, there’s still work to be done to rationalize Medicaid funding to ensure that the program—ever more vital as the pandemic wreaks economic havoc—remains sustainable.

Yet more arcane, but meaningful, regulatory change from CMS

Alongside its announcement that it plans to withdraw the proposed MFAR regulation, CMS also released the first part of its 2022 Medicare Advantage (MA) Advance Notice this week, detailing changes to how it pays insurers for beneficiaries enrolled in private Medicare coverage. Of particular note, CMS intends to complete the transition to a new risk adjustment methodology first mandated by the 21st Century Cures Act of 2016. Previously, CMS adjusted the per-member capitation rate it paid MA plans to reflect the health status of enrollees using diagnosis information submitted by insurers to the Risk Adjustment Processing System (RAPS). For 2022, CMS will instead adjust for enrollee health risk solely using “encounter data”, actual clinical information on diagnosis and treatment entered by hospitals and doctors. This follows a multi-year phase-in of the new methodology, which has consistently been met with the ire of insurers, who complain that encounter data are less accurate and reliable than RAPS data. Not coincidentally, the newer methodology has also tended to result in lower payments by CMS to MA plans.

That savings is part of the rationale for the new method, which is intended to reduce the long-standing industry practice of conducting retrospective chart reviews to flag additional diagnosis codes for enrollees, often with the help of third-party vendors, in order to “game” the risk adjustment process and garner higher payment rates. Softening the blow somewhat, CMS will also complete the phase-in of new supplemental adjustments for patients with behavioral health conditions, substance abuse issues, and chronic kidney disease, which were also mandated by the 21st Century Cures Act. As with murky Medicaid financing schemes, the machinations of private Medicare insurers to maximize government payments have often resulted in overspending and excessive administrative cost and complexity. This week’s announcements from CMS, along with efforts to increase price transparency and simplify Byzantine regulations, are welcome steps toward ensuring that taxpayers are getting their money’s worth as healthcare consumes an ever-larger share of the federal budget.


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

Physician practices hanging on thanks to federal aid

With lower patient volume and greater numbers of (often lower paid) virtual visits, physician practice economics, especially for smaller independent practices, have been under extreme pressure since the COVID-19 pandemic began. However, far fewer doctors have approached health systems and payers looking for employment or acquisition than expected. Federal COVID financial relief, combined with various forms of practice-level belt tightening, has helped physicians weather the storm so far. As shown in the graphic below, physician offices have been the largest recipients of healthcare sector loans from the Paycheck Protection Program (PPP). As of July, more than 22,000 practices have received loans of over $150,000, and thousands more received smaller loans. Healthcare and social assistance organizations have so far received the largest share (13 percent) of PPP loans issued to support small businesses, incentivizing them to keep their employees on payroll and ultimately allowing for loan forgiveness. But even with financial relief, many physicians report they are still reducing their practice staff, as well as their own income, to stay afloat. Without further federal aid or support from payers, 2021 may be a year of reckoning for independent doctors, forcing many to seek alignment with health systems, insurers or investors, especially if volumes continue to slump as the pandemic persists.


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

Will ED volumes ever bounce back?

We’re hearing from health systems across the country that physician office, surgery and diagnostic volumes have mostly returned to pre-pandemic levels. Consumers appear to feel comfortable coming back to scheduled appointments as long as social distancing and capacity can be managed. But they’re more reticent to return to “unscheduled” care settings that may involve a long wait, like urgent care clinics and emergency departments, where visits have stabilized at 75 to 85 percent of pre-pandemic levels. The latter in particular has proved concerning to hospitals leaders, who have begun to ask, what if ED volumes never fully come back? (Around 15 percent of ED visits convert to inpatient stays, on average, making the ED an important source of downstream revenue for hospitals.) We spoke recently with a health system COO who realistically thinks that 10 percent of the volume could be gone for good, and recognizes that “from a public health perspective, that’s probably a good thing”, given that lower-acuity, non-emergent patients account for a portion of the “lost” volume. But concerns about patients delaying much-needed care persist—amplifying the need for alternate channels, both virtual and in-person, for patients to access care and quickly connect to more intensive services if needed. Hospital leaders would be wise to prepare for a “90 percent future”, and adjust revenue models and cost structures to be less dependent on admissions and procedures that come through the emergency department.

Hiring into post-pandemic healthcare jobs

The healthcare sector shed hundreds of thousands of jobs this spring as many providers reduced staffing during the height of the pandemic. Across the summer, healthcare has a seen a wave of rehiring, as doctors’ offices and outpatient surgery and testing centers reopened. But despite the ongoing recession and high unemployment rates, competition for talent remains fierce. In particular, hiring into lower-level clinical support roles is more difficult than before the pandemic, as potential applicants weigh the risk of being exposed to COVID. In the past, applicants for non-degree positions were attracted by good benefits and a clear career path, but “someone looking to make $15 per hour as an entry-level phlebotomist or patient care associate is now choosing the Amazon warehouse or delivering for DoorDash,” one health executive told us recently. “They’re worried about COVID, and they see the hospital as a place where they’re more likely to get it, even though that’s probably not the case.” A second health system leader mentioned they have posted hundreds of new job openings in the past two months. According to the COO, “these may be the most important hires we’ve made in decades.” Ensuring this new class of recruits feels safe and supported in the pandemic, and is entering a culture of pride and respect, will lay the foundation for the “post-COVID generation” of the healthcare workforce.


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

On last Monday’s episode, we spoke with Embold Health CEO Dr. Daniel Stein, who is trying to create a market for high quality care by building bespoke provider networks based on quality metrics for employers. He says consumers often have more information on restaurant quality than healthcare quality, and his team at Embold is trying to get better information in their hands.

Coming up on next Monday’s episode, we’ll hear from Dr. Rushika Fernandopulle, co-founder and CEO of Iora Health, which fields value-based primary care networks in several states. COVID has led Iora to organize care delivery less around the physical office, instead focusing on connecting with their (mostly senior) patients through a variety of virtual modalities, including video and telephone care. Make sure to tune in, you won’t want to miss it!

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Give this a spin, you might like it.

The pandemic derailed everyone’s plans. The true measure of resilience is what happened next. For Igor Levit, the 33-year-old Russian-German pianist who brings new meaning to the word wunderkind, 2020 was supposed to be a big year. He’s a Beethoven specialist who burst onto the classical scene in 2013 with a daring recording of the late piano sonatas and went on to record Beethoven’s entire sonata catalog to much acclaim last year. Along the way, Levit became a household name in Germany not just for his performances but also for his rock-star demeanor and outspoken politics, taking a strong stance against the rise of a new wave of fascist politicians in his adoptive country. All eyes were on Levit as 2020 brought the 250th anniversary of Beethoven’s birth—a year of major performances and recordings were on the books. And then came coronavirus. What Levit did next was truly remarkable: between March and May, for 52 straight nights, he got on Twitter and live-streamed Hauskonzerte—house concerts—from his apartment in Berlin, garnering an audience of tens of thousands of fans who tuned in each night to see what he’d play next. (The story of the Hauskonzerte is fascinatingly retold in Alex Ross’ excellent profile of Levit in the New Yorker.) Now Levit is back with Encounter, a recording of some of the pieces he played during those 52 extraordinary nights, including piano transcriptions of choral pieces of Bach and Brahms by Busoni and Reger, along with a breathtakingly minimalist piece by 20th century American composer Morton Feldman. Levit brings his characteristic sensitivity to the pieces, in a welcome reminder of the power of this music to calm and transport. Even if you’re not a big fan of classical music, it’s worth checking out the new album, and digging into Levit’s back catalog as well.


Stuff we read this week that made us think.

Shining a spotlight on commercial prices

American hospitals are paid at rates that are nearly 2.5x higher than Medicare prices, according to a new study out this week from RAND Corporation. Researchers analyzed claims for hospital services from state all-payer claims databases, as well as participating health plans and self-insured employers, to evaluate prices at 3,112 hospitals across 49 states. Arkansas, Michigan, and Rhode Island were the most affordable states, with commercial prices less than 200 percent of Medicare. With average prices of nearly 350 percent of Medicare, West Virginia, Florida and South Carolina have the highest hospital prices in the country; meanwhile, clocking in at 409 percent of Medicare, Walnut Creek, CA-based John Muir Health was the country’s highest-priced hospital system. Higher-priced hospitals were somewhat more likely to score higher on quality and value measures, but it’s hard to make the argument based on this dataset that high price buys better care, while it’s clear that a meaningful cohort of “high-value” (high quality, low cost) providers does exist. While this study provides one of the most extensive analyses of hospital pricing to date, the results are not surprising. In seeking higher commercial rates, hospitals are behaving rationally under current fee-for-service market incentives; as growing numbers of Medicare and Medicare patients stress cross subsidy-based business models, we’d expect commercial prices to continue to rise. As we look toward the election, the new RAND analysis will undoubtedly generate more interest in policy solutions to control prices, whether it’s the Democrats’ proposed “public option”, or Republicans’ continued push for price transparency.

We’re not getting back to normal in 2021

If you, like us, find yourself in an growing number of conversations with friends and family who express optimism that with the COVID vaccine trials trending positively, “we’ll all be able to get back to normal next year”, might we suggest sharing this piece from New York Times contributing writer Dr. Aaron Carroll? A professor of pediatrics at the Indiana University School of Medicine, Carrol provides a more sober look at what it will take to “get back to normal” from where we are now—and his realistic assessment (seconded by Dr. Anthony Fauci) is that we are likely to be wearing masks and social distancing well into the second half of next year. The gist: we’re all tired of the restrictions and weary of feeling fear, so we gravitate to promising news reports of quick vaccine approvals and new treatments that can bring a quick end to the pandemic. But that’s largely magical thinking.

Across the summer, we squandered our chance to suppress COVID cases and prepare for the fall, leaving the country open to an increased magnitude of spread this winter. Even under the most optimistic scenarios, with one or more vaccine approvals by the end of the year, it will still take months to manufacture and distribute hundreds of millions of doses. And it’s likely that a new vaccine will only be partially effective, not to mention the fact that a large portion of Americans will refuse to take it, at least initially—making it highly unlikely that we’ll quickly reach the goal of 70 percent protection that would ensure the population-level immunity needed for “back to normal”. As Carroll says, “It would be better to prepare for a difficult 2021 and be surprised by its being easier than to assume things will be easier and find life is still hard.” So, let’s put on our masks and prepare for the long haul—and hope that we’ll get to toss them out sooner than we expect.

That brings us to the end of another week in the crazy world of healthcare. Thanks so much for taking the time to read our thoughts on the events of the day, and for sharing your feedback and suggestions. We love hearing from you! And we really appreciate you forwarding this to a friend or colleague and encouraging them to subscribe, and to listen to our daily podcast.

We’ll be back in a couple of weeks. Until then, don’t hesitate to reach out and 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!

To those who celebrate, Shanah Tovah!

Best regards,

Chas Roades
Co-Founder and CEO

Lisa Bielamowicz, MD
Co-Founder and President