March 3, 2023

The Weekly Gist: The Unhappy Commanders Edition

by Chas Roades and Lisa Bielamowicz MD

If you treat your employees well, your business will thrive. Seems obvious, right? Evidently not to Dan Snyder, infamous owner of our hometown Washington Commanders. Truth be told, we stopped paying attention to the Burgundy-and-Gold years ago, as many DC sports fans have—the lousy product on the field has been matched only by the odious off-field revelations about Snyder’s reign. So it was no surprise to us that in a recent survey of locker rooms conducted by the NFL Players Association, the Commanders came in dead last among all 32 teams across several key categories of “employee engagement”. Locker room? F-minus. Team travel? F-minus. Training room? F-minus. Food service? D-plus. Only the strength coaches got positive ratings, earning an A-plus from Washington players. Good thing, too—you’ve got to be strong to tolerate working for this shambolic franchise. Please, someone—anyone—come buy this franchise and give us the football team we deserve.
THIS WEEK IN HEALTHCARE

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

  1. Eli Lilly cuts prices on its insulin products. On Wednesday, Indianapolis, IN-based pharmaceutical giant Eli Lilly announced that it will cut its list price for both Humalog and Humulin, its two most commonly prescribed insulin products, by 70 percent. While these changes will go into effect later this year, the company is also immediately expanding its Insulin Value Program, available at participating pharmacies for the commercially insured and upon program enrollment for the uninsured, to match Medicare Part D’s $35 per month out-of-pocket insulin cap. Eli Lilly shared that 30 percent of the US’s 8M insulin users rely on its products, though the company is only cutting prices for its older insulin products.

The Gist: Nearly 30 percent of uninsured and 20 percent of commercially insured insulin users in the US report having to ration their doses due to cost concerns. While it still won’t be providing its insulin for free, as some have demanded, Lilly’s move should help the company gain market share, in addition to generating some good PR—and it’s expected that other large insulin manufacturers will be pressured to follow suit. But even if a $35 out-of-pocket cap was adopted nationally, Americans would still be paying three times more for their insulin than people in comparable countries.

  1. UnityPoint Health and Presbyterian Healthcare Services announce intent to merge. On Thursday, Des Moines, IA-based UnityPoint Health and Albuquerque, NM-based Presbyterian Healthcare Services revealed they have signed a letter of intent to explore a merger. The UnityPoint and Presbyterian brands would continue to operate in their local regions, but the combined system would manage $11B in annual revenue, over 40 hospitals, and nearly 3K physicians and advanced practice clinicians.

The Gist: A UnityPoint and Presbyterian link up would seem to follow the playbook of the recently closed Advocate Aurora and Atrium merger. Mergers between large, noncontiguous health systems are currently popular as a means to achieve the benefits of scale without tripping the alarms of federal antitrust regulators. UnityPoint has been seeking a merger partner for years; most recently its plan to combine with Sanford Health fell through in 2019. It may have found a like-minded partner in Presbyterian, as both systems have made significant investments in risk, including establishing mature ACOs, developing their own Medicare Advantage plans, and expanding their hospital at home programs. We’re expecting to see a number of these cross-state system mergers announced over the course of 2023, as large regional players seek combinations that allow them to scale into super-regional, or even national, delivery platforms.

  1. FDA approves first combination flu and COVID at-home test. Last Friday, the Food and Drug Administration (FDA) granted emergency use authorization to the Lucira COVID-19 and Flu Test, making it the first at-home flu test approved for US consumers. The decision came just days after Lucira filed for Chapter 11 bankruptcy, blaming a protracted approval process for a test it had anticipated would be approved last August. As Lucira was unable to find a buyer prior to filing for bankruptcy, it remains unclear if the test will ever reach store shelves.

The Gist: While most Americans first experienced at-home viral testing with COVID, Europeans have used the same underlying technology to diagnose themselves with the flu at home for years. Lucira’s test was only approved because its capacity to detect COVID qualified it for emergency approval, and even then, approval took so long that the company began to falter. Many have questioned the FDA’s slow-walking of at-home diagnostics, especially now that Americans have demonstrated both the willingness and ability to swab their own noses. With the locus of care shifting towards the home, and in an environment of cost-conscious consumers, the push for more at-home diagnostics will continue to grow.   

Plus—what we’ve been reading.

  1. Colon cancer diagnoses are shifting younger. A worrying new study on colorectal cancer, published this week, shows that the proportion of newly diagnosed individuals younger than 55 has nearly doubled across the past 25 years. While colorectal cancer overall is on the decline—thanks to an emphasis on earlier detection and treatment—its incidence and death rates among those under 50 have averaged an increase of 2 percent and 1 percent, respectively, each year since 2004.

The Gist: Researchers do not yet have a full explanation for this trend, but are emphasizing the importance of early detection, reflected by new guidance that lowers the recommended age to begin screening age from 50 to 45. While successful smoking cessation effort have helped drive down US colorectal cancer rates, consumption of processed foods and rising obesity rates are increasingly prevalent risk factors for the disease. Colon cancer remains the second-most common cause of cancer death in Americans, and there are significant disparities in incidence and outcomes, especially for Black Americans, necessitating targeted outreach for screening.

GRAPHIC OF THE WEEK

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

Payers racing to expand their provider footprints

In last week’s graphic, we showed how the nation’s largest health insurance companies earn annual revenues several times greater than the largest health systems. In the graphic below, we unpack the 2022 revenue of five of the largest payers, to show just how diversified they have become. UnitedHealth Group (UHG) continues to lead the way not only as the largest US payer, but also the most vertically integrated, growing its OptumCare provider business by over 30 percent last year. Playing catch-up, the other payers have also shown willingness to spend large sums on provider acquisitions, with CVS dropping nearly $20B on primary care company Oak Street and home health company Signify last year. UHG and Humana also recently spent over $5B each, on their own home health companies, in pursuit of lower cost settings for treating their Medicare Advantage enrollees. In contrast, Cigna and Elevance have not been as active in the M&A space of late, prompting Cigna investors to question the CEO on whether the company may be at a competitive disadvantage. We’d expect the race to create full-stack, vertically integrated healthcare platforms, of the kind illustrated by these large payers, to gain steam across the rest of 2023 and beyond. Looming even larger than UHG, CVS Health, and the like: Amazon and Walmart, both of which are actively pursuing their own platform visions in healthcare.

 
INTERMISSION

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

The Consultant (Amazon Prime Video)—The mesmerizing Christoph Waltz lands a leading role in this dark comedy series about events following the untimely death of a computer game executive. The moral of the story: be careful who you hire to advise your company on a turnaround, they might just be the devil!
THIS WEEK AT GIST—ON THE ROAD

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

Questioning the value of the integrated delivery system

During one of our regular check-ins with a health system CEO this week, the conversation took a turn for the existential. Lamenting the difficult economic situation in the industry, the continued shift of care to ambulatory disruptors, and the mounting pressure to dial back money-losing services, he shared that he was starting to question the fundamental business model. “Many years ago, we set out to become an integrated delivery system. But I’m not sure we’ve succeeded at any of those things: we’re not integrated enough, we don’t act like a system, and we don’t seem to be delivering the kind of care consumers want.” A stark admission, but one that could apply to many large health systems across the industry. In theory, those three “legs of the stool” should create a virtuous flywheel: greater integration across the care continuum (perhaps in a risk-bearing model, but not necessarily) ought to allow systems to deliver quality care at the right place, right time. And a system-oriented approach ought to allow for efficiencies and cost-savings that enable care to be delivered at lower cost to patients. Instead, the three components often create a vicious spiral: care that’s not coordinated across an integrated continuum, with little success at leveraging system-level efficiencies, resulting in unnecessary, duplicative, and variable-quality care delivery at excessive cost. Capturing the value of integrated delivery systems will ultimately require hard work, and not just lip service, on all three pieces. Meanwhile, scaling a broken model will only exacerbate the problems of organizations that are neither integrated, nor systemic, nor delivering care that is high value.
THIS WEEK AT GIST—ON THE PODCAST

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

Last Monday, JC spoke with attorney Stuart Vogelsmeier, EVP and Chair of the Healthcare and Business practices at St. Louis-based law firm Lashly & Baer, about how the Federal Trade Commission’s proposed ban on noncompete agreements could impact the healthcare industry.

This Monday, JC will talk with Alec Tyson, Associate Director of Research at the Pew Research Center, about a recent Pew survey which found that a majority of Americans are uncomfortable with healthcare providers relying on artificial intelligence to make diagnoses or recommend potential treatments.

[Subscribe on Apple, Spotify, Google, or wherever fine podcasts are available.]
That’s all for now. Here’s hoping March came in like a lamb for most of you, and that you’re as excited as we are for the Madness ahead. Thanks for taking time to read the Weekly Gist, and don’t forget to drop us a line to share your feedback and thoughts. We love hearing from you! Even better, share this with friends and colleagues, and encourage them to subscribe, and to check out our daily podcast. We’d be most grateful!

And of course, 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
chas@gisthealthcare.com

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