Category: Providers

Recon takes an analytical look behind select developments in healthcare

AI in healthcare III: COVID-19 applications and implications

COVID-19 has accelerated the adoption of AI in healthcare. AI based tools and solutions can work quickly, be deployed at scale, and respond to the dynamic nature of the crisis. Use-cases span all facets of responding to the pandemic, from diagnosis and triage, to treatment and combating new transmission. A wide range of players—including startups, established companies, universities, and more—are bringing their capabilities and perspectives to the table. Startups like Current Health, a UK-based remote-monitoring company supporting Mayo Clinic and Baptist Health with their COVID-19 response, are benefitting the industry’s

Read More

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

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

Read More

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

Read More

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

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;

Read More

Strategy in the Time of Covid

Preamble A recent post from Recon Strategy outlined the longer-term strategic implications of Covid-19 on 12 healthcare sectors. This post highlights the opportunity to redeploy corporate strategy assets to focus on the most important short-term strategy imperatives to not only ensure organizational resilience but to set up for success coming out of this crisis. Corporate strategy teams have tremendous analytical, creative, and operationally savvy resources that are accustomed to jumping into new situations, getting quickly up-to-speed, and delivering value. Leaders should proactively point these resources towards these areas of greatest

Read More

The day after: Implications for hospitals, payers, biotech and more…

Even as our priority today is dealing with the Covid crisis, healthcare organizations would do well to start thinking about the longer-term implications for their strategies. In some instances the marketplace will revert to the prior dynamic, but in many others the changes wrought during this crisis are likely to persist in a way that will call for new strategy or will produce unpredictable outcomes that will require scenario planning. Sectors will be impacted in very different ways and there will be winners and losers in each. In this short

Read More

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

Read More

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

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

Read More

Full-service vs. self-service: an emerging bifurcation in healthcare

A clinical vignette: the cases of Jane and Joe Imagine if you will two individuals both at age 50. Jane is a project manager whose recent health care has focused on managing menopausal symptoms, a knee injury sustained while skiing, and moderate episodic depression, with a medication list of one chronic medication, and one medication as needed.  Joe is a bus driver whose recent health care has focused on managing Type II diabetes, hypertension, and low back pain, with a regimen of 4 chronic medications, and 2 medications as needed.

Read More

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

Read More

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,

Read More

There’s always a bigger fish: healthcare services giants are looking anxiously over their shoulders

With the closing of the CVS/AET and CI/ESRX combinations, healthcare services are now led by a triumvirate of vertically-oriented goliaths. And we can anticipate that there will be more care delivery acquisitions and investments to fill out the new vertical platforms—just as the leader UnitedHealth Group (UNH) continues to invest in its care delivery arm (with the pending acquisition of DaVita’s physician group) a decade after it first went into the clinic business. The extent to which the two new combinations have allowed legacy constituents CVS, AET, CI and ESRX

Read More

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

Read More

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

Read More

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

Read More

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

Read More

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

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

Read More

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

Read More

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

Read More

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

Read More