Author: Tory Wolff

Recon takes an analytical look behind select developments in healthcare

Convenience care, telemedicine and breaking down barriers to geographic competition – a speculation

A few problems Geographic barriers to the entry have long protected providers from best-in-class competition.  Provider consolidation – theoretically a logical response to the current operating environment — reinforces these barriers by locking up referrals and making systems too big / too few to fail.  Instead of pushing providers aggressively on value, payers and regulators may end up nursing underperforming systems (e.g. Highmark’s bail-out of the West Penn Allegheny system) and discouraging disruptive entrants for fear of unintended damage to the stability of the local provider infrastructure.  Even if consolidation is

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The Ochsner Health Network: has Ochsner gone “a hospital too far”?

Over eight months between October 2014 and June of this year, Ochsner formalized alliances with five major provider systems in Louisiana. The first wave (with St. Tammany Parish, Terrebonne and Slidell) reinforced Ochsner’s stronghold in New Orleans. The second wave (with Lafayette General and CHRISTUS) secured pathways to markets west along I-10 and the coast and northwest along the I-49 corridor to Shreveport. This collection of alliances — dubbed the Ochsner Health Network (OHN) — is effectively statewide with ~30% of the hospital beds and ~30% of the physicians. Key

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Can convenience care be a platform for an insurance product?

Summary A Portland-based urgent care operator is launching a health plan from scratch The strategy targets the busy and healthy with the convenience of a retail network providing “store brand care”; a simple, consumer oriented service model at low cost. Carving out this segment can plausibly allow for sustained advantage in admin, medical cost and revenue management. The plan has hit a speed bump with regulators on pricing, so evidence of this model’s market appeal will come slowly. Convenience care has historically played nice with the ecosystem, but Oscar’s explosive

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Comparing the emerging national networks of Cleveland Clinic and Mayo Clinic

The build-out of the Cleveland Clinic and Mayo branded networks continues apace. Most recently, the Virginia Hospital Center joined the Mayo Clinic Care Network in March and Sequoia Hospital (Dignity), Piedmont Healthcare and Valley Health System (NJ) signed up with Cleveland Clinic this past March and early April. Growth of the networks and current snapshot These four deals cap torrid growth in the networks especially in 2013 and 2014. As of the end of the first quarter of 2015, Mayo has affiliations with systems totaling 13.4K beds (and a rough

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A sizeable step forward but miles still to go: CMS’ Next Generation ACO model

CMS has issued a “Request for Applications” describing its Next Generation (NG) ACO. The model makes progress on three issues that have generated plenty of analytical handwringing from MedPAC and the broader ACO community. It also signals a strategy to set ACOs up to compete more directly with Medicare Advantage (MA). (1) Enhancing predictability The Medicare Shared Savings Program (MSSP) and Pioneer ACO models had different approaches to solving the same business parameters. With NG, CMS has generally picked the ones which enhance simplicity and predictability (see table). For example,

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Cosgrove moves south: competitive implications of the formation of the Midwest Health Collaborative

A few days ago, Cleveland Clinic announced the formation of the Midwest Health Collaborative (“the Collaborative”), a new company jointly managed by six Ohio delivery systems across the state. The company’s goals are to share best practices, collaborate to reduce costs (e.g., procurement synergies) and “explore the business case” for developing a state-wide provider network. Notably, the deal was announced just eighteen months after Cleveland Clinic’s key competitor in Ohio, Mercy Health (formerly Catholic Health Partners), announced its own state-wide alliance, Health Innovations Ohio; this new deal also links three

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Shifting lines in the mobile health competitive battlefield: Aetna makes a strategic retreat while United digs in?

The battle to own healthcare’s consumer relationship is being nowhere fought more intensely than in the mobile arena. Tea leaves suggest that Aetna has pulled back from trying to own this relationship in favor of a more collaborative “ecosystem” strategy, but United appears determined to lead. The thinking is speculative but I let me point out the emerging evidence and offer some guesses on what will come next. Strategy environment for consumer mobile health At the risk of oversimplification, let me offer six hypotheses regarding the strategic context for consumer

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The “weaponization” of ACO narrow networks: Strategic destabilizers which compel their own replication?

In theory, narrow networks built around a single provider or a network of aligned providers (“provider-orchestrated narrow networks” or “ACO networks”) can pose a much higher stakes threat to non-participating providers than ones assembled solely by payers (i.e., where the payer picks who is in based on cost and rates): They are more likely to achieve broad utilization reduction because participating providers can align on principles, build shared capabilities and coordinate management of specific patients consistently. As a result, discounts can play a smaller role in creating a compelling value

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Ochsner and River Parishes: one type of endgame for managing redundant hospital capacity (updated)

Please see update at end of post. If value-based care broadly delivers on its promise to reduce hospital admissions by providing more timely ambulatory care, a lot of today’s bed capacity will end up redundant and stranded. How can we navigate to a new equilibrium? Recent developments in the New Orleans area (whose population size still has not recovered from Katrina and is potentially therefore a model case of oversupply) may offer some window into future endgames for resolving the supply-demand imbalance. Acquire, unbundle, and selectively shut-down One approach is

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Boeing’s model for creating product-based competition among providers

Summary Boeing is creating a benefit design model which sets up providers to compete for their book of lives via provider-branded narrow networks By offering a choice among competing narrow and full network products, the model may make narrow networks more palatable for employees Narrow networks can produce a volume windfall for providers (e.g., share gain, leakage reduction) and profits from better care management and a risk deal  Providers “pay” for the narrow network opportunity by being lower cost (often via incremental discounts) in hopes that these gains outweigh cannibalization

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Apple HealthKit, provider partnerships and walled gardens: three observations

A number of observers have noted that the Apple’s partnership with Epic on HealthKit could reinforce the role of “closed IT system” strategies in general and Epic’s leading position among EMR vendors in particular. Others have noted that prominent PHR failures (Google, Revolution Health) should add some sobriety to the hype around HealthKit. While I don’t disagree with these concerns, I have three other thoughts on the announcement that Apple has built a framework for collecting and presenting health data from a wide variety of consumer devices and apps. Providers

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Aetna not conceding the private exchange space to the benefits consultants

Summary Aetna is stitching its inventory of ACO deals into a national ACO network and will offer them on its proprietary private exchange (PHIX) Linking ACOs and PHIXs is smart because PHIX’s defined contribution feature creates a strong consumer reward for picking a tighter network product Promising a national network of ACOs is bold: ACO deals depend on willing providers and opportunity in local care patterns; in many geographies, the delivery system isn’t ready or interested. If Aetna can create a national network, it should be attractive to major employers

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Bring it on: Highmark brings in a long-distance ally to help compete vs. UPMC in cancer care

Summary Allegheny Health Network (AHN), the major delivery system in Pittsburgh owned by Highmark, and Johns Hopkins Medicine have signed a MOU to create an affiliation between Allegheny and the Johns Hopkins Kimmel Cancer Center.  Over many years, UPMC has established a very large network of cancer care throughout western Pennsylvania; AHN has responded in kind albeit much less broadly. At this point, there is very little independent cancer care left in the region. By partnering with a prominent UPMC competitor in oncology, the deal is likely designed to shore

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Cigna and Samsung: assembling a “global account”-based business model for mobile

Samsung and Cigna have agreed to a multi-year development alliance for health applications for the Samsung smartphone. The partners will initially focus on content (access to the health-related tips and articles Cigna already offers its customer base). Ultimately, the partnership will “connect individuals with caregivers, doctors and hospitals to improve health and wellness globally.” So far, the announcements have been silent on any exclusivity. In our view, the content deal is a sideshow: health and wellness tips are highly commoditized and an insurer an undifferentiated supplier for this content. I

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Marrying into the right family: the bets underlying United’s revenue cycle management joint venture with Dignity Health

Market for outsourced revenue cycle management could be big The revenue cycle management (RCM) vendor industry is about $2.0B for hospitals and $11 billion for physicians today. The market is constrained because most providers do their own RCM. Vendors only have a ~10% penetration among hospitals and a 25% penetration among physicians (implying that the potential combined hospital and physician market is $60-70B). However, RCM as a function is getting more complex and outsourcing could quickly start looking more attractive: Value-based contracting models raising the stakes in documentation, reporting, benchmarking,

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Declining value of the EMR walled garden? An emerging signpost from Cleveland Clinic

Quick follow-up to our post about the Epic-eClinicalWorks deal: Today’s Healthcare Informatics has an interview with Martin Harrison, CIO of Cleveland Clinic, was asked what is the biggest strategic IT challenge right now. His answer? The challenge element is partly being driven by the complexity of the challenges in this value-driven world. So all the care providers belonging to this collaborative probably will not belong to the same organization. So the biggest challenge to my mind right now is the effectiveness of interoperability. We talk about it a lot, but

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Change in tactics or change of heart? Speculations on the eClinicalWorks–Epic interoperability announcement

Epic is famous for its intense focus on interoperability across its own systems coupled with its conservatism regarding interoperability with other EMRs. In 2012, KLAS said Epic has the “deepest data sharing of all the vendors” across its own practice and hospital EMRs (see this example in which Cleveland Clinic and neighboring system MetroHealth — both on Epic — have put interoperability in place). But when it comes to non-Epic systems, customers must work through defined “exits” to the Epic system (“we don’t let anyone write on top of our

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Metrics alone will not unleash the market: Porter and Lee ignore the demand side to the peril of their proposed strategy

Summary Michael Porter and Thomas Lee have articulated a strategy for fixing healthcare focused on restructuring providers and assessing them based on metrics “that matter to patients” The most compelling example they cite of system-wide improvement (vs. anecdote) is the case of IVF where public outcomes reporting demonstrates widespread and consistent performance improvement However, the IVF story has several unique features which make it an exception rather than a model for improving healthcare System improvement cannot be a matter of supply-side restructuring and outcomes metrics: market forces needs to be

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Quiet after the storm: Is there an emerging competitive equilibrium in Ohio?

Summary In August and early September, several Ohio provider systems have picked sides in the competition between Catholic Health Partners and Cleveland Clinic The recently announced Health Innovations Ohio collaboration signals that Catholic Health Partners is playing for the overall Ohio market; however, there is no clear, attractive competitive response for Cleveland Clinic Cleveland Clinic lacks a footprint in populous southern Ohio to match Catholic Health Partners but it is not obvious which systems there would seek an alliance or an acquisition Cleveland Clinic and Community Health Systems joint venture

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Strategic “crowd-out” via narrow networks: an emerging case study in Wisconsin

Last week, I argued that, if payers want to secure competitive advantage from improved provider care, they would need tighter, more exclusive alignments with these providers to “crowd out” the free riders (the “free riders” in this case are the other payers who have members being treated by the same providers and who can therefore share in any improvements). Two deals last week suggest a case study of the concept may be developing in southeastern Wisconsin: On September 9, Anthem announced that it will be teaming up with highly ranked

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