Each time I send out the THCB Reader, our newsletter that summarizes the best of THCB (Sign up here!) I include a brief tidbits section. Then I had the brainwave to add them to the blog. They’re short and usually not too sweet! –Matthew Holt
Yes it’s time to talk Medicare Advantage (MA). It’s been a huge couple of weeks for the world of MA. On the commercial side, CVS bought the biggest pure play MA provider, Oak Street Health for $10bn. This pissed me off as if they paid $2 a share more I’d have made a profit on the stock I foolishly bought “on a dip” in 2021.
But this amazed many of us on THCB Gang, as they paid a huge premium and it works out to some $60k per patient. Now health care organizations have been overpaying for patient “lives” as long as I can remember–going at least as far back as Aetna nearly going out of business when it bought US Healthcare in 1996. So why is today’s incarnation of Aetna buying providers?
Well that’s to do with the regulatory side of MA. I have been on record since the very first post of THCB that Medicare FFS is an inefficient and expensive program–even if 80% of American hospitals say they lose money on it and have to charge commercial insurers more to make up for it. But while it’s possible to agree with George Halvorson that MA delivers better care at a lower cost than FFS Medicare, it is simultaneously possible to believe that MA costs more than it should. That’s because of aggressive RAF upcoding that’s been built both into home visits from companies like Signify and also into the EMRs doctors have been using to code MA members’ health status.
There are lots of proposals on how to fix this–including this one from Chenmed on how to change MA from paying for inputs (i.e how sick people are when they join MA) to outputs (how much better they got while in MA). But it’s clear that CMS is now officially coming after upcoding including full cross plan audits back to 2018. Even if not back to 2011. The MA plans will grumble about those past audits and tie CMS up in court but they know going forward the game is up
To make more money in MA they need to get hold and shake loose or frack some of the 85% of the premium that goes to provider organizations. Hence they are all getting into bed with them or buying them outright. UHG, Humana & now Aetna/CVS have been buying physician groups that serve MA populations at a quickening rate, and their goal is to put more of the 50% of seniors already into MA into those groups.
Will this save any money? Well probably not, at least not yet. Humana has been reporting on the costs in its full risk capitated MA groups versus its FFS ones for a couple of years, and the difference is a rounding error. But the point is that the next war in Medicare Advantage is going to be what happens inside these plan-owned medical groups. So expect a lot more scrutiny of both costs, outcomes and patient experience within MA focused medical groups starting about now.
Imagine a government program where private contractors boost their bottom line by secretly mining participants’ personal information, such as credit reports, shopping habits and even website logins.
It’s called Medicare.
This is open enrollment season, when 64 million elderly and disabled Americans choose between traditional fee-for-service Medicare and private Medicare Advantage (MA) health plans. MA membership is soaring; within a few years it’s expected to encompass the majority of beneficiaries. That popularity is due in no small part to the extra benefits plans can provide to promote good health, ranging from gym membership and eyeglasses to meal delivery and transportation assistance.
There is, however, an unspoken price for these enhancements that’s being paid not in dollars but in privacy. To better target outreach, some plans are routinely accessing sophisticated analytics that draw upon what’s euphemistically labeled “consumer data.” One vendor boasts of having up to 5,000 “certified variables for every adult in America,” including “clinical, social, economic, behavioral and environmental data.”
Yet while companies like Facebook and Google have faced intense scrutiny, health care firms have remained largely under the radar. The ethical issue is obvious. Since none of this sensitive personal information is covered by the privacy and disclosure rules protecting actual medical data, it is being deliberately used without disclosure to, or explicit consent by, consumers. That’s simply wrong.
But a more fundamental concern involves the analyses themselves.
Today on Health in 2 Point 00, we have scandal, drama, intrigue, $100 million and murder! Wait, no; not murder. On Episode 166, we catch up on more deals before Jess gets carried away again. The $100 million goes to Carbon Health in a Series C, which is another Bay Area-based primary care startup; they’re doing a lot of work in COVID testing and growing fast. Next we have many health plans uniting with Cigna Ventures, Humana, and Anthem all investing in Buoy Health which just raised $37.5 million in a Series C. That leads us to a scandal with the former CEO of Navigating Cancer suing Merck’s Global Health Innovation Fund. Finally, in the world of DTx, NightWare has received FDA clearance for its Apple Watch app designed to wake people with PTSD up from nightmares. —Matthew Holt
Humana has 4m Medicare advantage members with ~2/3rds of those in value-based care arrangements. The report has lots of data about how Humana makes everything better for those Medicare Advantage members and how VBC shows slightly better outcomes at a lower cost. But that wasn’t really what caught my eye. What did was their chart about how they pay their physicians/medical group
What it says on the surface is that of their Medicare Advantage members, 67% are in VBC arrangements. But that covers a wide range of different payment schemes. The 67% VBC schemes include:
Global capitation for everything 19%
Global cap for everything but not drugs 5%
FFS + care coordination payment + some shared savings 7%
FFS + some share savings 36%
FFS + some bonus 19%
FFS only 14%
What Humana doesn’t say is how much risk the middle group is at. Those are the 7% of PCP groups being paid “FFS + care coordination payment + some shared savings” and the 36% getting “FFS + some share savings.” My guess is not much. So they could have been put in the non-VBC group. But the interesting thing is the results.
Today on Health in 2 Point 00, we’re starting out with a riddle: what’s the similarity between the 49ers Super Bowl performance and digital health? Find out on Episode 108, where Jess and I discuss other news in health tech starting off with another IPO, OneMedical. Now worth more than Livongo at $2.7 billion, this went better than anyone could’ve expected. Hinge Health raises $90 million in a Series C round, offering physical therapy at home and tapping into the loads of waste that goes towards back surgeries. Finally, Humana partners with a private equity company to expand primary care centers, what is the deal with this? —Matthew Holt
Walmart (WMT) is in talks with Humana (HUM) about a relationship enhancement, possibly an acquisition. The two already know how to work together in alliances (narrow pharmacy network, marketing collaborations, points programs). If a new structure is needed, WMT and HUM must be considering a major expansion of scope or a set of operating models where contributions are difficult to attribute and reward (e.g. joint asset builds). What is on their minds? Beyond any interim incremental moves, what could be the endgame?
Catching convergence fever
Horizontal combinations among the top five health plans have arguably reached the regulatory “permissible envelope.” But provider combinations continue apace, enhancing ability to execute on value-based care to be sure, but also increasing negotiation leverage relative to payers. Further, Amazon’s (AMZN) interest in healthcare is gaining momentum but the specific goals are still mysterious, leaving many incumbents to imagine red laser dots are on their foreheads.
Accordingly, health plans are seeking defensible terrain in convergence combinations: CS & Aetna (CVS-AET), Cigna & Express Scripts (CI-ESRX), Anthem’s PBM insourcing and growing attention to CareMore (United Healthgroup [UNH] has been ahead of the curve as usual: but their recent SCA and DaVita medical group acquisitions have clarified for the market the scope of its ambitions for OptumCare). Of course, each of these moves just contributes to the uncertainty about the new competitive paradigm, driving more land grabs in response. I view the WMT-HUM discussions as part of these developments.
Jessica DaMassa asks me about digital health funding, Walmart and PillPack, Blockchain and my sweater — not in that order, but all in less than 2 minutes. Bonus–Farzad Mostashari’s bow tie makes a twitter appearance! — Matthew Holt
For Episode 14, Jessica DaMassa asks me all the questions she can about health & technology in 2 minutes. On the docket today, Walmart & Humana, MyFitnessPal’s huge data breach, and Apple in health tech (again!)–Matthew Holt
Did Aetna just pull a nasty, Trump-like move and up the ante on the Obamacare debate in advance of the election and exchange open enrollment for 2017?
The allegation is that the company withdrew from 11 state insurance exchange marketplaces for 2017 after the Justice Department failed to heed Aetna’s warning that it would do so if Justice didn’t approve its $37 billion purchase of Humana. The Justice Department announced last month that it was challenging that deal and Anthem’s proposed merger with Cigna, saying both deals threaten to sharply reduce competition in the health insurance marketplace.
A July 2016 letter from Aetna to Justice, unearthed by Huffington Post, contains the threat. But in announcing its exchange pullback this past week, Aetna made no mention of the letter and insisted its action was prompted by existing and expected future financial losses in the exchanges.
How does a corporate behemoth heavily invested in the transaction-based health care system of today make the shift to engaging with its 20 million+ customers about their health in new and deeper ways? Humana’s new CEO Bruce Broussard sees technology as key to successfully meeting this challenge.
The company does a good part of its $39 million annual business in one of the health system’s status quo areas: providing medical benefit plans to employer groups.
In his October 1st keynote at the Seventh Annual Health 2.0 2013 Fall Conference, Broussard will share some thoughts from the executive suite about the role Humana envisions for itself as part of health care’s future. Health 2.0 co-founder Matthew Holt recently chatted with Broussard about Humana’s plans.
Matthew Holt: Humana has been looking to get involved in the new changes in health care as a whole. I know you’ve been surveying the role of new information technologies and tools in recent months.
What kinds of things are you seeing? What has most surprised you about the possibilities?
Bruce Broussard: The informational tools that are coming out are pretty powerful. I’d categorize them as allowing individuals and companies like Humana to educate and motivate individuals, and to gain easier access to providers and to more timely treatments.
When we look at the new tools coming out, I think these are going to greatly improve health care in multiple ways.