If I printed a tee shirt for the 2020 J.P. Morgan Healthcare Conference, what would it say? In past years, it would have been "Big Data," Analytics, Artificial Intelligence, ACA, Risk, Medicare Advantage or Quality. This year, I'd have to say it was: diversification, organic growth and scale. Almost every presentation we attended used those terms, to the point where I wanted to jump up and yell "Bingo! I got it already." But the message that came through loud and clear this year is that the healthcare industry has figured out what it needs to do and where it needs to go – and that it is creating positive impact for patients while generating good profits by doing so.
The healthcare industry clearly is not at scale yet. As John Starcher, Jr., the Chief Executive Officer of Catholic health system Bon Secours Mercy Health, said, "none of us has scale as we all are under 3% in the US market, that's not scale." On the provider side, we continue to see consolidation occur, as we see ongoing health system, physician organization and post-acute mergers and acquisitions. And with continuing revenue growth and strong balance sheets being reported by many of the health systems, there is dry powder for more consolidation in 2020.
And yet, company after company took pains to show substantial organic growth in addition to growth from acquisitions. We saw it with health plans like Centene and with multiple hospital systems. It looked like it was a Lake Wobegone economic statistic, where everyone was growing in their market share, revenue and/or patients, all at the same time. There was a lot of confidence presented, even in markets where the future is uncertain such as the ACA Marketplace (and, no, we did not hear one word today about the ACA Texas court challenge working its way back from the Circuit Court to the district court in Texas).
On the health plan side, the effects of scale are showing. Centene Chief Executive Michael Neidorff noted that Centene will be serving 1 in 15 of Americans after the WellCare acquisition closes, given its diversified product portfolio of Medicaid, Marketplace and Medicare Advantage. Neidorff recounted the effect of their investment in systems and IT at scale – he said that Centene in many states was paying the average doctor in six days or less with greater than 98% accuracy. And analytics can be provided to doctors on an almost real-time basis, with only three days of lag. Neidorff said that having that deep, fresh data has been very helpful in showing the states with which Centene is contracting the true burden of illness and costs of the contracted population, resulting in better contracted rates. "We are becoming in many ways," Neidorff said, "a technology company that does healthcare."
Which leads us to Oscar. Bruce Broussard, Chief Executive Officer of Humana today said that Oscar and Devoted Health are changing the experience with customers, making the experience more about health than the insurance product. Oscar's Chief Executive Officer, Mario Schlosser, showed to a standing room only crowd how Oscar has come of age in 2020, operating in 29 markets with individual, small group and Medicare Advantage products. He shared some fascinating insights into how higher engagement that they have achieved leads not only to greater retention, but also: (1) higher premiums; (2) reduction of network costs, through direction of physician visits to lower cost, quality providers and channeling of prescription drugs to lower cost choices through the establishment of a $3 co-pay for 'preferred" drugs (much like WalMart does with its employees); and (3) reduces total healthcare costs. Oscar also showed that it has approximately 40% utilization of telemedicine visits by patients with chronic major complex conditions (with almost 30% telemedicine utilization for their general population). Schlosser then took the JPM audience through how easy it is using the Oscar system to drive health behaviors beneficially through their engagement tools. For example, an automated reminder is sent out when it is time for a colorectal screening – but a homekit is offered out as an easy way to undertake the screening. Schlosser reported a 20% uptake on that email campaign, resulting in more screening and at lower overall cost. But wait, there's more! For patients screened with a positive result, the doctor is prompted to call the patient and discuss the results. For patients where a follow up colonoscopy is then indicated, the plan may then waive the patient co-pay as a way of incentivizing the screening behavior to avoid disease progression and higher, long-term costs to the system overall. For us systems geeks, though, one of the most interesting parts is the way that the engagement tool has been integrated into utilization management and claims processing. When the waiver of co-pay and cost estimate is provided to the patient electronically, it is accompanied by an auto-adjudication in the claims system, resulting in a coordinated and lower cost system operation. As Broussard of Humana said later on Day 1, the focus now is on how to slow disease progression and improve quality and cost. Schlosser continued the technology company metaphor by reminding the audience that large technology companies do about 1,000 A/B tests per day with their products. Imagine changing your insurance benefits or your claims system like that! But the flexibility of the campaigns' technology, logic and engagement showed a pathway forward.
The other interesting announcement by Oscar and Cigna today was their strategic alliance in the small group employer market under the "Cigna + Oscar" brand in multiple markets in 2020, using Oscar's engagement and enrollment tools to provide consumer-centric health care coverage with Cigna's high-performing provider networks. The plans will offer integrated medical, behavioral and pharmacy services, serving the more than 500,000 new companies launching each month that are in need of health coverage for their workers. Oscar and Cigna will share risk equally under a reinsurance agreement. As a shameless self-promotional plug, we also wanted you to know that Sheppard Mullin partners Christine Clements, Eric Klein, Todd Padnos and Adam Shipley represented Cigna in creating this alliance.
Flipping back to the idea of A/B testing (which Google does constantly, for example), it was interesting today to listen to discussions of supplemental benefits under Medicare Advantage which are being enhanced in the market but still have somewhat limited uptake by consumers. Perhaps that is in part either because of a top-down approach or less effective, longer cycle time testing? Bruce Broussard of Humana said that Humana is testing supplemental benefits and seeing what the customer wants. For example, benefits that address a social determinant of health may be offered and then the plan waits to see how that works – how is the customer responding to it, is it raising the costs of other benefits, in essence cannibalizing the insurance product. But, I would note that this is incredibly top-down and slow cycle time – due to the locked in plan benefits and the regulatory environment – likely resulting in less than optimal supplemental benefit profiles that is trying to chase members' evolving needs and opinions. Imagine now if we could see more bottoms-up design of plan benefits and faster iteration to solve in more real time healthcare problems and frictions.
While traditional Medicare Advantage may not allow such, the CMMI Value Based Insurance Design (VBID) model for 2020 allowed Value-Based Insurance Design by condition, socioeconomic status, or both. Taking advantage of this program may allow for more customized and customizable supplemental benefit designs and more effective testing and iteration of consumer-driven benefit choices. We as an industry should continue to push and expand this faster cycle-time approach, such as perhaps allowed under a well-designed VBID model, to keep pace with technology and the evolution of medical knowledge.
The other interesting trend of the day was diversification. As a matter of fact, it was mentioned so much today that I was ready to start printing tee shirts. On the health plan side, we expect to continue to see diversification of their offerings to include services and tools. Centene's Neidorff cited to Babylon, Quartet, Wellframe and RxAdvance as diversifying partnerships and said to expect to see a lot more of this type of investment activity coming out of Centene in this area. Humana also will continue to focus on diversification that meets its primary objectives, including slowing disease progress while reducing cost – which means potentially more investments by Humana in provider entities and service capabilities. We also continued to see diversification efforts by health systems, who cited their revenue cycle management offerings, their health plans, their physician entities, their research commercialization, their generic pharmaceutical manufacturing and their pharmacy benefit management services, among others. Interestingly, this included both faith-based and non-faith based systems, as the entire sector is moving toward a broader scope of offerings to both control costs, touch more of the patient premium and anticipate the trend toward value and risk.
Other interesting moments of the day:
- Concerto HealthAI which is focusing on the application of real word data through AI in the precision oncology space. With a goal of reducing cancer deaths by 25% in the next 10 years, this system works to predict metastatic status and survival rates with precision oncology treatment to better structure, organize and implement clinical trials. They are partnering with Texas Oncology (one of the largest community oncology practices in the country) to apply AI tools to advanced precision medicine.
- Teladoc's acquisition of Intouch Health, which provides virtualization tools in the inpatient setting. This extend Teladoc's continuum from home to office to urgent care to acute setting. Provides more opportunity for revenue growth and addressable market. Teladoc was reporting a 60% CAGR in visits and revenue. Does this also allow for additional solutions for the perennial problem of effective care transitions?
- Home run of the year – Bon Secours Mercy Health sale of a majority stake of their Ensemble revenue cycle management business, bought by them in 2016 for $60 million, and sold for $1.2 billion in 2019. Pretty good revenue cycle growth!
- The growth of Navitus, a pharmacy benefit management company owned by SSM Health. Navitus is based on a fully transparent pass-through model, which is an interesting alternative market model to the more traditional rebate based, less transparent model adopted by other PBMs.
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