August 2, 2019

The Weekly Gist: The Woodstock is Canceled Edition

by Chas Roades and Lisa Bielamowicz MD

Metaphor alert! Nostalgia junkies of a certain age may have been saddened to hear this week that Woodstock 50, a music festival planned to commemorate the Summer of Love gathering that defined a generation, has been canceled due to a failure to adequately plan for the event. Organizers forgot to get permits for the New York festival site, had a falling-out with financial backers of the concert, and were unable to secure planned headliners after the event had to be relocated to the DC suburbs. Not thinking ahead, mismanaging finances, and an ignominious end in the ‘burbs? Sounds about right. No going back to the garden…

THIS WEEK IN HEALTHCARE

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

The Great Healthcare Debates, round 2

Across two marathon nights of debate among Democratic candidates this week, it seemed as though everyone was running to be President of Healthcare. With 30 minutes on the first night and 24 minutes on the second night devoted to the topic of Medicare for All (M4A), public options, KamalaCare, Obamacare and related topics, a sharp divide emerged between progressive and moderate candidates. The M4A contingent, including Sanders, Warren, Harris, Sen. Kirsten Gillibrand (D-NY), and New York Mayor Bill de Blasio, staked out aggressive positions on the future of private insurance (diminished or abolished) and government coverage (universal or nearly-universal). The M4A advocates faced fierce critiques from moderates, who forcefully argued for building on the successes of the Affordable Care Act (ACA), and more modest proposals to allow Americans to buy into “public option” plans. During the course of the exchanges, insurance companies and pharmaceutical firms came in for the strongest criticism, while there was relatively little discussion of the contribution of hospitals and doctors to what was widely described as a healthcare cost crisis. At one point, frontrunner and former Vice President Joe Biden even seemed to suggest jailing insurance executives, although by that point in the debate it seemed as though few candidates had any clear idea what was actually being discussed, whether or not they had “written the damn bill”. There was little discussion of how to pay for any of the proposals being discussed, which could cost into the trillions of dollars, although it’s clear that some form of new tax revenue would be needed to fund almost any proposal. In general, this latest round of debates was further evidence that healthcare reform is far too complex for 60-second talking points and 15-second retorts. Nonetheless, expect more of the same in the next round, as the leading progressives come face-to-face with the frontrunning moderates. Buckle up, it’s going to be a bumpy ride.

Getting to know KamalaCare

In advance of this week’s Democratic debates, Sen. Kamala Harris (D-CA) introduced her version of “Medicare for All”, which might better be called “Medicare Advantage for All”. Building on the popularity of Medicare Advantage (MA), in which a third of seniors are already enrolled, Harris proposes offering MA coverage to everyone, not just over-65s. “KamalaCare” would have a 10-year phase-in period and launch an immediate Medicare buy-in option, as well as immediately enrolling newborns. At the end of the transition period, private insurance could only be purchased in the form of MA plans, or narrower plans that provide supplemental coverage. Harris’s strategy appears designed to ease opposition from the insurance industry, which already profits handsomely from providing private Medicare coverage. In stark contrast to the plans of Sens. Bernie Sanders (I-VT) and Elizabeth Warren (D-MA), Harris’s plan would preserve a leading role for private coverage, albeit with greater restrictions on benefit levels and out-of-pocket expenditures. The role of employer-based coverage, which remains broadly poplar and covers about half of insured Americans, remains unclear under Harris’s plan. Harris has said she views the linkage between employment and health coverage as unfair. She proposes paying for her plan through increased taxes on households making more than $100,000, stock and bond transactions, and income taxes on offshore companies. The newly-announced “KamalaCare” plan is an attempt to thread the needle between more aggressive single-payer proposals and narrower “public option” approaches being touted by moderate Democrats. We view some form of MA buy-in option as the most likely outcome, if any, of the ongoing coverage expansion debate.

New rules fill in details on the Trump transparency push

Amid a flurry of rulemaking this week, the Centers for Medicare and Medicaid Services (CMS) laid out its proposal to force hospitals to reveal negotiated rates, as directed by President Trump’s executive order issued in June. As part of the 2020 Medicare Hospital Outpatient Prospective Payment System (HOPPS) proposed rule, the agency will require hospitals to publish the list price, or gross charges, as well as the insurer-negotiated rates for all “shoppable” services online in a machine-readable format beginning in January 2020. Most noteworthy, the proposal defines a shoppable service as any “service that can be scheduled by a health care consumer in advance”, creating a broad and long list of hospital procedures and services, from simple diagnostics to complex surgeries, that would be subject to the regulation. CMS calls the proposal a “first step” toward transparency, likely bracing for significant pushback from industry stakeholders, many of whom came out against the proposal with guns blazing. Five hospital advocacy organizations, including the American Hospital Association and the Federation of American Hospitals, immediately issued a joint statement, calling it a “misguided attempt” that could “harm patients by reducing patient access to care”; payer advocacy groups listed similar concerns. Much of the criticism from industry stakeholders focuses on the inability of consumers to digest, compare and act on complex pricing information. We view that response as paternalistic on its face, and think it ignores the greater impact will come from employers, who can use the data to assemble lower-cost networks and hold insurers and providers accountable for price variability. Lobbying efforts across the comment period will surely water down the final rule and early attempts at transparency will be imperfect, but the proposal sets a clear direction toward full rate transparency, which over time is likely inevitable.

The HOPPS rule and 2020 Physician Fee Schedule proposed rule, also issued this week, included a host of other changes that would be headline news if not overshadowed by the price transparency debate. CMS removed total hip arthroplasty from the “inpatient only” list and added total knee replacements to the list of procedures eligible for reimbursement in the ambulatory surgical center (ASC) setting, opening the door for large volumes of profitable hip and knee replacements to continue move away from the hospital. CMS also continued the march toward site neutral payments, reducing payment for clinic visits performed in a hospital outpatient setting by an additional 30 percent. Setting aside last year’s controversial proposal to condense evaluation and management (E&M) code payment for clinic visits, the PFS rule includes a rate bump for the most intensive visits while holding payment for shorter visits steady, providing a significant payment boost to primary care physicians and “cognitive” specialists who manage the most complex patients—but also creating more incentive to “upcode”. Taken in full, the proposed rules are consistent with the agency’s move toward payment policies that actively direct care to lower-cost settings and facilitate healthcare market competition over voluntary incentives that nudge providers to reduce costs.


GRAPHIC OF THE WEEK

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

In need of a new lens on demographic trends

As we’ve discussed before, our view is the healthcare system faces two fundamental demographic challenges across the next decade. The first is how to sustainably accommodate 80M Baby Boomers—all of whom will be over 65 within the next ten years and in the Medicare program. This will entail providers learning to care for seniors in a much lower cost, lower intensity way, and payers (the federal government and insurers) to design benefits, networks and reimbursement approaches that support a more appropriate model of care delivery. The second, often less discussed, is how to adapt traditional delivery approaches for the (even larger) Millennial generation, who will enter their “fix me” years within the next decade, and bring their high-demand, high-information, digitally-oriented consumption behaviors to an industry that has been built for older consumers more accustomed to the “hurry up and wait” model.

Our concern for incumbents, as the graphic suggests, is that they view these two demographic challenges through the lens of their current business models and seek to protect their legacy economics. We commonly hear provider executives talk about “taking a wait and see attitude” and having a bias toward “no-regrets moves”. Why should we embrace price transparency, destroy demand for our own services, or disrupt ourselves, while we’re still making so much money on fee-for-service medicine? But self-disruption is becoming an urgent priority as newly-emboldened outsiders look to upend the traditional model. Players like CVS, UnitedHealth Group and others view now as the time to assemble low-cost delivery assets and redesign network and benefit structures to capture the loyalty of those Boomers in Medicare Advantage plans for the next decade or more. And technology companies from Amazon to Google see an immediate opportunity to build new models around consumer loyalty as well, moving at Internet speed. The sooner incumbents wake up to the reality that these unprecedented demographic forces demand a new approach to doing business, the better their chance of avoiding being outflanked by these kinds of disruptors.


THIS WEEK AT GIST—ON THE ROAD

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

A family field trip to the CVS HealthHUB         

Lisa:
My kids grumble that even on vacation, I still keep talking and thinking about healthcare. So, they weren’t surprised when our family vacation in Houston last weekend included a detour to check out one of CVS’s three HealthHUB pilot stores. HealthHUB branding, starting with a big blue banner above the entrance announcing “HealthHUB. Come inside!”, was prominent. And the store felt appreciably different from the average CVS pharmacy. Half of the store’s footprint is dedicated to healthcare services—and it was quickly apparent that the HealthHUB is built with the Medicare Advantage (MA) population in mind. The HealthHUB design is pretty sleek: wood floors, modern furniture, and bold graphics surround three exam rooms and a concierge positioned at the front to assist with services. But to reach it, you first have to pass a large selection of durable medical equipment (DME). Seeing the stacks of toilet chairs, shower seats, and walkers, my daughter commented it “made CVS feel like a hospital”, although she did enjoy testing out the $1,300 motorized lift chair on display.

Service offerings are bucketed into “everyday care” (school physicals, primary acute care, an expanded roster of immunizations) and “ongoing care” (chronic condition management, preventive care and wellness, and health insurance navigation). There is a full calendar of in-store light exercise (“gentle yoga”, Zumba and “senior games”) and stress management classes—all scheduled during the day. The clinic closes at 7:30 pm on weekdays, and 4:30 pm on the weekend—hours that seem designed for seniors with time on their hands, rather than busy families looking for late-evening access. My parents, both in their late 60s, were intrigued. My mother, who hates the hassle of going to the doctor, said this seemed like an easier way to get primary care. On hearing that Aetna plan members pay no copay for services and get 15 percent off all CVS purchases, my father said that made the insurance offering more attractive. Converting their initial reactions to action is the key challenge for CVS. The HealthHUB space and services undoubtedly feel new and different. But success will require consumers, particularly seniors, to actually use them—and find value in the connection of Aetna benefits, care platform and expanded services.

The view from Spoketown

Chas:
I had an interesting visit this week with executives at a health system that’s long been in an enviable position—the largest system in a medium-sized town. They weren’t quite the only game in town, but they were the biggest fish in a relatively small pond for many years, located smack dab in the center of their state. Their community, while not at the level of the state’s larger, metropolitan centers, has enjoyed economic stability and attractive demographic trends. But as hospital system consolidation has accelerated in their state, they’ve suddenly found themselves confronted with a number of new market entrants, who have been building clinics, buying doctors, deploying system-owned insurance products, and even opening small hospitals, all right in their backyard. As the CEO put it to me, their town has rapidly become the “spoke” on a lot of bigger, better-capitalized, out-of-town “hubs”. Making matters worse, two of the “hub” competitors are academic systems and are beginning to poach doctors and entice patients based on the strength of their brands. How is the hometown system going to compete with these newcomers? My suggestion: run to your strength. You’re deeply rooted in the community, and your system is deeply woven into the fabric of residents’ lives. Accentuate that—if you feel your value to the local community is stronger than the newcomers’, then double down on your “local-ness”Fight the outmigration of patients by investing in better access, more convenient care options, and more affordability. But avoid getting into an arms race with better-funded outsiders—stick to what you’re good at and know which services you’ll probably have to cede to others. I’ll keep you posted on their progress as we continue to work with them over time.


ON THE GIST TURNTABLE

Give this a spin, you might like it.

If we ever manage to drive a stake through the heart of “world music” as a category, which treats all non-Western music as a single cabinet of curiosities, it’ll be thanks to artists like Sarathy Korwar, the US-born, Chennai-raised, London-based electro-jazz percussionist who just released his second studio album, More Arriving. Korwar vaulted to prominence on the new jazz scene just a couple of years ago and has become a rising star with his transnational fusion of hip hop, jazz and electronica, working alongside titans like Kamasi Washington and Shabaka Hutchings. His latest is a protest album of sorts, spotlighting the experience of first-generation South Asian immigrants in the Western world, who are often stereotyped as exotic “others”—over Korwar’s drumming, the London poet Zia Ahmed bitterly describes it this way: “I am your gap year/You said you were lost, I hope you found yourself/I am Slumdog Millionaire/Downward dog/Eight-headed god/I am Shiva, al-Qaeda/I am auditioning for the role of Terrorist #1”. The album is a polyglot mix of collaborations, bringing in Mumbai DJs, classical Indian singers, and diaspora artists to contribute to the blend. It’s music for dancing and thinking—Korwar’s music and message feel urgent, not just in Brexit-era Britain but beyond. Best tracks: “Mumbay”; “Bol”; “Coolie”. Bonus video: “More Arriving Mini-Documentary”


GIST IN THE NEWS

We said it, they quoted it.

Many fear Hahnemann’s story will send a message: Buying a failing hospital pays
WHYY Philadelphia; July 31, 2019

“‘Pediatric hospitals, particularly those who serve a low-income population like St. Christopher’s, have learned how to operate on a Medicaid budget, so to speak, and have found ways to be more efficient and work within that coverage in a way that a lot of hospitals that primarily serve adult patients maybe haven’t had to,’ said Lisa Bielamowicz, co-founder of Gist Healthcare, a D.C.-based health care consulting firm…

…‘There’s also an element of wanting to preserve the competitive dynamic and capacity for that care in the market by preserving St. Christopher’s, so that Philadelphia doesn’t become a one-horse town for specialty children’s care,” said Bielamowicz.’”


WHAT WE’RE READING

Stuff we read this week that made us think.

What’s wrong with an 80-hour work week? Maybe nothing.

Many physicians who trained prior to 2003, when the 80-hour work week limits for resident physicians were instituted, will tell you that those restrictions have adversely impacted patient care and continuity. But recent research shows no impact of shorter workweeks on the long-term quality of medical training. Researchers evaluated outcomes for 500,000 patients treated by newly independent doctors who trained before and after the inception of 80-hour work week requirements, finding no difference in 30-day mortality, readmissions or cost of care, undermining the argument that longer hours translate into better preparation for independent practice. (Other research, however, disputes this for surgical residents, noting that shorter workweeks have resulted in exposure to a lower number of surgical cases.) The authors surmise that team-based care and electronic medical records may have smoothed potential continuity gaps that result from more frequent resident shift changes. And given that physician burnout often begins in residency, they suggest that even shorter resident work weeks might be explored, to reduce long-term incidence of physician fatigue. That said, researchers fail to acknowledge the operational challenges of shorter work weeks. Interns and residents are a lynchpin of the hospital clinical workforce, providing around-the-clock coverage. Reducing resident work weeks further without increasing training slots will create gaps that will have to be filled by more costly staff.

Smells like teen spirit

As much as we focus on Boomers and Millennials as drivers of a fundamental, generational change in healthcare (and the rest of the economy), we’re still, deep down inside, a little skeptical about the analytical value of “generations” as an organizing category. But of course we’re skeptical—we’re Gen X’ers! And a new article this week in Bloomberggave us new (and rare) reason to be proud of our cynical, sandwich-generation status. Turns out we’ve done at least one thing right—we’ve produced a new generation of well-educated, cagey, worldly-wise kids called Generation Z, who look to be very different from their older Millennial cousins. Already a quarter of the world’s population, Gen-Z were specifically engineered by Gen-X parents and our jaded view of the cohorts that surround us: “…[A]lthough Gen X didn’t agree on everything (The Cure or The Smiths? Nirvana or Pearl Jam?), in recent years they’ve rallied around one defining idea: Baby boomers are a bunch of self-indulgent narcissists, and their helicopter parenting transformed their millennial kids into entitled mini-mes. Generation X parents have purposefully tried to raise a different kind of kid, influenced by their own upbringing.” Yes! So here’s what to watch for in the up-and-coming ranks of Gen-Z, according to experts: they’re highly-educated, socially-conscious, frugal, credit card-averse, and engage in far less risky behavior—sex, drugs (except pot), and alcohol—than older cohorts.  How they interact with the healthcare system remains to be seen, though a general trend toward depression and issues of self-worth (an artifact of lives lived and curated very publicly online) are likely to mean an even more urgent need for behavioral health services at an earlier age. As we gear up for “Generation Me” (the Millennials) to enter their prime healthcare years, it’ll be worth keeping a close eye on “Generation Meh” as well.


That’s all from us for this week. Thanks for reading along, and for sharing this with friends and colleagues and encouraging them to subscribe. We’re so grateful for our readers, and for your level of interest and engagement and your always-helpful feedback and suggestions for future work. Keep it coming!

Most of all, let us know if there’s anything we can do to be of assistance in your work. As fun as it is to write about what’s happening in our industry, what we like best is working with you and your teams. 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