November 2, 2018

The Weekly Gist: The Vote Early and Often Edition

by Chas Roades and Lisa Bielamowicz MD

Not the best week in recent memory, if we’re being honest. Horrific news on the national level, a frustrating week of work and travel challenges for us personally, and the World Series went from a welcome distraction to a bizarre form of aversion therapy across the course of 18 excruciating innings, at least for this Dodgers fan. (There was some consolation for fans of the Red Sox, to whom congratulations are in order.) Surely next week will be better, not least because the ugly pre-midterm political fever might finally break. And most importantly, we get to do that most incredible thing next Tuesday. It’s the end of the spooky season in more ways than one, and a good time to follow a sage piece of advice: “Don’t boo. Vote!”

Here’s an update from the week gone by.


THIS WEEK IN HEALTHCARE

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

Bowing to physician pressure, CMS delays visit code changes

Yesterday the Center for Medicare & Medicaid Services (CMS) finalized the 2019 Physician Fee Schedule (PFS), announcing they will delay implementation of changes to physician evaluation and management (E&M) codes until 2021. CMS had proposed to collapse five E&M codes into two, and to streamline physician documentation requirements. The delay is a win for the thousands of physicians who submitted comments opposing the changes, complaining that the proposal would penalize doctors who see more complex patients. Doctors also expressed concern that the rates assigned to the proposed codes were too low, discouraging doctors from seeing Medicare patients and creating access challenges. Along with the two-year delay, CMS also raised base rates, and created an additional code for complex visits. These changes are a win for doctors—and provide time for continued lobbying to permanently forestall implementation.

The 2019 rule also includes several other noteworthy changes that were largely lost in hubbub surrounding E&M visit coding, most of which will be well-received by doctors. At the top of our list: CMS significantly expanded telemedicine coverage, and will now reimburse for telemedicine and telephone visits for brief check-ins, evaluation of patient-submitted images or remote monitoring data, as well as more comprehensive and preventive care visits. This is a substantial step toward increasing access for the two-thirds of Medicare beneficiaries who are ineligible for telemedicine coverage today. We will be continuing to make our way through the details of the rule, and sharing our thoughts on its impact for doctors and health systems. In the longer term, it is worth watching whether continued pressure from doctors postpones further action, and whether the administration will enact changes that could upset the physician base—significantly, the 2021 PFS rule will likely drop in the weeks just before the 2020 Presidential election.

Walmart signs an ACO deal in the Big Easy

Late last week, retail giant Walmart announced that it had struck a deal with Louisiana’s largest clinically-integrated network, Ochsner Health Network, to manage the care of more than 6,000 Walmart and Sam’s Club employees across the greater New Orleans and Baton Rouge regions. Starting on January 1st, employees will have access to care coordination, telemedicine, and disease management services through the new Ochsner Accountable Care Plan, a network that will include 200 primary care physicians and 1,300 specialists drawn from Ochsner’s own facilities and doctors as well as those of St. Tammany Parish Hospital and Slidell Memorial Hospital. In addition, the new plan includes access to a 24-hour call center designed for Walmart employees, which will allow scheduling, access to test results, and other services. The partnership is similar to other arrangements Walmart has set up with health systems to provide an enhanced level of services for its employees, and to focus on improving quality and reducing cost. This is Ochsner’s first such deal with a major national employer, and the first for its clinically-integrated network, which includes five other health systems and 30 hospitals.

Walmart has had an on-again, off-again relationship with health systems over the past few years, experimenting with partnerships around in-store clinics and center-of-excellence referral networks for high-cost procedures. More recently, it has pursued a handful of deals similar to the Ochsner arrangement, announcing an accountable care network deal earlier this year with Emory Healthcare for its Walmart and Sam’s Club employees in the Atlanta, GA region. Meanwhile, the retailer has pushed forward with its own entry into the care delivery business, and as we have described before, presents a major disruptive threat to incumbent health systems as it inches closer to a potential acquisition of the insurer Humana. Health systems with sufficient expertise in population health management and with provider networks broad enough to cover a substantial geography would do well to explore partnership with Walmart—and other large employers—if for no other reason than to stave off the disruption possible should the retailer decide to double down on delivering its own primary care services to its enormous employee population, and on steering referrals to low-cost specialists and hospitals at commoditized levels of pricing.

A Blues plan (finally) deals a health system in on full risk

Blue Cross Blue Shield of Massachusetts (BCBS-MA) announced this week that it plans to launch a new extension of its long-standing value-based payment program, the Alternative Quality Contract (AQC), which ties physician payments to the total cost of care delivered to their patients. In the first arrangement of its kind in the AQC program, BCBS-MA will pilot a similar, capitation-like approach with South Weymouth, MA-based South Shore Health, an independent health system serving southeastern Massachusetts. As we described in a blog post on the AQC earlier this year, the broader program is structured around physician networks and their primary care practices, which bear two-way, upside-downside risk for the cost of care for patients attributed to them. Participating practices also have the ability to earn sizeable bonuses based on their performance on a number of quality metrics. The new approach is intended to experiment with putting the hospital directly at risk, encouraging it to reduce unnecessary admissions and other high-cost care by collaborating with physicians and other care providers. While full details of the plan were not released, the agreement was described as a pilot program, to test the model of so-called “global budgeting” for hospitals. A similar approach to paying hospitals has been in place in Maryland for several years, as part of that state’s Federal waiver program. Notably, the CEO of South Shore Health, Dr. Gene Green, previously served as President of Suburban Hospital in Bethesda, MD, and in a press release stated, “What’s so encouraging about this partnership is that the provider and the payer are finally coming together at the same table with the same goal: drive down costs without affecting quality of care”.

The move is noteworthy because health plans—and particularly BCBS carriers—have historically been reluctant to share true risk with hospitals, for a variety of reasons. Some have claimed that hospitals lack the ability to manage commercial risk, while others have worried about the strategic implications of enabling health systems to move into the commercial risk market, fearing new competition for employer contracting. For the most part, carriers have preferred to limit risk-based programs to physician practices, encouraging doctors to manage total cost of care by limiting referrals to high-cost specialists and hospitals. To the extent health plans have “shared risk” with hospitals, it has typically been in the form of performance-based bonuses added onto fee-for-service payments. That phenomenon has served to stall the broader transition to provider risk envisioned by the authors of the Affordable Care Act (ACA) in creating the Medicare Shared Savings Program (MSSP) and its much-debated accountable care organizations (ACOs). The new BCBS-MA pilot with South Shore Health will be closely watched by BCBS leaders across the country. It’s no accident that the first such pilot in the AQC program is with a smaller, independent system that operates in the shadow of the dominant Partners Healthcare system, an arrangement unlikely to raise competitive concerns among BCBS-MA executives.


GRAPHIC OF THE WEEK

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

Are physicians falling behind other high-wage earners? 

While hospitals continue to worry about the growing “investment” or subsidy they contribute to their employed medical groups, doctors often fear that their personal income is not keeping pace with growth in the rest of the economy. To help us understand this question and look deeper into trends in physician compensation, we partnered with our colleagues at Ancore Health, a data strategy company working with healthcare organizations to drive clarity, manage performance and create accountability. The graphic below compares physician wage growth in recent years to increases seen by other earners. It turns out the doctors are right: physician compensation growth has lagged behind increases seen for both the total labor market and other high-skilled earners. 

But that’s only half the story. Physician income growth has far outstripped the growth in physician reimbursement from Medicare. And for employed medical groups, health systems are funding a growing gap between physician payment and compensation—one that is likely to increase as their payer mix shifts toward public payment. Given the structure of compensation models, doctors are often sheltered from the economic realities of the health system. The vast majority of physicians’ income is still tied to individual productivity rather than bonuses, and doctors’ income is rarely tied to overall performance of the health system—a stark contrast to trends in professional compensation in other sectors. Health systems and doctors continue to search for the “magic” compensation plan that perfectly aligns incentives with strategy. The search for the perfect model usually ignores an elephant in the room: to reduce the cost of care, clinical labor costs must go down. For physicians, there are two ways to get there: each doctor can make less, or physicians can maintain and grow their impact through new care models that extend their reach with a larger care team and technology.


THIS WEEK AT GIST—ON THE ROAD

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

The power of saying “I’m sorry”

Lisa:
The past few months have been rough for my extended family, with three separate admissions to the hospital. In two of these episodes, while the care received was not ideal, we did get to observe best-practice risk management in action. My uncle, healthy and in his early 60s, had an elective total knee replacement at a high-volume, hospital-based program. He attended “joint boot camp” to learn about the procedure and recovery, and was discharged less than a day after what seemed like a routine procedure. A few days later I received a text message with pictures of his leg from a concerned relative. You didn’t need a medical degree to see that something was incredibly wrong. He went to the ED, and was admitted for four days of IV antibiotics to treat a bad case of postoperative cellulitis.

Post-op infections can happen despite best efforts, but in this case there were other issues at play. My uncle had called the surgeon, concerned about his leg, and reported that the doctor was abrasive and told him everything had been covered at discharge, suggesting that his lack of activity could be causing the problem. Even more concerning, the hospital sent him home with the wrong medications, mixing up his discharge prescriptions with another patient’s. Rightfully, he and his family were angry. After he was feeling better, I encouraged them to write a letter to the health system’s CEO detailing their experience—CEOs read patient letters and they make an impact. Their response: “Maybe, but it’s ok now. And the surgeon said he was sorry the next time we saw him.”

Just last week, my 96-year-old grandmother was admitted to a community hospital for her second heart failure exacerbation in three months. She became confused, and despite having a sitter she fell when getting out of bed, and broke her shoulder. This injury could lead to significant lifestyle and financial consequences for my family. If she can’t manage her personal care, “Granny” may have to leave her assisted-living apartment and move in with family, or into a nursing home. I was upset, but my mother, her primary caregiver, noted how quickly the hospital team responded—and how many people kept apologizing. “They’re doing their best,” she said.

As a physician, I know both situations were not healthcare’s “best”. But they illustrate how well the cornerstone of risk management works: angry patients who experience real lapses in care are often satisfied by being told “We’re sorry, and will work to ensure it doesn’t happen again.” We get asked regularly by doctors about the impact of “defensive medicine” on healthcare costs. My family’s recent experiences illustrate that the best defense against malpractice claims is not ordering marginal tests to cover all possibilities, but taking a few extra minutes to develop a relationship with a patient. And should something unexpected happen, being quick to acknowledge it and say, “I’m sorry”.

Questioning the value of physician employment 

Chas:
This week was a busy one for me. I spent time with a range of different groups, including the board meeting of a West Coast independent practice association (IPA), a market-wide physician retreat hosted by a large, for-profit health system, and the executive team meeting of a management services organization (MSO) that enables physician practices to implement population health management strategies. Common across all three organizations was a shared point of view about how the healthcare delivery system ought to be structured, centered around maintaining the independence of physician practices. Although each of the markets I visited was in a different place in terms of provider consolidation, transition to risk, and adoption of care management models, the perspective of the majority of physicians I met with was that the downsides of employed practice, whether becoming part of health systems, health plans, or even the new breed of private equity-backed aggregators, outweigh the benefits. The physicians I spoke with largely agreed that the loss of decision-making authority, the risk of a “civil service” mentality, and the bureaucratic burden of entering employed practice were enough to keep them striving for ways to remain independent, despite rising practice costs and an increasingly difficult market environment. Surprisingly, this was true even among the younger, millennial doctors I talked to, despite the conventional wisdom that what newer doctors really want is a job, not an entrepreneurial challenge.

Of course, there was some selection bias at work here: you’d expect the groups I was with to take a dim view of physician employment. But what I heard was consistent with the gestalt I’ve started to sense more broadly. Anecdotally, it seems to me there’s a growing backlash against the employment trend of the past few years, particularly among primary care doctors. I’m picking up on increasing skepticism among doctors that employment can provide the answer to some of their more pressing concerns—practice sustainability, succession planning, investment in new staff and technology. While some practices have benefited from being part of a larger system, the frustration of being a “cog in the wheel”, and just another “mouth to feed” for health system medical groups is palpable. At the same time, I’m hearing growing interest in alternative paths to maintaining independence: shifting to a concierge model, building a direct primary care practice, or looking to new “enablers” (like the MSO I was with this week) to provide infrastructure that allows doctors to preserve independent practice. Meanwhile, I’ve begun to hear health system execs complain that employing doctors hasn’t yielded the benefits they’d hoped for, given how expensive it can be. It’ll be worth watching whether these early rumblings portend a broader shift in the market over the next couple of years.


BINGE WATCH ALERT

We would’ve worked harder, but we watched this instead.

In case our recent recommendation of the outstanding German-language interwar crime drama Babylon Berlin whetted your appetite for more subtitled crime shows on Netflix, have we got a treat for you. (Never let it be said we don’t know how to generate excitement…) This week we watched The Forest (Le Forêt), a six-episode drama that was released on the streaming network over the summer, having originally aired on Belgian and French TV last year. The show takes place in a small town near the French-Belgian border, in the middle of the Ardennes forest, and surrounds the events following the disappearance and murder of a teenage girl from the village. As local police investigate, the plot unfolds to reveal layer upon layer of dark secrets held by residents of the village, and we learn how complex their relationships are with each other and the dense forest that becomes a character unto itself.

At the center of the drama is the uncomfortable partnership of the long-suffering local policewoman Virginie Musso (whose own family is deeply tied up in the mystery) and police chief Gaspard Decker, newly arrived to the village after service in Africa. If you’re a fan of police procedurals, this isn’t the show for you; the technical details of how the crime is solved are almost laughably depicted. Rather, what the show brings to the genre is a nuanced and gritty view of modern village life (at least as good as the recent British hit drama Happy Valley, which mines a similar vein), and a lead actress in Suzanne Clément, whose portrayal of Virginie puts her in a league with Frances McDormand at her best. It’s well worth dealing with the less-than-ideal subtitling to spend time with these characters, and to get to know the small town of Montfaucon they inhabit. Magnifique!


WHAT WE’RE READING

Stuff we read this week that made us think.

CVS launches a membership program as Amazon looms 

Even though CVS CEO Larry Merlo said recently that he doesn’t lie awake at night worrying about Amazon, we were interested to read the company’s recent announcement that they would be piloting a new subscription-based membership program for home drug delivery and other services. The program, called CarePass, will launch in Boston and provide free delivery for any CVS online purchases, including prescription drugs. Members will also have access to a pharmacist helpline and receive 20 percent off CVS-branded items. At $48 annually or $5 per month, the cost of a CarePass membership is less than half of the fee for Amazon Prime, and seems directly targeted to counter Amazon’s move into the prescription drug business, which has seemed imminent since the company’s acquisition of online pharmacy PillPack earlier this year.

Amazon’s entry into the pharmacy space threatens CVS on multiple fronts beyond prescription delivery. Sales in the “front of the store” (i.e. all of the shampoo and Doritos we buy when we pick up our prescriptions) account for $20B of CVS’s $185B of revenue, and Amazon could also run directly at CVS’s $100B pharmacy benefit management (PBM) business. We’ve long thought that pharmacies were missing out on the opportunity to offer subscription-based services. Many regular customers, who may already talk to their pharmacist for advice, might be willing to pay a small fee for a “membership” that includes care management support and access to MinuteClinic visits (CVS hinted the latter might be added to the offering). For most of us, our “relationship” with CVS consists mainly of the six-foot long receipts we receive at checkout offering coupons for cold medicine and toilet paper. When announcing its merger with Aetna, the company described its intent to turn its stores into “Health Care Hubs” , providing comprehensive care in the pharmacy—and linking patients to lower-cost Aetna networks. If well-executed, CarePass could be a key ingredient in creating ongoing consumer loyalty beyond the storefront, critical for securing the company’s old and new businesses.  

Precision medicine patients face the “financial toxicity” of treatment

Precision medicine has been hailed by researchers as the next great leap forward in cancer treatment. Studies have indicated the potential to dramatically increase survival rates and reduce side effects for a range of cancers, including leukemia, melanomas, and advanced lung and breast cancers. However, as a recent article in Kaiser Health News describes, accessing these therapies can come at a very high financial cost to patients, leaving some to weigh survival versus bankruptcy. The dilemma is illustrated by the story of 38-year-old breast cancer patient Kristen Kilmer, who has shown an outstanding response to the targeted therapy Lynparza. Unfortunately the drug has only been formally approved for treating breast cancers with specific genetic mutations not present in Kilmer’s tumor. While the drug can be used off-label to treat patients, Kilmer’s insurer considers off-label use experimental, leaving her responsible to cover the $17,000 monthly cost. Her family depends on financial aid from the drug manufacturer to cover the costs—and has made the gut-wrenching decision to discontinue treatment should that support disappear, rather than face the prospect of bankruptcy and long-term debt.

It’s no secret that serious illness creates a huge financial burden for patients and families. A study published this month in the American Journal of Medicine showed that 42 percent of all cancer patients had depleted their entire life’s financial assets two years into treatment, racking up an average debt greater than $90,000. And precision medicine presents a much more complex challenge than standard therapy. While often marketed similarly to standard drugs, the process of precision medicine is often much more involved, beginning with enhanced diagnostics such as genomic sequencing and immune typing, allowing highly customized matching of tumor to treatment regimen. Take CAR-T cell therapies Kymriah and Yescarta, which involve the “reprogramming” of a patient’s own immune cells to attack cancer cells. This process of extraction, complex lab work to alter the cells, and reinfusion and monitoring doesn’t conform to standard methodologies for pricing and reimbursing chemotherapeutics. Precision medicine highlights the conflict that can emerge when real innovation, delivered at a very high cost, collides with our complex and rigid third-party payment system. While the system figures out how to categorize and reimburse these complex treatments, patients will be caught in the middle, left to find their own funding for lifesaving treatment, or to make the difficult decision to go without—a prime example of how de facto rationing of care exists in our country today.   

Caregivers struggle to make a living wage despite demand 

After seeing their parents die in nursing homes, Baby Boomers are increasingly determined to age in their own homes. With children living far away and working full-time, many will be highly reliant on help from paid caregivers. Demand for home health aides is expected to exceed supply of workers by 3M in the next decade. However, the supply of personal care and home health aides is falling even as demand skyrockets. A recent article in the Wall Street Journal shows exactly why: it is increasingly difficult for these workers to make a living wageOver the past decade inflation-adjusted hourly wages for direct-care workers (including home health aides, personal care aides, and nursing assistants) has fallen by two percent. A forty-hour work week provides an annual income of just $24,600, forcing many to take second jobs. Even those who love the work are seeking other jobs (wages are comparable to those of fast-food workers, and slightly lower than pay for retail sales jobs).

Why are wages for these critical workers falling? Reimbursement for home health services, mostly coming from Medicaid and Medicare, has fallen 1.7 percent since 2010, while costs continue to rise. These payers reimburse about $24 for the first hour of a visit, leaving little room for paying experienced workers more. As the population ages, we face an impending caregiving crisis. Working with the oldest patients, particularly those with dementia, is physically and emotionally taxing. These patients benefit from care aides with more skills, who able to address social needs in a way that can prevent high-cost hospital admissions. Investing to build this talent base—and finding technology solutions that scale the impact of caregivers—will be a critical capability for any health system looking to successfully manage the total cost of care for Medicare and Medicaid patients.


That’s it for this week. A rough one to be sure, but what makes it worthwhile for us is the opportunity to contribute to the conversation, and to engage with so many of you along the way. We’re so grateful for the time you take to listen to our thoughts, share your feedback, and send us ideas and suggestions. We hope you’ll encourage others to join in as well, and that you’ll subscribe if you enjoy reading our work.

Most importantly, we hope you’ll let us know if we can be helpful to your work in any way. 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