Carbon Health Chief Medical Officer Dr. Sujal Mandavia

Providers

Cross-Market Mergers Aren’t For the Patients

Make sure you’re sitting down for this one, because new research suggests that cross-market hospital mergers aren’t doing patient wallets any favors.

To investigate the impact of cross-market mergers on both prices and quality, researchers rounded up 214 hospitals that acquired hospitals further than 50 miles away, then compared them to 955 control hospitals without any merger activity during the study period. This was also the first study to use claims data to back its findings.

Six years after acquisition, acquirers had increased their prices for patients by an average of 12.9% relative to control hospitals, yet saw no discernible impact on mortality or readmissions.

• The impact was even higher among serial acquirers with at least four separate acquisitions, which increased prices by a steep 16.3%. This wasn’t a small subset either, representing 45% of the M&A hospital group.

• On top of that, there was a 21.8% price increase when the target’s market share was greater than the acquirer’s (vs. 9.7% when the opposite was true), which makes sense as smaller acquirers have more to gain from acquiring an entity with more market power.

There have been a couple of other studies examining the impact of cross-market mergers, but this was the first to use claims data to untangle some of the factors driving the price effects (serial acquisitions, target size) while showing no significant impact on quality.

Although the mechanisms behind the price effects weren’t within scope, there are a few potential reasons that likely contributed.

• Common customers – If the target and acquirer hospitals both share the same customer, having a larger operational footprint improves bargaining power (e.g. employers need provider networks that span multiple patient markets if they have employees in multiple markets).

• Tying – A health system with a strong position in one market could tie its services to a second market (e.g. a cutthroat system could operate at a loss in a second market to drive out competitors while staying afloat using margin from its primary market).

• Change in control – Acquirer hospitals are able to increase prices at the target because it wasn’t maximizing profit for whatever reason. Given the increases this study shows at the acquirers themselves (which by definition didn’t change control), this one is probably ruled out.

The Takeaway

All-in-all, the evidence is mounting that competing hospitals don’t make massive acquisitions for altruistic reasons (earth-shattering, we know). If the scale wasn’t already tipped toward needing more antitrust scrutiny of cross-market mergers, this study seems to get us past the usual conclusion of “more research is needed.”

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The Wire

• Baptist Deploys Caregility Cloud: Baptist Health is bolstering its bedside care by increasing its usage of Caregility’s intelligent telehealth devices to more than 700 beds system-wide, doubling the footprint of its virtual inpatient services. The ramped up partnership builds on Baptist’s success with virtual admissions and discharge programs enabled by both wall-mounted and cart-based Caregility devices. The expansion was made possible by the recent roll out of Caregility Cloud, which allows systems to scale virtual programs using hardware loaned by Caregility, instead of fronting the cost of the devices themselves.

• Pandemic Pediatric Impact: A recent study in JAMA Pediatrics found that COVID-era disruptions led to “modest” delays in developmental milestones among young children. The Johns Hopkins-led study is the largest yet of its kind, examining data from 50k children up to 5 years old based on a web-based screening tool used by PCPs. During the three-year period beginning just prior to the pandemic, kids saw a 3% decrease in communication scores, a 2% decline in personal-social scores, and a 2% drop in problem-solving scores. Turns out social distancing didn’t help with social skills. 

• Nuvo Breaks Exit Drought: Just in time for Mother’s Day last week, maternal health company Nuvo hit the Nasdaq via a SPAC, marking the first digital health public exit in over 21 months. Nuvo provides remote monitoring solutions for pregnancy, as well as an FDA-cleared platform for fetal non-stress tests. The Nasdaq debut adds more momentum to the resilient women+ digital health sector, which saw seven funding rounds bring in $105M in Q1 alone, compared to $73M for the entire second half of last year.

• Nabla Joins Forces With Stratum Med: Nabla inked a new partnership with Stratum Med, bringing ambient AI within reach of over 12k physicians across a hundred medical groups. Stratum will be hands-on with the partnership to not only streamline documentation workflows for providers, but also to coordinate steering committees to drive product innovation, enable new feature validation through targeted pilot programs, and inform specialty template optimization by facilitating clinician feedback loops.

• Private Plans vs. Medicare: The latest RAND report shows that private health plans pay hospitals an average of 2.5x more than Medicare for the exact same services, with seven states even breaking the 3x mark. There were also wide variations within the same markets, where RAND found private health plans forking over between 2x and 3x Medicare rates at different hospitals in the same city with the same quality rating. The authors said the amount of variation could give employers leverage at the negotiating table if they take the time to do diligence on their market.

• How Carbon Health Does CareOps: The CareOps team put out another gem of an interview, this time discussing Carbon Health’s approach to combining clinical evidence and agile development with Kerem Ozkay (COO) and Dr. Sujal Mandavia (CMO). If you’re short on time, make sure to jump to the 24 minute mark to hear about Carbon’s strategy for continuously optimizing their tech-enabled care flows, which centers around uncovering the true problems underpinning their providers’ surface-level pain points.

• GenAI Falls Short for Chest X-Rays: Generative AI tools that can understand both text and images have performed impressively under controlled conditions on generic images, but a study in Radiology showed that at least one algorithm falls short in radiology. GPT-4 With Vision struggled creating reports for 100 chest X-rays, with a positive predictive value of just 12% and true-positive rate of 5.8%. The paper sparked a debate on X/Twitter on whether physicians really understand that generative AI isn’t yet ready for clinical prime time. 

• Vivalink’s ECG Monitoring Solution: Remote monitoring company Vivalink launched its new wearable cardiac monitoring solution, which is designed for Mobile Cardiac Telemetry and Holter monitoring. The new solution combines Vivalink’s 14-day ECG patch that launched last year with an app for data transmission and patient engagement, an arrhythmia detection algorithm, a clinician portal, and an ECG report generator.

• Healthcare Industry Prognosis 2024: Venture firm Venrock polled nearly 300 industry experts to get their “prognosis” on healthcare trends for the rest of the year, drumming up as much cynicism as optimism. The continued momentum of GLP-1s was basically consensus, although 34% worry that gray market counterfeits will become a major concern. Most everyone also agreed that the FTC and DOJ will continue to be “all bark, no bite,” with 74% predicting that new policies will do little to slow down private equity takeovers, and 91% agreeing that the UnitedHealth antitrust investigation won’t lead to major consequences.

• Chapter C: Medicare navigation startup Chapter hauled in $50M in Series C funding to help more beneficiaries assess their coverage options (over half currently fail to do so each year). Chapter assesses all available Medicare options using data on plans, physicians, and prescriptions to provide personalized recommendations. Its advisors walk people through the  pros and cons of each plan to help find a fit, then support seniors throughout the enrollment process and with any questions post-approval.

• Claims-Based MACE Predictor: A novel prediction model using real-world data from medical and pharmacy claims accurately predicted 1-year major cardiac event risks for 6.6M adults with type 2 diabetes (concordance index of 0.74). The ACME model integrates 30 variables to forecast MACE events, addressing major limitations of standard prediction models, including reliance on data that may not be routinely available.

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