November 17, 2023

The Weekly Gist: The Smoke Break Edition

by Chas Roades and Lisa Bielamowicz MD

Herb enjoyers and old-school hip-hop fans will already have heard the news, but for those who haven’t yet: Snoop Dogg is giving up weed. Or at least, “smoke”, according to the music legend’s Instagram page. Over the years, Snoop has become famous for his consumption level, once revealing that he takes more than 80 smoke breaks a day and employs a full-time staff member to roll his blunts. Will this latest news portend a late-career boost in musical productivity? In all the time he’s freeing up, surely Snoop Dogg could produce five or six albums a year. And will the price of bud collapse with this sudden drop in demand? Unlikely—but keep an eye on Willie Nelson and Tommy Chong. Any more defections from the ranks of Mount Kushmore would surely send the price of a high to an all-time low. Or might this all be a windup for a Super Bowl marketing stunt for “Dogg Treat” edibles? To that we say: puff puff? Pass.


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

  1. FDA approves latest weight-loss drug while AMA endorses coverage for obesity treatments. Last week, the Food and Drug Administration (FDA) announced the approval of Eli Lilly’s drug tirzepatide for treating obesity. The drug, which will be sold under the name Zepbound for obesity, is already branded as Mounjaro for diabetes treatment. While Novo Nordisk’s blockbuster semaglutide drug (sold as Wegovy for obesity and Ozempic for diabetes) works only as a GLP-1 agonist, tirzepatide also targets a second receptor and has been shown to elicit greater weight loss. Spurred by trial results demonstrating significant health benefits beyond weight loss tied to these drugs, the American Medical Association House of Delegates voted this week to adopt a policy advocating for insurance coverage of GLP-1-based obesity treatments, affirming that it regards obesity as a disease, and that patients left untreated for the condition are at greater risk for serious health consequences. To date, most insurers and self-funded employers have resisted covering weight loss drugs due to their prices: Zepbound has a list price of $1,060 per month, while Wegovy is priced at around $1,300 per month.

The Gist: We have entered a new era in treating obesity. Even with payers and employers dragging their feet over coverage decisions, and Medicare remaining prohibited from covering weight-loss drugs by law, consumer demand for the drugs has been strong enough to outpace supply. Zepbound’s approval will hopefully both improve availability and exert downward pricing pressure. While these drugs will undoubtedly contribute to higher healthcare spending in the short term, the long-term benefits of significant weight loss, combined with cardiovascular risk reduction, could lower healthcare costs over the patient’s lifespan—although the payer “holding the bag” for the cost today may not see the return, given that as many as 20 percent of individuals with commercial insurance switch carriers every year.

  1. Health systems file suit against 340B offsite clinic policy reversal. A group of more than a dozen health systems, including Mercy Health, Northwestern Medicine, and Stanford Health Care, are suing the Department of Health and Human Services and the Health Resources and Services Administration (HRSA) over a policy change that returns the registration process for 340B offsite clinics to pre-pandemic requirements. In 2020, HRSA began allowing hospitals participating in the drug discount program to prescribe 340B drugs at all hospital-owned clinics prior to their inclusion in a Medicare cost report filing, a process step that can take at least several months. HRSA reinstated the cost report requirement last month in a manner that the health system plaintiffs allege violates both the required notice-and-comment rulemaking process and exceeds HRSA authority. They claim that the costs of reversing the COVID-era temporary policy, which many health systems hoped would become permanent, will cause significant clinic registration delays that will cost them hundreds of millions of dollars, and could deter them from building new offsite facilities.

The Gist: As this case appears to hinge on HRSA’s adherence to rulemaking procedure rather than its authority to reinstate a previous policy, it seems health systems, who benefited from the streamlined pandemic-era reprieve, are merely hoping to delay its return. But given the importance of the 340B program to health system finances—we’ve heard from a number of systems that program savings account for their entire margin—any change to the program now seems destined for litigation. This year, we’ve already seen drugmakers win a case limiting contract pharmacy sales and a provider organization successfully challenge HRSA’s limits on who qualifies as a patient. And hospital groups may soon file suit against the Medicare outpatient cuts to all hospitals that offset a lump-sum remedy providing back pay owed to 340B hospitals ordered by the Supreme Court last year.

  1. Cigna’s Express Scripts adopts cost-plus pricing model. This week, Express Scripts, the nation’s second-largest pharmacy benefit manager (PBM), which is owned by health insurer Cigna, announced a new pricing model. It is giving employers and health plans the option to pay pharmacies up to 15 percent over acquisition costs, plus a dispensing fee, for covered drugs. This payment structure was popularized by the Mark Cuban Cost Plus Drugs Company, founded by the billionaire businessman in reaction to the opaque pricing and complicated discounts and rebates common among PBMs. While Cigna is not promising that this new pricing model will result in lower prices, it says it will improve transparency and should benefit retail pharmacies, who will split the markup with Express Scripts. Cigna projects that only some employers will lower their healthcare spending through the cost-plus model, and that patient cost-sharing should be similar under both approaches.

The Gist: Between disruptive competitors like Cuban’s venture and increasing scrutiny from Congress, PBMs are facing new pressures to improve transparency and account for their role in rising drug costs. This move by Cigna is an attempt to address at least one of those concerns, possibly intended to preempt regulatory and legislative action. After years of complaints surrounding their business practices, it appears that the Congressional tide may be turning toward PBM industry reform. However, patients—who by and large are unaware of what PBMs are or do—won’t be satisfied till they see their out-of-pocket prescription drug costs go down. Next up on this front: seeing which provisions targeting PBMs, many which have bipartisan support, make it into the Senate’s broad healthcare legislation planned for the end of this year, and in what form that bill ultimately passes.

Pluswhat we’ve been reading.

  1. UnitedHealth Group AI algorithm cutting off patient care. This week, Stat published a scathing investigation into the way UnitedHealth Group subsidiary NaviHealth uses an algorithm, nH Predict, to deny Medicare Advantage (MA) patients access to rehabilitation services and long-term care. United set a target to keep rehab stays within one percent of nH Predict’s projection for the year. Interviews with former case managers and access to internal documents reveal that NaviHealth employees faced disciplinary action and even termination if they approved care that strayed from these algorithmic recommendations. UnitedHealthcare, the nation’s largest insurer, is now subject to a class-action lawsuit filed this week over these practices. But NaviHealth’s impact extends beyond just United beneficiaries, as other insurers, covering around 15M MA enrollees, also use its services

The Gist: This article provides a stark example of what can happen when an artificial intelligence (AI) algorithm is used not to complement, but to replace, clinical judgment. While profit incentives in US healthcare are nothing new, what’s pernicious about an algorithm like nH Predict is how it replaces individual patients, whose needs vary, with a theoretical “average patient”, whose health and life needs can be easily predicted by the handful of data points available to the insurer. When patients fail to recover along expected timelines—that are imperfectly calculated by incomplete datasets—they’re the ones who suffer.


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

Taking stock of a decade of Medicare ACOs 

In this week’s graphic, we showcase recent data from Health Affairs highlighting the progress made by the Centers for Medicare and Medicaid Services’ (CMS) flagship value-based payment initiative, the Medicare Shared Savings Program (MSSP). Ten years into the program, a majority of MSSP accountable care organizations (ACOs) have now adopted downside risk, after a slow start that was accelerated by CMS’s 2018 Pathways to Success program update. With more ACOs in downside risk, over 60 percent of program participants received shared savings bonuses in 2022, as MSSP ACOs with two-sided risk are twice as likely as ones with upside-only risk to receive a bonus. Beyond taking downside risk, the highest-performing ACOs in the program have been smaller, physician-only ACOs with relatively more primary care doctors and fewer specialists. While the MSSP program has seen improved growth and savings coming out of the pandemic, the $1.8B in Medicare savings that it generated in 2022 represents only 0.2 percent of total Medicare spending last year.


A recommendation from our weekly diet of music, movies, TV, and other good stuff.

Life on Our Planet (Netflix)—Those looking for a non-football, non-parade, non-dog show TV option over the Thanksgiving holiday might consider checking out this impressive 8-part nature documentary. Morgan Freeman narrates the history of life on Earth, told with a breathtaking combination of field footage and impeccable CGI. It’ll make you thankful to be part of the lucky one percent of species that have survived to present day, and even more thankful you’ll never run into the other 99 percent. Gobble, gobble! (Literally.)


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

Can artificial intelligence provide a solution to physician burnout? 

At a recent meeting, a health system chief clinical officer couldn’t wait to share his doctors’ experience with an “AI scribe” tool. “It’s the first thing I’ve seen that makes me feel we have something real to offer to help physician burnout,” he shared, describing the results of a pilot program where a dozen doctors used an artificial intelligence listening tool during patient encounters in the clinic. The AI scribe (in this case, Nuance’s Dragon Ambient eXperience Copilot, but we’ve heard good reports about Augmedix and other tools as well) records the conversation between patient and doctor, and combines information from the visit with key history, lab results, and other data in the patient’s medical record to generate a near-complete note. The output was impressive. He shared a few examples with us, and it was hard to believe that the AI-generated note, which was much more complex than just a transcript, wasn’t written by a human, much less a clinician.

The results of this small pilot, plus others shared with us, have been impressive. Time spent by doctors completing records after hours has been slashed by half or more. And participating patients appreciated that not having a computer between them and their doctor made for more focused interaction. “My doctor actually made eye contact with me,” reported one patient. While there is still work to be done to scale these tools across specialties and clinical settings, they bring more promise to reducing the “pajama time” burden doctors experience than anything else we’ve seen—and physicians should run to be part of the work that brings them to prime time.


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

Last Monday, JC spoke with Brad Kittredge, CEO and founder of mental telehealth platform Brightside Health. They met up at the HLTH conference in October to discuss the services that Brightside offers, along with its recent announcement that it will begin serving Medicare and Medicaid beneficiaries.

The podcast will be off for Thanksgiving week. But coming up on Monday, November 27, JC will share her recent conversation with Transcarent CEO Glen Tullman. They’ll discuss Transcarent’s recent announcement that the company has partnered with ten health systems across the country to create a new provider ecosystem.

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

That’s all for this week! Time to take a break and eat a lot of turkey and stuffing—and don’t forget the cranberry sauce! We hope you enjoy a relaxing Thanksgiving with friends and family. We’re thankful for your continued readership, and we hope you’ll share the Weekly Gist with friends and colleagues and encourage them to subscribe.

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-President and Managing Director

Lisa Bielamowicz, MD
Co-President and Managing Director