Month: August 2024

The Dynamics Steering Healthcare in Q3 2024

Posted on by Jason Barry

It’s rare that a mid-year trend roundup qualifies as the biggest story of the week, but it’s also rare that they’re as stellar as the one that former HHS policy leader Paul Mango just released.

Mr. Mango served juicy takes on three of the biggest trends shaking up the industry:

Trend #1) Payor transformation has been full-speed-ahead as payors seek success in managing beneficiaries with chronic conditions by developing their own disease management platforms (not to mention new arcs of growth help justify their climbing P/E ratios).

  • Evernorth is now 80% of Cigna’s total revenue and a whopping 68% of its profit – mostly as the result of its Express Scripts acquisition in 2018. In the first half of the year, Evernorth grew 29% while Cigna as a whole grew 4%.
  • United was obviously an early mover into non-health plan assets, but Optum is now the key growth driver for the entire enterprise. United Healthcare remains Optum’s largest client (accounting for two-thirds of its revenue), but Optum now represents 25% of UNH’s total revenue and 49% of its profit (thanks in large part to OptumRx).

Trend #2) Provider tailwinds are adding up as several key performance measures improve simultaneously, including higher volume, increased acuity for inpatients, and lower labor costs. 

  • HCA just posted same store revenue up 10% due to a combination of the aforementioned tailwinds. ACA exchange volume was up 46% (total commercial volume rose 12.5%), and contract labor costs were down 25%.
  • Even Community Health Systems, whose performance has lagged other national hospital chain operators, saw a 3.2% increase in admissions and a 4.7% bump to same store revenue. CHS axed contract labor costs by 39% year over year.

Trend #3) Medicare Part D upheaval has been emanating from the Inflation Reduction Act, which will take full effect on the 1st of next year.

  • Mango boils down the IRA’s impact on Part D as such: it shifted the economic burden from beneficiaries who are heavy consumers of prescription drugs to the payors issuing the plans. 
  • Medicare Part D has been around for twenty years and during that time the combination of the beneficiary’s premium and government’s subsidy only rose to $64.28. “The impact of the IRA in one year’s time will cause that to rise to $179.45.

The Takeaway

Where is all this payor transformation heading, especially as providers increasingly view them as competitors? Will health systems sustain their momentum, or is recent performance a reflection of pent-up pandemic demand? All eyes will be on next quarter’s numbers to find out, and you’ll be the first to know when we see them.

Employers Feeling the Healthcare Pressure

Posted on by Jason Barry

Employers are among digital health’s most important customer bases, and the Business Group on Health’s annual survey is one of the best ways to get a pulse on their healthcare priorities.

Some stats that caught the eye:

  • Employers expect healthcare costs to spike 8% in 2025 – the highest jump in a decade.
  • Pharmacy has risen from 21% to 27% of employer healthcare spend from 2021 to 2023.
  • Cancer, MSK, and cardiovascular conditions are the top three cost drivers.
  • 80% of employers feel pressure for new mental health, obesity, and cancer treatments.

The above chart shows the accelerating climb in employer healthcare costs since 2019, with most of the 28% increase looking like it was absorbed by employer contributions to premiums. 

  • Cancer was the most commonly cited cost driver in 2024, and 72% of employers noted a higher prevalence of the disease among their workers and their families.
  • While some of that can be attributed to delayed care and screenings during the pandemic, it’s also perpetuated by an “alarming” rise of diagnoses in younger people.

GLP-1s, gene therapies, and specialty drugs were another major culprit behind the cost pressure, and over half of employers specifically called out the impact of GLP-1s.

  • Nearly all employers cover GLP-1s for diabetes, compared to 67% for obesity and 34% for cardiology (although it appears that cardiology’s share could double by 2027).
  • GLP-1s are undoubtedly promising medications, yet 96% of employers worry about their long-term cost implications, and 52% would strongly consider reducing their coverage to better control healthcare expenses.

To reign in costs, employers are actively reevaluating their vendor partnerships, and plan to use upcoming RFPs to negotiate better terms and end relationships with underperformers.

  • Six in 10 employers are looking to cut back on the number of vendors they work with, and underutilized solutions will be the first ones on the chopping block.
  • Vendor management is at the center of employers’ cost containment strategies, and they’re aiming to integrate benefits to eliminate expenses and simplify the member experience.

The Takeaway

Employers are clearly feeling the pressure to get costs under control, but the areas where they need the most help – obesity care, behavioral health, MSK – are also brimming with digital health startups promising that their solution is the answer. That begs the question: if these tools are actually working, why are costs only continuing to climb faster?

Storytime at Epic UGM 2024

Posted on by Jason Barry

Epic’s “Storytime” User Group Meeting is officially a wrap, and the number of updates shared at the event would be hard pressed to keep with the theme and fit in a children’s book.

CEO Judy Faulkner donned the podium dressed as Mother Goose to tell the tale of Epic’s recent advances, AI roadmap, and even a “25-to-50-year” company plan.

It wouldn’t be a 2024 UGM without AI hogging the spotlight, and the EHR behemoth certainly delivered on that front. Highlights included:

  • Epic currently has two killer use cases for AI. Medical scribes (186 user orgs), and draft responses to portal messages (150 user orgs). Those counts reflect the number of “user” orgs, but it wasn’t clear how many have done system-wide deployments.
  • Epic is actively working on over 100 new GenAI solutions, ranging from auto-populating forms and discharge papers to delivering evidence-based insights at the point of care.
  • Epic Cosmos’ Look-Alikes AI tool is now live at 65 sites, helping identify rare diseases by cross-referencing symptoms in its database of over 226M patient records and connecting physicians with kindred cases.

The teasers stole the show, and physicians (or payors!) have plenty to look forward to if Epic can deliver.

  • An upcoming Best Care Choices for My Patient tool will provide treatment recommendations at the point of care based on what worked / didn’t work for similar patients. NYU Langone and Parkview Health are already test-driving the solution.
  • A new Payor Platform is now available to all health system customers, with AI features to streamline prior auths, manage claims denials, and connect provider directories. Epic is also exploring how to cut out clearinghouse middlemen by sending PA documentation directly to payors.
  • By the end of next year, MyChart’s GenAI will be able to pull in test results, medications, and other patient details to better customize draft messages and help automatically queue up orders for labs and prescriptions.
  • A Teamwork staff scheduling application is sparse on details but on the way “soon.”

The Takeaway

Given how much time clinicians spend in the EHR and the treasure trove of data it holds, it isn’t a surprise that Epic has become an integral component of its health systems’ AI strategy. That said, user group meetings are meant to excite user groups, and we’ll know soon enough how many of these announcements were just Storytime.

How Much Will GLP-1s Change Hospitals?

Posted on by Jason Barry

When a new drug class bursts onto the scene as fast and furious as GLP-1s, hospitals start wondering whether a single medication can force them to rethink their entire model.

Norman Regional Health System in Oklahoma is blaming the diabetes management and weight loss drugs for prompting it to shutter its bariatric surgery center after patient volumes plummeted 30% within just the last year.

  • A Philadelphia system recently cited similar reasons for canceling its own bariatric surgery unit expansion plans, and other providers are actively revisiting where they want to allocate their growth capital.
  • Direct-to-consumer marketing and expanded coverage has led to roughly 1 in 8 U.S. adults reporting GLP-1 use, with analysts predicting that 30M Americans could be taking the drugs by 2030.

The roaring appetite for these medications adds to a number of other trends already impacting hospital footprints, such as new care delivery models and a post-pandemic shift to remote care.

  • Hospitals are now faced with the unenviable task of recalculating utilization forecasts for everything from diabetes and cardiac care to orthopedics and joint replacements.

Although it might still be too early for long-term capital planning, hospitals can turn to other recent advances like statins to glean some important lessons.

  • Statins were originally projected to make a massive impact on cardiovascular care volumes, but it turned out that patients were just older before needing those services.
  • Statins also contributed to longer life expectancies, and while the jury’s still out on whether GLP-1s will do the same, more people living past 65 would cause Medicare’s role as the country’s largest healthcare consumer to grow, meaning less price elasticity for many hospitals.

Hospitals don’t yet have answers to the long-term effectiveness of GLP-1s for managing chronic conditions or increasing life expectancy, but they do have the questions: 

  • Which service lines will lose volume? 
  • Which service lines will see more volume as the population ages?
  • How would these volume shifts affect payor mix?
  • What operational changes have to happen to sustain financial performance?

The Takeaway

GLP-1s have arrived in a big way, raising important questions about the changes hospitals will need to make to adapt. Those questions will take time to answer, but now’s the time to start thinking about them.

Astrana Joins Forces With Awell to Bring CareOps to VBC

Posted on by Jason Barry

Astrana Health ranks among the rare breed of publicly traded digital health players that can actually turn a profit, so it’s worth paying attention to when they join forces with a company like Awell to push their advantage even further.

Astrana gives physicians the keys to value-based care by supplying the technologies and administrative services needed to succeed in risk-based arrangements.

  • Once upon a time, Astrana got its start as “ApolloMed” and established itself as an innovator in the VBC-enablement space, particularly within Medicare Advantage.
  • These days, Astrana is taking on financial risk for patient outcomes and creating a “constellation of quality care” to help providers meet quality metrics and manage cost of care. 

Awell’s CareOps platform is a low-code editor that lets clinical and ops teams build workflows that embed into their existing tech stack, without requiring IT or engineering resources.

  • Picture drag-and-drop building blocks tied together with if-this-then-that logic that you can use to create your ideal workflow. Oversimplification, but you get the gist.
  • That allows orgs like Astrana to design and implement automated processes in a matter of days, giving them a unique advantage from an operational efficiency standpoint.

Scaling CareOps across Astrana’s extensive network will not only allow it to eliminate manual workflows and improve the experience of its providers and patients, but it will also accelerate the pace of future improvements by enabling it to adopt an agile development framework.

  • Similar to the DevOps transformation that redefined the software industry, CareOps trades fragmented teams and lengthy deployment cycles for integrated dev/care teams and quicker software releases. (Here’s CareOps 101 for the uninitiated.)
  • By breaking down the silos between clinicians and engineers, Awell empowers more of Astrana’s best and brightest to participate in the creation of the care processes that should ultimately deliver better patient outcomes.

The Takeaway

Healthcare is changing faster than ever before, and anyone looking to keep up is going to need a tech stack that’s as flexible as the challenges heading their way. Astrana and Awell are all-in on using CareOps to make that possible, and it’ll be exciting to keep an eye on their results as the partnership gets up to speed.

Spotlight on Medicare Advantage, Q2 Results

Posted on by Jason Barry

Medicare Advantage stole the spotlight last week with a steady barrage of new reports, investigations, and Q2 payor results.  

KFF kicked things off with its MA Enrollment and Key Trends Update, which showed that 54% of eligible Medicare beneficiaries – 32.8M people – are now enrolled in private MA plans.

  • That’s quite the jump from just 19% in 2007, and the CBO projects that percentage to continue climbing to 64% by 2034.
  • The report also underscored the high concentration of MA enrollment among a small number of firms, with UnitedHealthcare (29%) and Humana (18%) accounting for an eye-popping 47% of nationwide enrollees. 

Things only heated up from there, with the Wall Street Journal publishing a home visit hit piece on the “one hour nurse visits that let payors collect $15 billion from Medicare.”

  • The investigation found that major Medicare Advantage players frequently push nurses to make diagnoses during home health assessments, which often involves inaccurate diagnostic tests or deliberate misinterpretation of questionnaires.
  • Right on cue, STAT scorched UnitedHealth with its own report on several of the same issues, particularly problems related to the QuantaFlo device used to identify peripheral artery disease during home visits.

CVS and Humana added to the action with their Q2 investor calls, which both highlighted headwinds for their Medicare Advantage operations.

  • CVS lowered its full-year forecast after its MA business saw elevated utilization across inpatient, benefits, and pharmacy, with CEO Karen Lynch stepping back into her old role at the helm of Aetna to oversee $2B in cost-cutting.
  • Humana also revealed that it will likely lose a “few hundred thousand” MA members next year after shrinking its benefits and exiting markets in an effort to improve margins, marking the first time the payor has predicted membership losses from culling its plans.

The Takeaway

There’s nothing like a few hit pieces and payors trimming their forecasts to lure out the Medicare Advantage doomsayers, but the MA program isn’t going anywhere, even if it isn’t quite the margin machine that it once was.

Spring Health Eyes IPO After $100M Series E

Posted on by Jason Barry

If 2024 wasn’t already the Year of Mental Healthcare, Spring Health’s $100 million Series E just cemented it.

The funding vaulted Spring’s valuation to $3.3B and made April Koh the youngest woman to helm a multibillion-dollar company in the process. Not bad for 31 years old!

Spring provides employers and health plans with access to a stable of over 10k contract therapists that can help improve outcomes while reigning in treatment costs.

  • At the core of Spring’s platform is Precision Mental Healthcare, which uses AI to analyze patient data (symptoms, socio-demographic, “key factors”) and quickly match individuals to appropriate care.
  • The value proposition seems to be resonating. Spring covers 10M lives through 450 directly contracted employers, strategic payor relationships, and channel partners.

The funding follows the recent expansion of Spring’s Global offering (soon to be available in 30 languages), the launch of Community Care (an SDOH initiative), and a big push for SpringWorks (a workplace culture program).

  • Spring also touted that it’s the only platform of its kind to receive external validation for delivering employers a net positive ROI.
  • That’s apparently been a key differentiator from other behavioral health heavy-hitters vying for the same employers. Headspace, Lyra, and Evernorth all jump to mind.

An investment memo from Series E participant Kinnevik helped color in the roadmap Spring outlined in its announcement.

  • Outside of fueling Spring’s expansion into higher acuity needs and pediatrics, the funding was intended to strengthen up its balance sheet ahead of an impending IPO.
  • The memo also revealed that Spring is in a good spot to be eyeing a public debut after growing run-rate revenue by 15x since 2021 and setting itself up to hit positive margins sometime next year. 

The Takeaway

Mental health is one of the defining problems of the decade, and Spring Health is at the forefront of addressing it. Scaling globally without sacrificing care quality is a delicate balance, but Spring believes that it’s “on track to build one of the world’s most valuable companies.”

Hidden Flaws Behind High Accuracy of Clinical AI

Posted on by Jason Barry

AI is getting pretty darn good at patient diagnosis challenges… but don’t bother asking it to show its work.

A new study in npj Digital Medicine pitted GPT-4V against human physicians on 207 image challenges designed to test the reader’s ability to diagnose a patient based on a series of pictures and some basic clinical background info.

  • Researchers at the NIH and Weill Cornell Medicine then asked GPT-4V to provide step-by-step reasoning for how it chose the answer.
  • Nine physicians then tackled the same questions in both a closed-book (no outside help) and open-book format (could use outside materials and online resources).

How’d they stack up?

  • GPT-4V and the physicians both scored high marks for accurate diagnoses (81.6% vs. 77.8%), with a statistically insignificant difference in performance. 
  • GPT-4V bested the physicians on the closed-book test, selecting more correct diagnoses.
  • Physicians bounced back to beat GPT-4V on the open-book test, particularly on the most difficult questions.
  • GPT-4V also performed well in cases where physicians answered incorrectly, maintaining over 78% accuracy.

Good job AI, but there’s a catch. The rationales that GPT-4V provided were riddled with mistakes – even if the final answer was correct – with error rates as high as 27% for image comprehension.

The Takeaway

There could easily come a day when clinical AI surpasses human physicians on the diagnosis front, but that day isn’t here quite yet. Real care delivery also doesn’t bless physicians with a set of multiple choice options, and hallucinating the rationale behind diagnoses doesn’t cut it with actual patients.

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