August 12, 2022

The Weekly Gist: The Summertime Splooting Edition

by Chas Roades and Lisa Bielamowicz MD

To paraphrase the great Ella Fitzgerald standard, birds do it, bees do it, even…squirrels do it. No, not that. We’re referring to “splooting”, helpfully described in a recent tweet from the New York City Department of Parks & Recreation. The tweet accompanied a picture of a squirrel in Central Park, laying flat on its belly with its little paws spread wide apart. Splooting, also known as heat dumping, is apparently common among many quadrupeds during the summer months, allowing them to cool down by transferring heat into the ground. As hot as it’s been the last few weeks, we may just have to give this a try. Pardon us while we sploot.

THIS WEEK IN HEALTHCARE

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

  1. House expected to vote to pass healthcare and climate reform bill, sending it to President Biden for signature. The $740B Inflation Reduction Act (IRA) includes significant reforms for Medicare’s drug benefits, including capping seniors’ out-of-pocket drug spending at $2,000 per year, and insulin at $35 per month. Medicare plans to fund these provisions by requiring rebates from manufacturers who increase drug prices faster than inflation, and through negotiating prices for a limited number of costly drugs. Drug prices are consistently a top issue for voters, but seniors won’t see most of these benefits until 2025 or beyond, well after this year’s midterms and the 2024 general election.

The Gist: While this package allows Democrats to deliver on their campaign promise to allow Medicare to negotiate drug prices, the scope is more limited than previous proposals. Over the next decade, Medicare will only be able to negotiate prices for 20 drugs that lack competitors and have been on the market for several years. Still, because much Medicare drug spending is concentrated on a few high-cost drugs, the Congressional Budget Office projects the bill will reduce Medicare spending by $100B over ten years. However, these negotiated rates and price caps don’t apply to the broader commercial market, and some experts are concerned this will lead manufacturers to raise prices on those consumers—creating yet another element of the cost-shifting which has been the hallmark of our nation’s healthcare system. The pharmaceutical industry also claims that this “government price setting” will hamper drug development (although there is limited to no evidence to support this proposition), signaling that they will likely spend the next several years trying to influence the rulemaking process as the new law is implemented.

  1. CVS Health considering acquisition of Signify Health. According to a Wall Street Journal report, CVS is expected to submit a bid to purchase Dallas-based Signify Health, which supports physicians, payers, and health systems with tools and technology to provide in-home care. Signify acquired accountable care organization manager Caravan Health earlier this year. Last week, the Journal reported that Signify, valued at more than $4B, was looking for buyers. While CVS is said to be interested, so are private equity firms and other managed care companies.

The Gist: CVS CEO Karen Lynch told investors during last week’s earnings call that the company plans to grow its primary care and home health offerings through mergers and acquisitions. The Signify bid, along with reports that CVS considered acquiring concierge primary care company One Medical, suggests that the retail pharmacy and insurance giant is charging ahead with its strategy of creating a vertically-integrated healthcare company. As several newly public digital health and value-based care companies have seen share prices plummet and capital dry up in a cooling economy, they are becoming targets for large insurers and tech companies who have seen their own fortunes grow during the pandemic. Watch for more announcements from these “platform assemblers” in the months to come. 

  1. Federal government adjusts monkeypox vaccine strategy. This week, the Food and Drug Administration (FDA) announced a change intended to stretch out the limited supply of monkeypox vaccine doses, allowing the shots to reach five times the number of patients. Monkeypox, a disease in the smallpox family, is spread primarily through skin-to-skin contact, often causing patients to develop painful lesions. Although most cases resolve within a few weeks, the rapid growth in cases, now more than 9K domestically and 30K globally, is still a cause for concern, leading federal officials to declare a public health emergency last week. The FDA is also recommending that providers administer the vaccine between layers of skin, rather than below the skin into fatty tissue. This dosing change will allow providers to extend the nearly half a million doses not yet sent to states, in order to reach the more than 1.6M Americans considered highest risk.

The Gist: The country is now dealing with two public health emergencies from highly contagious diseases simultaneously. While monkeypox isn’t nearly as transmissible, deadly, or overwhelming to the healthcare system as COVID, the public health response has nonetheless been lackluster (and this week’s new COVID guidance suggests that the CDC has largely given up on managing the response, devolving responsibility to individuals in nearly all settings). For those hoping that the COVID experience would spark faster action by our public health system, the federal response to monkeypox shows we haven’t applied the lessons learned. Public health authorities aren’t conducting rigorous disease surveillance, testing and treatments remain hard to get, and Congress isn’t dedicating funds for the response. The lack of proactive leadership is likely to result in healthcare providers again bearing the brunt of efforts to manage another unsuppressed viral outbreak. 

Plus–what we’ve been reading.

  1. The wave of CEO retirements is upon us. In just the first half of this year, more than 60 hospital CEOs have retired or left their roles, according to search firm Challenger, Gray and Christmas. Retirements are up 48 percent from the same time last year. Part of this is generational, as many Baby Boomer leaders are at retirement age, but the latest wave comes after many delayed planned exits during the pandemic to guide their organizations through the crisis. Now, after two-plus grueling years of leading through COVID, executives are ready to pass the baton. The latest high-profile announcement came this week, with Salt Lake City-based Intermountain Healthcare’s CEO Marc Harrison announcing his plans to leave the system for a role at venture firm General Catalyst.

The Gist: As a recent piece from Modern Healthcare points out, many systems have known their CEOs were exiting well in advance, but the significant cultural and financial consequences associated with choosing a new leader, especially during a period of industry-wide change, are presenting boards with hiring decisions as difficult as they are important. Astute organizations have been planning ahead for these transitions, developing a bench of next-generation leaders, and providing them exposure to the board. COVID also served as a helpful stress test to identify talent who rose to the occasion to lead confidently and calmly through the crisis, while simultaneously weeding others out who floundered under uncertainty. The next generation of leaders will need different skills to navigate current and future challenges, including rethinking the role of the health system in response to a new class of disruptors, and managing through a workforce crisis that will require evolving the labor model while meeting new demands for workforce diversity and engagement.  

 


GRAPHIC OF THE WEEK

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

The outmigration of orthopedic surgeries 

One of COVID’s many effects on the health system business model has been the accelerated migration of care to outpatient settings, with orthopedic surgeries, such as knee and hip replacements, leading the way. For this week’s graphic, we partnered with Stratasan, a Syntellis-owned healthcare data analytics firm that provides market intelligence for strategic planning, to track how quickly joint replacements have shifted to hospital outpatient and ambulatory surgery centers (ASCs) over the last five years. Using data from Stratasan’s proprietary All-Payer Claims Database, we found that by the end of 2021, only one in four knee replacements and one in three hip replacements were performed in inpatient facilities, down from over 95 percent in 2018. A major catalyst for the shift was the removal of the procedures from Medicare’s Inpatient Only list, first knee replacements in 2018, then hip replacements in 2020. This change triggered an outpatient shift across all payers; COVID’s dampening effect on inpatient demand only exacerbated the trends. Patients who undergo these surgeries in an inpatient hospital tend to be sicker, older, and more likely to be on Medicare. This translates to an altered payer mix for these procedures, with hospitals seeing a drop in lucrative commercial payment and an uptick in lower Medicare reimbursements. Amid rising expenses and slow-to-return volumes across the board, this outpatient migration presents another significant challenge to health systems’ financial bottom lines, and they must either find ways to recapture revenues in ambulatory settings, or watch a once reliable source of revenue walk—gingerly—out their doors.

 


INTERMISSION

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

The Sandman (Netflix)—Good news for fans of Neil Gaiman’s iconic comic book series from the early 1990s: not only does the Netflix version capture the dark magic of the original material perfectly, but Gaiman brings a playful, mature reinterpretation of his own material to the small screen. Delve back into the gothic nightmares of Dream, Death, Desire, and the whole panoply of weird creatures with this big-budget streaming series—it’s a glorious homecoming.


THIS WEEK AT GIST—ON THE ROAD

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

Designing physician leadership for scale 

This week we met with a health system chief clinical officer who sought guidance on physician leadership structures: “We have more ‘closely aligned’ doctors than ever, but I feel like we’re really short on physician leaders to organize our medical staff around important goals and move them forward.” It’s a common concern. One medical group president lamented the loss of connection between doctors as their group grew rapidly: “Our medical group has almost doubled in size in the past five years. When we had 300 providers, I knew every one, and they all felt like they could come to me directly. We just passed 1,000, and there’s no way I can know a thousand people, let alone have a personal relationship with them.” As networks have grown, executives have shared their need to develop a new “middle layer of physician leaders”, who can build personal connections with frontline doctors. But for this middle layer to work, they stress, these leaders must be tightly connected with the executives who run the group and the health system and carry real decision-making authority: “Real respect is critical, and it won’t happen if they feel like a mouthpiece.”

There was also debate about the right candidate for the job, in particular, the need to have younger physicians, who can relate directly to the needs of their peers, in leadership roles: “It took us a while to realize that the profile of our traditional medical staff leader, an older doctor nearing retirement, wasn’t working when we’re looking to lead a ‘majority millennial’ medical group.” Regardless, every medical group agreed that they needed to identify and train more leaders, and create roles to bring them into leadership earlier in their careers. But many questions remain about how to design leadership roles. How many frontline providers can a leader work with? How should leadership structures span employed and aligned independent doctors? And how should leaders weigh same-specialty alignment versus cross-specialty collaboration? If you are thinking through these issues, we’d love to hear from you about what is working, and what challenges have emerged.


THIS WEEK AT GIST—ON THE PODCAST

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

A bittersweet milestone: on Alex’s final episode as host of Gist Healthcare Daily, she featured an interview with Stratasan’s Senior Product Manager Michael Shipley about the findings from our collaboration regarding the dramatic movement of hip and knee replacements to outpatient settings. Shipley advises hospitals to prepare for this migration, expected across multiple service lines, and says health systems need to rethink their investments in outpatient services.

The podcast will be taking a break for the remainder of August, as we take some much-needed vacation, and bring a new podcast host into the fold. We’re looking forward to returning to the airwaves in September, with all new episodes and features. See you soon!

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That’s all for this week. Thanks for taking the time to read the Weekly Gist—hope you’re doing it while splooting somewhere nice and cool. Let us hear from you with your feedback and suggestions, and don’t forget to forward this edition to a friend or colleague and encourage them to subscribe. Spread the word!

As always, 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-Founder and CEO
chas@gisthealthcare.com

Lisa Bielamowicz, MD
Co-Founder and President
lisa@gisthealthcare.com