By ANDY MYCHKOVSKY
Today, primary care is considered the bee’s knees of value-based care delivery. Instead of being viewed as the punter of the football team, the primary care physician (PCP) has become the quarterback of the patient’s care team, calling plays for both clinical and social services. The entire concept of the accountable care organization (ACO) or patient-centered medical home (PCMH) crumbles without financially- and clinically-aligned PCPs. This sea change has resulted in rapid employment or alignment to health systems, as well as a surge in venture capital being invested into the primary care space.
Before we get too far in the weeds, let’s first begin with the definition of primary care. The American Academy of Family Physicians (AAFP) defines a primary care physician as a specialist typically trained in Family Medicine, Internal Medicine, or Pediatrics. Some women do use their OB/GYN as their PCP, but these specialists are not traditionally considered PCPs. Now if you’ve gone to your local PCP and noticed that your care provider is not wearing a white coat with the “MD” or “DO” credentials, you are either receiving treatment from a hipster physician, nurse practitioner (NP), or physician assistant (PA). Two of the three professionals are trained in family medicine and can provide primary care services under the responsibility of an associated PCP. At least one of the three has a beard.
The crazy thing is, despite the industries heightened focus on the importance of PCPs, we’re still expecting a shortage of primary care providers. In April 2019, the Association of American Medical Colleges (AAMC) released a report estimating a shortage of between 21,100 and 55,200 PCPs by 2032. Given we just passed 2020, this not that far off. The primary reason for the shortage is the growing and aging population. Thanks mom and dad. Digging into the numbers will really knock your socks off, with the U.S. Census estimating that individuals over the age of 65 will increase 48% over that same time period. Like a double-edged sword, the issue is not just on the patient demand side though. One-third of all currently active doctors will be older than 65 in the next decade and could begin to retire. Many of these individuals are independent PCPs who have resisted employment by large health systems.
By ANDY MYCHKOVSKY
I feel like the healthcare world just skipped over the $17.3 billion mega-merger between Centene and Wellcare, which just received final regulatory approval last Wednesday. With their powers combined, this new company will create the Thanos of government-focused health plans, hopefully without any of the deranged plans to take over the world. I do get it, 181 million lives are covered by employer-sponsored insurance, between full-risk and self-insured plans. These employer populations have the most disposable income and their HR departments are willing to provide supplemental benefits. However, in my opinion, the future growth of health insurance will be governmental programs like Medicare Advantage (MA), Medicaid managed care, and ACA exchanges. But instead of me telling you this, here is exactly what Centene and WellCare said in a press release to defend the merger:
“The combined company would be the leader in government-sponsored healthcare with increased scale and diversification both geographically and in its managed care service offerings, and enhance access to high-quality services for members. It will offer affordable and high-quality products to its more than 12 million Medicaid and approximately 5 million Medicare members (including Medicare Prescription Drug Plan), as well as individuals served in the Health Insurance Marketplace and the TRICARE program. The combined company will operate 31 NCQA accredited health plans across the country and will have increased exposure to government-sponsored healthcare solutions through WellCare’s Medicare Advantage and Medicare Prescription Drug Plans. It will also benefit from leveraging Centene’s growing position in the Health Insurance Marketplace to new markets. The transaction creates a company with the size and scale to better serve members through enhanced healthcare programs, expanded capabilities and increased investment in technology.”
Simply put, here’s some of quick stats provided at the JP Morgan Healthcare Conference presentation on January 13, 2020:
- National footprint now serving 1 in 15 Americans
- Clear market leader in Medicaid managed care and ACA exchange marketplace
- Dominance serving most complex populations, #1 leader in LTSS and #2 in dual eligible
- Competitiveness in the Medicare Advantage (MA) enrollment wars
- $500 million in proposed savings due to annual cost synergies
By ANDY MYCHKOVSKY
Would it blow your mind if only five startup health plans interested in Medicare Advantage (MA) have collectively raised over $3.9 billion in private funding to-date? Well, readers, that is the reality. Now I know there are some skeptics out in the healthcare ecosystem, so I’m here to break down some of the investment thesis. Not going to necessarily defend, but explain some reasons why you should love and hate these investments. Let’s start with who raised these mind-boggling sums of money. The five startups are Oscar Health, Bright Health, Clover Health, Devoted Health, and Alignment Healthcare.
- Oscar Health has raised $1.3 billion
- Bright Health has raised $1.1 billion
- Clover Health has raised $925 million
- Devoted Health has raised $362 million
- Alignment Healthcare has raised $240 million
I think it’s safe to say that the MA insurance market (also known as Medicare Part C) has captured the imagination of the venture capital and private equity community. The changing demographic trends of an aging baby boomer population, the increased selection of MA plans versus traditional Medicare fee-for-service (FFS), and the opportunity of technology-first MA startup plans to better reduce administrative fees (“Administrative Loss Ratio” or “ALR”) and control medical spend (“Medical Loss Ratio” or “MLR”) seems too good to pass up. If you were going to start a health plan, of all the lines of business you could be focused on, MA has highest profit margins, growing population, and better potential to impact patient spend and manage chronic diseases. It is certainly harder than writing the previous statement, but there are some real benefits versus the traditional commercial or Medicaid managed care.
By ANDY MYCHKOVSKY
In this post, I write down all my strategy and business development knowledge in healthcare and organize it into the top 9 commandments for selling as a healthcare startup. I think everyone from the founder to the most junior person on the team should know these pillars because all startups must grow. I should also note these tenets are most applicable for selling into large enterprise healthcare incumbents (e.g., payers, providers, medical device, drug companies). Although I appreciate the direct-to-consumer game, these slices are less applicable for that domain. If your startup needs help developing or implementing your business development strategy, shoot me an email and we can discuss a potential partnership. Enjoy!
1. Understand Everything About the Product and Market
You must also understand the competitive landscape, who else is in the marketplace and how they appear differentiated? What has been their preferred go-to-market approach and is your startup capable of replicating a similar strategy with your current team members? Also, do you understand the federal and state policy that most affects your vertical, whether that be pharmaceutical or medical device (e.g., FDA), health plans (e.g., state insurance commissioners), or providers (e.g., CMS)? For example, if your company is focused on “value-based care” and shifting payment structures of physicians to downside risk, do you intimately understand The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) and the requisite CMS Demonstration Models from the Innovation Center (e.g., MSSP, BPCI-A, etc.)? Make sure you do or at least hire someone to explain what is important now and in the future.
By ANDY MYCHKOVSKY
In order to celebrate the next decade (although the internet is confused whether its actually the end of the decade…), we’re taking a step back and listing our picks for the 9 most influential healthcare companies of the 2010s. If your company is left off, there’s always next decade… But honestly, we tried our best to compile a unique listing that spanned the gamut of redefining healthcare for a variety of good and bad reasons. Bon appétit!
1. Epic Systems Corporation
The center of the U.S. electronic medical record (EMR) universe resides in Verona, Wisconsin. Population of 13,166. The privately held company created by Judith “Judy” Faulkner in 1979 holds 28% of the 5,447 total hospital market in America. Drill down into hospitals with over 500-beds and Epic reigns supreme with 58% share. Thanks to the Office of the National Coordinator for Health Information Technology (ONC) and movement away from paper records (Meaningful Use), Epic has amassed annualized revenue of $2.7 billion. That was enough to hire the architects of Disneyland to design their Google-like Midwestern campus. The other amazing fact is that Epic has grown an average of 14% per year, despite never raising venture capital or using M&A to acquire smaller companies.
Over the years, Epic has been criticized for being expensive, non-interoperable with other EMR vendors, and the partial cause for physician burnout. Expensive is probably an understatement. For example, Partners HealthCare (to be renamed Mass General Brigham) alone spent $1.2 billion to install Epic, which included hiring 600 employees and consultants just to build and implement the system and onboard staff. With many across healthcare calling for medical record portability that actually works (unlike health information exchanges), you best believe America’s 3rd richest woman will have ideas how the country moves forward with digital medical records.
By ANDY MYCHKOVSKY
As we near the end of the year, rather than reflect on fond memories of 2019 (for which I’m grateful for my family, friends, readers, and Twitter followers), I’ve already started thinking about 2020. If you ever wanted to get inside my brain for 5-10 minutes (scary proposition I know) related to healthcare startups and innovation, here are some areas or trends that I will be following in the new decade.
1. Medicare-For-All Will Be Everywhere
As we move closer to the Democratic Presidential caucus, some of the top-polling candidates (Sen. Elizabeth Warren, Sen. Bernie Sanders, Andrew Yang) are endorsing a Medicare-For-All (M4A) platform. If one of those candidates receive the nomination for the 2020 Presidential election, private v. public health insurance will be front and center. It will dominate all major news. I’m watching how the weight of the entire healthcare industry will politically respond to a national Medicare-4-All Presidential debate (both publicly and privately).
2. Updating Physician Anti-Trust Rules To Support Value-Based Care
In October, the U.S. Department of Health and Human Services (HHS) released their long-anticipated proposed rules to update the anti-kickback and physician referral regulations, to help spur greater provider participation in value-based care arrangements. Any changes once finalized would affect the Civil Monetary Penalties Law, the Federal Anti-Kickback Statute, and the Physician Self-Referral Law (“Stark Law”). After comments are received, I’m watching how the healthcare machine helps craft these new regulations that some would say, stifles innovation in provider care delivery.