Tory Wolff, Author at Recon Strategy

Facing new vertically integrated competitors, WellSpan and Capital Blue Cross prepare for a long siege

Tory Wolff May 31, 2019

Summary The Capital Region of Pennsylvania is shifting in “real time” from traditionally separate plan vs. plan competition and provider vs. provider competition to integrated vertical plan/provider vs. plan/provider competition Vertically integrated competition can initiate both arms races in delivery system capacity and new product and care management strategies The two big independents – WellSpan and Capital Blue Cross – are trying to match the disruptors with their own capital spend and a vertical alliance Once you cede decisions on terrain and timing to the competitor, you must make do

OptumCare’s legacy entanglements could slow its site-of-service shift

Tory Wolff May 8, 2019

By bringing together accountable-minded physicians, urgent care and ambulatory surgery centers (ASCs) on a national scale, OptumCare could prevent a lot of avoidable hospital care and move much of what remains to lower cost sites of service. Wrap a capitation business model around it and you have a powerful “anti-system” – profitable for itself and toxic to hospital margins. OptumCare has a long way to go to put this theory into practice. It is still in only ~35 of its target 75 markets. And, within many of those 35 markets,

Consider this speculative scenario on WMT-HUM: nibbling at the bottom and taking a slice off the top of the healthcare delivery pyramid

Tory Wolff April 13, 2018

WMT is in talks with 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

United’s Medicare Advantage footprint and OptumCare network do not overlap much (so far)

Tory Wolff April 4, 2018

United’s OptumCare promises a lot of value for health plans. An integrated system supported by Optum technology should be able to deliver consistent, analytically sophisticated care. Its ambulatory-focused configuration (clinics plus urgent care plus ambulatory surgical centers or ASCs) should keep patients out of high-cost settings through mutually reinforcing referral loops (where it has density[1]). One obvious question is whether United can use OptumCare to materially advantage its own health plans. Is a new, nationally-scaled Kaiser in the offing? If that is its endgame, United has a lot of work

Google’s health insurance apprenticeship: some unicorns (maybe) but no masterpieces

Tory Wolff March 19, 2018

Last month, word got out that Verily is in talks with health plans to “jointly bid” on care management contracts. Medicaid populations might be a reasonable surmised as the target given that (1) managed Medicaid requires bidding, (2) Medicaid contracts typically come in packets of hundreds of thousands of lives (which was the scale mentioned in the press reports) and (3) Verily had been considering (but decided against) bidding on Medicaid contracts using Oscar Health as a partner. It is curious, however, to see an organization seek collaboration with health

What precisely lies behind UPMC’s $2B investment in three new specialty hospitals?

Tory Wolff March 8, 2018

Last December, UPMC announced plans to spend $2B on three new specialty hospitals in downtown Pittsburgh. Each will abut an existing UPMC hospital currently serving as system center of excellence for the particular specialty: cancer will be located near Shadyside; cardiac and transplant near Presbyterian; eye and rehab near Mercy. Given inpatient’s declining share in care delivery, any new hospital construction in an over-bedded market with slow-moving demographics is a curiosity. Even if, as UPMC has promised, no net new beds will be added to the market, the new hospitals

Amazon offering health insurance: a potential mistake

Tory Wolff March 1, 2018

35%+ of consumers who purchased on Amazon over a 30-day period say they would be “open” to health insurance created by Amazon according to a new survey (see Becker’s headline and the LendEdu study description). Not surprisingly, interest varied depending on degree of commitment the consumer had to Amazon: 62% of the sample were Amazon Prime customers, and, of them, 42% were open to the idea. That implies that 26% of non-Prime customers were open. This data point is a fine example of the kind of freebie thinking Amazon can

Consider this speculative Amazon scenario in your strategic planning

Tory Wolff February 23, 2018

Amazon has many puzzled about its plans for healthcare. Arguably, Amazon is just as puzzled, but is – in effect — running a massive Delphi process to sort out the plan. Amazon is, after all, the Breaker of Industries, Destroyer of Margins. Allow rumors to float, hire some people, have meetings, seek a few regulatory approvals, start a vaguely missioned non-profit with other business titans. Fear and greed do the rest. Stock prices gyrate as investors bet and counter bet on who is vulnerable, incumbent CEOs promise cooperation or competitive

How can Optum be in only 35 out of 75 target markets while also being available to 70%+ of the US population? An analytical speculation

Tory Wolff January 30, 2018

During the UnitedHealth quarterly earnings call earlier this month, Larry Renfro, CEO of Optum, offered some additional color on the growth of OptumCare: “Combined with [Davita], OptumCare will be in 35 local care delivery markets, nearly one-half of the 75 markets targeted for engagement or development. And these market operations are still in the early stages of growth and development” (per transcript on SeekingAlpha). Yet, based on our data, we think OptumCare (including Davita Medical Group and its MedExpress and Surgical Care Affiliates components) is already present in Hospital Referral

The UPMC/Highmark brawl spills into Philadelphia’s backyard – what happens next?

Tory Wolff January 18, 2018

(For background on Pennsylvania market, please take a look at previous note here) Summary The UPMC/Highmark rivalry continues to open new fronts in Pennsylvania Highmark’s response to UPMC is differentiated in two ways: first, Highmark is using a coalition building strategy and, second, it is controlling its exposure to big in-patient assets; in contrast, UPMC is building an integrated, single-brand system and happily taking over hospitals (and building more) along the way When UPMC and Highmark make major investments in a region, local systems will be caught in the capex

Ochsner signs LOI to enter northern Louisiana and secure a medical school affiliation

Tory Wolff January 4, 2018

(For Louisiana market context, please take a look at previous notes on Ochsner here and here) Before the holidays, Ochsner signed an LOI to take over the management of ailing University Health located in Shreveport and Monroe and affiliated with LSU Health Sciences Shreveport. The details have yet to be finalized and public disclosure of discussions do not necessarily mean a deal will be made. But Ochsner has been looking at the system for a while and must know its warts and the state appears to have precluded other partnership

With the DaVita Medical Group acquisition, OptumHealth deepens its presence in existing markets rather than adding new ones

Tory Wolff December 19, 2017

OptumHealth and its proposed acquisition target DaVita Medical Group (DMG) have a lot in common: Ambulatory care portfolios: physician practices, urgent care centers and ambulatory surgical centers (ASCs) – both directly owned and affiliated via owned independent practice associations (IPAs) Geographic position: multiple states and markets Advantaged model: within-market cross-referrals and care collaboration which should support market share, economics and a value-based care advantage Construction: largely assembled via acquisition resulting in similar challenges in integrating operations (e.g. multiple EHRs, management structures) In short, the DMG acquisition is a classic horizontal

United’s ambulatory delivery system OptumCare can reach 70% of the US population

Tory Wolff December 4, 2017

Who will be the first to take integrated health care delivery national? A few years ago, the best bet might have been an established provider with a nationally compelling brand and a growing affiliate federation such as Cleveland Clinic or Mayo. Instead, Optum – just a decade ago three separate services largely focused on serving United’s health benefits business – has entered care delivery and — by a constant stream of acquisitions big and small — built up beachheads in a majority of markets and is – via ongoing big

Allegheny Health Network adds micro-hospitals to its ground game

Tory Wolff October 31, 2017

UPMC’s recent spectacular deal-making careen through central Pennsylvania (picking up the big Susquehanna and Pinnacle systems as affiliates and Tower as a joint venture partner all in under a year) contrasts oddly with its tentativeness at home: in mid-September, UPMC unexpectedly scuttled plans to build a 90-bed, $211M hospital in the South Fayette suburb of Pittsburgh just a week after signing a deal with a developer which would have launched construction. Spokespeople said UPMC is “pursuing other, more significant strategic options” (per Pittsburgh TribLive). Perhaps UPMC caught early wind of

Marrying into the right family pays off! Update on revenue cycle management joint venturing

Tory Wolff October 12, 2017

Back in 2013, Dignity and Optum formed a joint venture for revenue cycle management (RCM) services named Optum360. Dignity contributed processing centers and 1,700 employees in return for ~25% share in the venture. Optum contributed technology and 1,300 employees in return for owning the rest. In addition, Dignity promised to buy RCM services from the joint venture for the subsequent ten years. At the time, our view was that the joint venture “marriage” gave Optum the scale and reference client needed to credibly compete vs. majors (R1, Parallon, Conifer) at

UPMC’s race to the sea and the tentative steps towards Highmark-Geisinger alliance

Tory Wolff July 16, 2017

On May 10, Highmark and Geisinger announced plans for a clinical joint venture to create community-based care in four rural north-central Pennsylvania counties. The target counties are small (200K lives total), largely peripheral to Geisinger and Highmark core markets, and are already served by the Susquehanna Health system. Why all this complexity and investment to launch a battle for 1.5% of Pennsylvania’s population? Look at the whole board The move should be understood in the context of the widening struggle between Highmark and UPMC. Consent decrees have temporarily fixed some

Urgent care gets drawn into system-level market share battles in the Big Apple

Tory Wolff April 30, 2017

Warburg Pincus, the new majority owners of CityMD, a 68 site urgent care chain, will need to bring plenty of capital to an urgent care industry approaching its endgame. CityMD competes on a national stage against the likes of TPG’s Access Clinical Partners and UnitedHealth’s MedExpress. And rapid shifts in individual markets are raising the strategic stakes: where once urgent care could remain independent, today it is increasingly being asked to take sides in the share battles among big delivery systems. In November 2016, for example, Banner completed its acquisition

Rapid cycling to get medications right: a potential use case for coupling wireless patient monitoring with remote support?

Tory Wolff August 22, 2016

Summary Cheap home devices are starting to generate a flood of high frequency, low latency biometric data, much of it of uncertain clinical value This uncertainty makes designing the service model difficult: high value use cases may get bundled with broader, low value, more speculative ones (e.g. behavior change), reducing overall ROI and uptake Given the patient-generated nature of the data and uncertain accuracy / calibration of the devices, use cases will need specific targeting or depend on subsequent clinical grade investigation to sort signal from noise High value use

Attacking an oligopoly by integrating downstream services: Can Livongo’s closed loop get traction vs. the big glucometer incumbents?

Tory Wolff June 22, 2016

Summary Livongo is marrying a cellular-enabled glucometer and a data cloud with patient engagement services to help manage sugar levels Glucometer incumbents could match Livongo’s technology but will struggle to counter the business model innovation By expanding into services, however, Livongo is expanding its potential competitive set to include incumbent downstream care providers If Livongo’s model demonstrates compelling value, both device and services incumbents could find ways to stitch together competing solutions in collaborative ecosystems Closed loops are great ways to develop value propositions but can be rickety for trying

Ochsner solidifies its position in northern Louisiana (updated)

Tory Wolff April 22, 2016

Please see update at the end of the post. With new two affiliations, Ochsner Health has solidified its clinically integrated network in the most populous parish (East Baton Rouge) and built a beachhead in the one part of the state where it lacked a partner (the northeast). The two new partners are General Health System in Baton Rouge (announced in late March) and Glenwood Regional Medical Center in Monroe (announced in early April). These affiliations have a several implications: Ochsner Health Network is now viably state-wide. Its affiliates are directly

Author: Tory Wolff

Recon takes an analytical look behind select developments in healthcare