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Category: The Business of Health Care

The Licensing Walls Come Tumbling Down

BY KIM BELLARD

Abortion rights continue to be one of the most heated issues in American politics, super-fueled by last week’s leak of a draft Supreme Court opinion that would overturn 1973’s Roe v. Wade and return the issue to the states to decide. 

I’ll leave it to others more qualified than me – women, for example — to weigh in on abortion itself, but I want to talk about how abortion pills are going to force changes to our healthcare system that many may not be ready for.

Although the stereotype of abortions is a procedure done by a physician in an office/clinic, the majority of abortions in the U.S. are now done through the use of abortion pills.  It is a two step process, and the two medications must be prescribed by a physician. Until last December, women were required to see a physician in person, but the FDA permanently lifted those requirements, following a temporary waiver during the pandemic. The pills are considered both highly effective and safe.  There are startups, like Hey Jane and Just the Pill, that specialize in them.

Not surprisingly, since the leak searches for “abortion pills” have hit all-time highs.

The states that have been passing various abortion bans have not ignored the loophole that abortion pills represent. There are a variety of restrictions that have been enacted, such as requiring in-person visits to outright banning use of telehealth for them. In those states, some women have opted to travel out of state to do the telehealth visit and/or to receive the pills via the mail. 

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Dara’s “Hero Quest”: How About Embracing Universal Health Care in America?

By MIKE MAGEE

Joseph Campbell, who died in 1987 at the age 83, was a professor of literature and comparative mythology at Sarah Lawrence College. His famous 1949 book, “The Hero With a Thousand Faces” made the case that, despite varying cultures and religions, the hero’s story of departure, initiation, and return, is remarkably consistent and defines “the hero’s quest.” Bottom line: Refusing the call is a bad idea.

George Lucas was a close friend and has said that Star Wars was largely influenced by Campbell’s scholarship. On June 21, 1988, Bill Moyers interviewed Campbell and began with a clip from Star Wars where Darth Vader says to Luke, “Join me, and I will complete your training.” And Luke replies, “I’ll never join you!” Darth Vader then laments, “If you only knew the power of the dark side.”

Asked to comment, Campbell said, “He (Darth Vader) isn’t thinking, or living in terms of humanity, he’s living in terms of a system. And this is the threat to our lives; we all face it, we all operate in our society in relation to a system. Now, is the system going to eat you up and relieve you of your humanity, or are you going to be able to use the system to human purposes.”

Systems gone awry? Think Putinesque Russia, or Psycho-pernicious Trumpism, or Ultra-predatory Capitalism.

Dara Kharowshaki, the CEO at Uber, who took over the company from uber-bro, Travis Kalanick, is a fan of Campbell’s and understands the journey of a hero – departure, initiation, return. Perhaps that is why he defines “movement” as fundamental to life…adding deliberately the qualifier “movement in the right direction.” In an interview in December, 2021, with Brian Nowak, Equity Analyst, U.S. Internet Industry, for Morgan Stanley, he pushed for corporate engagement in a range of issues including “sustainability, safety, equity, and anti-racism – these are all issues that go to the core of who we are, and our identity.”

How did health care escape that list, especially considering the companies investment in “Uber Health” – a health care delivery service promoting speed, care coordination, privacy, and cost-effective and reliable transport to and from care-giving brick and mortar?

It may have something to do with the fact that Uber has fought tooth and nail to avoid providing health care as a benefit to its drivers. In 2020, the company joined Lyft, DoorDash and other gig companies in throwing $205 million into a lobbying effort in California titled “Yes on 22”.

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Matthew’s health care tidbits: Hospital System Concentration is a Money Machine

Each week I’ve been adding a brief tidbits section to the THCB Reader, our weekly newsletter that summarizes the best of THCB that week (Sign up here!). Then I had the brainwave to add them to the blog. They’re short and usually not too sweet! –Matthew Holt

For today’s health care tidbits, there’s an old chestnut that I can’t seem to stay away from. I was triggered by three articles this week. Merril Goozner on GoozNews looked at the hospital building boom. Meanwhile perennial favorite Sutter Health and its price-making ability came up in a report showing that 11 of the 19 most expensive hospital markets were in N. Cal where it’s dominant. Finally the Gist newsletter pointed out that almost all the actual profits of the big health systems came from their investing activities rather than their operations.

None of this is any great surprise. Over the past three decades, the big hospital systems have become more concentrated in their markets. They’ve acquired smaller community hospitals and, more importantly, feeder systems of primary care doctors. Meanwhile they’ve cut deals with and acquired specialty practices. For more than two decades now, owned-physicians have been the loss leader and hospitals have made money on their high cost inpatient services, and increasingly on what used to be inpatient services which are now delivered in outpatient settings at essentially inpatient rates. Prices, though, have not fallen – as the HCCI report shows.

Source: HCCI

The overall cost of care, now more and more delivered in these increasingly oligopolistic health systems, continues to increase. Consequently so do overall insurance premiums, costs for self insured employers and employees, and out of pocket costs. And as a by-product, the reserves of those health systems, invested like and by hedge funds, are increasing–enabling them to buy more feeder systems.

Wendell Potter, former Cigna PR guy and now overall heath insurer critic, wrote a piece this week on how much bigger and more concentrated the health plans have become in the last decade. But the bigger story is the growth of hospital systems, and their cost and clout. Dave Chase likes to say that America has gone to war for less than what hospitals have done to the American economy. That may be a tad hyperbolic, but no one would rationally design a health care environment where non-profit hospitals are getting bigger and richer, and don’t seem to be able to restrain any aspect of their growth.

Breaking down Optum’s $6.4 Billion Acquisition of LHC Group

I’m delighted to have a new contributor on THCB today. Blake Madden writes an excellent health care business newsletter called The Healthy Muse, which I highly suggest you subscribe to. Recently he gave his take on Optum’s latest big acquisition and it’s the first of I hope many pieces of his we’ll run on THCB–Matthew Holt

by BLAKE MADDEN

On March 29, UnitedHealthcare’s Optum announced its acquisition of LHC Group for $170/share. The transaction values LHC at about $6.4 billion including debt.

I know we all joke about working for UnitedHealthcare one day, but it’s terrifying when you think about their sheer scale. Even scarier when you look at Optum’s growth:

  • Optum Revenue in 2012: $29.4 billion
  • Optum Revenue in 2021: $155.6 billion. Like. What.

LHC Group is an important acquisition for Optum. Payors are continuing to morph into ‘payviders’ and UHG / Optum has a huge competitive advantage given its 60k aligned physician base. Acquiring LHC Group accelerates this payvider trend but also allows UHG to catch up to Humana, who now owns all of Kindred, in the post-acute sphere.

Meanwhile, Optum is deploying its grand vision of integrated care delivery right before our eyes. It’s happening whether you like it or not.

Even though I provided a first-impressions breakdown on Twitter related to the deal, I had to break this deal down into more detail and give you guys my thoughts on why the LHC acquisition is so significant.

Let’s dive in.


Investment and Deal Thesis.

LHC Group is well-positioned on a few fronts in the fast-growing home health sector:

  • They’re partnered with 435 health systems, giving Optum access to hundreds of hospital joint ventures.
  • Home health and at-home care is a MUCH more desirable care setting for Medicare beneficiaries. Comfort and patient experience is a huge factor.
  • Of all post-acute care settings, home health is the most cost-effective. Home health costs way less than skilled nursing. Lower costs = lower medical loss ratio for United. By keeping patients out of SNFs and hospitals, these programs could disrupt facility-based care delivery in the coming years.
  • From a demographics standpoint, home health benefits from an aging baby boomer population. Medicare will cover 79 million people by 2030 a major secular trend for healthcare. I’m sure you’re all WELL aware of that!
  • PDGM and other headwinds for smaller agencies will run out of relief funding, resulting in consolidation. This consolidation will benefit larger home health platforms.

In summary, LHC Group is a great operator in a high-growth industry: Home Health.

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MedPAC Got It Wrong (pt 3)

By GEORGE HALVORSON

This is the third part of former Kaiser Permanente CEO George Halvorson’s critique of Medpac’s new analysis of Medicare Advantage. Part 1 is here. Part 2 is here. Eventually I’ll be doing a summary article about all the back and forth about what Medicare Advantage really costs!-Matthew Holt

Risk status and RAF

What is on the MedPac radar screen and what keeps their attention and what actually takes up several long portions of the annual report this year is the other factor that changes the payment levels to the plans — the risk status of their enrollees.

The capitation levels that are paid to the plans are affected very directly by the health status levels of the actual enrollees.

Risk levels for the members set and change the payment levels for the plans. The very first capitation programs didn’t factor in relative risk status for the members, and it was possible for some care sites to make major profits on capitation just by enrolling healthier than average people and by being paid an average cost level for each area for the people they enrolled.

That initial payment process has evolved very intentionally into having diagnosis-based cost factors that attempt to link the health status of the members and a fair payment level for the plans. The plans identify for the risk filing process the diagnosis levels for the members and their payment levels as plans are directly affected by the risk levels they report for their members.

People have had some concern about whether some parts of that coding process have been done badly, incorrectly or with purely avaricious intent.

There have been significant levels of concern expressed about whether the plans might be able and willing to produce and present inaccurate and distorted information in the process. That alarm was triggered in part by the fact that some of the plans made getting that information into their annual filings a high priority and some were more successful than others in that process.

It is good to have accurate diagnosis information.

We actually should as a nation and a health care macro system want to see an expansion of our data base and our medical records on basic levels of diagnostic information.

As a nation and as a macro care system we should definitely want to have full diagnosis information for each patient. Care can be better when caregivers have the right diagnosis for all of their patients.

How CMS  has changed Risk Adjustment

CMS just did a brilliant thing and completely eliminated the filing system and process for risk coding and data.

The CMS Hierarchical Conditions Categories Risk Adjustment Model was just killed. CMS just took the system that has created the vast majority of concerns and churn about the issues of coding intensity and shut it down.

It no longer is a factor for any risk scores. CMS will still look at the relative risk levels of patients but will get that information completely from patient encounter filings and direct patient information and not from any plan filings or reports.

An entire industry of organizations working to enhance risk scores just became obsolete and irrelevant.

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MedPAC Got It Wrong (pt 2)

By GEORGE HALVORSON

This is the second part of former Kaiser Permanente CEO George Halvorson’s critique of Medpac’s new analysis of Medicare Advantage.Part 1 is here. The final part will be published on THCB later this week. Eventually I’ll be doing a summary article about all the back and forth about what Medicare Advantage really costs!-Matthew Holt

We clearly do have significant levels of quality data about the MA plans because we have extensive levels of quality programs and recognitions that exist in MA . Those programs get better every year — and MedPac should be reporting and even celebrating each year how many additional plans are achieving high scores in those areas as part of their report.

MedPac should be describing and celebrating progress that is being made in that five-star space and the members of the Commission don’t seem to know that information exists.

In fact, they sink lower than that pure denial in their report this year. They actually say in this year’s report that they have deep concerns about the quality of care for MA and they say clearly that they have no useful data to use for thinking about how MA is doing relative to quality issues.

Saying that there is no quality data about the plans is another MedPac falsehood (MPF) and, as they so often are, that particular falsehood is disproved quickly and easily by their own documents. In the final section of this year’s report where they were asked by Congress to do a report on the quality of care in the Special Needs Plans. The MedPac writers achieve that explicit goal in large part by using the easily available HEDIS quality data for those patients and for the other patients in the plans and by comparing both sets of numbers to relevant populations.

So this year’s report has that set of NCQA quality data for the MA plans included in it. MedPac is using it now even though they say no data exists and that means that’s another falsehood to say it doesn’t exist.

We know what the quality data of the five-star program is and we know what the HEDIS Scores are for the MA plans, and we also know how much MA costs us in every county because the bids give us that information.

We know that the plans bid below the average county fee-for-service Medicare costs in every county and we know what the total costs are by person for each county.

We need to know what the real costs are and we need to look at how we get the very best use of the Medicare dollar. MedPac should make it a priority to figure out how to get the best use of the Medicare dollar using both bids, capitation, and various kinds of ACO-related payment processes. ACOs all create better care than traditional fee-for-service Medicare, and the people who are critical of ACOs for not saving enough money should rethink their priorities. They should be happy with any use of the Medicare dollar that gives more for the member and patient

If an ACO that has team care and patient centered data flows just breaks even on costs relative to fee-for-service Medicare, that should be celebrated and supported as being a much better use of the Medicare dollar.

We should make patients our top priority. ACOs make patients their priority. MA Plans clearly set up benefits and care practices around the patient’s the top priority. Only fee-for-service Medicare completely lets the patient down by being rigid on benefits, rigid on service, and making costs a higher priority than people’s lives and doing that badly and inefficiently. We should be working through MedPac each year to see which approach to buying care actually gives us the very best use of our Medicare dollar.

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MedPAC Got It Wrong (pt 1)

By GEORGE HALVORSON

This is the first part of former Kaiser Permanente CEO George Halvorson’s critique of Medpac’s new analysis of Medicare Advantage. The rest will be published on THCB later this week. Eventually I’ll be doing a summary article about all the back and forth about what Medicare Advantage really costs!-Matthew Holt

MedPac just did their annual report on Medicare Advantage (MA) and they were extremely wrong on several key points.

The MedPac staff has a long tradition of being critical of MA, and they also, unfortunately, have a long tradition of being inaccurate, misleading, and consistently negative on some key points for no explicable or easily understood reason.

They achieved a new low this year by spending more than 20 pages of the report warning us all in detail about the upcoming cash flow distortions and coding abuses that they say are coming from a risk adjustment model and system that actually no longer exists in 2022 as a functioning system for our Medicare program — and they are also continued their distortion about Medicare overpayment of the plans by running an artificial cost number that functions only to deceive and not to inform and by using what is essentially a fake news number several times in the report.

Coding and Risk Adjustment

CMS has now officially canceled and retired the CMS Hierarchical Conditions Categories Risk Adjustment Model that has been used for almost two decades to calculate risk for plans. It is dead and completely gone for 2022 — and MedPac explained bitterly for more than 20 pages why it was a damaging approach and they somehow did not mention that it was now gone.

CMS has some very good thinking people who brilliantly took that whole set of coding linked issues off the table by making the system that was being potentially abused simply disappear.

MedPac wrote more than 20 pages in this year’s official report about MA complaining about that exact process and system and they didn’t mention that it was gone or explain why it was important to not have that data flow create the risk level information that we will now be using to get diagnostic information into the system.

The new approach for determining patient risk levels is fraud proof. There is no way to put wrong data into the information flow that they are now going to use to see and determine which patients are diabetic and which have heart disease or who has drug abuse issues for the risk discernment processes.

The impact on low income Medicare patients & union members

MedPac also had a major content deficit in their report and managed to leave the most important aspects of the work being done now by the plans to help offset some of the damage done to too many Americans who have been damaged by social determinants of health issues for far too long in their lives. MedPac also completely failed to report and discuss the important reality of the fact that we have now reached the point where two-thirds of our lowest income Medicare beneficiaries are all voluntarily in the MA plans.

They also left out of their report the fact that a significant number of union trust funds and a significant number of employer retirement programs that had made significant promises of retirement health care benefits to their retirees over the past decades are actually having those commitments kept, met, and even enhanced with the relatively new employer-sponsored MA plans that work directly with employer settings.

Five million people who might have had their retirement health care programs bankrupt, underfunded, or at serious risk have found a very strong safety net in the MA program — and MedPac does not think that development was important to understand and probably celebrate.

Anyone looking at the future politics and funding of the MA program will find both that overwhelming support for MA from our lowest income people and from our most well-connected employer retirement funds to be good and important to understand.

MedPac missed every bit of that agenda and set of accomplishments in this year’s report.

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Quickbite Interviews: Force Therapeutics/Xealth & Avia Health

I was at the VIVE conference in Miami last week and caught up with a number of CEOs & execs for some quickbite interviews — around 5 mins getting (I hope) to the gist of what they & their companies are up to. I am going to dribble them out this week.

Up here are Mikayla McGrath, Head of Partnerships at Force Therapeutics & Cynthia Church, Chief Strategy Officer at Xealth–they’re on together discussing their partnership. The other bite is with Cynthia Perazzo, EVP Insights, AVIA Health, who is telling us about the transformation she is seeing among American’s hospital systems. — Matthew Holt

Aledade: Mandy Cohen joins, Farzad speaks

Aledade is the “build an ACO out of small independent primary care practices” company. It was founded by former ONC Director Farzad Mostashari and has been growing fast and profitably in the last few years, having raised just shy of $300m. Farzad recently both tweeted out the latest and put up a slide deck about their financial and business progress. Aledade also announced a major star signing in Mandy Cohen, previously Secretary of HHS in North Carolina, who is becoming CEO of a new division called Aledade Care Solutions. I had a wide ranging conversation with both of them about what Aledade has done and what it is going to do, as well as the general state of play in primary care and risk taking–Matthew Holt

TRANSCRIPT (lightly edited for clarity)

Matthew Holt:

Okay, it’s Matthew Holt with THCB Spotlight. I’m really thrilled to have Farzard Mostashari and Mandy Cohen with me. So, both of these two doctors have spent a lot of their time in public, much of their career in public service, Farzad for many years was in New York City, and then later was at ONC. Mandy was at CMS, and more recently, was Secretary for Health in North Carolina. In fact, towards the end of the Obama administration, Farzad was doing venture capitalism in a bar and got given a check and founded Aledade. And the news just recently, was that Mandy, who has just finished her term in North Carolina, is now going to join Aledade and start a new division there. So, I thought we would chat about how Aledade’s doing, what it’s doing, and what it’s going to do in the future and hopefully, yeah.

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Simple Bills are Not So Simple

By MATTHEW HOLT

I went for an annual physical with my doctor at One Medical in December. OK it wasn’t actually annual as the last time I went was 2 & 1/2 years ago, but it was covered under the ACA, and my doc Andrew Diamond was bugging me because I’m old & fat. So in I went.

I had a general exam and great chat for about 45 minutes. Then I had blood work & labs (cholesterol, A1C, etc) and a TDAP vaccination as it had been more than 10 years since I’d had one.

Today, about one month later, I got an email asking me to pay One Medical. So being a difficult human, I thought I would go through the process and see how much a consumer can be expected to understand about what they should pay.

Here’s the email from One Medical saying, “you owe us money.”

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