December 20, 2019

The Weekly Gist: The Year of Blessings Edition

by Chas Roades and Lisa Bielamowicz MD

What a year! Looking back over 2019, just our second year at Gist Healthcare, we’re overwhelmed and humbled by our blessings—a growing membership of leading health systems, an incredible team of outstanding colleagues, engaging and challenging work, and the opportunity to share our thoughts and experiences with loyal readers and listeners. We’ve never worked harder, learned more, been more stretched, or had more fun that we have across the past twelve months, and we’re so grateful for all the support and encouragement we’ve had, and the opportunities we’ve been afforded. We don’t take it for granted, and we can’t wait to see what 2020 brings!

But before we get there, one more (eventful) week in healthcare to discuss!

Note to readers: We’ll be taking a break from writing and podcasting for the next two weeks. The Weekly Gist will return on Friday, January 3rd, and Gist Healthcare Daily will return on Tuesday, January 7th. See you then!


THIS WEEK IN HEALTHCARE

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

The future fate of the ACA left hanging for another year

On Wednesday, in a long-anticipated ruling, the Fifth Circuit Court of Appeals in New Orleans upheld a lower court’s finding that the Affordable Care Act (ACA) provision requiring individuals to purchase health insurance is unconstitutional. However, the appeals court sent the question of “severability”—essentially, whether striking down the individual mandate means that the entire ACA must be stricken—back to district court judge Reed O’Connor in Texas for further consideration. The appeal followed a ruling from O’Connor last December, in a case which pitted Democratic state attorneys general against the Trump administration and its state-level Republican allies. In that sweeping decision, O’Connor held that not only was the individual mandate invalid, since Congress eliminated the tax-based legal rationale for its existence as part of its 2017 package of tax cuts, but the entire law was illegal—from calorie counts on menus to Medicaid expansion to insurance marketplaces. The appeals court agreed with the first part of that argument, but asked O’Connor for more clarity around which specific elements of the ACA should be eliminated, setting up another round of legal wrangling that will likely last a year or more before reaching its inevitable conclusion at the US Supreme Court.

The O’Connor ruling has cast a long shadow over the healthcare industry for the past year, as it would have had a drastic impact on almost every facet of the largest sector of the US economy. The appeals court decision extends that uncertainty another year and will likely reverberate politically as well. Coming as it did on the same day that President Trump was impeached by the US House of Representatives, the decision may not have fully sunk in among partisans—it barely garnered a mention at Thursday’s Democratic presidential debate, where the limited time spent on healthcare continued to center on the merits of Medicare for All (M4A) rather than on the fate of the ACA. The appeals court has surely given Republicans an early Christmas gift, however, as the timeframe for any final resolution of the case will likely come well after the 2020 elections. That leaves doubts about the ACA hanging over yet another election cycle—the fifth since the law’s passage. Whether the landmark 2010 law will succumb to this latest threat, or whether Chief Justice John Roberts will step in—again, as he did in 2012—to rescue it, will be one of the most consequential questions to be answered in the coming year.

Christmas comes early for healthcare industry groups

Today, President Trump is set to sign into law a $1.4T spending agreement that keeps the Federal government open and avoids a year-end budget showdown with Congress. The agreement is comprised of two separate spending packages, with a total of 12 budget bills, and includes good news for almost every segment of the healthcare industry. It repeals the long-debated “Cadillac Tax” on high-cost health plans, which was a key funding mechanism for the ACA and was intended to force employers to encourage their employees to use healthcare services more frugally. It also repeals the “device tax” on medical device manufacturers, and the separate fee on health insurers, both also part of the ACA. In sum, those three repeals will reduce tax revenue by about $375B over the next decade and will remove a substantial portion of funding originally earmarked to sustain the 2010 health law. Meanwhile, notably absent from the budget deal are measures to address surprise billing, which have proven difficult to finalize despite broad bipartisan support, and steps to reduce the cost of prescription drugs, a key legislative priority on both sides of the aisle. Thanks to intense lobbying by various industry interest groups, and the toxic political environment in Washington, the year is drawing to an end with virtually no progress to show on either front. As a result, despite a year’s worth of heated rhetoric about the high cost of care, the burden of health spending on individuals, and the need to rein in runaway health spending, 2019 is ending with almost every industry interest—pharmaceutical companies, device manufacturers, insurers, physician groups, and hospitals—largely avoiding accountability in the form of federal legislation. As we head into an election year, we’ll likely have to wait until after next November to see real progress on any of these issues. Merry Christmas.

Trump administration moves to allow drug imports from Canada

Undeterred in their search for a win in efforts to lower prescription drug costs, the Trump administration moved forward with plans to enable American consumers to purchase drugs from Canada. The proposed regulation, announced in Florida on Wednesday by Health and Human Services (HHS) Secretary Alex Azar, would allow states to import drugs from Canada; a second draft would also allow pharmaceutical companies to apply for permission to import drugs from any foreign country. Canadian economists expressed concern that the policy could strain the country’s supply of critical medications. But Azar said he couldn’t predict how much money patients would save, as it’s unclear how many states would participate in the plan, although governors of Florida, Maine, Colorado, Vermont and New Hampshire have expressed interest. Pharmaceutical companies remain adamantly opposed to the plan, despite the exclusions of some high-volume yet expensive medicines for chronic disease patients, including insulin for diabetics, and Humira, used to treat rheumatoid arthritis. Proposals to allow Americans to buy drugs from Canada remain very popular with voters. Advancing these efforts will likely be seen as putting the administration on the side of consumers, even if patients are still a long way from actually being able to purchase their medications from Canada—and pharmaceutical companies are sure to lobby heavily to prevent the rule from being implemented.


GRAPHIC OF THE WEEK

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

A look at what lies under the (high) deductible

With the continued growth in high deductible health plans (HDHPs) in both employer- and exchange-based insurance markets, a larger number of services are falling “under the deductible”, leaving patients responsible for the full cost of careThe graphic below illustrates the national cost ranges of ten common outpatient services, based on data from a publicly-available commercial claims databaseIt’s not just minor services like lab tests or diagnostic imaging that are falling under the deductible—many consumers are now paying full freight for a growing list of outpatient procedures like cataract or carpal tunnel surgery, or even knee arthroscopy. Shopping can pay off: for any service, the highest-priced provider can be over three times the lowest-priced, translating into thousands of dollars of savings for patients with high-deductible plans. Outpatient services now account for over half the revenue of many health systems. As deductibles climb, more and more of the (profitable) health system services are becoming “shoppable” for consumers—creating an imperative for systems to both lower costs and pursue rational pricing as scrutiny becomes more intense.


THIS WEEK AT GIST—ON THE ROAD

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

Get ready for the “Yolds”

Lisa:
In a recent discussion on consumer strategy, a health system executive relayed a surprising data point: the system’s most “digitally activated” market was a local retirement community. The residents of this over-55, master-planned community, designed for active seniors, had the system’s highest rates of patient portal activation and online appointment scheduling. Growth of this cohort of “young old” consumers—over 65 but still active—will explode as the peak of the Baby Boom joins their ranks. And with a median wealth of $210,000, they’ll have tremendous spending power, so much so that the Economist recently dubbed the next ten years “The Decade of the Yold”. Many “Yolds” will keep working well into their 70s, and those that do will experience slower rates of health and cognitive decline. For health systems, the next few years are critical for deepening relationships as the Yolds transition into Medicare. What do they want today? Technology-enabled care, and access and communication that works right out of the box, as they have little patience for troubleshooting buggy software. Customized, high-touch services, like they’ve come to expect from everything they consume. And a focus on helping them maintain their active, productive lifestyle for as long as possible. But they’re not brand switchers: once they join a Medicare Advantage plan, there’s a 90 percent chance they’ll stay. Building loyalty with the Yolds can be the foundation of a healthcare relationship that lasts for the rest of their lives.

What we talk about when we talk about “digital”

Chas:
I had two separate conversations this week with health system executives that confirmed a growing suspicion of mine: “digital” is becoming the new “population health”—a confusing, catch-all term that no one really understands. Given all of the noise about technology “disruptors” entering the healthcare space, and the flurry of investment in telemedicine, incumbent health systems are feeling pressure to up their game on the virtual front. But it’s not just virtual care delivery models that warrant attention; there are important “digital” investments needed to improve scheduling, monitoring, prescribing, coding, billing, collections, planning, workforce management, and a host of other core health system functions. In short, “digital” is everywhere, which makes the question on the lips of many health system executives nearly nonsensical: “What’s our digital strategy?” The truth is there is no digital strategy, because digital isn’t a strategy, it’s a modality. It’s another, sometimes better and more efficient (and sometimes not) way of doing things we’ve always done, or new things that we need to do. Smart systems are starting to recognize the distinction between “doing digital” and “being digital” and focusing strategic decision-making and investment not on discrete digital activities but on building out digital components of key functions, from end-to-end. It might even be worth asking whether it makes sense to have a “Chief Digital Officer” at all—would that role make sense at an Amazon or Apple? We’ll be doing some focused work on this topic with our members across the coming year, but my initial instinct is that “digital” may be a term that’s nearing the end of its useful life.


THIS WEEK AT GIST—ON THE PODCAST

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

In Thursday’s episode, we broke down the federal appellate court decision that found the Affordable Care Act’s individual mandate unconstitutional. We spoke with Duke University Professor of Law and Business Barak Richman to get his take on the ruling. He pointed out that lawmakers have been changing pieces of the law since its passage, so it’s hard to say which parts of the law are inextricably linked.

Meanwhile, in last Monday’s episode, Kristen McGovern, a partner at healthcare consulting firm Sirona Strategies, explained Medicare’s new Direct Contracting model, which will allow providers to offer patients additional benefits and have more control over patient alignment. But with Medicare’s increasing number of value-based care initiatives, McGovern wonders how providers will navigate the eventual “model overlap”.

Note to listeners: Our podcast will be on a holiday hiatus until Tuesday, January 7th. Make sure to tune in then for a roundtable discussion of what to watch for in healthcare across the coming year.

[Subscribe on Apple, Spotify, Google, or wherever fine podcasts are available.]


ON THE GIST TURNTABLE

Give this a spin, you might like it.

Chances are you’ve never heard of Michael Ebenazer Kwadjo Omari Owuo, Jr., but perhaps you know him by his stage name: Stormzy. Or perhaps not, because despite how huge he is in his native England, winning a 2018 Brit Award for best album and headlining this year’s Glastonbury Festival, his work has barely registered in the US. Stormzy is the biggest thing going in grime—the distinctively British genre of rap that emerged from east London in the early 2000s. Depicting the same gritty urban reality familiar from US rap, but heavily influenced by Afro-Caribbean music and the lived experience of low-income British youth, grime music has become anthemic in the UK, and Stormzy is its most influential standard-bearer. Out this month with his second studio album, Heavy is the Head, he seems poised to make a worldwide splash—the record features collaborations with US R&B phenom H.E.R., UK crooner Ed Sheeran, and Nigerian superstar Burna Boy. The new collection finds Stormzy adapting to his sudden fame, still marveling at a year in which he found himself atop the charts with the #1 single “Vossi Bop”, wearing a custom-made flak jacket designed by performance artist Bansky, and name-checked by politicians in the recent UK general election. Amid a hip-hop landscape that’s begun to show signs of a numbing sameness, Stormzy and his fellow grime-sters are bringing something fresh and interesting—here’s hoping we hear more of it on this side of the pond. Best tracks: “Vossi Bop”; “Own It”; “Audacity”.


WHAT WE’RE READING

Stuff we read this week that made us think.

In a Boston acute care matchup, home beats the hospital

Despite all of the recent hype, the idea of “hospital-at-home” is hardly a new concept. The first randomized, controlled study on the topic, published over 20 years ago, showed that the model was safe, finding that patients with five common conditions who would normally have been admitted to the hospital experienced similar outcomes when treated at home. This week a new randomized, controlled trial from researchers at Boston-based Brigham and Women’s showed that hospital-at-home had better clinical outcomes and was a whopping 38 percent cheaper than equivalent management in an acute care hospital. Yes, the study was small (91 patients) and probably had some selection bias (just 37 percent of eligible patients chose home care). Drilling into the data, length of stay for home-based patients was a little longer, but at-home patients received dramatically fewer lab tests, imaging studies and specialist consults—raising the question of whether all those daily chest x-rays, CBCs and curbside consults in traditional hospitals really provide value. And 30-day readmissions and ED visit rates for home-based patients were less than half of the control group. Selection for clinical appropriateness and family support is critical, but experts estimate that up to a third of medical admissions could be managed in the home setting. As growing evidence shows hospital-at-home to be safe, effective and lower cost, the lack of a reimbursement model to support investments in home-based acute care is now the greatest obstacle to widespread adoption.

Trading high deductibles for narrow networks

For many employers, narrowing provider networks has been a bridge too far, despite unrelenting healthcare cost growth. A recent Los Angeles Times profile of a Boston union that was able not only to lower costs but also nearly eliminate employee cost-sharing may make doubters reconsider. Unite Here Local 26, which represents 9,000 hotel workers and their families, implemented a narrow network health plan in 2013, when two-thirds of its members agreed to forego care at certain marquee academic hospitals, which charged two to three times more than others in the Boston area. Today the union actually pays less in medical costs per member than it did six years ago, and premiums are ten percent lower than the national average, despite Boston being one of the highest-cost healthcare markets in the country. Employees pay no deductibles, and generic medications cost them only $1. Savings have translated into raises for many employees, with some low-income workers seeing a pay jump of up to 39 percent across six years.

As we’ve discussed in the past, employers are reaching a limit on how high they can push deductibles, especially in a tight labor market. Some are beginning to experiment with various network options that lower health care costs—but many have been reticent to change benefit design in any way that could be perceived as narrowing choice. Local 26’s experience shows that well-designed narrow networks, implemented with employee education and buy-in, can provide cost relief for both businesses and individuals that can be sustained over time.


That’s a wrap! Again, thanks for a great year, and thank you for taking the time each week to read our thoughts, and for sharing yours in return. We hope you’ll join us again in 2020, and in the meantime, we’d love it if you’d share our work with a friend or colleague and encourage them to subscribe and listen.

Our best wishes for a happy, healthy and peaceful holiday season, and a wonderful new year.

Best regards,

Chas Roades
Co-Founder and CEO
chas@gisthealthcare.com

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

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