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Category: The Business of Health Care

Matthew Explores the Referral Process

So I thought I would try a little experiment. Following up on a recent primary care visit I got a couple of referrals. I went investigating as to what I could find out about the where to go and what the cost might be. And what the connection if any between my primary care group (One Medical), the facility & specialists I was referred to, and my health plan, Blue Shield. I hope you enjoy my little tour of this part of the online health system–Matthew Holt

How to Fix the Paradox of Primary Care

By MATTHEW HOLT

If health policy wonks believe anything it’s that primary care is a good thing. In theory we should all have strong relationships with our primary care doctors. They should navigate us around the health system and be arriving on our doorsteps like Marcus Welby MD when needed. Wonks like me believe that if you introduce such a relationship patients will receive preventative care, will get on the right meds and take them, will avoid the emergency room, and have fewer hospital admissions—as well as costing a whole lot less. That’s in large the theory behind HMOs and their latter-day descendants, value-based care and ACOs

Of course there are decent examples of primary care-based systems like the UK NHS or even Kaiser Permanente or the Alaskan Artic Slope Native Health Association. But for most Americans that is fantasy land. Instead, we have a system where primary care is the ugly stepchild. It’s being slowly throttled and picked apart. Even the wealth of Walmart couldn’t make it work.

There are at least 3 types of primary care that have emerged over recent decades. And none of them are really successful in making that “primary care as the lynchpin of population health” idea work.

The first is the primary care doctor purchased by and/or working for the big system. The point of these practices is to make sure that referrals for the expensive stuff go into the correct hospital system. For a long time those primary care doctors have been losing their employers money—Bob Kocher said $150-250k a  year per doctor in the late 2000s. So why are they kept around by the bigger systems? Because the patients that they do admit to the hospital are insanely profitable. Consider this NC system which ended up suing the big hospital system Atrium because they only wanted the referrals. As you might expect the “cost saving” benefits of primary care are tough to find among those systems. (If you have time watch Eric Bricker’s video on Atrium & Troyon/Mecklenberg)

The second is urgent care. Urgent care has replaced primary care in much of America. The number of urgent care centers doubled in the last decade or so. While it has taken some pressure off emergency rooms, Urgent care has replaced primary care because it’s convenient and you can easily get appointments. But it’s not doing population health and care management. And often the urgent care centers are owned either by hospital systems that are using them to generate referrals, or private equity pirates that are trying to boost costs not control them.

Thirdly telehealth, especially attached to pharmacies, has enabled lots of people to get access to medications in a cheaper and more convenient fashion. Of course, this isn’t really complete primary care but HIMS & HERS and their many, many competitors are enabling access to common antibiotics for UTIs, contraceptive pills, and also mental health medications, as well as those boner and baldness pills.

That’s not to say that there haven’t been attempts to build new types of primary care

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When Star Ratings Backfire: How CMS Could Better Support Health In Medicare Advantage

By EMMANUEL ANIMASHAUN

The Centers for Medicare & Medicaid Services (CMS) Star Ratings system represents a cornerstone of quality assessment in Medicare Advantage (MA), designed to empower consumers with transparent information while rewarding plans that deliver superior care. Yet recent developments, particularly the seismic downgrading of Humana’s ratings reveal an unintended consequence: a system created to measure and incentivize quality may now be actively undermining it.

The Humana Case: Symptom of a Broader Problem

In 2025, Humana’s Medicare Advantage star ratings collapsed, with only 25% of members remaining in four-star or higher plans, down from 94%. This wasn’t due to declining clinical performance but resulted from CMS’s “Tukey outlier deletion” statistical adjustment implemented with minimal industry consultation. The change raised performance thresholds, causing Humana to lose billions in Quality Bonus Payments and $4 billion in market value. Humana’s legal challenge, arguing that CMS violated the Administrative Procedure Act through non-transparent processes, was denied. Other insurers including UnitedHealthcare and Centene also share concerns about methodological rigidity and that the rating system may have diverged from its purpose of improving patient care.

Perhaps more striking are the cases of Elevance and SCAN, which further illustrate how rigid metrics can distort assessments of actual care quality. In March 2023, both insurers were penalized after allegedly missing a single CMS “secret shopper” phone call, a call they claim was never received. The downgrade cost them tens of millions in Quality Bonus Payments and triggered legal challenges. As SCAN’s CEO wrote, the sanction came despite strong clinical performance and patient outcomes. A federal judge later ruled in favor of SCAN in June 2024, prompting CMS to recalculate the Star Ratings across all Medicare Advantage plans. This episode underscores a key concern: when measurement hinges on unverifiable administrative moments, it may end up punishing rather than promoting quality.

How Quality Measurement Can Undermine Actual Quality

The Star Ratings system aggregates over 40 metrics across preventive care, medication adherence, member experience, and customer service. However, it disproportionately rewards process compliance and documentation over health outcomes. Plans can excel by optimizing coding, maximizing documentation, or boosting survey participation without delivering better care. This misalignment diverts resources from genuine health innovations. Research from an NBER working paper even found that better-rated plans aren’t statistically better at keeping patients alive than lower-rated ones, raising fundamental questions about whether the system measures what truly matters for patient health.

Even more concerning is that MA contracts with higher proportions of dually eligible, disabled, or racially diverse members consistently score lower, not because they provide inferior care, but because the scoring system inadequately adjusts for social risk factors. A JAMA Health Forum study highlighted how plans serving more Black beneficiaries had lower star ratings even when controlling for other factors. This structural bias effectively penalizes plans doing the challenging work of serving populations with complex needs, creating a perverse disincentive to focus on health equity.

The uncertainty from frequent changes in star rating computation could also pose severe implications for strategic planning for companies. When a company like Humana loses billions due to a technical recalibration, it sends a troubling message: long-term investments in quality improvement may not yield returns if measurement methodologies change unpredictably. This volatility makes strategic planning difficult and discourages sustained investment in quality initiatives.

The Real-World Impact on Patients

These methodological shortcomings do not just affect health plans’ bottom lines; they have tangible consequences for Medicare beneficiaries. When plans lose Quality Bonus Payments (QBPs), they often must scale back valuable supplemental benefits like transportation assistance, dental coverage, or in-home support services, or increase plan premiums, as Avalere Health suggests. McKinsey estimates CMS rating changes could cost plans over $800 million in bonuses, reducing resources available for such benefits.

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Bloom is Off the Rose at UnitedHealth Group

By JEFF GOLDSMITH

A Forty Year Growth Saga is Coming to an End

After market close Wednesday April 16, UnitedHealth Group reported its First Quarter 2025 earnings. UNH missed their expected 1Q earnings by 9 cents a share, but the firm also lowered its full year 2025 earnings estimate by 12%. On Thursday opening, investors reacted with an unbridled fury, and stripped UNH of more than a hundred billion in market capitalization in a matter of hours. In the glare of hindsight, UNH was priced for perfection at a pre-crash trailing Price Earnings ratio of 38, six points higher than Amazon and eight points higher than Microsoft, which might account for the savagery of the correction.

Definitive answers to the question–what is happening to United’s sprawling mass of businesses–are impossible because the company is an $400 billion black box. The main United businesses–health insurance, care delivery, pharmacy benefits management and business intelligence/services–are so intertwined with one another that only United CFO John Rex and a few other senior managers actually know from whence United’s earnings actually flow. What follows is some speculation on the root causes of United’s earnings problem.

First, a major driver of the last two decades of United’s earnings growth has been using a big chunk of its astonishing monthly cash flow (which was approaching $3 billion a month) buying other companies. This party might be over. United has historically spent about half their accumulated wealth on dividends and share buybacks, that is, paying off shareholders to remain shareholders.

However, a big and undisclosed contributor to UNH earnings growth has been acquisitions, which have occurred in a nearly unbroken string for forty years. From 2019 to 2023, United spent an astonishing $118 billion buying other companies, nearly all of which ended up in Optum. Thanks to great discipline by UNH Executive Chair Stephen Hemsley and CFO-now-President John Rex, United almost invariably bought profitable firms in transactions that were accretive to earnings.

United appears to be running out of accretive transactions. With the dearth of major new transactions, United’s $81+ billion horde of cash and short term investments (larger than Exxon Mobil) is likely to plump up yet more. This will cause folks to wonder why United is raising their rates to employers or shaking down providers for deeper discounts when they are sitting on a growing mountain of cash.

United cannot buy more health insurers (both CIGNA and Humana been for sale for years) because federal antitrust enforcers will stop them. There are no more accretive risk-bearing physician group deals. Hospitals presently employ more than a third of practicing physicians in the US (a very unhappy state affairs for both parties). But these hospital acquisitions have limited the universe of available physician transactions for United.

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NYU Langone Super Bowl Ad Claimed “We’re #1,” But Where’s Scorecard?

By MICHAEL MILLENSON

When the Philadelphia Eagles thrashed the Kansas City Chiefs 40-22 in Super Bowl, no one disputed that they sat at the peak of professional football. In contrast, NYU Langone Health’s multi-million-dollar Super Bowl ad claiming “#1 for quality care in the U.S.” gave viewers just 2 seconds to read the very small print at the bottom of the screen providing an obscure justification for that championship status.

It read: “2024 Vizient Quality and Accountability Ranking. Ranked #1 out of 115 participating comprehensive academic medical centers.” Huh?

I’ll discuss in a moment what that attribution – meaningless to even most in health care, much less to any significant slice of the 127 million people watching the game – actually signifies. But perhaps the most salient signal of the misplaced focus of U.S. health care is that online and media reaction focused exclusively on the non-profit system paying an estimated $8 million for the 30-second spot. Yet if the data actually support NYU Langone’s assertion that it’s “the best health system,” as the ad trumpeted, shouldn’t they be praised for competing on the quality of patient care rather than the quality of the pull-on-the-emotions advertising typical of most hospitals?

I reached out multiple times to NYU Langone and Vizient in order to dig more deeply and didn’t hear back from either, so let’s examine the information that’s publicly available.

While many Americans know of the hospital rankings by U.S. News & World Report, Vizient plays an insider game. Its roots are as a group purchasing organization; i.e., a membership group hospitals join to secure volume discounts on supplies and other purchases. However, Vizient has evolved to provide a heavy dose of member consulting services ; it now calls itself “the nation’s leading healthcare performance improvement company.”

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It’s Money That Changes Everything (Or Doesn’t) For Surgeons

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By MICHAEL MILLENSON

Money changes everything,” Cyndi Lauper famously sang about love to a pulsating rock ‘n’ roll beat. So, too, when it comes to financial incentives for surgeons, two new studies suggest, although “How much money?” and “What do I have to do?” are the keys to unlocking monetary motivation.

The first study, a JAMA research letter, examined the impact of a new Medicare billing code for abdominal hernia repair that paid surgeons more if the hernia measured at least 3 centimeters in size. Previously, “size was not linked to hernia reimbursement,” noted University of Michigan researchers.

Surprise! The percentage of patients said to have smaller, lower-payment hernias dropped from 60% to 49% in just one year. Were “small hernia” patients being denied care? Nope. Were surgeons perhaps more precise in measuring hernia size? Maybe. Or possibly, wrote the researchers in careful academic language, “the coding change may have induced surgeons to overestimate hernia size.” Ambiguous tasks, they added, “can be conducive to perceptive [cq] bias and potentially even dishonest behavior, perhaps more so with financial incentives at play.”

This being an academic publication, two footnotes informed us that dangling money in front of our eyes can cause people to “see what you want to see” and come up with an “elastic justification” for truth.

If a simple coding change can apparently boost the number of large-hernia patients by 18% in just one year, what about a payment incentive meant to induce more urologists to follow the medical evidence on low-risk prostate cancer and adopt “active surveillance” (formerly known as “watchful waiting”), rather putting patients through a painful and expensive regimen of biopsies and surgery?

A second study, also in Michigan, involved commercial and Medicare-age members of the state’s Blue Cross and Blue Shield plan. However, after three years and more than 15,000 patients, “the payment incentive was not associated with increased surveillance use among patients with low-risk disease,” researchers concluded in a JAMA Network Open article.

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Ten Shadowy Figures Who Shaped Our Health Care System

By MIKE MAGEE

The incoming Trump Administration nominees for positions in Health and Human Services (like RFK Jr. to direct the department and Mehmet Oz to head Medicare and Medicaid Services) are names you know and apparently many trust? In this morning’s New York Times, Dr. Ashish Jha, President Biden’s Covid lead, thinks he knows why. He says, “You have a large swath of the population facing a health crisis, and they feel like medicine and public health isn’t delivering…They’re much more open to people saying, ‘The whole system is corrupt and we have to blow the whole thing up.’”  As Ashish knows better than most, we didn’t arrive here out of the blue. Over the years, many of the players who had the greatest impact on America’s health care system as we know it, remain hidden in the historic shadows. Here (in no particular order) are 10 of the least known but most influential figures in shaping health policy in our lifetime.

Sam Massengill

In spring 1937, the head of sales for S.E. Massengill Company in Bristol, Tennessee, went to the company head, Samuel Evans Massengill, with an idea generated by customer feedback. Massengill salesmen were passing along reports from doctors that there was demand among parents of young children suffering from strep throat for a liquid version of their new sulfa drug.

Massengill, charged the company’s chief chemist, Harold Cole Watkins, to find an effective solvent in which powdered sulfanilamide (an anti-biotic) could be dissolved. His choice was diethylene glycol, which smoothly dissolved sulfanilamide powder and led to a concoction that was 10 percent sulfanilamide, 72 percent diethylene glycol, and 16 percent water. Flavored with raspberry extract, saccharine, and caramel, it passed the taste and smell tests, but in keeping with then current federal regulations—or lack thereof—there was no test for safety. In fact, no one did even a rudimentary check of the literature on diethylene glycol, which would have quickly revealed that it was a highly toxic component of brake fluid, wallpaper stripper, and antifreeze that had caused a fatality in 1930.

Instead, perhaps sensing that its competition would be right behind, Massengill rushed its “Elixir Sulfanilamide” into production, then shipped 240 gallons of the red liquid to 31 states through a network of small distributors in early September 1937.

Within two weeks, children began to die. In all, more than 100 children died, but only after going through 7 to 21 days of wrenchingly painful illness including “stoppage of urine, severe abdominal pain, nausea, vomiting, stupor, and convulsions.”

The whole disaster was vigorously reported in the press, and drug safety soon inched its way up the list of New Deal priorities. By June 11, 1938, bills from the Senate and House of Representatives had been reconciled, and on June 25, 1938, President Roosevelt signed into law the 1938 Federal Food, Drug, and Cosmetic Act.

Samuel Massengill belatedly issued a statement on behalf of his company: “My chemists and I deeply regret the fatal results, but there was no error in the manufacture of the product. . . . I do not feel there was any responsibility on our part.” Unfortunately, Massengill’s morally blind position reflected the letter of the law at that time. In short, the absence of effective legal sanctions meant that a company or an individual could indeed sell a deadly medication and get away with it.

Mary Lasker

Born in 1900, Mary Lasker was the daughter of Frank Elwin Woodard, the head of the local bank in Watertown, Wisconsin, and a shrewd businessman with Chicago connections. By her own account, she was a campaigner almost from birth, and she traced her interest in promoting medical research back to an event she experienced at the age of three or four. Her mother, a local community supporter and civic activist, took Mary to see their ailing servant, a Mrs. Belter, who had undergone a double mastectomy as treatment for breast cancer. “I thought, this shouldn’t happen to anybody,” Mary Lasker later wrote.

As a young adult, she began to focus on health policy issues and became a devotee to Margaret Sanger. Mary sought out financial support for the organization, turning to a dynamic advertising man, Albert Lasker, who had launched some of America’s most recognizable consumer brands, including Lucky Strike cigarettes. Known as the “father of modern advertising,” Lasker is credited for suggesting that the Control Federation of America be renamed the Planned Parenthood Federation.

When Albert asked Mary what she wanted to accomplish, she listed reforms in health insurance, cancer research, and research against tuberculosis. Albert responded, “Well, for that you don’t need my kind of money. You need federal money, and I will show you how to get it.”

When Mary and Albert married in 1940, the world was preparing for war.

Beginning in 1942, the Laskers began to cultivate science luminaries who shared their commitment to maximizing government funding of applied research. The Laskers realized early that they would need a credible health-related national organization to anchor and launch their campaign and set their sights on the American Society for the Control of Cancer, an organization created in 1913 by 10 physicians meeting at the Harvard Club in New York City. The leadership was more than happy to grant the Laskers easy entry to their Board of Trustees in return for financial support. By 1944, the Laskers had seized control of the Board, largely dumped the doctors, and renamed the group the American Cancer Society (ACS). Its leadership was now composed of name-brand corporate heads, entertainment giants, and advertising executives.

To add further glory to the idea of Big Science, Mary and Albert created the annual Lasker Awards, with the somewhat self-serving tagline “Sometimes called ‘America’s Nobels.’” She then began to collect academic researchers, promote their careers, injecting publicity and special placement on government bodies. Over a decade she was at the center of creating seventeen specialty Institutes within the new NIH, most built around her favored scientists.

Mary Lasker died in 1994, a controversial figure.In the assessment of author and political journalist Elizabeth Drew, “Mrs. Lasker has been considered an able woman who has done good things but is too covetous of power, too insistent on her pursuits, too confident of her own expertise in the minutiae of medicine.”

William Menninger

During the first major WW II battle in North Africa, a startling number of soldiers were incapacitated with “Shell Shock.” One neurologist in North Africa, Frederick R. Hanson, discovered that a bit of kindness in the form of a hot shower and a warm meal, combined with sedation-induced rest, was remarkably successful in rehabilitating the majority of the “mentally incapacitated” men under his care.

Hanson’s success did not go unnoticed by the Army’s chief of the division of neuropsychiatry in the Office of the Surgeon General, William C. Menninger. After studying his results, he decided that if psychiatric casualties in a standard unit exceeded one mental casualty for every four wounded in action, this was a harbinger of broader problems—like a breakdown in morale, leadership issues, prolonged combat fatigue, or a policy breakdown in the evacuation scheme.

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Pamela Stahl, Avalon Healthcare Solutions

Pamela Stahl is the President of Avalon Healthcare Solutions. You’ve heard of pharmacy benefits managers (PBMs) but Avalon is a labs benefits management company. Working on behalf of health insurers Avalon ensures that patients are getting the right labs at the right price, . Why are they needed? There are 14 billion lab tests and they drive a lot of health care decisions (70%+!). As you might guess there’s a ton of variation in test price, lots of test are ordered in error, many are repeated, and many are unnecessary. Avalon’s job is to figure that all out!–Matthew Holt 

Innovators: Avoid Health Care

By KIM BELLARD

NVIDIA founder and CEO Jensen Huang has become quite the media darling lately, due to NVIDIA’s skyrocketing market value the past two years ($3.3 trillion now, thank you very much. A year ago it first hit $1 trillion). His company is now the world’s third largest company by market capitalization. Last week he gave the commencement speech at Caltech, and offered those graduates some interesting insights.

Which, of course, I’ll try to apply to healthcare.

Mr. Jensen founded NVIDIA in 1993, and took the company public in 1999, but for much of its existence it struggled to find its niche. Mr. Huang figured NVIDIA needed to go to a market where there were no customers yet – “because where there are no customers, there are no competitors.” He likes to call this “zero billion dollar markets” (a phrase I gather he did not invent).

About a decade ago the company bet on deep learning and A.I. “No one knew how far deep learning could scale, and if we didn’t build it, we’d never know,” Mr. Huang told the graduates. “Our logic is: If we don’t build it, they can’t come.”

NVIDIA did build it, and, boy, they did come.

He believes we all should try to do things that haven’t been done before, things that “are insanely hard to do,” because if you succeed you can make a real contribution to the world.  Going into zero billion dollar markets allows a company to be a “market maker, not a market-taker.” He’s not interested in market share; he’s interested in developing new markets.

Accordingly, he told the Caltech graduates:

I hope you believe in something. Something unconventional, something unexplored. But let it be informed, and let it be reasoned, and dedicate yourself to making that happen. You may find your GPU. You may find your CUDA. You may find your generative AI. You may find your NVIDIA.

And in that group, some may very well.

He didn’t promise it would be easy, citing his company’s own experience, and stressing the need for resilience. “One setback after another, we shook it off and skated to the next opportunity. Each time, we gain skills and strengthen our character,” Mr. Huang said. “No setback that comes our way doesn’t look like an opportunity these days… The world can be unfair and deal you with tough cards. Swiftly shake it off. There’s another opportunity out there — or create one.”

He was quite pleased with the Taylor Swift reference; the crowd seemed somewhat less impressed.

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Blue Shield CA, CVS Caremark & the mystery of the extra $116, with 2 UPDATES (at the end)

By MATTHEW HOLT

Today we’re going to have fun with show and tell. I’m going to show you how a little corner of American health care is making my life as a consumer worse and more expensive–hopefully someone can tell me why.

The cast members are: me, my MD, the (sort of) independent pharmacy that delivers, Alto, and my insurer Blue Shield of California and its PBM CVS Caremark, which also owns a mail order pharmacy.

The brief backstory: For some years my doctor has been whining about my high cholesterol, and a few years back I went on a statin called Rosuvastatin Calcium. Older readers may remember Jean Luc Picard himself advertising the branded version Crestor, but it’s been off patent for about a decade. About 50 million Americans now take a statin, almost all of them a generic, including many 60 year old males like me. My cholesterol has come down, but my MD told me it could come down more, so a few months ago we boosted the dose to 40mg from 20mg. 

Until recently I’d been insured by BCBS Massachusetts, and you might recall a little over a year ago I wrote a piece on THCB about the fun and games to be had trying to figure out what their PBM (CVS Caremark) was doing with the pricing of my kid’s ADHD medication. But they’d never messed with my medication as my statins are cheap. At least I thought they were. In fact as recently as April last year, they were free. You can see the price from the delivery from Alto Pharmacy below.

How BCBS Mass came up with $0.00 as the price I pay I don’t know, but presumably they think it’s a good thing to have me on statins in the hope I don’t have an (expensive) heart attack instead.

Then for some reason my price for the statin later the same year went up to $23. No longer $0 but at $8 a month not really worth making a fuss about.

At the end of the year, COBRA expired and I went to buy insurance on the California exchange. And in order to keep access to my family’s doctors at One Medical, I chose the only plan they were in, the Blue Shield of California HMO.

My next 90 day supply was the first one which went from 20mg to 40mg, but it’s still a common generic. Blue Shield of California also uses CVS Caremark (although it’s been talking a good game of ditching CVS Caremark and setting up its own PBM) and the cost at Alto barely budged. Now it was $28.

What happened next: So all was going normally until late last week when my next 90 supply was delivered. Except it wasn’t. Alto delivered me a 30 day supply and charged me $19.

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