January 10, 2020

The Weekly Gist: The San Francisco Schadenfreude Edition

by Chas Roades and Lisa Bielamowicz MD

We’re back into the regular swing of things, with a full week of travel and a lot of healthcare news to keep track of! We love being out with our members, and we’re excited about the year ahead. Mercifully, we aren’t scheduled to be in San Francisco next week for the Big Ol’ Healthcare Conference, but our deepest sympathies are with those who’ll be checking into their $2,000/night hotel rooms this weekend—have fun! We’ll just be here, plugging away. Let us know how it goes.

THIS WEEK IN HEALTHCARE

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

One Medical prepares to go public

Fast out of the gates in 2020, One Medical became the first healthcare company to file for an initial public offering (IPO) last week. The “concierge-lite” primary care practice was founded in San Francisco in 2008, and has grown to 77 clinic locations across seven states and Washington, DC. It offers individual, subscription-based memberships to patients, as well as enterprise-level memberships for corporate clients, who then offer One Medical’s access-forward, consumer-friendly primary care services to their employees as part of their benefits package. Over time the company has shifted from the former model to the latter, and it now has over 6,000 corporate clients, from which it derives the bulk of its membership fees. More recently, the company has launched partnerships with traditional health systems, including AdvocateAurora Health, Providence, and UC San Diego. Despite touting itself as a technology-driven company with software-as-a-service (SaaS) revenue characteristics, the company’s IPO filing indicates that the vast majority of its revenue comes from traditional fee-for-service billings, raising questions about its ability to earn a market valuation in line with other “health tech” companies. We are huge fans of One Medical’s service offering, which we’ve had the opportunity to experience both as researchers and as patients. But we wonder whether One Medical can continue to grow revenue and earnings at a pace that will satisfy the public markets, given that at its core, it remains firmly rooted in traditional primary care practice economics. Its future success will hinge on its ability to deliver a lower total cost of care to the employer market, for which it will eventually need to show that it can reduce “downstream” specialty and hospital costs by managing utilization and referrals, not just providing a better primary care clinic experience. Stay tuned.

A Brand New Day for Bright Health

Bright Health, the Minneapolis, MN-based insurance startup that offers individual market and Medicare Advantage (MA) plans in 12 states, added a 13th to its footprint this week by acquiring the Southern California MA plan Brand New Day. It’s the first time Bright Health has entered a new market via acquisition, spending some of the $635M it raised in its latest round of funding. Brand New Day brings Bright an additional 41,000 enrollees, mostly in Medicare plans, and provides it an opportunity to pursue its narrow-network strategy of partnering with local health systems in the crowded Los Angeles and Orange County markets. By seeking such exclusive partnerships, Bright aims to offer lower premiums and reduce care costs through tighter coordination and integration, a strategy it has rolled out in New York, Chicago, Denver, Phoenix, and other metropolitan markets. With over 200,000 covered lives, Bright is one of a handful of venture capital-funded insurance startups rolling out across the country, including OscarClover, and Devoted Health, all of which have targeted the lucrative MA space for growth. Bright is the first of this group to make a health plan acquisition, which may prove a more effective way to enter a crowded market with high MA penetration, versus an organic launch.

Given the unique structure of the Southern California insurance market, which is dominated by Kaiser Permanente but also populated by a number of risk-bearing, MA-focused physician groups, it will be interesting to see how Bright intends to grow the footprint of Brand New Day in the market, and in particular whether it follows its playbook of identifying a health system “care partner” for the 2021 enrollment season. (Southern California is also a top target for UnitedHealth Group’s integrated strategy, where it’s bringing together its Optum-owned physician assets with its commercial insurance platform in a new product it calls “Harmony”.) We’re bullish on Bright’s partner model, and keen to see how this latest evolution unfolds.

More people are surviving cancer, but can we afford it?

Cancer death rates saw the sharpest one-year decline ever measured, dropping 2.2 percent from 2016 to 2017, according to data published this week by the American Cancer Society. Cancer death rates peaked in 1991 and have continued to fall steadily since, translating to 2.9M fewer cancer deaths compared to the number if peak death rates had persisted. Long-term gains resulted primarily from declines in breast, colorectal, lung and prostate cancers. Last year’s progress was largely the result of novel therapies for lung cancer and metastatic melanoma. Both classes of treatments are effective but are extremely expensive and highly customized. However, progress in breast and colorectal cancers has stalled, largely due to racial and geographic disparities, and the continued rise in obesity. This contrast sets up a dilemma for researchers and policymakers: can we continue to afford skyrocketing prices for personalized genomics and immunotherapies, which seem to be the primary treatment targets for many cancers? And how do we balance that against the need to bolster public health efforts that could save thousands of lives through prevention and early diagnosis?


GRAPHIC OF THE WEEK

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

How are “Big Tech” companies working with health systems?

Over the past few years, Big Tech companies have been beefing up their healthcare strategies as the $3.6T US healthcare industry offers them seemingly limitless opportunities. With no shortage of news headlines announcing these companies’ acquisitions, new hires, and pilots with incumbent providers in the healthcare space, we wanted to step back and take stock of their main areas of focus. The graphic below illustrates where Google/Alphabet, Microsoft, Apple, and Amazon are currently pursuing early partnerships with health systems. Google, Microsoft, and Amazon are competing head-to-head in the world of cloud-based data aggregation, both to meet current health system needs for data storage and to access the volume of clinical data needed to develop machine learning algorithms and new artificial intelligence software to improve diagnostics and manage patient care. They are also developing nearer-term applications like virtual scribes and chatbots to improve clinical operations and workflow. Apple, on the other hand, has been focusing on leveraging consumer devices for patient monitoring and data collection—and has now begun working with health systems to integrate this patient-generated data into the EHR. Amazon and Google are also making plays for this space, the latter aided by its recent acquisition of Fitbit. Though health systems are increasingly interested in partnering with Big Tech, consumers remain wary—a recent Rock Health survey found only 11 percent of consumers were willing to share their health data with a tech company. Providers who enter into these partnerships should be as transparent as possible with their patients about how personal data is being stored and used.


THIS WEEK AT GIST—ON THE ROAD

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

Yes, mamas, do let your babies grow up to be doctors

Lisa:
At three recent presentations to mostly physician audiences, I’ve had doctors approach me afterwards and ask versions of the same question: “Given everything you just talked about, would you still encourage your son or daughter to go into medicine?” When I interviewed at medical schools in the 90s, I remember being asked whether I had any family members who were doctors—the implicit message being that you couldn’t understand the lifelong commitment and effort needed to be a successful doctor unless you had personally experienced it through a family member. Now it seems a growing number of practicing doctors are questioning whether they should steer their children toward another career path. Mid-career physicians have experienced an unprecedented amount of change during their careers, and rightfully feel uncertain about what the future of practice may look like in a decade—and about the status of doctors both within the profession, and relative to other high-earning professionals. My answer: a resounding “yes”, qualified by the need to understand how the field is changing.

Here’s the guidance I give prospective med students: Medicine will provide a stable career and you will be well-compensated, but if money is your primary motivator, go elsewhere. It’s no longer a ticket to the country-club set. Training is long and exhausting, and you will at times be insanely jealous of your friends in law school, not to mention those at consulting firms. To enjoy it, or even just get through it, you must be motivated by a love of science and problem-solving, connecting with people, and taking care of patients. To make sure you are, spend time in a clinical setting as soon as you can. Be realistic about where the field is moving. Doctors are no longer the center of the care universe, but will lead and be part of care teams, and guided by technology. Seek out an understanding of healthcare business, policy and payment systems early to make an informed specialty choice. And most important: choose the lowest-cost training path possible—less debt means more career options. My 14-year-old son is empathetic, bright, loves science and building things with his hands. He thinks he might want to be a surgeon. Would I tell him to go down that long, hard path? If he’s clear-eyed about the work and the tradeoffs, absolutely.

Zooming through an urgent care visit

Chas:
Despite having spent more than two decades working in the healthcare arena, I’m a self-confessed wimp when it comes to actually going to the doctor when I’m sick. But even I recognize when medical attention is warranted, and when a Google search of my symptoms this week said that all signs pointed to kidney stones, I decided to get the professionals involved. As it happened, I was in Portland, OR, and remembered a case study institution we’d written about previously—the urgent care chain ZOOM+Care. After a splashy but rocky start, the consumer-friendly company was acquired about a year ago by Vancouver, WA-based PeaceHealth, and it’s now going strong, with more than 40 locations across Oregon and Washington State. I’m pleased to report that the care experience was exceptional—starting with convenient locations, OpenTable-style scheduling, and a robust app that allowed me to pay my bill and get my labs and visit notes. The clinic itself was billed as their “Super Clinic”—meaning that it’s closer to a freestanding ED than a true urgent care, with extended hours, onsite labs, pharmacy, and imaging. I was in and out in 90 minutes, including a full run of blood work, ultrasound, and physical examination (which confirmed Google’s diagnosis). I was struck by the careful choreography of the clinical staff—all of whom were constantly communicating with each other via earpieces, and with me about what they were doing and what to expect. The facility itself was nice, but I wouldn’t describe it as luxe; rather, what made the experience sing was the efficiency of the process itself, along with the thoughtful integration of a digital front end (scheduling and copay) and back end (billing, clinical notes, and even a chat function to allow free follow-up for seven days). And the price was reasonable, and definitely far lower than if I had ventured into a local hospital emergency department instead. Having spent endless hours at various urgent care clinics with my kids over the years, I have never seen a more user-friendly offering. If you’re ever in the Pacific Northwest, and feeling under the weather, I highly recommend it!


THIS WEEK AT GIST—ON THE PODCAST

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

Apologies to those who were looking forward to our podcast discussion of trends to watch for in 2020—we intended to record it on Monday in Portland, but the health gods had other plans (see above). We’ll try to make time in the studio in the coming weeks, schedule permitting. Such is life on the road!

In next Monday’s episode, we’ll be talking to the outgoing CEO of Boise, ID-based St. Luke’s Health System. Dr. David Pate reflects on his decade of leadership, where he’s guided St. Luke’s through an aggressive transition to value. Dr. Pate is a true thought leader, as well as a health system executive (and fellow blogger!), and you won’t want to miss this conversation. Tune in Monday to hear what’s on his mind.

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


BINGE WATCH ALERT

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

Did Santa bring you a shiny new piece of Apple hardware this year? If so, you might already have discovered that you’re eligible for a year of free access to Apple TV+, the new streaming service launched last fall by the Cupertino fruit company. Once you’ve moved past the tentpole drama The Morning Show, a mediocre mélange of big star talent and on-the-nose storyline, may we suggest you make time to check out one of the minor offerings from Apple’s TV studio: Dickinson. It’s a quirky, anachronistic coming-of-age series about the enigmatic poet Emily Dickinson, done in period costume and setting but with a thoroughly modern sensibility. As in: a hip hop soundtrack, moody teens, lots of current slang (“A romantic Italian villa—so pimp!”), and a steamy, illicit romance between Emily and her soon-to-be sister-in-law. Plus Wiz Khalifa. Hailee Steinfeld is a standout at the titular poetess, and the show’s winking modernity works to reinforce the themes showrunner Alena Smith is trying to tee up—the role of women in society, the nature of family, the sources of artistic inspiration—without seeming artificial or too cute. It’s a fun, ten-episode romp, and a refreshing palate cleanser after the over-produced, self-serious content Apple’s also offering up. (Thank goodness the service is free, for now.) Check out Dickenson while you can!


WHAT WE’RE READING

Stuff we read this week that made us think.

A new study raises serious doubts about “hotspotting”

Focusing on “superutlizers”—complex and costly patients who use healthcare services at a very high rate—is one of the few approaches in population health management considered settled practice. A new study published this week in NEJM questions the efficacy of that model, by examining the work of the New Jersey-based Camden Coalition of Healthcare Providers, who were the pioneers of the “hotspotting” model of intensive care management to prevent rehospitalization for high-cost, at-risk patients. Researchers found no difference in 180-day readmission rates or cost of inpatient care (the primary goals of the Camden program) between intervention and control patients.

Although these findings are undoubtedly a blow to the many clinicians and leaders who have replicated the model across the country, the study provides helpful guidance on how to continue to hone care management. Previous work has shown that these kinds of interventions work well for complex Medicare patients, but Camden’s patients were younger, requiring a solution more oriented toward social needs. And many of the highest-cost patients often won’t be high-cost forever, as cost of care will regress to the mean regardless of intervention, particularly for younger patients. Also, the study didn’t evaluate whether the interventions improved a patient’s quality of life—which in many cases, they undoubtedly did. Dr. Jeffrey Brenner, founder of the Camden Coalition, discussed his reaction to the study: “It’s my life’s work, so of course you’re upset and sad, but this is the messy thing about science. Sometimes things work the way you want them to do, and sometimes they don’t.” Kudos to Camden Coalition leaders, who participated in the study design and execution to rigorously examine their work, rather than coasting on their intuition and (well-deserved) reputation.

(To hear more of the conversation with Dr. Brenner and the Camden team, check out the most recent episode of reporter Dan Gorenstein’s Tradeoffs podcast. It’s a great listen!)

Calling bundled payment strategy into question 

While many, from the Trump administration to large employers like Walmart and Lowe’s, have worked to implement bundled payments to reduce costs and improve quality, two new studies in Health Affairs this week question the model’s potential to achieve these goals for Medicare patients. A meta-analysis of 20 studies published between 2016 and 2019 on the Acute Care Episode (ACE) Demonstration, the Bundled Payments for Care Improvement (BPCI), and the Comprehensive Care for Joint Replacement (CCJR) program found bundled payments for knee and hip replacement surgeries were the only models that saved Medicare money. Researchers found no evidence that bundled payments were associated with any changes in patient outcomes, or the quality and volume of care. In a separate study investigators found Medicare’s voluntary bundled payment program for hip and knee replacements reduced spending by 1.6 percent—lower than previously estimated—with no difference in quality. Study authors point to the fact that lower extremity joint replacement patients tend to be younger, healthier, and more affluent, and that these surgical episodes don’t require the lifestyle behavior changes required by other diagnoses or procedures to generate cost savings success.

These continued lukewarm outcomes, coupled with the mandate for bundled payments in Medicare to move to downside risk, are causing more hospitals and doctors to question the model. But as we’ve written previously, bundled payments bring benefits beyond short-term cost management. Bundled payments can provide a platform to better align with providers, particularly specialists, around service line performance. And most importantly, providers must develop the capability to build and deliver efficient care episodes for consumers, even if complexity prevents bundled payments (in their current form) from being a long-term solution to reducing healthcare costs.


And so begins another year. We’re looking forward to sharing our thoughts and perspectives with you in 2020, and we hope you’ll return the favor and let us know what’s on your mind, too. We love hearing your feedback, guidance, and suggestions for the Weekly Gist! Don’t forget to share this with a friend or colleague and encourage them to subscribe (and listen to our podcast!).

Most importantly, 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
chas@gisthealthcare.com

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

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