|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
Walgreens launches a new digital care marketplace
This week, Walgreens launched a new digital marketplace of care providers called Find Care Now, available online and through its popular mobile app. The marketplace provides a way for Walgreens customers to find low-cost, convenient alternatives to traditional physician and hospital visits, including a number of telemedicine options, and provides easy-to-understand information on pricing and availability of those services, customized to each user’s local geography.
At launch, 17 care partners were participating in the Walgreens marketplace, including MDLive (telemedicine), Heal.com (on-demand home visits), UnitedHealth Group’s MedExpress (urgent care), and New York-Presbyterian Hospital’s Second Opinion service. Also included, depending on location, are clinics from a range of traditional providers who have partnered with Walgreens, including Advocate Aurora Health (Chicago), SSM Health (St. Louis), Baptist Health (Jacksonville), and Piedmont Healthcare (Atlanta). The marketplace is a significant addition to Walgreens’s mobile app, which already provides the ability to refill prescriptions, print photos, and receive shopping discounts, and is one of the most popular retail apps in the US, with over 50M downloads and 5M active monthly users.
Walgreens is facing a fierce competitive landscape, with its closest rival CVS Health pursuing a merger with insurer Aetna, intended to build on its popular Minute Clinics to create a fully-integrated care platform for consumers. Further pressure is coming from the online retailer Amazon, which is moving closer to the pharmacy space with its recent acquisition of online pharmacy provider PillPack. Several years ago, Walgreens was viewed as the leader among retail chains in moving toward a new vision of healthcare delivery, launching several accountable care pilots with partner organizations. But following the chain’s merger in late 2014 with Alliance Boots, Walgreens pulled back from that strategy, and has since been viewed as lagging rival CVS in the drive to innovate retail pharmacy’s role in the new landscape.
As consumerism continues to take hold in healthcare, however, Walgreens’s new play toward digital health and transparent pricing is a compelling alternative in an increasingly crowded convenient-care space. Particularly interesting is the “non-insurance” pricing offered by its marketplace partners: $99 for a doctor house call; $59 for a telemedicine visit or dermatology consult; $99 for an online therapist visit, and so forth. This “marketplace” strategy echoes Amazon’s approach to curating a range of vendor options for consumers, mediated through its own online platform—an alternative to “owning it all” that may prove successful for Walgreens as it tries to keep pace with its aggressive competitors.
Centene and Ascension announce a new Medicare partnership
This week St. Louis, MO-based Ascension, a Catholic health system which operates more than 150 hospitals across 17 states, announced plans to form a joint venture with Centene Corp., a Clayton, MO-based insurer that operates health plans largely targeted at low-income enrollees in 20 states. The new venture will offer Medicare Advantage plans in the two companies’ overlapping markets (of which there are 13—including NY, TX, IL, and FL) starting in 2020. Centene derives most of its revenue from its Medicaid plans, but has previously stated an intention to grow its Medicare book of business from a current 9 percent of revenue to 20 percent in coming years. The venture plans to target lower-income seniors, leveraging Ascension’s provider platform to manage care for those enrollees, whose care needs are generally more complex and costly.
With Centene looking to grow its presence in the burgeoning Medicare Advantage marketplace, which is forecasted to grow from 35 to 50 percent of all Medicare enrollees over the next five years, the deal with Ascension signals a willingness to partner with, rather than compete directly against, established providers in markets it targets for expansion. While UnitedHealth Group and Humana have both pursued aggressive employment and direct contracting strategies to tie up physicians and other delivery assets, Centene has declared that it intends to pursue a different approach. Although it recently acquired a physician group in Miami-Dade County, FL, that is not Centene’s preferred strategy, according to CEO Michael Nierdorff. “We’re not out there buying all the practices we can and the clinics that we can,” he stated on recent investor call. As provider organizations look for strategies to improve the economics of care for low-income patients, particularly in the Medicare and Medicaid populations, the Centene-Ascension venture could provide an alternative vision for how insurers and hospitals can work together to tackle that challenge.
A secret White House debate on the future of Obamacare
The New York Times reported this week that a debate has been going on between senior Trump administration healthcare officials and the White House over the possibility of allowing states to partially expand Medicaid coverage, but that the idea was rejected—at least until after the upcoming midterm elections—by the President himself. The proposal, supported by Secretary of Health and Human Services (HHS) Alex Azar and Centers for Medicare & Medicaid Services (CMS) Administrator Seema Verma, would have allowed so-called “non-expansion” states to opt for partial expansion for adults earning up to 100 percent of the federal poverty level, rather than the 138 percent envisioned by the Affordable Care Act (ACA).
Azar and Verma’s argument: with several “red states” (including Maine, Idaho, Utah and Nebraska) already moving toward full expansion via referendum, and Virginia’s legislature having approved full expansion, opening the door to partial expansion under a block-grant style Medicaid waiver could forestall additional state attempts to fully expand the program. Inside the White House, the proposal was opposed by budget director Mick Mulvaney, Treasury Secretary Steven Mnuchin, and others. According to internal memos obtained by the New York Times, the debate was halted last week by President Trump, who had been urged by Congressional conservatives to avoid taking any action on it until after the midterm elections for fear of being seen to compromise on Obamacare expansion.
The internal debate highlights the shifting politics surrounding Obamacare, and particularly Medicaid expansion. Having failed to fully “repeal and replace” the ACA via legislative action, the Trump administration has turned to regulatory approaches to modifying the law (such as this week’s new regulations governing short-term health plans), which has put HHS and CMS leaders in the position of “managing” the ACA, rather than simply opposing it. Meanwhile, as anti-Obamacare rhetoric begins to lose its potency as an electoral tool, state-level budgetary considerations have begun to drive the politics of Medicaid expansion. Outside of a few holdout states, we’d expect several other “red states” to explore options for expanding Medicaid, enabling them to take the relatively favorable terms offered by the ACA in order to reduce the numbers of uninsured residents, and the burden the uninsured place on states’ economies. While some Congressional Republicans may try to leverage Obamacare angst one more time at the ballot box this fall, the politics of healthcare are beginning to shift unfavorably for them, as voters increasingly look for positive solutions and not just oppositionist promises from candidates.
A Blues plan leader puts a stake in the ground on shared risk
Many health systems actively working to shift their commercial contracts toward value-based risk are often stymied by what we call the “Blue Wall”: market-dominant state Blue Cross Blue Shield (BCBS) plans who have little motivation to partner with providers and fear disrupting their highly profitable large and small-group businesses. We’ve seen little innovation from most BCBS plans, who seem content to ride out the current model as long as they can. One notable exception to watch: Dr. Patrick Conway, CEO of Blue Cross Blue Shield of North Carolina (BCBS-NC), has signaled that he intends to apply learning from his previous role as Director for the Center for Medicare & Medicaid Innovation (CMMI) to control costs in the commercial market. Speaking this week at the American Board of Internal Medicine Forum, Dr. Conway sent North Carolina health systems a strong message that he expects them to partner in this effort: “I will never give you a fee-for-service rate increase if you don’t go on the value-based healthcare journey with us.”
Conway has stated that in order to continue to receive annual rate increases, North Carolina health systems will need to enter shared-savings risk arrangements. While the specifics of the program have not been announced, it’s likely to be modeled on aspects of the Medicare accountable care organization (ACO) programs that were developed and implemented under Conway’s leadership at CMMI. He has also recruited other members of his former team to drive the effort, including former CMMI Deputy Director Dr. Rahul Rajkumar, hired last fall as Chief Medical Officer of BCBS-NC.
While we applaud Conway’s efforts to move the commercial insurance model toward value, it is far from a slam-dunk in delivering lower costs. As we’ve discussed in the blog, Medicare’s ACO program has yet to generate significant cost savings. Applying the Medicare model to the commercial population brings added complexities. Just a few to consider: are savings easily achievable in a heathier population where high-cost events drive much of the spending? How will the plan attribute commercial patients, who are less likely to regularly see a primary care provider? Conway’s ultimatum of “partner or else” will bring health systems to the table, but will it engender the collaboration and co-creation needed to develop a successful and sustainable model?
BCBS-NC is clearly serious about controlling rate increases: the plan also announced this week that they will lower rates for plans on the North Carolina exchange in 2019 by an average of 4.1 percent. To do so, they appear to be turning to traditional tactics of narrowing networks to exclude high-cost providers (in this case, Duke University Health System and WakeMed Health & Hospitals). The same market forces affecting provider profitability also threaten to disrupt the Blues’ perch atop the commercial market. Innovation is not an easy option for dominant Blues plans, as nearly all stand to lose market share as the commercial population ages into Medicare, and employer health benefits move toward defined contribution. Providers across the country should keep a close eye on the work of Dr. Conway and BCBS-NC—their success or failure could set path for other Blues plans as they evaluate provider partnerships.