July 2, 2021

The Weekly Gist: The Tiddlywink Testing Edition

by Chas Roades and Lisa Bielamowicz MD

With the Delta variant driving a resurgence of COVID cases in some parts of the country, it’s important not to let our guard down, meaning that rapid testing must continue to be widely available. But if the risk of infection doesn’t provide enough motivation to get tested, perhaps the story of Mary McCarthy of Christchurch, New Zealand, will. The 45-year-old experienced excruciating pain during her recent test, only to discover that the swab had dislodged a tiddlywink that she had shoved up her nose as a child of 8. A subsequent visit to the local emergency department yielded the yellow disk, still intact and, presumably, tournament legal. (If you’re wondering why billionaires are moving to New Zealand, it’s because life is so pleasant that you can walk around with a tiddlywink in your nose for 37 years without noticing.) Get tested, be safe, and stay vigilant.

Note to readers: We won’t be publishing next Friday—hope everyone enjoys the long holiday weekend! We’ll be back on Friday, July 16th with an all-new edition.


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

The Supreme Court lets site-neutral payment policies proceed

This week, the Supreme Court declined to hear an appeal challenging Medicare’s 2019 regulation calling for “site-neutral payment” for services provided by hospitals in outpatient settings, clearing the way for the rule’s implementation. The appeal was filed by the American Hospital Association (AHA), along with numerous hospitals and health systems, after a lower court ruling last year upheld the change to Medicare’s reimbursement policies. The rule aims to level the playing field between independent providers and hospital-owned clinics by curtailing hospitals’ ability to charge higher “facility fees” for services provided in locations they own. Site-neutral payment has been a longstanding target of criticism by health economists and policymakers, who cite the pricing advantage as a driver of consolidation in the industry, which has tended to push the cost of care upward. The AHA expressed disappointment in the Court’s decision not to hear the appeal, saying that the changes to payment policy “directly undercut the clear intent of Congress to protect them because of the many real and crucial differences between them and other sites of care.” The primary difference, of course, is hospitals’ need to fully allocate their costs across all the services they bill for, making care in lower-acuity settings more expensive than similar care delivered by practices that don’t have to subsidize inpatient hospitals and other costly assets. Over the years that legitimate business need has turned into a deliberate business model—purchasing independent practices in order to take advantage of higher hospital pricing. As Medicare looks to manage Baby Boomer-driven cost growth, and employers and consumers grapple with rising health spending, expect increasingly rigorous efforts to push back against these kinds of pricing strategies.

Biden administration begins to implement a ban on surprise bills

On Thursday, the Biden administration issued the first of what is expected to be a series of new regulations aimed at implementing the No Surprises Act, passed by Congress last year and signed into law by President Trump, which bans so-called “surprise billing” by out-of-network providers involved in a patient’s in-network hospital visit. The interim final rule, which takes effect in 2022, prohibits surprise billing of patients covered by employer-sponsored and individual marketplace plans, requiring providers to give advance warning if out-of-network physicians will be part of a patient’s care, limiting the amount of patient cost-sharing for bills issued by those providers, and prohibiting balance billing of patients for fees in excess of in-network reimbursement amounts. The rule also establishes a process for determining allowable rates for out-of-network care, involving comparison to prevailing statewide rates or the involvement of a neutral arbitrator, but falls short of specifying a baseline price for arbitrators to use in determining allowable charges. That methodology, along with other details, will be part of future rulemaking, which will be issued later this year. Of note, the rule does not include a ban on surprise billing for ground ambulance services, which were excluded by Congress in the law’s final passage—even though more than half of all ambulance trips result in an out-of-network bill. Expect intense lobbying by industry interests to continue as the details of future rulemaking are worked out, as has been the case since before the law was passed. While burdensome for patients, surprise billing has become a lucrative business model for some large, investor-owned specialist groups, who will surely look to minimize the law’s impact on their profits.

Amedisys to acquire hospital at home provider Contessa

On Wednesday home-health and hospice provider Amedisys announced it would acquire hospital at home company Contessa for $250M, extending Amedisys’s traditional home care platform into higher acuity services. Launched in 2015, Contessa was one of the first companies to build and scale the hospital at home and skilled nursing at home models, partnering with a range of health systems including Mount Sinai Health System, Highmark Health and Marshfield Clinic, with plans to expand to over 100 hospitals across 28 states. While hospital at home has a proven track record of providing high quality, lower-cost care over two decades, a confluence of market forces has accelerated adoption of home-based care services. The pandemic sped up consumer adoption of in-home care, and payers have looked to add hospital at home to their growing portfolios of virtual and home-based care services, aiming to treat patients in lower-cost settings. The Centers for Medicare & Medicaid Services (CMS) waiver program has also opened up payment for home-hospital care during the pandemic. Provided that this waiver becomes permanent, as anticipated, we’d expect the rapid adoption of hospital at home to continue. In adding Contessa to its portfolio, Amedisys now offers a full suite of home-based care solutions, on par with the offerings assembled by health insurer Humana, which has focused its own vertical-integration strategies on building a comprehensive home-care platform. For health systems and payers looking to partners for these services, Amedisys could provide a “one-stop shop” for a complete, home care platform.


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

Private equity accelerates its push into physician practice

As we reported recently, healthcare M&A hit record highs in the first quarter of 2021—with deal activity in the physician practice space surging 87 percent. The graphic below highlights private equity firms’ increasing investment in the sector over the last five years. Both the number and size of PE-backed healthcare deals have increased substantially from 2015 to 2020, up 39 and 45 percent respectively. In 2020, physician practices and services comprised nearly a fifth of all transactions, with PE firms driving the majority. One in five physician transactions involved primary care practices—a signal that investors are banking on profits to be made in the shift to value-based care models. Meanwhile, PE firms are still rolling up high-margin specialty practices, with ophthalmology, orthopedics, dermatology, and anesthesiology groups all receiving significant funding in 2020. PE investment in physician practices will likely continue to accelerate, as investors view healthcare as a promising place to deploy readily available capital. But we remain convinced that private equity investors have little interest in being long-term owners of practices, and will ultimately look for an exit by selling “rolled-up” physician entities to health systems or insurers.


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

Is it time to consider putting doctors on salary? 

In theory, the idea of salaried compensation for employed physicians makes a lot of sense. For one thing, it’s blessedly simple, with the potential to remove the tensions that arise in shifting to value-based payment or implementing lower-cost (but lower-reimbursement) care models like telemedicine. However, medical group leaders have long feared that productivity would tank if doctors were put on salary. (As a consulting colleague said recently, the switch to salary would cause a 20+ percent drop in productivity in the medical group, creating a challenge akin to keeping an airline profitable after removing a quarter of the seats on its planes). We’ve been expecting that more doctors might seek stable compensation models in the wake of the pandemic, and so weren’t entirely surprised when the question of moving to straight salary came up in three conversations over the past two weeks.

In all three cases, leaders are hoping to create more predictability, and to decrease the resources and effort needed to execute against a menu of complex plans. They believe that a move to salary is inevitable, and their questions have more to do with timing. Gauging when to make the move should be determined not by external market shifts, but by internal cultural and operational readiness. Are the systems in place to enable doctors to work at a high level of efficiency? And do we have the group collaboration needed to maintain high performance without paying doctors as if they are salesmen on commission? Another wrinkle has popped up for groups who might be ready now: the past year has upended the benchmarks that groups might otherwise use to inform decisions on where to set salaries. Nevertheless, over time we expect more groups to move in this direction, with the hope of getting off the “hamster wheel” of compensation committee meetings and ever more exotic permutations of bonus plans, in search of a more stable model.

A new divide is making the workforce crisis worse

Health system executives continue to tell us that the top issue now keeping them up at night is workforce engagement. Exhausted from the COVID experience, facing renewed cost pressures, and in the midst of a once-in-a-generation rethink of work-life balance among employees, health systems are having increasing difficulty filling vacant positions, and holding on to key staff—particularly clinical talent. One flashpoint that has emerged recently, according to leaders we work with, is the growing divide between those working a “hybrid” schedule—part at home, part in the office—and those who must show up in person for work because of their roles. Largely this split has administrative staff on one side and clinical workers on the other, leading doctors, nurses, and other clinicians to complain that they have to come into work (and have throughout the pandemic), while their administrative colleagues can continue to “Zoom in”. There’s growing resentment among those who don’t have the flexibility to take a kid to baseball practice at 3 o’clock, or let the cable guy in at noon without scheduling time off, making the sense of burnout and malaise even more intense. Add to that the resurgence in COVID admissions in some markets, and the “help wanted” situation in the broader economy, and the health system workforce crisis looks worse and worse. Beyond raising wages, which is likely inevitable for most organizations, there is a need to rethink job design and work patterns, to allow a tired, frustrated, and—thanks to the in-person/WFH divide—envious workforce the chance to recover from an incredibly difficult year.


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

Last Monday, we heard from Dean Sanpei, Chief Strategy Officer at Centennial, CO-based Centura Health, about Colorado’s newly-passed public option, and what lessons were learned from Washington State’s first year of its own public option implementation.

Coming up on Tuesday, after the holiday, we’ll head to Missouri, which finds itself in the grip of another COVID surge as the state struggles with low vaccination uptake. We’ll speak with Dr. Davin Turner, Chief Medical Officer of St. Joseph, MO-based Mosaic Life Care, who says if vaccinations don’t increase, he expects ongoing surges to become the new normal.

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Dark theater, sticky floors, total strangers…what’s not to love?

As Americans return to movie theaters this holiday weekend, lured by the prospect of even faster, more furious car chases featuring Vin Diesel, weirdos and oddballs know what to do instead: take a left turn and spend two hours with one of the strangest, most influential, yet most underrated bands of the last 50 years—Sparks. Sure, Edgar Wright’s (Baby DriverShaun of the Dead) masterful new documentary, The Sparks Brothers, will be available to stream at home later this month, but it takes a big screen to do justice to the sprawling careers of Ron and Russ Mael, California brothers who came of age in the late 60s wanting to be the next Kinks, and are still chasing the dream—two of the hippest septuagenarians striding the planet. Wright’s film (here’s the trailer) takes an album-by-album (there are 25 of them!) approach to documenting the enormously varied, insanely productive journey of the Mael brothers, featuring concert performances, behind-the-scenes footage, and testimony from some of the many, many musicians who’ve worked with or been influenced by Sparks: New Order, Erasure, Duran Duran, Beck, Björk, Human League, The Go-Go’s, and on and on. Early progenitors of glam, then pioneers of synthpop, and still at the cutting edge of art rock, Sparks have never given up on their unique musical vision, even as their contemporaries settled into comfortable careers replaying “greatest hits”. They were Kraftwerk before Kraftwerk, Queen before Queen, Devo before Devo—experimental, edgy, enigmatic, and always a Zelig-like presence at the fringes of pop music, Russ belting out lyrics and Ron scowling inscrutably behind the keyboards. Their music is whip-smart, smirkingly funny, and eminently danceable. If you’re already turned on to the band, by now you’ve seen The Sparks Brothers and loved it; for the rest of you, don’t miss the opportunity to check out the greatest band you’ve never heard of. Sparks sampler: “This Town Ain’t Big Enough for the Both of Us” (1974) ; “The Number One Song in Heaven” (1979); “When Do I Get to Sing ‘My Way’” (1994); “Dick Around” (2006); “All That” (2020).


Stuff we read this week that made us think.

Hastening the demise of independent physician practice

A new report from consulting firm Avalere Health and the nonprofit Physicians Advocacy Institute finds that the pandemic accelerated the rise in physician employment, with nearly 70 percent of doctors now employed by a hospital, insurer or investor-owned entity. Researchers evaluated shifts to employment in the two-year period between January 2019 and January 2021, finding that 48,400 additional doctors left independent practice to join a health system or other company, with the majority of the change occurring during the pandemic. While 38 percent chose employment by a hospital or health system, the majority of newly employed doctors are now employed by a “corporate entity”, including insurers, disruptors and investor-owned companies. (Researchers said they were unable to accurately break down corporate employers by entity, and that the study likely undercounts the number of physician practices owned by private equity firms, given the lack of transparency in that segment.) Growth rates in the corporate sector dwarfed health system employment, increasing a whopping 38 percent over the past two years, in comparison to a 5 percent increase for hospitals. We expect this pace will continue throughout this year and beyond, as practices seek ongoing stability and look to manage the exit of retiring partners, enticed by the outsized offers put on the table by investors and payers.

Half the year already gone! Thanks, as always, for taking the time to read the Weekly Gist—we can’t wait to see what the second half of this year holds, and to share our thoughts and observations with you. Please return the favor: let us know what you’re thinking, and send us your suggestions and feedback. And remember to share this with a friend or colleague and encourage them to subscribe, and to listen to our daily podcast.

Most importantly, please let us know if there’s anything we can do to be of assistance in your work. You’re making healthcare better—we want to help!

Happy 4th!

Chas Roades
Co-Founder and CEO

Lisa Bielamowicz, MD
Co-Founder and President