THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
- Walmart reportedly exploring purchase of ChenMed. Bloomberg reported this week that retail behemoth Walmart has engaged in talks to acquire a majority stake in ChenMed, a closely held value-based primary care company based in Miami, FL. The deal would significantly expand Walmart’s primary care footprint and capabilities, adding to the 39 Walmart Health centers slated to be in operation by the end of this year. ChenMed, which operates 120+ clinics across 15 states, delivers primary care to complex Medicare Advantage beneficiaries, taking risk for the total cost of care, and has grown its membership by 36 percent annually across the last decade. It has remained privately owned by the Chen family, but recently revamped its leadership structure and tapped UnitedHealth Group (UHG) veteran Steve Nelson to run operations. ChenMed has an expected value of several billion dollars, a price that could be driven upwards if other bidders express interest. Bloomberg’s sources emphasized that the deal could still be weeks away and that no terms have been finalized.
The Gist: Should this purchase go through, it might change Walmart’s status as a “sleeping giant” in healthcare. ChenMed’s primary care model and strong foothold in the Southeast would dovetail with Walmart’s store clinic footprint and its 10-year partnership with UHG to drive value-based care adoption in that region. With ChenMed competitors Oak Street, One Medical, and VillageMD now backed or owned by some of Walmart’s biggest competitors, Walmart may view ChenMed as its best opportunity to scale its primary care footprint through a large acquisition. However, much of ChenMed’s success to date has been attributed to its strong culture and track record of physician recruitment and retention—something a large company like Walmart may have challenges preserving.
- Intermountain and UPMC switching from Oracle Cerner to Epic. Two of the nation’s largest nonprofit health systems, Salt Lake City, UT-based Intermountain Healthcare and Pittsburgh, PA-based UPMC, have recently announced plans to end their electronic health record (EHR) contracts with Oracle Cerner and transition, enterprise-wide, to Epic. Intermountain, which operates 33 hospitals across seven states, plans to integrate Epic’s EHR into all of its facilities by 2025; its legacy SCL Health hospitals in Colorado and Montana already use Epic. UPMC, which operates 40 hospitals in three states, has set mid-2026 as the target for consolidating its nine EHRs into a single platform with Epic. It has been using Oracle Cerner in inpatient settings and Epic for ambulatory care. Both systems cited provider feedback and a desire to simplify patient record-keeping as key reasons behind their decisions to switch.
The Gist: With two more marquee health systems jumping ship for Epic, Oracle Cerner faces a steeper battle to maintain a foothold with health systems and may need to rethink its target market and value proposition. Cerner initially appealed to large, progressive, value-oriented systems with highly customizable offerings, but over the years the resulting “Franken-Cerner” systems (as one CIO put it) became hard to maintain and scale. Meanwhile, Epic continues to grow its lead in the domestic EHR market: it now covers roughly half of acute-care beds in the US and holds records on 78 percent of US patients. Sitting on troves of health data, Epic is also well-positioned to become a leader in the rollout of next-generation healthcare AI, which it has already set in motion through its partnership with Microsoft.
- FDA approves updated COVID vaccines. On Monday, the Food and Drug Administration authorized new COVID vaccines from Moderna and Pfizer-BioNTech, and the Centers for Disease Control and Prevention followed Tuesday by recommending the shots be given as a single dose for most people five years of age and older. Children older than six months but younger than five, as well as completely unvaccinated people of any age, may be eligible for multiple doses. These vaccines were formulated to target the XBB.1.5. variant, which was the dominant strain in January but has since receded, although initial results suggest they remain effective against all currently circulating variants. Pharmacies and healthcare providers are expected to have the updated vaccines available by early next week.
The Gist: Due to the end of the COVID public health emergency in May, this COVID vaccination campaign will be the first not directly bankrolled by the federal government.While insurers are still required to cover vaccinations without cost-sharing, the uninsured may find free shots, which the Biden administration says it will still provide at certain locations, harder to access. Unlike past COVID boosters, reframing this shot as an annual vaccine that patients receive along with their flu shots should help with the rollout, as around 50 percent of Americans got a flu shot in 2022 while only 17 percent received the bivalent COVID booster. With COVID cases and hospitalizations currently rising, promoting widespread uptake is critical to dampening a likely winter COVID spike. However, public health officials will have to overcome many Americans’ wearied indifference toward COVID to motivate them to get vaccinated.
Plus—what we’ve been reading.
- Private equity could worsen cardiology’s overutilization problem. An article published this week in Stat documents private equity’s move into the cardiovascular space. There’s reason to suspect private equity ownership could exacerbate cardiology’s overuse problem, according to several cardiologists and researchers. Studies has found private equity acquisition results in more patients, more visits per patient, and higher charges. Outpatient atherectomies have become a poster child for overutilization, with the volume billed to Medicare more than doubling from 2011-2021.
The Gist: Fueled by the growing number of states allowing outpatient cardiac catheterization, all signs point to cardiovascular practices being the next specialty courted for PE rollups. However, the service line brings more complexities to deal structure and future returns than recent targets like dermatology and orthopedics. Heart and vascular groups are more heterogeneous, and less profitable medical management of conditions like congestive heart failure accounts for a greater portion of patient volume. Much more of the medical group business is intertwined with inpatient care and, unlike other proceduralists, around 80 percent of cardiologists are already employed by health systems. While that doesn’t mean health systems are safe from cardiologists seceding for the promise of PE windfalls, the closer PE firms get to the “heart” of medicine, the more they’ll find their standard playbook at odds with the broad spectrum of care that cardiovascular specialists provide—and the more they’ll find that partnering with local hospitals will be non-negotiable to maintain the book of business.