May 24, 2019

The Weekly Gist: The Rolling Thunder Edition

by Chas Roades and Lisa Bielamowicz MD

There’s nothing like Memorial Day traditions—the pools open, the white shoes come out, the barbecue grills get fired up again. It’s a time to honor our war heroes, of course, and the sacrifices so many have made for our nation. For DC’s denizens, Memorial Day is also a time for motorcycles. This time each year, hundreds of thousands of bikers descend on the city for Rolling Thunder, to honor veterans and prisoners of war. But this year will be the event’s last, sadly—even the Harley-riding, leather vest-wearing bikers have surrendered to Washington’s red tape and traffic nightmares. So this weekend, we’ll be reveling in one more (very, very noisy) running of the Hogs.

Happy Memorial Day!


THIS WEEK IN HEALTHCARE

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

The White House is preparing to blow the lid off healthcare prices

The Wall Street Journal reported Friday that President Trump is planning to issue an Executive Order, as soon as next week, that will force hospitals, insurers, and others in the healthcare industry to reveal their privately-negotiated prices for services. As part of its ongoing campaign to increase price transparency, the White House has been working on a plan for months that would give consumers their first look into the secret discounts that hospitals, doctors and insurance companies negotiate with each other. According to the Journal, the plan envisions using authority given to the Executive branch under a number of different laws, including the Affordable Care Act (ACA) and the Employee Retirement Income Security Act (ERISA), to force full provider price disclosure. The executive order is also expected to mandate greater antitrust scrutiny of consolidation among hospitals and health systems. Although industry groups are expected to strongly oppose the planned order, it would bear the force of law and comes at the same time that bipartisan forces are aligning around the need to address high healthcare prices and their impact on individual consumers. We’ll know more details when the Executive Order is announced, but it’s clear that the Trump administration views expanding price transparency and combating the rising out-of-pocket cost of healthcare as a potent political issue, and one that can mobilize voters in their favor in the upcoming elections. The devil will be in the details, but we believe increasing transparency in healthcare can only be a good thing in the long run, and is likely inevitable given the enormous cost challenges our country faces.

Sweeping new legislation to address healthcare costs

Meanwhile on Capitol Hill, Sens. Lamar Alexander (R-TN) and Patty Murray (D-WA) released a detailed discussion draft of sweeping new bipartisan legislation to address the rising cost of care. The “Lower Health Care Costs Act of 2019”, introduced by Alexander and Murray, who are chairman and ranking member of the Senate Health, Education, Labor and Pensions (HELP) Committee, respectively, is a massive bill that addresses a range of topics including surprise medical billing, cost and quality transparency, prescription drug pricing, vaccine hesitancy, maternal mortality, and more. To address the hot-button issue of surprise billing, the bill would rely on a mechanism known as “network matching”, which makes hospitals responsible for ensuring that emergency and ancillary physicians who deliver care to their patients participate in the same insurance networks as the facility itself, and limits patient financial responsibility to the in-network rates for those services. Hospitals and insurers would also be required to give consumers a good-faith estimate of expected out-of-pocket costs for services on 48 hours’ notice. On prescription drugs, the plan would ban so-called “spread pricing” by pharmacy benefit managers (PBMs) and would require PBMs to pass 100 percent of the rebates they negotiate along to their clients. The bill would also mandate the creation of a national, all-payer claims database, administered by a newly-created nonprofit entity, to enable greater transparency into healthcare costs and quality. A similar bipartisan bill is being drafted by Senate Finance Committee chairman Chuck Grassley (R-IA) and ranking member Ron Wyden (D-OR), and the two bills could eventually be merged. Sen. Alexander announced his intention to work toward a vote on the bill by the full Senate by July. There is growing bipartisan consensus around the need to address the issues of surprise billing, drug costs, and transparency, and we wouldn’t be surprised to see much of this legislation enacted this year.

The staggering burden of healthcare spending on households

new report from the Commonwealth Fund released this week lends support to the growing national focus on out-of-pocket healthcare spending. The report examines spending by individuals and families covered by employer-sponsored insurance, a group which includes 158M Americans. According to the report, the median household with employer-sponsored insurance spends $2,200 on employee premium contributions, and another $800 on out-of-pocket costs for healthcare goods and services not fully paid for by insurance. Those numbers vary widely across households and from state to state, however: households in the 90th percentile of spending pay $8,000 in premium, and $5,000 in out-of-pocket costs; those in the West have relatively high out-of-pocket costs compared to household income, while people in the South have both high premium and out-of-pocket spending relative to income. In six states, meanwhile (Maine, Connecticut, Minnesota, Nebraska, New Hampshire and South Dakota), median combined spending on premium and out-of-pocket costs was in excess of $5,000. In comparison, median household income in the US is $57,652 according to the Census Bureau. And a recent report on household economic well-being from the Federal Reserve indicates that 40 percent of Americans would have difficulty covering an unexpected expense of $400 or more. According to that same report, in 2018, 24 percent of Americans went without some form of medical care due to inability to pay. Little wonder that the White House, Congress, and policymakers from across the political spectrum are increasing scrutiny on the cost of care and proposing aggressive new measures to confront the issue.


GRAPHIC OF THE WEEK

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

Where do we spend our personal healthcare dollars?

Beyond the eye-popping data on how much individuals and households spend on healthcare each year, it’s helpful to dig a little deeper to understand where all those dollars are going—where are individuals spending their copays and deductibles, and all the other money we pay for health? As we continue to play with the excellent interactive tools created by the Peterson-Kaiser Health System Tracker project, we’ve tried to find some answers. The graphic below is a start. Here, we compare data on aggregate national healthcare expenditures since 2000—excluding public and private spending on health insurance itself (and associated spending on taxes to pay for public insurance) but focusing just on direct spending on healthcare goods and services—with out-of-pocket spending over the same time period. Both have risen dramatically since the turn of the century; total spending is up over 150 percent, while out-of-pocket expenditures have risen more than 80 percent. Unsurprisingly, three big categories drive total national spending: hospitals, doctors, and drugs. Most of those expenses, however, are paid for via insurance, rather than directly out-of-pocket. The chart on the right shows where individuals spend their own money on healthcare. Hospitals make up a much smaller proportion of personal spending, while dental care and medical products (non-prescription drugs and supplies) account for a greater share of spending. Interestingly, physician services and prescription drugs still consume a significant share of personal spending—thanks to the copays, deductibles, and coinsurance built into most insurance plans. As the national conversation about “bending the cost curve” builds steam, it’s worth remembering that the chart on the left is interesting from a theoretical, policy-making perspective, but it’s the chart on the right that really matters to individuals—also known as voters.


THIS WEEK AT GIST—ON THE ROAD

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

Letting primary care physicians “stealth narrow” the network 

Lisa:
As employers have started to reach the limits of how much cost they can shift onto their employees, some have begun to look to narrow networks as an alternative solution to manage health spending. Recently we have seen the emergence of a new strategy to create narrow networks around a lower-cost “front end”: empowering primary care physicians (PCPs) to “stealth narrow” the network. At first blush, this may sound like the re-emergence of the gatekeeper model of the 1990s, but there are several key differences. The gatekeeper PCP worked inside a narrow network of a limited number of specialists, and a formal referral, conferring permission to see the specialist, was required. With stealth narrowing, the patient maintains access to a broad network of specialists. They are, however, encouraged to form a relationship with a PCP who has access to cost and quality performance data of area specialists—and incentives that support referring patients to “high-value” doctors. In our conversations, we’ve found several physician groups and payers deploying this strategy. Much of the savings from health plan-sponsored patient-centered medical home programs like that of Maryland-based CareFirst BlueCross BlueShield, have come from PCP-driven high-value referrals. The strategy is even more common in Medicare Advantage. And recently we spoke with Catalyst Health Network, an independent primary care network based in north Texas, which has seen strong interest from employers in contracting around this model. We’d predict continued growth in these types of strategies, allowing payers and employers to maintain the benefit of broad choice while delivering the savings of a narrow network built around empowered PCPs. Not surprising, it’s much easier and more palatable to let doctors narrow the network than for employers and payers to do it themselves.

The workforce implications of robotics and automation

Chas:
I had an interesting exchange with a health system CEO this week, in the course of a broader discussion about economic and demographic forces that will impact strategy over the next decade. His system has invested heavily in virtual care and has begun to make real strides in applying automation and artificial intelligence not only to clinical care delivery but also to key operational processes. Having glimpsed the potential for process automation to radically reduce staffing costs in areas like revenue cycle management, he’s begun to wonder about the larger implications for workforce development—both inside his organization and in the economy as a whole. Like many health systems, his organization not only provides care to the communities they serve, they also provide employment opportunities and job growth. What happens when large swaths of healthcare delivery become more automated—how will the system look to retrain those workers for other roles? One clear area of workforce need over the coming decades will be hands-on caregiving for an older, sicker population that wants to age in place. Health aides, home health workers, community social workers and so forth—will those roles ultimately be filled by workers from other parts of healthcare (and the economy beyond) who find themselves displaced by automation and robotics? Will the Amazon warehouse worker of today become the home care worker of tomorrow? The conversation was fascinating and made me realize that we’ve paid too little attention to two key issues. First, the tension between healthcare as a cost problem and healthcare as a source of job growth. And second, the redistribution of workers into roles that will require hands-on, human presence (like caregiving) in the midst of the coming wave of automation and robotics.


BINGE WATCH ALERT

We would’ve worked harder, but we watched this instead

Last week we shared some suggestions for shows to fill the dragon-shaped hole in your TV viewing schedule, and it was called to our attention that our three recommendations (spaceship battles, kung fu fighting, Wild West profanity) were all a bit…testosterone-y. Fair enough! We’ll make amends by offering up something completely different. Fleabag, the second season of which just launched on Amazon Prime, is one of the sharpest, funniest, best-written black comedies we’ve ever seen. Created for BBC Three by the English actor and writer Phoebe Waller-Bridge, the show tells the story of a 30-something single British woman navigating a tangled world of dating, sex, family, religion, and work in the wake of personal tragedy and loss. Across two compact, punchy, six-episode seasons, Waller-Bridge manages to turn her deeply-flawed, frantically-unstable title character into the viewer’s best friend and confidante. Supported by a stellar cast (The Favourite’s Olivia Coleman as the Machiavellian stepmother, Sherlock’s Andrew Scott as an impious family priest), Waller-Bridge brings the show to a satisfying and well-earned conclusion at the end of the new season, with no further episodes planned. The perfect Memorial Day binge, with not a laser beam or six-gun shooter in sight. Enjoy!


WHAT WE’RE READING

Stuff we read this week that made us think 

Google’s AI beats radiologists in spotting lung cancer 

An artificial intelligence (AI) algorithm developed by Google researchers outperformed seasoned radiologists in detecting cancerous lung nodules on computed tomography (CT) scans, according to a paper published this week in Nature Medicine. Google’s AI engineers trained a deep learning algorithm using more than 42,000 CT scans with known positive or negative lung nodules, then pitted the algorithm against six experienced radiologists. The AI outperformed all six doctors in accurate detection of malignant nodules, reducing false positives by 11 percent and false negatives by 5 percent. The study was hardly the first (or the most rigorous, or the largest) study to show AI’s promise in detecting lung cancer, but received wide coverage, likely due to Google’s role in spearheading the work. Despite a growing body of research showing AI’s promise in evaluating images to detect lung cancer, melanoma and other disease, much work remains to test the algorithms in real clinical settings, and ascertain the optimal workflow to maximize and integrate human and machine capabilities. Radiologists, pathologists and other doctors who spend much of their time analyzing images won’t be put out of business, but a future where diagnosis is driven by AI and managed by clinicians seems inevitable. Clinicians would be wise to embrace, rather than fight, the integration of technology, which will only be accelerated by the involvement of a tech giant like Google.

Report uncovers more dangerous safety lapses at a Houston hospital 

The results of a March survey of Houston-based Baylor St. Luke’s Medical by the Centers for Medicare & Medicaid Services (CMS) were made public this week, detailing shocking safety violations across the hospital. The issues noted in the 203-page report are cringe-worthy: failure to follow dialysis protocols leading to potentially fatal air bubbles in tubing; failure to properly clean transvaginal ultrasound probes between patients; retained objects during surgery; failure to administer ordered medication; sewage backup in the hospital kitchen. In sum, the report shows a lack of processes throughout the hospital to “ensure the staff always followed safety standards and learned from serious mistakes”. In an open letter, St. Luke’s CEO Doug Lawson vowed to “restore excellence”, and said actions to correct many of the lapses were already in place. This report is the latest in a string of challenges at the hospital, beginning with an investigation into the hospital’s cardiac surgery program last year through joint reporting by Houston Chronicle and ProPublica, resulting in loss of Medicare funding for its heart transplant program. Correcting the violations may be easier than regaining public trust, surely damaged after the depth and detail of the coverage of the safety issues. This saga highlights the importance of local journalism in holding healthcare institutions accountable and communicating safety and performance issues to the public.

Comcast jumps into home-based health monitoring

According to a CNBC scoop, Comcast is developing an in-home monitoring capability that will use a network of sensors to monitor a person’s basic health metrics, gathering information about issues like mobility, frequency of bathroom use, and fall detection. While the offering was initially described as Alexa-like, it will not be positioned as a communications or personal assistant tool, although it could make emergency calls. Comcast plans to pilot the service this year, with possible commercial launch in 2020. The company does not plan to market the technology directly to consumers, but rather through partnerships with insurers and hospitals, and is considering a shared-savings arrangement with providers.

Comcast joins tech behemoths like Apple, Google and Amazon in the home and personal health monitoring space, and at first blush might be expected to fall short of competitors in creating a user-friendly system that will be embraced by consumers—after all, who likes the cable company? But the company has been steadily building its healthcare acumen, redesigning employee health benefits and creating a joint venture with Philadelphia-based Independence Blue Cross. Cable providers have looked to grow by owning both entertainment content and the fiber-optic network, but a sharp uptick in “cord cutting” has disrupted that strategy. Home healthcare is diversification play that creates a new use for the existing fiber network. And the demise of net neutrality will give Comcast more control of who can access customers’ homes through that network, and for what purposes—potentially setting up a battle for home health monitoring between companies that provide care and those who manage the flow of information in and out of the home.


Thanks for joining us for this week’s edition of the Weekly Gist. We love writing it, and we hope you love reading it, too. Let us know—hearing your feedback and guidance is always the highlight of our week. And if you can, please consider forwarding it to a friend or colleague, and encouraging them to subscribe as well.

As always, if there’s anything we can do to be of assistance in your work, we hope you’ll let us know. You’re making healthcare better—we want to help!

Happy Memorial Day!

Best regards,

Chas Roades
Co-Founder and CEO
chas@gisthealthcare.com

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