|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
Walgreens closes nearly half of in-store clinics
Walgreens Boots Alliance Inc. announced this week that they will close 160 of their nearly 400 in-store retail clinics. The company will shutter all of its wholly-owned and operated clinics, but keep the clinics operated by local health system partners. The move is part of an effort to cut costs in preparation for further paring back sales of tobacco products (last spring Walgreens raised its minimum age to purchase tobacco to 21). The company also announced plans to open smaller-scale stores focused on pharmacy and wellness services in urban areas, and a partnership to bring Jenny Craig weight loss services into 100 stores nationwide. Walgreens has lagged behind rival CVS in expansion into care delivery and insurance products, pursuing a strategy of partnerships rather than owned services and acquisitions. Just a few years ago, Walgreens seemed the more forward-looking of the two competitors, arranging with provider organizations to launch accountable care organizations, announcing co-branding deals with leading local health systems, and unveiling plans to get into the care management business. Since its combination with Alliance Boots, however, and its subsequent abortive acquisition of Rite Aid, the pharmacy retailer seems to have been in catch-up mode. By lagging CVS in ceasing tobacco sales, the company is not only likely to take a larger financial hit (since they surely saw cigarette sales spike after CVS took them off their shelves) but may fail to gain the same level of goodwill and positive coverage. Both CVS and Walgreens are pursuing a strategy of expanding into chronic disease management and wellness. However, Walgreens’ partnership-driven approach, with no “risk model” to capture cost savings from better health management, may leave it lagging its main rival in the healthcare space.
Seema Verma’s signature program is halted
Indiana announced on Thursday that it will delay the rollout of its Medicaid work requirements. The “Gateway to Work” program, which was scheduled to go into effect in January, would require non-exempt Medicaid beneficiaries to track and report their work hours (or time spent on another qualifying activity) each month to maintain benefits. The decision is in response to a lawsuit filed by four Indiana residents challenging the program, arguing it violates the primary goal of Medicaid, providing coverage. Work requirements in other states have faced similar challenges. A Federal appellate court is weighing the Trump administration’s challenge to a ruling that struck down work requirements in Kentucky, Arkansas and New Hampshire. Arizona recently announced it would also delay starting its work requirements until the court cases were resolved. A Government Accountability Office report found the infrastructure to administer work requirements comes at a significant cost to states, and in some models, could offset any savings.
Indiana was the first state to link value-based incentives and beneficiary premiums to Medicaid expansion under the Healthy Indiana Plan (HIP). The first iteration of HIP, launched in 2015, was architected by current Centers for Medicare and Medicaid Services Administrator Seema Verma, who was an advisor to then Indiana governor and current Vice President Mike Pence. A waiver extension in 2018 added more restrictions, including increasing premiums for tobacco users and imposing coverage lockout periods for adults who failed to complete the eligibility process on deadline. Indiana has been a national leader in implementing conservative Medicaid reforms, and HIP is the seminal achievement of Verma’s work prior to her tenure at CMS. The outcome of court cases on Medicaid work requirements could determine whether her work on those strategies at the national level is ultimately deemed a success.
Google gets a step—or 10,000—closer to monitoring your health
If you Google “Where is my Fitbit?”, you’ll get about 42 million results, most pointing to a popular app that helps users locate their lost activity tracking device. (Mine’s gathering dust at the back of my dresser drawer, and I bet yours is too.) This week Google provided another answer to that question—Fitbit is soon to be added to the growing portfolio of parent company Alphabet’s healthcare holdings. The company announced that it has finalized a deal to acquire Fitbit for $2.1B, putting it squarely in competition with rival tech giant Apple, which accounts for half of the global market for smartwatches. Fitbit has struggled in recent years, after the launch of the more richly featured Apple Watch, although the company has been engaged in stabilizing its sales and pivoting to more of a health management focus rather than its earlier, narrower focus on fitness and step-counting. Coming on the heels of a wave of recent hires by Alphabet that signal a serious intention to become a major player in the healthcare industry, the Fitbit acquisition indicates that Google—which is well-positioned to be the “information layer” in healthcare—is in search of more ways to collect health information from individual consumers. That aspiration is shared by other major healthcare disruptors, including UnitedHealth Group’s Optum division, which this week acquired Vivify, a remote patient monitoring platform. Vivify helps keep track of individual health status outside of traditional care settings and in the home—especially for people with chronic medical conditions. That’s an important component of reducing the need for expensive hospital and specialty care—a view clearly shared by both Google and Optum in their most recent acquisitions.