Please Don’t Poke the Baby – Sharing a best practice and talking about taking a local hospital learning and turning it into a systemwide approach, Mark Harrison of Intermountain Healthcare shared the fact that taking fewer blood samples from neonatal intensive care unit (NICU) babies was shown to lead to less infections in the NICU and on average a two week earlier discharge from the NICU. Who knew?
Drug Pricing – Drug pricing was on many lips today. Intermountain Healthcare launched Civica to address generic drug pricing and reported that it had approximately 500 hospital members now. More than one-third of US hospitals (!!) have inquired about joining Civica, which provides an exclamation point on the issue of generic drug pricing and availability. Mark Harrison of Intermountain said that products would start being available in 2019. He also noted that Civica doesn’t have to produce pills if the generic manufacturers will engage appropriately. Teva predicted generic drug market stabilization in their presentation today, which was also noted in the Walgreens Boots presentation as well. Walgreens Boots thought that the pace of cost reduction has slowed though. Let’s see who wins this game of “chicken.” Also today, Northwell announced that they were launching their own pharmacy benefit management (PBM) operation. We expect to see a lot of realignment and new entries in the PBM space, given the recent mergers and other activity (CVS/Aetna, Cigna/ESI, Anthem/IngenioRx). Much of the PBM space is being rethought now as its scope can expand to chronic condition management (an objective highlighted by Cigna today) or to medical benefits management as ESI is hoping with its recent acquisition of eviCore.
SDOH, Guns and Food Insecurity – Multiple presenters addressed the impact of food insecurity, guns and the social determinants of health on health care status and costs. Bernard Tyson of Kaiser said that we have to address food insecurity in order to make meaningful gains in healthcare. His point is well taken if you look at how many Medicare and Medicaid patients are at or close to the poverty line nationally. Geisinger’s presentation by Jaewon Ryu echoed that as well, sharing that its diabetes management program supplying fruits and vegetables to families of diabetic patients has reduced A1C scores by approximately 2 points (more than the average reduction on diabetes medication) and resulted in average cost savings of $12,000 per patient based on fewer emergency room visits and inpatient admissions. On the topic of guns, Tyson made it clear that the presence of guns needed to be confronted, given the number of gunshot wounds that Kaiser treats every day. Violence in our society and its impact on patients and the healthcare system was also a topic in the CommonSpirit presentation (Dignity Health and CHI). These items and other social determinants of health (SDOH), such as housing, need to gain more publicity, attention and resources if we are to bend the cost curve in healthcare. Mark Harrison of Intermountain was heartened by HHS Secretary Alex Azar recently signaling support for SDOH funding and we will wait to see next steps on this initiative from the federal government (once it reopens).
Physician Organization Partnering – While not a new topic, one of the focus areas today was the beneficial results of tight affiliations with physician organizations. Humana’s presentation repeatedly mentioned their joint ventures and relationships with JenCare and Iora Health, as well as discussing their attempt to consolidate and build a brand around Conviva, which aggregates their employed physician businesses in Florida and Texas into a professional services entity and management services organization (MSO) multiple organization to consolidate and improve clinical approaches, management infrastructure and branding. Humana also has its proprietary primary care offering, Partners in Primary Care.
Why does this matter? Here’s two reasons: (1) Humana is focused on reducing avoidable senior hospital admissions per thousand (which they consider a key statistic) by 10 to 30 admissions per thousand, each point of which reduction is equivalent nationally per Humana to $35 million in cost reduction (and therefore profit improvement); and (2) Humana’s medical expense ratio (MER; also known as medical loss ratio (MLR)) drops by “hundreds of basis points” when unmanaged care is transformed into full risk-bearing reimbursement structures managed by effective physician organizations. Per Humana, risk works. Cigna also emphasized the importance of alignment and shared that 85% of its Medicare Advantage business is in some form of value-based arrangement now.
The acquisition of physicians by health system also is continuing, although the discussion now is focused on what can be done with those acquired and employed physicians. Many health systems are losing money directly on their physicians, but they are critical overall to the health of the health system. Interestingly, Northwestern in Chicago noted today that 80% of its health system revenue can be traced to its employed physician groups.
Medicaid – Notwithstanding the current uncertainties surrounding the Affordable Care Act from the recent Texas federal court decision in Texas v. Azar, the Medicaid market was portrayed generally positively at the conference today. Centene remains bullish, forecasting growth and maintaining its earnings guidance, and noted that the addressable market for Medicaid is large and growing. Centene’s CEO also noted their focus on process automation and cost reduction. He also focused on a strong opportunity to use technology to better manage drug spend and pharmacy benefit management (PBM). Interestingly, he also mentioned that Centene was preparing to move away from or be less reliant on PBM rebate structures. Given that the recent CMS pronouncements did not follow through on the Office of Management and Budget consideration of rethinking rebates, as was disclosed last year, this appears to be very forward thinking and in part may be driven by the desire for greater transparency and data driven decision making.
Humana’s CFO also focused in part on the Medicaid market in his remarks today, noting that there is a large opportunity for Humana to use their Medicare Advantage “chassis” for serving the dual eligible population. Humana is focused initially on the Florida and Texas markets, and, reading between the lines, there may be an appetite for a Medicaid acquisition to grow to scale. Humana also noted an opportunity with DSNPs, especially as state and federal coordination continues in this sector.
Cancer – A big market, and getting bigger as we have longer lifespans and more seniors, cancer was very much framed today as a significant opportunity. Whether it was CommonSpirit noting that they had 12 million patients with cancer in their two ministries right now and were committed to their precision medicine initiative to apply genomics to drug selection or Intermountain’s Navican that focuses on oncology precision medicine, improving cancer care was very much a topic of interest today. We have seen a good deal of activity in the oncology space recently, including the recent launch of One Oncology by private equity fund General Atlantic, several leading oncology medical groups and oncology EMR provider Flatiron Health.
Revenue Cycle Management – Lots of good news on the revenue cycle management (RCM) front today. Intermountain reported very positive results from its recent enterprise wide outsourcing/partnering transaction with R1 RCM last year. Significant performance improvements and jobs were saved. Similarly, Bon Secours Mercy Health shone a spotlight on their Ensemble Health Partners RCM enterprise today. CEO John Starcher reported that Ensemble, which had been acquired two years ago with $10 million in EBITDA, now was heading toward $90 million in EBITDA and was one of the most profitable units in the health system.
ACA, Remember That? – While ACA – exchange products and pricing and Medicaid expansion – was a hot topic at prior JP Morgan conferences, it was pretty much ignored or just folded into a routine discussion of product lines. No discussion of the Texas federal case, Texas v. Azar, or potential Congressional actions in any of the presentations we attended today, nor any wringing of hands or gnashing of teeth. Guess we’ve moved on…
View our Day 2 notes on the 2019 JP Morgan Healthcare Conference.