Category: Network strategy

Recon takes an analytical look behind select developments in healthcare

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

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

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

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

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

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

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How does OptumCare manage its physician staffing once the big deals are done?

OptumCare’s acquisitions usually make headlines.  But what happens when the reporters leave? How is clinical capacity managed? What role do micro-acquisitions, recruiting and retirements play in advancing OptumCare capabilities?  This is important because OptumCare is a risk-taking engine.  Perhaps by understanding post-acquisition moves, we can reverse engineer United’s view on how clinician capacity and specialty mix can maximize value.   We looked at two mature OptumCare geographies, Nevada and Texas with large physician presence and healthy United Medicare Advantage market share (just below 50%).  Our analysis primarily uses the Medicare

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

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

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

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

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

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

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

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

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

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,

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

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

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

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

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

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

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

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

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Consider this speculative Amazon scenario in your strategic planning

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

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

(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

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

(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

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

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

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

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

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Allegheny Health Network adds micro-hospitals to its ground game

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

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

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

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