|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
A new academic mega-deal in the Carolinas
This week Charlotte, NC-based Atrium Health, a 42-hospital system with operations across the Carolinas and Georgia, and Winston-Salem, NC-based Wake Forest Baptist Health, a 7-hospital academic system that includes the Wake Forest School of Medicine, announced that they are in talks to combine the two organizations in an arrangement that would bring a new medical school campus to Charlotte, one of the largest cities in the country without its own medical school. Merger talks are planned to conclude at the end of this year, with the new campus to open in Charlotte in 2021 or 2022. The announcement comes a year after Atrium’s failed attempt to merge with Chapel Hill, NC-based UNC Health Care, and would fulfill a decades-long goal among Charlotte business and community leaders to bring a four-year medical school to the Queen City. Despite the enthusiasm expressed by civic leaders, the deal is certain to raise consolidation concerns among payers, especially Blue Cross Blue Shield of North Carolina, whose CEO Patrick Conway (formerly an Obama administration official) has been engaged in a vocal public campaign to rein in rising healthcare prices in the state. Civic pride and executive hubris notwithstanding, we continue to be surprised by health systems’ interest in adding medical schools to their portfolios—a trend that has surfaced in several states. The investment in clinical research capabilities and a pipeline of next-generation physicians is understandably appealing. But given the high operating costs and challenging economics of academic research and teaching, we worry that already-costly health systems run the risk of exacerbating an already-mounting price problem, making care even more expensive in the pursuit of academic prestige.
Florida man convicted of largest Medicare fraud in history
Late last week in Miami, a jury convicted skilled nursing and assisted living facility owner Philip Esformes of money laundering, bribery, obstruction of justice, and paying illegal kickbacks related to a $1.3B Medicare fraud scheme, the largest of its kind in the program’s history. Over an 18-year period, Esformes was found to have engaged in paying off regulators and funneling money to doctors for referring patients unnecessarily to his facilities. Esformes has been in jail since 2016 and is now awaiting sentencing in the case, facing up to 250 years in prison. (In a related case, although one not associated with the current college bribery scandal, a University of Pennsylvania basketball coach last year pled guilty to money laundering after taking a $74,000 bribe to help Esformes’s son gain admission to the school.) Separately this week, a Florida man and 23 others were charged in a $1.2B Medicare fraud case, after authorities broke up a multinational telemedicine scheme that paid kickbacks and bribes to doctors to prescribe unnecessary orthopedic braces to seniors. In addition to the CEO of two Florida telemedicine companies, medical equipment vendors, telemedicine operators, and clinicians were charged in California, New Jersey, Pennsylvania, South Carolina and Texas. The two schemes highlight the susceptibility of unwary seniors to fraudulent medical services and underscore the need for continued vigilance by Federal investigators in battling Medicare and Medicaid fraud. While “reducing fraud and abuse” can sometimes seem like a fig-leaf slogan used by politicians to substitute for real proposals to control healthcare spending, these recent cases demonstrate that substantial dollars are at stake, along with risks to patients’ health.
Disrupting primary care in the Lone Star State
A large payer and a national retailer announced separately this week that they are launching new primary care offerings in the state of Texas. On Tuesday, Health Care Service Corporation, the parent company of Blue Cross Blue Shield of Texas (BCBS-TX), announced a partnership with global healthcare firm Sanitas to launch ten primary care clinics in Houston and Dallas next year. The clinics will provide health and wellness services in addition to primary care, imaging and lab services. The following day, Walgreens announced a partnership with Chicago-based primary care provider VillageMD to place primary care physician offices inside select Walgreens pharmacies in Houston by the end of the year. The offices, to be called “Village Medical at Walgreens”, will each include six to eight exam rooms and offer a full range of primary care services. Both companies describe these strategies as central to their efforts to lower costs and shift toward value-based care. Texas is also the test market for CVS-Aetna’s HealthHUB pilot stores, which opened in Houston in February, and was the first site for Walmart’s in-store comprehensive primary care clinics in 2014.
BCBS-TX appears to be building its new clinics from scratch, and the BCBS-Sanitas clinics are likely to directly employ their doctors, raising concerns that they will compete with local physicians, many of whom also participate in BCBS-TX’s value-based payment and care management programs. “It’s disappointing that BCBS didn’t look to work with us after a decade of performance-based partnership, or explore partnerships with other local physician groups,” said Dr. Christopher Crow, CEO of North Texas-based Catalyst Health Network, in an interview with the Weekly Gist. “We’re also concerned about the potential impact on continuity of care for patients who are forced to switch carriers away from BCBS.” (Catalyst is the largest independent clinically-integrated network in the US, serving over 450,000 attributed lives.) Texas has become a testing ground for disruptors looking to refine their consumer-focused care offerings. Coupled with the highest number of urgent care and freestanding EDs in the US, the state is now the epicenter for new access and care services. Healthcare leaders nationwide should closely monitor the Lone Star State to see how these experiments evolve, and how they impact traditional providers.