September 20, 2019

The Weekly Gist: The Sleeveless Fleece Season Edition

by Chas Roades and Lisa Bielamowicz MD

It must be almost autumn! It was downright chilly in Washington this morning…so chilly we had to put on our sleeveless, logo-adorned, fleece “founder’s vests” to venture outside. Just kidding, we wouldn’t be caught dead in one of those! (Apologies to our colleagues in the tech world.) The closest we’ll come to showing off our startup swag is to brag on our podcast—have you heard it yet? We’ve already had hundreds of subscribers, and the buzz is building! Thanks so much for the early feedback and reviews. Don’t forget to spread the word: start every weekday morning with the latest news, analysis and comment on the world of healthcare business and policy, in 10 minutes or less. Gist-sized, for your listening pleasure! Subscribe and listen.

THIS WEEK IN HEALTHCARE

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

A new proposal to address the rising cost of drugs

House Speaker Nancy Pelosi (D-CA) revealed her plan to lower the cost of prescription drugs on Thursday. It would give the Secretary of Health and Human Services (HHS) the power to negotiate prices for as many as 250 medications a year for Medicare and extend those negotiated prices to the private market. The legislation includes fines as an enforcement measure if drug companies refuse to cooperate in negotiations. Pelosi’s proposal would also limit out-of-pocket drug spending for Medicare beneficiaries to $2,000. In a nod to President Trump’s own drug cost proposals, Pelosi’s plan includes a provision tying the maximum price for a drug to a multiple of what other countries pay for it. With that, Pelosi earned at least some initial buy-in from the White House in tweet form, with Trump saying he was glad to see her plan in addition to the one jointly proposed by Senator Chuck Grassley (R-IA) and Senator Ron Wyden (D-OR), and encouraging further bipartisan cooperation on the issue. Grassley, however, has struggled to get Republican support for his bill, which would penalize drug companies if they raise prices faster than inflation, which many in the GOP oppose on free market principles. The Grassley-Wyden plan also includes a cap on out-of-pocket spending for Medicare Part D beneficiaries, albeit one higher than Pelosi’s at $3,100. HHS Secretary Alex Azar has warned that giving his department the power to negotiate drug prices could backfire and end up leading to drug companies pulling back on innovation. The drug lobbying group Pharmaceutical Research and Manufacturers of America (PhRMA) concurs, calling Pelosi’s new plan “radical”, and saying it would upend the market-based system which allows for development of innovative, lifesaving medicines. The Trump administration’s efforts to address the high cost of drugs have been largely fruitless thus far: a federal judge struck down a rule which would have compelled drug companies to provide the list price of drugs in television ads, and the administration backed off its proposal to ban rebates paid by pharmacy benefits managers (PBMs) in Medicare and Medicaid. We continue to believe there is bipartisan interest in addressing drug costs in the runup to the 2020 election, and the issue may be one of the rare few where legislative action could be taken across the next year.

Introducing…Pete-care

Democratic Presidential candidate and South Bend, IN mayor Pete Buttigieg introduced his healthcare plan this week, calling it “Medicare for All Who Want It”. His plan emphasizes consumer choice and proposes a “public option” to create market competition by incentivizing private insurers to offer better plans to customers. Like former Vice President Joe Biden, whose plan is positioned as an expansion of the Affordable Care Act (ACA), Buttigieg’s proposal would auto-enroll low-income residents of states which haven’t expanded Medicaid. It would also increase subsidies to make ACA marketplace plans more affordable. Unlike other candidates, however, Buttigieg is targeting hospitals, along with insurers and drug companies, as contributors to the high cost of care. Similar to legislation currently being considered in Congress, his plan would set benchmarks for how much out-of-network providers could bill for procedures at in-network facilities and peg the allowable amount to twice the Medicare rate. Although this will surely not excite providers, it would likely result in less of a cut to hospital payment rates than would occur under Medicare for All (M4A) proposals. Buttigieg estimates his plan will cost $1.5T over a decade, a lot less than that of Senator Bernie Sanders (I-VT), whose plan is pegged at $30T over the same timeframe. He plans to pay for his plan through “cost savings” and corporate tax reform. Mayor Pete seems to be trying to appeal to both Democratic camps, those who like the ACA, as well as those who are intrigued by M4A but are skittish about abrupt change forcing people off their private coverage. Time will tell whether this more moderate approach will energize the Democratic base in next year’s primaries.

Federal judge strikes down CMS site-neutral payment rule

This week a DC federal court judge overturned the “site-neutral” payment rule the Centers for Medicare and Medicaid Services (CMS) put into place this year. U.S. District Court Judge Rosemary Collyer said CMS exceeded its authority when it cut the payment rate for clinic services at off-campus provider-based clinics. The industry fervently opposed the policy, which was expected to cost hospitals $760M in reimbursement this year. The judge said the process was the problem, not the rule itself. CMS may be correct, Collyer wrote, that “it is paying millions of taxpayer dollars for patients’ services at outpatient departments that could be provided at less expense in physician offices.” But she added, the agency can’t ignore the process of setting rates laid out by Congress and choose to lower reimbursements for only certain services by certain providers. Hospitals may be out the dollars they’ve lost on lower payments so far this year, as the judge did not rule that CMS must reimburse hospitals for those lost funds. Despite this win, it may be premature for hospitals to celebrate, as CMS is likely to appeal. And while the ruling may relieve pricing pressure in the short term, site-neutral payments have bipartisan support, and it’s likely their implementation is inevitable. Moreover, hospitals will still have to justify to the public why the same service costs more at hospital-owned practices than at independent ones, or run the risk of losing patients to lower-priced competitors.


GRAPHIC OF THE WEEK

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

Steps on the path to “Member Health”

As we work with health systems to think though the implications of moving to a “Member Health” model, which treats every consumer and patient the system touches as though they are a “member”, we constantly make the point that achieving that level of sustainable consumer loyalty does not necessarily require having a health plan or transforming the system into a Kaiser-like organization. What’s required is carefully identifying the levers that drive loyalty, and then building service offerings that reinforce those levers. We’ve used the graphic below to illustrate approaches to “Member Health” that don’t entail rolling out a fully-integrated, provider-sponsored health plan (although there’s no doubt that having a risk model can enhance many of these approaches). The options range from access-forward strategies that meet consumers in every channel and at every point they want to interact with the system (convenient locations, digital platforms, partnerships with retailers and others who have their own loyalty-driven programs), to membership-like offerings that may be as simple as bundled, easy-to-navigate clinical programs (think orthopedics or oncology) or as refined as membership-model direct primary care (alone or in partnership with one of the many innovative DPC companies now popping up everywhere). At the extreme, direct-to-employer relationships can even serve as “loyalty-based networks”, building sustained, ongoing relationships between the health system and employees of a partner organization. We’ve been cataloging examples of all of these approaches—many of them still in the pilot stage—and would be happy to share details if your system is working on these solutions as well.


THIS WEEK AT GIST—ON THE ROAD

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

Our addiction to hospital ranking “heroin”

Lisa:
I spent time this week with the physician leadership and board of the academic flagship hospital of a large health system. As you’d expect, a portion of their discussion on clinical quality performance centered on their rankings in the US News & World Report Best Hospital Rankings. Leaders drilled down into specific services and categories where they were ahead or behind compared to other academic and tertiary care providers in the market and celebrated a service line which had adopted specific tactics to improve their US News ranking, with great results. I understand why academic centers focus on these and similar rankings—they’re seemingly the most public representation of quality and brand. But we’re skeptical of the value and quality of the analyses. A recent study published by a  highly-respected group of researchers found serious flaws with the metrics and methodology of four major rating systems—none comes close to a “gold standard” for consumers or the industry. Moreover, several of the ratings companies host conferences and sell consulting services focused on improving your ranking, raising obvious questions about the integrity of their models. The health system’s CEO recognized that despite their frustration with the system, they also contribute to the problem: “We know these rankings are flawed, but we’re also part of the problem. We put the numbers on billboards. It’s like heroin for us—and we need to get off of it.” Systems would be better served to trumpet their own data and stories of quality and experience success—and actively support third parties who are working to create better methods to accurately measure and communicate the value of care.

Part-time doctors, full-time (or more) consumers

Chas:
I was talking to the Chief Clinical Officer of one of our members last week about their health system’s attempt to build a more consumer-friendly access model. Like many systems, they are fighting the battle of trying to convince their doctors to open up their schedules, to allow patients to set up appointments more easily by phone and online. The goal, as it is in many places, is to move to an “Open Table” approach to scheduling—to meet the rising access demands of consumers. Of course, they’re facing the usual opposition that many have encountered, with doctors reluctant to give up control of their calendars. (As we heard from one doctor recently, only partly tongue-in-cheek, “You can pry my schedule from my cold, dead hands.”) But the system is encountering another challenge as well. With demographic shifts in their physician workforce, they now have many more primary care doctors who are interested in work-life balance, and a growing number who are looking to work part-time. They’re not alone in facing this challenge—as a recent article in the New York Times discussed. This has added complexity to the challenge of creating open-access scheduling, particularly as the same demographic trend has engendered a new consumer who’s more interested in evening and weekend access that fits their busy lifestyles. Their solution? Set access standards for their physician practices, but let the doctors sort out who’s working when, and how to patch together consumer-friendly access across multiple physician work patterns. They’re off to a good start, and the doctors feel like their autonomy and preferences are being respected even as the system is trying to expand working hours overall. We’ll keep you posted on how it works out over time.


ON THE GIST TURNTABLE

Give this a spin, you might like it.

Just two albums into what was fast becoming a legendary career as the frontwoman of the blues-rock band Alabama Shakes, Brittany Howard put the group on indefinite hold and went back to the studio to record a solo album. Released today, Jaime, named after her late sister (who died of a rare form of eye cancer that also left Howard partially blind), is an intensely personal, extraordinarily powerful statement that makes a strong case for Howard as one of the most important voices on the music scene today. Bringing the full force of her whisper-to-a-scream vocal talents, combined with her Prince-like, guitar-hero funk, Howard bares her soul across eleven tracks that explore how poverty, racism, sexual politics, and religion have made her who she is. Howard takes us to church on the Paisley Park-tinged “He Loves Me”, worshiping a higher power who “still loves me when I’m smoking blunts/Loves me when I’m drinking too much”, and then gives us a new credo of brother-and-sisterly love on “13th Century Metal”, recited in a Morse code arrangement by the great jazz pianist Robert Glasper. For all the funk rock experimentation that threads through the album, the collection’s center of gravity is the acoustic soul number “Short and Sweet”, which Howard delivers with all the quiet precision and power of a Grace Jones ballad. It’s not clear if Howard will return to her work with the Shakes, especially after the critical acclaim her solo debut is likely to garner. Either way, listeners can look forward to years of great music to come from this soulful 30-year-old superstar. Best tracks: “History Repeats”; “Stay High”; “Goat Head”.


WHAT WE’RE READING

Stuff we read this week that made us think.

The healthcare arms race continues apace

Healthcare’s Hatfields and McCoys each got a fresh supply of ammunition this week, as dueling studies were released indicating that both health plan and hospital consolidation have reached new heights across the nation, with negative consequences for consumers. The Health Care Cost Institute (HCCI), which mines commercial and Medicare claims datasets for insights about the cost of care, released a report indicating that hospital consolidation in 72 percent of the metro areas it studied has now reached or exceeded the Justice Department’s benchmark of “highly concentrated”. The study by HCCI, which is partially funded by large insurers, also noted a positive correlation between high levels of hospital consolidation and higher cost of care. While neither finding is particularly newsworthy, the report is worth checking out if only for the interactive graphics used to illustrate the results. Among the most consolidated hospital markets: Springfield, MO; Peoria, IL; and Cape Coral, FL. Meanwhile, an update from the American Medical Association to its study on competition in health insurance markets shows that 75 percent of those are now “highly concentrated” as well, with 91 percent of markets having a single insurer with over 30 percent market share. Although high levels of insurer concentration might be expected to moderate the impact of hospital consolidation, lack of health insurance competition may also lead to higher premiums for employers and individuals. The least competitive states for insurance markets in 2018 were Alabama, Louisiana and Hawaii. There’s not a clear inverse correlation between hospital and insurance market consolidation: interestingly, the three markets flagged by the HCCI study as most consolidated on the hospital front were not among the least consolidated in the AMA study. Nevertheless, expect both sides to continue firing across each other’s bows in the ongoing battle of blame for the high cost of American healthcare.

The international perspective on physician compensation

We all know doctors in the US are paid more than physicians in other countries. A new report from Medscape comparing results from their physician compensation surveys in seven countries shows just how much: American doctors make an average of $313K per year, as compared to $163K in Germany and $138K in the United Kingdom, the next-highest countries. Gender disparities know no borders: female doctors make significantly less in every country, roughly 25% less than their male colleagues. But it turns out money may buy happiness. By far, US doctors are the most satisfied with their compensation. So why are our doctors paid so much more? The survey counters the idea that American doctors work significantly harder than their foreign counterparts. US doctors reported seeing patients an average of 36-40 hours per week, which was only slightly higher than other countries (and French doctors spend more time seeing patients). And it turns out the administrative work is just as cumbersome in other countries. The cost of medical education explains much of the salary gap between US doctors and their peers in other countries. In additional to being two years longer, public medical education in the US is three times more expensive than that in the UK, the next most expensive country. Despite the bevy of philanthropic programs that propose to make medical school tuition-free, solving this problem will require rethinking the funding and structure of US medical education, and we may ultimately have to move to an undergraduate model of education, as many other countries have done.


That’s it for this week. Thanks again for reading our work, and for sharing your thoughts and suggestions. We love to hear from you! And if you’re so inclined, please remember to pass along the Weekly Gist to a friend or colleague and encourage them to subscribe as well. (And don’t forget to mention Gist Healthcare Daily, our new podcast!)

Most importantly, if we can be of any assistance in your work, we hope you’ll let us know. 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