Tory Wolff, Author at Recon Strategy

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

Mercy Health exits the insurance business and curtails ambitions for its state-wide provider alliance

Tory Wolff March 24, 2016

Earlier this month, Mercy Health announced deals to dismantle HealthSpan (the former Kaiser business in northeast Ohio acquired in 2013), selling the insurance arm to local powerhouse Med Mutual, dissolving the medical group, and transitioning physicians to various northeast Ohio providers. 2015 was supposed to be a growth year for the business, but membership declined across lines of business, PMPM costs ballooned and Exchange risk adjustment obligations wreaked havoc with the bottom line ( HealthSpan is said to cover 160K lives total, of which half are risk with the legacy

Rewarding patient loyalty vs. earning patient loyalty

Tory Wolff March 9, 2016

A new article in JAMA recommends that ACOs and health systems develop patient loyalty programs comparable to those offered by coffee shops, hotels and airlines (McMahon et al, “Health System Loyalty Program – An Innovation in Customer Care and Service” JAMA, March 1, 2016) . The value of patient loyalty to the health system is clear: greater share of wallet plus an ability to manage patients’ health in a more integrated way. Integration should be valuable to the patient as well, but – conditioned perhaps by years of being asked

Centene bringing a new managed care strategy to The Big House?

Tory Wolff February 29, 2016

Correctional health and correctional pharmacy 2.2M people are incarcerated in local jails and state and federal prisons at any one time in the U.S. for whose healthcare various government agencies are responsible. This aggregate number hides some important segment differentiation (see table). Local jails are housing a little over 700K on any average day but typically for a short period of time (on average a month or less), implying over 11M people flowing through the jail system in any one year (boldly assuming few repeated tours). Less than a month

The Walgreens-Advocate deal: end of urgent care’s strategic neutrality in Chicago?

Tory Wolff February 9, 2016

This past January, Walgreens assigned operational control of 56 in-store clinics to Advocate Health. The deal signals another intensification of the already fierce hospital competition in Chicago, and may have implications for the future of urgent care broadly. Prisoner’s dilemma Healthcare’s market failures often prevent the timely exit of redundant capacity, so any new care capacity ends up raising – rather than reallocating –fixed costs across a market. Urgent care, which is enjoying widespread and rapid growth, can be an exception: many providers lack the scale and geographic concentration of

Observations on NextGen ACO’s first cohort of participants

Tory Wolff January 22, 2016

Earlier this month, CMS announced the first cohort of Next Generation ACO (“NGACO”) providers (see here our summary of the key changes made in the Next Generation). Below are a few thoughts on who signed up: The Next Generation cohort is diverse The cohort of 21 participants has the flavor of a structured pilot: Heritage mix: 8 are former Pioneer ACOs (with 232K lives attributed in 2014), 8 came out of former MSSP ACOs (217K lives attributed in 2014) and 5 are new to the CMS ACO program but with

Outcomes patients want: Could it be that the more common the condition, the worse doctors understand the outcomes patients seek?

Tory Wolff January 6, 2016

Leif Solberg and team published research last month contrasting how patients value outcomes vs. how physicians think patients value outcomes. The approach was novel: they asked patients! They identified patients with an MRI or CT for abdominal or back pain and asked them (first in an open-ended way to identify 21 outcomes and then more systematically) to rate the importance of outcomes (e.g., find cause of pain, return to normal life functions, avoid surgery, etc.) on a 5 point scale (5=highest). They then asked PCPs to put themselves in the

Emails substituting for visits: Evidence points to “yes” but providers need to answer a lot of emails to replace a single visit

Tory Wolff December 30, 2015

Earlier this month, researchers released a study of patient-initiated emails to providers with Northern California Kaiser Permanente (KPNC) in 2011/12 in the JAMC . The study focused on patients with one or more chronic condition (CDC data indicates this would be about 50% of an average population) but otherwise sought a mix of conditions, benefit designs and demographics among its participants. Respondents were asked about their use of email in the previous 12 months. The study found substantial patient initiation of email contacts: Of the 71% in the sample with

Ohio’s Mercy-Summa alliance grows contracting teeth

Tory Wolff December 7, 2015

Mercy Health – the largest system in Ohio – has recently formed a Clinically Integrated Network (CIN) with Summa Health called Advanced Health Select. CINs allow separately owned provider systems to jointly contract with payers on a risk basis as well as invest in clinical systems to support consistent practice and joint accountability. The model offers some key advantages of affiliation (joint economics and investment) without the regulatory hurdles, governance challenges and business risks change of control usually entails. Mercy and Summa had two prior business relationships: First, Mercy holds

Author: Tory Wolff

Recon takes an analytical look behind select developments in healthcare