Despite years of provider attention focused on getting out in front of consumerism, health system performance metrics remain centered on transactions rather than the strength of patient relationships.
Kaufman Hall’s 2023 State of the Healthcare Consumer Report explores the key findings distilled from a survey of 59 healthcare executives, each revolving around quantifying consumer relationships and incorporating that data into operations.
The use of consumer-focused measurement remains limited among health system leaders, and organizations over-rely on traditional transaction-focused metrics.
- An FFS model that incentivizes volume gives rise to performance metrics that track the same, such as visit volume (tracked by 100%), market share (89%), and revenue per visit (86%).
- Only half of respondents track at least one advanced consumer-focused measure, such as share of a patient’s total healthcare spend, their lifetime value to the system, or churn.
While traditional metrics provide valuable insights, they don’t capture the “stickiness” of patient relationships, a key driver of both better outcomes and business improvements.
- One exec noted that most health systems deliver a wide range of services, but they rarely package and articulate them to consumers in a way that provides more touch points along the care continuum.
- By contrast, financial-service companies lean in on consumer-facing metrics, which allows them to go after share of wallet and lifetime value through integrated solutions.
Kaufman Hall then offers a Glide Path to Success for health systems looking to recalibrate toward a more relationship-based strategy.
- Perform an assessment of each service line using consumer-centric metrics
- Identify loyalty drivers by analyzing how patient choices impact upstream utilization
- Identify services that could be improved or added to improve consumer metrics
- Measure ROI to determine whether changes are creating the expected return and pivot if they’re not
If the industry intends to shift from volume to value, it’s important to continue asking what exactly it is that patients value in their healthcare. Asking them directly is an obvious option, but consumers vote every day with their wallets and their business, so tracking that data seems like a critical first step to delivering on what really matters.
There have been some amazing healthcare market updates published recently, but Trilliant Health’s 2023 Trends Shaping the Health Economy Report might just take the cake.
The expansive analysis highlights 10 trends that define the emerging landscape of the health economy, as well as the corresponding challenges for each stakeholder.
It goes deep… 147 pages deep to be exact, but it’s well worth the time if you can find it. That said, time is a hot commodity, so here’s the breakdown:
- The commercial coverage market continues to erode
- The physical and mental health of Americans is unraveling
- Drug and diagnostic investments signal emerging patient needs
- The tepid demand trajectory for healthcare services persists
- Consumer behaviors are starting to manifest in patient decision making
- The traditional care pathway is becoming disintermediated
- New models of care further constraining provider supply
- The monopolistic effects of provider M&A are overstated
- Employers are facing higher costs for less care
- The market yield has been revealed, and it’s lower than you think
Where do we go from here? Stakeholders that depend on the commercial population can no longer ignore the fact that healthcare is a negative-sum game, with costs outpacing the value that’s created. Demand is heading in the wrong direction, and we cover new entrants commoditizing services on a weekly basis. The way to “lose less” is to compete on value.
It’s the same strategy for every payor, provider, and pharma company. The tactics are what’s different. Pick your battles, cut losses early, and lose less frequently / by a smaller margin than the competition. There isn’t enough space to get into those here, but 147 pages definitely gets the job done.
These trends each stem from the fact that healthcare is a negative-sum game, and that every part of the health economy will be impacted by reduced yield. Demand is declining alongside the number of people with commercial health coverage, while at the same time new entrants are commoditizing services and making loyalty harder to capture. Although the answer to this problem isn’t nicely tucked away in the report, Trilliant does a masterful job highlighting the trends that might help find it.
If we’re in a digital health funding rut, Aledade definitely missed the memo. The primary care enablement company just raised what looks like its “last funding round needed” after securing an eye-popping $260M in Series F capital.
Aledade partners with independent primary care practices to establish tech-enabled accountable care organizations. It uses data analytics and guided workflows to help better manage high risk patients, then shares in the success of its partners’ value-based contracts.
- The company works with over 1,500 practices across 45 states, and the 500 that joined this year make it the country’s largest network of independent PCPs.
- Aledade’s 150+ VBC contracts cover more than 2M lives (including 1M Medicare Shared Savings Program, 250k Medicare Advantage), collectively controlling over $20B in total healthcare spending.
- Although Aledade has many “fellow travelers” in this space (namely Privia, Agilon, et al.), it views fee-for-service as its real competition, and recently walked the talk by converting to a Public Benefit Corporation.
The funding is earmarked for accelerating the growth of Aledade’s primary care network and its strategic partnerships with payors, but it will also allow Aledade to keep an “opportunistic” eye on potential acquisitions.
- Aledade already picked up VBC analytics platform Curia in February, marking its second M&A move after acquiring end-of-life care planning company Iris Healthcare last year.
- The recent launch of Aledade’s Care Solutions division also gives it a way to help PCPs deliver wraparound services, and the companies that provide these services are high on the M&A target list (behavioral health and kidney care were honorable mentions).
Aledade’s flywheel is clearly getting up to speed, with each practice that it signs making it easier to get payor contracts, which in turn makes it easier to sign practices. That virtuous cycle and a $260M Series F round might suggest that a public market debut is on the horizon, but in the words of Aledade’s CEO Dr. Farzad Mostashari, “An IPO is not a destination.” Aledade’s focus is on the journey of bringing value-based care to the masses, but “if we’re ready and the public markets are ready… then that’s what we’ll do.”
A Johns Hopkins-led study in JAMA reached a conclusion that many health systems are already all-too-familiar with: reporting on quality metrics is a costly endeavor.
The time- and activity-based costing study estimated that Johns Hopkins Hospital spent over $5M on quality reporting activities in 2018 alone, independent of any quality-improvement efforts.
Researchers identified a total 162 unique metrics:
- 96 were claims-based (59%)
- 107 were outcome metrics (66%)
- 101 were related to patient safety (62%)
Preparing and reporting data for these metrics required over 100,000 staff hours, with an estimated personnel cost of $5,038,218 plus an additional $602,730 in vendor costs.
- Claims-based metrics ($38k per metric per year) required the most resources despite being generated from “collected anyway” administrative data, which the researchers believe is likely tied to the challenge of validating ICD codes and whether comorbidities were present on admission.
Although the $5M cost of quality reporting is a small fraction of Johns Hopkins Hospital’s $2.4B in annual expenses, extrapolating those findings to 4,100 acute care hospitals in the US suggests that we’re currently spending billions on quality reporting every year.
That conclusion raises questions that are outside the scope of this study but extremely important for understanding the true value of quality reporting.
- Do the benefits of quality reporting outweigh the burden it places on clinicians?
- Would the time and effort required for quality reporting be better spent on patient care?
- Do quality metrics accurately reflect a hospital’s overall quality of care?
Non-clinical administrative costs are a giant slice of the healthcare spending pie, and quality measurements unintentionally contribute due to increasing spending on chart review and coding optimization. Quantifying the burden of quality reporting is a key step to understanding its overall cost-effectiveness, and although this study doesn’t tackle that issue directly, it lays the foundation for those who are.
There are dozens of companies fighting for the independent primary care crown, but as of right now it looks like that crown belongs to Aledade. After adding more than 450 new practices in 2023, Aledade is now the nation’s largest network of independent primary care.
How does a value-based care enabler defend that crown? If you’re Aledade, you acquire VBC analytics company Curia to push your advantage.
Curia uses “practical applications of AI” to optimize the targeting of patient care, identify risk gaps, and predict the likelihood of adverse outcomes – three areas core to Aledade’s value-based performance.
- The acquisition follows a pilot where Aledade leveraged Curia’s predictive algorithm to target patients with the highest risk for two-year mortality with advance care planning services. Safe to say that went well.
- Aledade now plans on folding Curia’s tech into its existing solutions while exploring new use cases such as preventing hospitalizations and improving engagement programs.
To give you an idea of what it takes to have the largest independent primary care network in the country, Aledade works with over 1.5k practices, 5k PCPs, and 15k clinicians across 45 states.
- Aledade recently closed a $123M Series E that helped it scale to over two million patients covered by 150+ value-based contracts across Medicare, Medicare Advantage, Medicaid, and commercial payors.
- Playing in all of those different arenas gives Aledade a big leg-up on most of its VBC enablement competition. MA-focused comparable agilon health last reported 356k members live on its platform, and Oak Street had 59k at-risk members when it was scooped up by CVS for $10.6B.
Aledade’s scale and nearly half a billion in funding both seem to suggest that an IPO would be a logical next move, although it’s CEO Dr. Farzad Mostashari is on the record saying “the most likely scenario for Aledade to be able to continue our mission is to remain an independent company.” Although that could just be a headfake, the fact that Aledade recently changed its legal structure to a Public Benefit Corporation suggests that it intends on walking the talk and remaining independent as it focuses on delivering better outcomes for everyone, not just its shareholders.
It looks like it’s already shaping up to be a big year for physician enablement companies, with Pearl Health raising $75M in Series B funding to help stake its claim in the independent practice land grab.
The Pearl Platform assists primary care providers participating in Medicare’s ACO REACH model with identifying patients who are driving expenses, then incentivizes them to deliver high-value care.
- The platform distills data from health plans, hospitals, and pharmacies into turnkey reports that help PCPs prioritize their sickest patients and rein in expenses.
- It also equips them with admit, discharge, and transfer alerts so they have the information they need to effectively coordinate care following acute events.
- Pearl’s seen some stellar growth since going live in 2022, growing its platform to over 800 physicians delivering care to upwards of 43k Medicare patients across 29 states.
Unlike many competing platforms, Pearl doesn’t require an EHR integration. After a practice is onboarded, using the Pearl Platform can be as simple as signing on to the website, which more-than-likely played a major role in its rapid adoption.
- Pearl views its platform agnostic approach as its key differentiator from other VBC enablers like Privia and Agilon that have longer onboarding time due to EHR integration requirements.
- The fresh funding is earmarked to help Pearl bring more practices onto its platform as quickly as possible, which should help it invite more payors to its model, and in turn allow it to offer more risk-based contracts to its providers.
The sun is definitely shining on physician enablement platforms, with an aging population and increased utilization acting as powerful tailwinds for companies that can steer providers toward high-value care. That said, there are only so many available physicians and a growing line of startups knocking on their door to help them with the VBC transition, but Pearl’s recent growth seems to suggest that doctors like the sound of its platform agnostic knock.
Many VCs appear to be done waiting on the sidelines, with VBC tech startup UpStream Healthcare adding to the recent string of digital health mega-rounds with an eye-popping $140M Series B raise.
UpStream provides primary care physicians operating under full-risk, value-based arrangements with a suite of solutions designed to help manage complex populations such as seniors on Medicare.
- To accomplish this, UpStream deploys pharmacist-led care teams into partner practices with the aim of improving patient outcomes (and generating shared savings) through careful prescription management.
- Upstream also equips PCPs with a tech platform built on top of Innovaccer’s unified patient record to enable custom chronic care workflows that predict health risks and provide clinically contextual patient engagement sequences.
- Providers get the benefit of offloading most of the administrative burden that comes with transitioning to VBC, as well as proactive compensation for delivering quality care through Upstream’s GAP-Q program.
The Series B raise will be used to help UpStream expand to 20 states over the next three years, with the goal of becoming profitable in each market within 24 months.
- UpStream currently has over 2,900 physicians contracted for 2023 across Community Care Physician Network in North Carolina, Tidewater Medical Group in Virginia, Primary Care Associates in South Carolina, and MUSC Health Alliance.
- Like most companies operating in this space, UpStream views provider burnout as one of its key adoption drivers, and it’ll be focused on bringing its solution to independent physicians, large health systems, and everyone in between.
As more PCPs continue moving towards value-based care models, companies like Agilon, Privia, Tebra, and UpStream have each begun competing with their own unique flavor of resources to help enable the transition. UpStream’s pharmacist-centric approach seems like a solid way to help PCPs manage risk without adding more work to their plates, but the VBC-enablement landscape has plenty of competition and each strategy’s individual results will ultimately be what decides the victors.
Biotech veteran Wah Yan made a big splash across digital health social media last week after putting out a fantastic article that explores how a playing field of well-intentioned actors has managed to turn healthcare into a Squid Game.
If you missed the wildly popular Netflix show, the article’s subtitle tells you everything you need to know: “why healthcare stakeholders keep trying to punch each other in the face”
Yan lays the foundation for the article by explaining how improving the US healthcare system is difficult due to the mismatch between how revenue is generated vs. how value is measured.
- Revenue is commonly generated per “unit of economic activity” (i.e. per visit or per procedure), so that increasing revenue depends on increasing activity.
- On the other hand, measurements of healthcare value (i.e. a healthier population) are often tied to decreasing healthcare activity (i.e. a healthier population = less visits).
While that might sound like Healthcare 101, Yan goes on to illustrate how this relationship creates an inherently hyper-competitive market because “the value of an innovation is often dependent on declining utilization of other products & services at the population level – even if they’re not in the same vertical.”
- The value of new interventions – whether a drug, a diagnostic, or a service – is increasingly defined by its impact on total cost of care regardless of the reimbursement channel.
- As a result, everything competes with everything else for revenue, regardless if the final payer is a health plan, employer, or patient (e.g. home care reducing hospital utilization, pharmaceuticals replacing procedures).
This hyper-competitive landscape is what Yan contends is accelerating a growing number of Squid Game dynamics, including a land grab for scarce resources and a tendency to favor control over collaboration (e.g. acquiring companies vs. remaining partners).
Whether or not the shift to value-based care is creating a healthcare Squid Game, Yan’s article provides a great lens for looking at the incentives influencing stakeholder behavior (and vice versa). He goes into a lot more depth than we can cover here, so it’s worth checking out for anyone looking to understand some of the dynamics driving healthcare innovation.
Privia’s a tough company to pin down with a one sentence definition. It’s a physician enablement platform, a multi-specialty medical group, and a risk bearing entity rolled into one.
It’s also one of the best performing digital health IPOs of the past few years, and the wide scope of its operations made its Q2 earnings report a solid bellwether for some of healthcare’s biggest themes.
Here’s the quarter in three bullets:
- Privia’s total Q2 revenue was $335.5M (+49%), adjusted EBITDA came in at $15.5M (+55%), it repaid all outstanding debt, and it raised its full-year guidance. Not bad at a time when layoffs are growing more common than funding rounds.
- Privia’s platform helps physicians strengthen their practices while preserving their independence, and part of its success can be attributed to the fact that it caters to all provider types, all care settings, and all reimbursement models.
- This flexibility has helped Privia scale to nearly 900 locations, 4M patients, 3,500 providers, and over 850k lives under value-based contracts. It operates in 8 states, leaving 42 to go.
Unlike many of its peers, Privia’s asset-light approach doesn’t involve building out its own clinics, even though it technically has all the pieces in place to do so. This has played to its advantage as the market cools off and profitability becomes the flavor of the month.
- Instead, Privia forms its providers into regional medical groups then equips them with its full technology stack and management services, enabling them to generate shared savings.
- Privia then takes it a step further by forming the risk bearing entity that leverages the provider network and payor relations to enter value-based contracts, giving it one of the most robust strategies of any “physician enablement” company.
The main takeaway from Privia’s Q2 call probably depends on your corner of the market, but the broad-based momentum it reported makes it an interesting case study on a unique model that appears to be firing on all cylinders. Privia’s role at the intersection of SaaS, management services, and value-based care makes it worth keeping an eye on, and so far it looks like there’ll be plenty more news to keep up with.
“People familiar with the matter” are hitting a hot streak with market moving healthcare news, especially after one of them informed the Wall Street Journal that CVS Health is in talks to acquire tech-driven value-based care enabler Signify Health.
The setup for this headline barrage started last week when the WSJ ran a separate piece about Signify enlisting Goldman Sachs and Deutsche Bank to help identify “strategic alternatives” that included a potential acquisition.
- Signify’s platform helps payors and providers establish in-home care programs and transition to VBC – a combination that could draw interest from both private equity and managed care organizations.
- The initial offers are due this coming week, and although there’s no guarantee any agreement will be reached, there’s also a non-zero chance that something gets announced and makes this old news before it reaches inboxes on Thursday.
It would be tough to come up with a better company than Signify to meet CVS Health CEO Karen Lynch’s description of an ideal acquisition target: “primary care, provider enablement, and home health… with a robust management team, background in tech, and that can grow quickly.”
- Signify’s core VBC business already checks a lot of boxes, and its recent $300M acquisition of Caravan Health added ACO management and population health icing to the cake.
- With a $135B market value and plans to expand its in-home operations by the end of this year, it makes sense why CVS has emerged as a frontrunner to scoop up Signify, which popped 20% to a ~$6B market value on the announcement.
As CVS looks to expand into primary care and in-home health, it can either build or acquire the pieces to make it happen, and it’s been pretty transparent about which strategy it prefers. That said, the last time CVS threw its hat in the ring to acquire a high-profile company was for primary care provider One Medical, and we all know how that turned out.