Category: Providers

Recon takes an analytical look behind select developments in healthcare

The coming site-of-care shock for infusions

There’s a major disruption looming in how the site-of-care for infusions is managed which will have repercussions for plan competition, delivery system economics, PE hunting for healthcare opportunity and biopharma commercialization strategy. Plans have long been frustrated by the growth of infusion care in expensive hospital outpatient department (HOPD) settings. HOPD infusion services can cost health plans on average 70% more than a physician office for the same infusion. But because patients on infusion therapy are often very sick and the therapies hard to tolerate, plans have historically been reluctant

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The ongoing physician affiliation land grab in Pennsylvania’s Capital District

Closed vs. open Hospitals can compete for patient referrals either by exclusively affiliating with a subset of physicians (“closed model”) or by collaborating with as many qualified physicians as possible irrespective of competing affiliations (“open model”). (Both of these strategies are from the perspective of the facility, of course. A population health strategy would still focus on affiliating with physicians to aggregate patients, but with a goal of minimizing (not just directing) facilities based care.) The two strategies are generally incompatible. If most hospitals use the same approach in a

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Optum opening new competitive terrain in Revenue Cycle Management

What is revenue cycle management? Revenue cycle management (RCM) is the process of converting care delivery into cash. At its most comprehensive, services include: patient intake (scheduling/registration, coverage verification and financial counseling) claim submission (charge capture, coding, documentation, submission), and payment capture (payment processing, denials, customer service and collections).   Effective RCM is challenging because of: The variety of plans and benefits designs (what’s covered, patient co-pays, rates, etc.), Ambiguities of payer approval of specific clinical services (prior authorization, etc.), Requirements and opportunities in characterizing the care and patient risk

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Profit engine swap-outs: How UPMC sustained itself after the Highmark decoupling

UPMC’s decoupling from Highmark exposed a critical vulnerability: economic dependence on its Allegheny County hospitals. In FY11-12,[1] these hospitals provided 70% of UPMC’s overall operating margin, an average of ~$270M annually.[2] A few years later, these operating margins had been cut in half and, by FY19, these same hospitals could contribute just $9M to the enterprise.[3] How did this happen? The Highmark dispute created severe economic headwinds for its western Pennsylvania (what we call “Core”)[4] hospitals: Decay in payer mix. As Highmark patients went elsewhere, the overall commercial share of

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The Puzzling Future of Healthcare

This post is from a talk at the 2021 Link Ventures CEO summit. Original talk: Transcript: The practice of medicine has always been an information problem. Clinicians seek to diagnose an ailment and to prescribe a cure based on an incomplete understanding of what’s happening in a patient’s body as it relates to an incomplete set of knowledge about diagnoses and treatments.  This aspect of medicine has remained the same for centuries even as our collective understanding of medicine has gone through three major phases.  Until the 18th century, much

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Iora Agonistes: High-touch primary care in Medicare Advantage is no sure bet after all

Iora Health was one of the original primary care transformers offering a clinically capable, engagement-focused, and accountability-grounded care model.  After an initial foray into commercial, Iora pivoted in 2014 to Medicare Advantage (MA), an alliance with HUM and a global capitation-oriented strategy broadly similar to Oak Street or ChenMed. MA – whose members often have chronic conditions that respond to management and with a payment model that rewards quality (via stars) and patient intimacy (via risk coding) – is fertile ground for Iora’s high touch primary care.  And that terrain

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Four plausible rationales for incumbent hospitals to embrace hospital@home despite the potential to divert “heads from beds”

We identify four different business strategy rationales for hospital@home depending on each hospital’s specific market situation and each with clear predictive implications for local markets.  These are: on-demand capacity expansion, bed capacity rationalization, competitive matching and system consistency.  Almost all participants in CMS’s current Hospital@home program could find one of these four rationales applicable.  If these rationales become compelling business cases, the future of hospital@home is bright and it is time to start the healthcare ecosystem to prepare for its disruptive consequences. The cannibalization challenge Hospital@home uses innovative protocols, technology,

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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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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

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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

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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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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;

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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

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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

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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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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

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