September 27, 2019

The Weekly Gist: The Secret Schemes Revealed Edition

by Chas Roades and Lisa Bielamowicz MD

It was a hectic week in Washington, full of late-night phone calls, frantic exchange of electronic documents, last minute consultations with legal counsel, and a nerve-wracking, behind-the-scenes effort to prepare for a high-profile public appearance. That’s right, we’ve launched our new-and-improved website at! What, was something else going on this week?

Kidding aside, we’d love for you to take our updated site for a spin: check out our Weekly Gist archives, have a look at our member services, meet our growing team, and browse our job openings. You can even get more information about how to subscribe to our new podcast, Gist Healthcare Daily. What are you waiting for? Clickety-click already! Don’t worry, Anderson Cooper and Sean Hannity won’t go anywhere.


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

A busy week for the usual suspects

On Tuesday, in a long-anticipated move that could signal its future healthcare intentions, online retailer Amazon launched a new telemedicine and home visit service for its Seattle-area employees called For area employees who get their health coverage through Amazon (except, interestingly, those who are covered by Kaiser Permanente plans), the service offers no-charge telemedicine visits, in-home follow-up care from nurse practitioners, and home delivery of prescription drugs. Given that the service is only available to certain Amazon employees and their family members, it’s not clear why the company launched a public-facing website touting the new service, other than to test the waters across the broader industry for reactions to its pilot program. Although it appears on its face to be little more than a new virtual care and home visit benefit for employees (something many other firms offer), industry reaction was breathless, with many observers hailing the move as just the first step in the e-commerce giant’s inevitable disruption of American healthcare.

To our minds, more significant this week were two new steps taken by the planet’s largest retailer, Walmart, to lay the foundations for its imminent bid to remake our industry. Coming hard on the heels of this month’s unveiling of Walmart Health, a new clinic pilot in Dallas, GA, Walmart announced this week that it plans to offer discounted “bundles” of healthcare services to members of its Sam’s Club discount warehouse stores. The bundles, which will be available to Sam’s Club members in North Carolina, Michigan and Pennsylvania, will include cut-rate dental care, generic medications, and—in partnership with Seattle, WA-based virtual care company 98point6—telemedicine. Walmart’s membership platform is the perfect channel to test new ways of meeting consumers’ healthcare needs, as it allows the retailer to leverage longitudinal consumer data (and loyalty) to understand care needs. Also notable is that a portion of the Sam’s Club offering relies on Walmart’s partnership with insurer Humana, with whom it has been rumored to be in takeover talks.

Also this week, Walmart announced a new employee benefit of its own—one that may telegraph its concerns about staffing its future buildout of healthcare offerings. As part of its employee educational benefit package, it now plans to offer its 1.5M employees access to a range of bachelor’s degree and job-training programs in healthcare disciplines, in partnership with a number of universities. True to form, Walmart’s employees will be able to take advantage of these training programs for the everyday low price of $1. We have long wondered how Walmart planned to solve its “McDonald’s Shrimp Sandwich” problem with respect to clinical labor. (Q: Why doesn’t McD’s offer shrimp sandwiches year-round in all its restaurants? A: There aren’t enough shrimp in the ocean.) Low-cost retraining of its existing workforce is a clever way to approach the problem, and likely signals that Walmart is looking ahead to the day—which we continue to believe will be the ultimate game-changer in healthcare—when it scales its healthcare offerings to become the US’s de facto “Copper Plan”.

Bernie Sanders wants to eliminate medical debt

This week, Presidential candidate Sen. Bernie Sanders (I-VT) unveiled details of his plan to have the federal government wipe away the $81B dollars in medical debt reported to credit agencies. Sanders plan would strengthen consumer protections, by limiting collection practices and restricting the types of assets that can be seized and wages that can be garnished. Sanders also proposed instructing the Internal Revenue Service to review the billing and collection practices of nonprofit hospitals to ensure they are in line with charitable standards and suggested taking action against those who are not. Medical debt is a serious problem for many in this country, including those with insurance. According to a study in Health Affairs about 16 percent of credit reports included medical bills in collections, and the problem is likely larger because the study didn’t include debt paid off through other means. At a recent campaign stop in Nevada, a man struggling with more than $100,000 in medical debt told Sanders that he was so desperate he had considered suicide. The newly-announced plan extends Sanders’s already aggressive proposals to move to a single-payer, Medicare for All coverage system, and is likely to further raise the ire of industry interests. Sanders hasn’t detailed exactly how he plans to pay for his plan, other than alluding to raising corporate taxes as one possible source of funding.

BCBS of North Carolina CEO resigns, Cambia merger put on hold

This week health insurers Blue Cross Blue Shield of North Carolina (BCBS-NC) and Cambia Health Solutions announced a suspension of their planned merger. The decision was prompted by news of the arrest of BCBS-NC CEO Dr. Patrick Conway, slated to become CEO of the combined organization, after an alcohol-related collision in June. Last week it was publicly revealed that Conway had been charged with driving under the influence and child abuse (his two young daughters were in the vehicle). While the BCBS-NC board initially said it supported Conway’s leadership and would keep him on as CEO, that support wavered as new details emerged across the week, suggesting that key details about the incident may have been withheld from the Board and raising questions of an internal cover-up. Facing pressure from the state’s insurance commissioner, Conway resigned late Wednesday.

Formerly Director of the Center for Medicare & Medicaid Innovation (CMMI), Conway had pursued an aggressive agenda centered on moving BCBS-NC’s provider contracts to value-based payment, which gained the health plan national attention and set the pace for statewide transformation. The plan’s proposed merger with Cambia would have combined the two progressive Blues plans around a shared agenda of value-based care. Conway’s exit leaves a leadership vacuum within BCBS-NC, and raises questions among providers in the state about whether the insurer’s value agenda will continue apace. It will also likely intensify recent scrutiny on the plan’s relationship with state officials, and whether BCBS-NC received an advantage in the state’s Medicaid contracting process, the subject of a lawsuit filed last week by rival Aetna. On a personal note, we are saddened by news of Conway’s difficulties, having known him personally and professionally for many years. We wish well in recovery and hope that his legacy of advocacy for healthcare improvement continues on, and that his individual challenges can serve as a teaching moment as well.


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

The self-reinforcing economics of Member Health

Last week we suggested there are multiple avenues to build a “Member Health” posture toward the market that don’t necessarily involve launching a fully-integrated, provider-sponsored health plan. One of the concerns we hear frequently from health system members is about the wisdom of moving too aggressively toward “owning lives” without an economic model in place that supports strategies to help manage those lives in a more cost-effective way—that way lies demand destruction, in the minds of many. Our view is that there’s a positive flywheel effect in building more consumer loyalty, even in the context of traditional fee-for-service economics, and that systems should start investing in Member Health strategies now.

The graphic below shows our logic. It has always made sense, even in fee-for-service, to focus on reducing cost of care and increasing efficiency in the “Event Health” business (the part of the system responsible for “doing things to people in places”)—lower cost produces higher margins. Passing some of those savings along to Members, however, can create a “performance advantage” for systems, whose services look relatively attractive to the market. That in turn provides the opportunity to turn consumer attraction into consumer loyalty, by investing in Member Health strategies (curation, navigation, membership services) that increase stickiness and keepage—encouraging consumers to stay with the system. That engenders a “volume advantage”—more patients returning for other services—which can increase the efficiency and quality outcomes of the Event Health business. Key to making the flywheel work: providing plentiful, convenient, appropriate access to care in all the channels patients are looking. All of which is to say, the better you do for patients, the more patients you’ll have a chance to care for, and the better you’ll do economically. Seems like a simple insight—after all, that’s how most of the rest of the economy works. Healthcare should be no different.


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

Disintermediating the doctor?

Over the past several weeks, I’ve had a handful of non-physician executives ask questions along the lines of, “How can we get our doctors to do [or support] X?”. The specifics of “X” matter less than the fact that it almost always relates to a change in practice. At the same time, a number of physicians have approached me with their own questions about managing change. Some examples: “How will we be able to control costs when patients demand imaging or tests, and will they just go somewhere else if I say no?” Or, “How can we be expected to change practice when it could mean I get paid less?” And, “Referring to patients as ‘consumers’ or ‘customers’ undermines the healing relationship between a physician and patient and demeans us both.”

Both sides are talking past each other. System leaders who view changing care models as “getting doctors to do something” rather than engaging and supporting physicians to lead and create new processes are set up to fail. And it’s concerning that a growing number of doctors seem to be adopting a victim mentality with respect to change. Moreover, I worry both are missing the larger picture of disruptors aiming to build radically different care models that depend very little on doctors. Walmart, CVS and Amazon rely almost entirely on nurses, advanced practice providers and other non-physician clinicians, supported by technology, in their new models of care. They’ve recognized that doctors can be slow to adapt to change, not to mention expensive, and are looking to create a care system that sidelines them as much as possible. It’s too early to tell whether these models will prove effective clinically (I’d bet they’ll be just fine for low-acuity needs) and in engaging consumers. But they underscore the need for doctors to work together to create lower cost, consumer-friendly care models. Patients benefit when doctors take a critical eye to new modes of care. But if our skepticism presents as an obstacle to change, we doctors risk being disintermediated from a growing portion of care and patients.

Into the matrix

This week a conversation with a regional health system CEO had me looking around for Morpheus and his red and blue pills. Describing the system’s efforts to hire a systemwide service line leader for oncology, a priority area for investment, he walked me through the matrix organizational structure the new service line chief would be part of, and as far as I could tell, this new leader will report to no fewer than four executives. The system has an academic anchor, so there will be faculty oversight; there’s an existing cancer center with its own leadership structure, and a collection of community-based oncology clinics jointly managed by the medical staff and facility leaders. And there’s also a system-level chief clinical officer who will have ultimate purview over the oncology strategy.

The intention is right—let’s bring in someone to pull together all of our cancer assets into a coherent, market-wide strategy for oncology. But pity the poor executive who steps into this matrix structure. Who’s in charge? Who is the ultimate decision maker? Matrix org structures are not unique to healthcare; indeed, they pervade corporate America, typically allowing organizations to manage products and functional areas in a more integrated way. Geography can add a third dimension to matrix structures, but healthcare’s byzantine tangle of physician governance and clinical oversight takes them to a new level of complexity. What’s most important is to identify where the buck stops—my own bias is to invest ultimate authority in a “product” leader, who’s responsible for the delivery of a high-quality, well-coordinated service offering to patients and consumers. As for the complexity behind the scenes? Best to give patients the blue pill and hope they never have to see or worry about it.


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

Fans of cloak-and-dagger intrigue will not want to miss The Spy, a new limited-series release on Netflix. The six-episode series, set in the early 1960s in Israel and Syria, tells the real-life story of Mossad agent Eli Cohen, who infiltrated the highest levels of the Syrian military government by posing as a rich businessman and playboy. Cohen’s story is fascinating by itself, but what makes the tense thriller a must-watch is the unlikely performance of Sacha Baron Cohen—familiar to American audiences as Borat, Ali G, and the creator of last year’s gonzo-gotcha HBO series Who is America? Perhaps because of his chameleon-like ability to inhabit characters, Cohen proves masterful at portraying the double-life drama of the undercover Mossad agent, and much of the plot revolves around Eli Cohen’s personal struggle in reconciling his fierce loyalty to Israel with his invented identity in Damascus. The series was created by Israeli director Gideon Raff, who also created the show that was the basis for counterterrorism thriller Homeland, and he brings the same knife-edge pacing and atmosphere to this project. Noah Emmerich, who played the ill-fated Stan on The Americans, is a bit wooden as Cohen’s Mossad handler, but the period setting is absorbing and the espionage tradecraft very satisfying. Here’s hoping the series marks the start of a longer dramatic career for Sacha Baron Cohen, whose performance leaves no doubt that he has the chops to do much more than pratfall comedy.


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

Price Transparency: A Physician’s Perspective

New this week, Dr. Richard Hamrick, former Divisional Chief Medical Officer at HCA Healthcare, shares his thoughts on how physicians should factor cost and out-of-pocket patient spending into their decision-making on how to deliver care. He relates his own experiences as both a physician leader and patient and argues that doctors need much more visibility into the financial implications of their practice at the point of care. Check out Dr. Hamrick’s insights, and let us know your thoughts!


Stuff we read this week that made us think.

Taking stock of progress toward value

Boston-based health policy researcher Austin Frakt, who contributes to the New York Times’ excellent Upshot blog, is out with a typically excellent new column this week, providing a helpful “where are we now?” overview of the value-based payment movement in healthcare. Reviewing progress to date on the myriad programs launched in the wake of the Affordable Care Act to increase “value” in Medicare, and to encourage the broader adoption of value-oriented payment methods industry-wide, Frakt finds mixed success. He correctly points out that we have been over-generous in determining what counts as value-based payment (where a $3 penalty on $100 of payment counts as $103 of “value”) and underwhelming on measurement of actual value. (Do readmissions penalties work? It’s unclear, because we don’t know quite what to measure.) Frakt is a little more bullish on the results of bundled payment programs, which have produced measurable savings for Medicare, and optimistic about accountable care organizations (ACOs)—although more positive for physician-led ACOs than for those involving hospital providers. As ever, Frakt provides links to the most useful academic research and quotes from leaders in the field, such as his Harvard colleague Michael Chernew, who sums up the state of play nicely: “The successes [of value-based payment] are more like singles than home runs.” It’s clear we’re still feeling our way toward sustainable solutions.

For more on the successes and challenges of implementing ACOs and other value-based approaches from the perspective of an industry pioneer, don’t miss our podcast interview with Aledade Co-Founder and CEO Farzad Mostashari, MD in this coming Monday’s edition of Gist Healthcare Daily. Subscribe on Apple or Spotify, and tune in Monday morning (and every weekday)!

And you thought Saks Fifth Avenue was pricey

Look, we’re a small strategy firm with big ambitions and an audacious vision for changing healthcare, but even we know when our reach exceeds our grasp. Not so the consulting titan McKinsey & Company (full disclosure: Chas used to work there), which—in a first-of-its-kind move—today opened a new retail store in the Mall of America. That’s right, you can now buy underwear, perfume, and jewelry from the same outfit that sells you million-dollar advice on your merger strategy. Turns out that’s the point: the store is a testing ground for new consumer retail technologies that McKinsey’s clients are interested in trying on for size, including smart mirrors, contactless payment, virtual shopping carts, and the like. Per one McKinsey partner, the store (called “Modern Retail Collective”—maybe hire someone else for your branding engagements) will “unlock the power of multiple technologies working together to cultivate pioneering insights retailers need to transform their customer experience.” Yep, that sounds like them. So next time you’re strolling the largest mall in the country, once you’ve had your fill of Orange Julius and eyebrow threading, why not pop into the McKinsey store and check out their wares? Maybe you can borrow one of their watches and tell them what time it is! (Note to our friends at The Firm—we kid because we love.)

So ends another exciting week in healthcare. Thanks so much for taking time to read our recap, and letting us share our thoughts and observations with you. We’d love to hear what’s on your mind—send us your feedback and guidance, and don’t forget to share this (and our podcast!) with a friend or colleague and encourage them to subscribe as well.

Most importantly, 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

Lisa Bielamowicz, MD
Co-Founder and President