Harry Sultan and Tory Wolff, Harry Sultan, Tory Wolff, Author at Recon Strategy

Walmart Health didn’t test the opportunity in rural underserved markets

Tory Wolff June 20, 2024

What lessons can be drawn from Walmart’s precipitous shut down of its attempt to launch primary care, dental and behavioral health services? The Walmart Health management team (after some mid-stream ‘dialing in’) was composed of savvy healthcare insiders; the team could tap into learnings from Walmart’s four prior attempts to launch clinics inside supercenters; and Walmart invested quite a bit of money in the effort. Collectively, however, these assets were not enough for success. We think Walmart Health’s key mistake was to target markets with high disposable income, which, unfortunately

Amazon becomes a shopping facilitator for healthcare services (finally…)

Tory Wolff November 20, 2022

Back in 2018, I offered a speculation about what Amazon might do in healthcare as part of its now defunct joint venture with JPMorgan and Berkshire Hathaway. The focus was on doing what Amazon is remarkably good at: creating simple, consumer-friendly, transparent and highly liquid markets. Here was my suggested Step 1: “[T]here are several classes of healthcare that many patients are ready to shop for (and payers have been trying to get them to shop for): minor acute care (sniffles and coughs to simple fractures), basic diagnostic

Are some of Kaiser’s regional ambitions starting to pay off?

Tory Wolff September 19, 2022

PDF: Are some of Kaiser’s regional ambitions starting to pay off? We have produced a new study evaluating developments in Kaiser’s regions (outside of California). The report provides an explanation for recent improvements in performance as well as leadership and governance changes. Further, we identify several implications for the future of Kaiser strategy. The Kaiser Permanente model has a heavy infrastructure, and so it requires a lot of local market share and operating scale to deliver a positive net underwriting margin (we roughly size how much using statistical analysis). Yet,

What’s so special about One Medical in the eyes of Amazon? A few quick thoughts

Tory Wolff July 27, 2022

There isn’t a bricks-and-mortar primary care acquisition out there that is beyond Amazon’s financial reach. While the announcement regarding One Medical has provoked fresh rounds of speculation about what Amazon might do broadly in primary care (e.g., push Pillpack),[1] our interest here is in why Amazon seems to think One Medical specifically is the right move right now. Below are some quick thoughts: Compatible business models One Medical’s legacy commercial business and Amazon (Prime) both operate a fixed annual membership fee plus charge-per-transaction business model. The membership fee provides customers

The coming site-of-care shock for infusions

Tory Wolff April 26, 2022

There’s a major disruption looming in how the site-of-care for infusions is managed which will have repercussions for plan competition, delivery system economics, PE hunting for healthcare opportunity and biopharma commercialization strategy. Plans have long been frustrated by the growth of infusion care in expensive hospital outpatient department (HOPD) settings. HOPD infusion services can cost health plans on average 70% more than a physician office for the same infusion. But because patients on infusion therapy are often very sick and the therapies hard to tolerate, plans have historically been reluctant

The ongoing physician affiliation land grab in Pennsylvania’s Capital District

Tory Wolff December 21, 2021

Closed vs. open Hospitals can compete for patient referrals either by exclusively affiliating with a subset of physicians (“closed model”) or by collaborating with as many qualified physicians as possible irrespective of competing affiliations (“open model”). (Both of these strategies are from the perspective of the facility, of course. A population health strategy would still focus on affiliating with physicians to aggregate patients, but with a goal of minimizing (not just directing) facilities based care.) The two strategies are generally incompatible. If most hospitals use the same approach in a

Optum opening new competitive terrain in Revenue Cycle Management

Tory Wolff November 21, 2021

What is revenue cycle management? Revenue cycle management (RCM) is the process of converting care delivery into cash. At its most comprehensive, services include: patient intake (scheduling/registration, coverage verification and financial counseling) claim submission (charge capture, coding, documentation, submission), and payment capture (payment processing, denials, customer service and collections). Effective RCM is challenging because of: The variety of plans and benefits designs (what’s covered, patient co-pays, rates, etc.), Ambiguities of payer approval of specific clinical services (prior authorization, etc.), Requirements and opportunities in characterizing the care and patient risk

Profit engine swap-outs: How UPMC sustained itself after the Highmark decoupling

Tory Wolff November 2, 2021

UPMC’s decoupling from Highmark exposed a critical vulnerability: economic dependence on its Allegheny County hospitals. In FY11-12,[1] these hospitals provided 70% of UPMC’s overall operating margin, an average of ~$270M annually.[2] A few years later, these operating margins had been cut in half and, by FY19, these same hospitals could contribute just $9M to the enterprise.[3] How did this happen? The Highmark dispute created severe economic headwinds for its western Pennsylvania (what we call “Core”)[4] hospitals: Decay in payer mix. As Highmark patients went elsewhere, the overall commercial share of

JAMA Network: Trends in the Concentration and Distribution of Health Care Expenditures in the US, 2001-2018

Tory Wolff September 14, 2021

Iora Agonistes: High-touch primary care in Medicare Advantage is no sure bet after all

Tory Wolff June 20, 2021

Iora Health was one of the original primary care transformers offering a clinically capable, engagement-focused, and accountability-grounded care model. After an initial foray into commercial, Iora pivoted in 2014 to Medicare Advantage (MA), an alliance with HUM and a global capitation-oriented strategy broadly similar to Oak Street or ChenMed. MA – whose members often have chronic conditions that respond to management and with a payment model that rewards quality (via stars) and patient intimacy (via risk coding) – is fertile ground for Iora’s high touch primary care. And that terrain

Four plausible rationales for incumbent hospitals to embrace hospital@home despite the potential to divert “heads from beds”

Tory Wolff May 24, 2021

We identify four different business strategy rationales for hospital@home depending on each hospital’s specific market situation and each with clear predictive implications for local markets. These are: on-demand capacity expansion, bed capacity rationalization, competitive matching and system consistency. Almost all participants in CMS’s current Hospital@home program could find one of these four rationales applicable. If these rationales become compelling business cases, the future of hospital@home is bright and it is time to start the healthcare ecosystem to prepare for its disruptive consequences. The cannibalization challenge Hospital@home uses innovative protocols, technology,

WMT’s MeMD acquisition: too small a play to make the difference

Tory Wolff May 14, 2021

Last week, WMT acquired MeMD, a virtual provider in Arizona. Per the press release, MeMD will “allow Walmart Health to provide access to virtual care across the nation including urgent, behavioral and primary care, complementing our in-person Walmart Health centers.” Can MeMD rescue Walmart’s struggling clinic strategy? I am skeptical. Virtual is a great complement to the clinics Adding virtual to the clinics could be a very good idea: Walmart’s clinics had the extraordinarily bad luck of rolling out during a pandemic. More importantly, they are weighed down with unresolved

How much are Humana’s value-based care models really taking out of utilization?

Tory Wolff March 8, 2021

All that effort for only 0.4% savings Since 2014, HUM has reported on the performance of primary care in value-based arrangements (“VBA”) vs. traditional contracts (“non-VBA”)[1] in Medicare Advantage (MA). One statistic regarding total medical expenditures (TME) is, at first blush, a stunner. The most recent data (2019) shows PMPM TME of VBA members measured only 0.4% less than for non-VBA members. Given HUM’s long-standing strategic commitment to value-based care, commentators are puzzled: is the whole value-based enterprise in vain? does healthcare transformation require quasi-geologic timeframes to deliver meaningful cost

Walmart Health: Will the fifth attempt at clinics be the charm?

Tory Wolff February 17, 2021

Eighteen months ago, WMT opened its first Walmart Health clinic attached to a supercenter in Dallas, GA. The operation combined multiple services – primary/urgent care, dentistry, behavioral health, optometry, and audiology – with WMT’s Every Day Low Price philosophy (for example, $30 total for a primary care check-up, $40 for a sick visit) in one ~11K sq. ft. site. Boosted by typical supercenter traffic (~5K visits a day is our estimate), and a scarcity of primary and dental care in the local area[1], the clinic got to 2.3K visits-per-month within

A tale of two cities: Referral networks of orthopedic surgeons in Miami and Seattle

Tory Wolff October 22, 2020

Summary: We conducted a comparative analysis of the referral networks of orthopedic surgeons in King County (the area around Seattle, WA) and Miami-Dade County. Similarities Bigger systems are better at keeping referrals internal So, the level of fragmentation in the referral base is associated with the level of fragmentation in the specialty market structure Despite this, a consolidated referral base does not necessarily mean that systems are able to keep orthopedics referrals internal Miami-Dade Independent physicians make a significant proportion of referrals (9.4%) So, independent surgeons receive a significant

Buying kit for a leadership position in the @Home revolution? Implications of Optum’s acquisition of naviHealth

Tory Wolff May 27, 2020

Summary NaviHealth is a leader in post-acute care management; since it manages but does not provide care, its impact is constrained by quality of available providers By aligning with Optum clinical and technology assets, naviHealth can raise the capabilities of post-acute providers, direct more cases to be discharged directly to the home and speed up the return home for others Given inpatient stays often mark the start of sustained needs for help in the home, a post-acute navigator like naviHealth could be well-positioned to orchestrate longer-term “aging-in-place” support Overview of

Covid’s backhand blow: payer mix degradation and the threat of renewed payer/provider rate brawls

Tory Wolff May 18, 2020

Among Covid’s many repercussions, the recession shock will drive a sustained degradation of provider payer mix. I estimate that each 5% added to unemployment will incrementally reduce hospital[1] operating margin by 1.0-1.5% and hospitals would need to charge 3-4% more on commercial care to maintain margins[2]. Given that hospital costs make up 40-45% of commercial total cost of care and we are facing unemployment scenarios of 15-20% (per Robert Wood Johnson – see table and source notes), we could ultimately expect this hospital rate pressure – if not averted or moderated

Medicare Advantage’s durable – but underexplained – post-acute care advantage

Tory Wolff May 13, 2020

Health Affairs has put out another study – this one by Skopec and team (subscription access) – comparing post-acute care (PAC) among Medicare Advantage (MA) vs. traditional Medicare (FFS). And, once again (see earlier study here – subscription access), we learn that MA beneficiaries use a lot less PAC than FFS with no major differences in outcomes. The pattern varies by type of PAC: far fewer post-acute MA members spend time in an inpatient rehab facility (IRF) but, when they do, they stay just as long as their FFS counterparts;

Bolting a full-risk engine onto an urgent care chassis in New York

Tory Wolff September 7, 2019

Last month, Warburg Pincus closed on previously announced plans to acquire a major multi-specialty practice in northern New Jersey (Summit) and combine it with an urgent care network centered in the New York metro area (CityMD). The deal reflects private equity’s recognition that, as the stand-alone urgent care business model is increasingly vulnerable, the valuations in accountable care are increasingly compelling. Urgent care’s evolution Early on, urgent care entrepreneurs focused on filling the gap between overscheduled primary care and expensive ERs. Ramp the visits per day high enough and the

Choosing your customers wisely: are hospitals the right place to engineer the future of healthcare (and the software services to support it)?

Tory Wolff July 29, 2019

MSFT’s pathbreaking alliances in healthcare services are impressive and well designed to grow adoption of their Azure cloud over the medium term. But if MSFT wants to be at the forefront of change and maintain a robust hold on healthcare cloud share in the long-term, their publicly disclosed partner set seems highly incomplete[1]. The two major alliances announced this year – Walgreens and Providence St. Joseph (PSJ) — are predictable outcomes of the emergence of the UNH, CVS/AET and CI/ESRX triumvirate. Healthcare’s anxious mid-tier services players need enablement partners with

Author: Tory Wolff

Recon takes an analytical look behind select developments in healthcare