Growth is on the wrong side of the equation

https://mailchi.mp/05e4ff455445/the-weekly-gist-february-26-2021?e=d1e747d2d8

3 health systems' growth strategies, straight from the CEOs

We spend a lot of time talking to health system leaders about growth. It’s almost an article of faith among executives that growth is paramount to success. That’s understandable for investor-owned companies—top-line growth is often the most straightforward way to generate greater earnings, which is what investors demand. But for not-for-profit systems, the answer is a little muddier. 

One unspoken but obvious reason for growth is leverage—the ability to extract higher rates from third party payers.

There are other, more palatable arguments for increasing scale: it yields greater ability to drive efficiencies in purchasing and operations, to invest in talent and technology, to identify and implement best clinical practices, and to ensure financial sustainability. All of those are real and demonstrable benefits of scale, but more often it’s a desire for greater pricing leverage that underlies many “growth strategies”.

Unfortunately, that kind of growth can be downright value-destroying for patients and consumers. The problem is that growth is on the wrong side of the equation, thanks to our dysfunctional, third-party payment system. 

In healthcare, growth is an input to strategy—whereas in other industries, growth is an output, the result of delivering superior services to consumers. Health systems do better by getting bigger, while other firms get bigger because they are better: their growth is earned.

That doesn’t mean that health systems shouldn’t seek to grow, and we certainly spend a lot of our time helping them figure out how to capture growth opportunities. But it’s worth recognizing that it’s the structure of the payment system, not the malevolence of health system executives, that results in leverage-driven growth.

The right focus for policymakers is restructuring incentives to encourage systems to compete on creating value for consumers, rather than punishing health systems for responding rationally to the incentives that currently exist.

Health systems falling further behind the industry in size

https://mailchi.mp/05e4ff455445/the-weekly-gist-february-26-2021?e=d1e747d2d8

Even though signs point to a post-COVID spike in health system mergers, retailers, insurers, and other healthcare industry players already far exceed health system scale. Even the largest of the “mega health systems” pale in comparison to other healthcare companies up and down the value chain, as shown in the graphic aboveAnd with the exception of pharma, these other industry players have seen revenues surge during the pandemic, while health system growth has stagnated. 

According to a recent report from Kaufman Hallhospitals saw a three percent reduction in annual total gross revenue in 2020. The majority of the decrease stemmed from a six percent decline in outpatient revenue, as volumes plummeted during the pandemic. 

The largest companies listed here, including Walmart, Amazon, CVS, and UnitedHealth Group, continue to double down on vertical integration strategies, configuring an array of healthcare assets into platform businesses focused on delivering value to consumers. 

To remain relevant, health systems will need to increase their focus on this strategy as well, assembling the right capabilities for a marketplace driven by value, at a scale that enables rapid innovation and sustainability.

A somber milestone on the path to brighter days ahead

https://mailchi.mp/05e4ff455445/the-weekly-gist-february-26-2021?e=d1e747d2d8

U.S. tops 500,000 COVID-19 deaths | PBS NewsHour

Although the nation reached a grim and long-dreaded milestone on Monday, surpassing 500,000 lives lost to COVID—more than were killed in two World Wars and the Vietnam conflict combined—the news this week was mostly good, as key indicators of the pandemic’s severity continued to rapidly improve.

Over the past two weeks, hospitalizations for COVID were down 30 percent, deaths were down 22 percent, and new cases declined by 32 percent—the lowest levels since late October. This week’s numbers declined somewhat more slowly than last week’s, leading Dr. Rachel Walensky, director of the Centers for Disease Control and Prevention, to caution people against letting their guard down just yet: “Things are tenuous. Now is not the time to relax restrictions.” Of particular concern are new variants of the coronavirus that have emerged in numerous states, including one in New York and another in California, that may be more contagious than the original virus.
 
The best news of the week was surely a report from the Food and Drug Administration (FDA) evaluating the new, single-shot COVID vaccine from Johnson & Johnson (J&J), showing it to be highly effective at preventing severe disease, hospitalization, and death caused by COVID, including variants. On Friday, a panel of outside experts met to assess whether to approve the J&J vaccine for emergency use, which would make it the third in the nation’s arsenal of COVID vaccines. If approved, the vaccine will be rolled out next week, according to the White House, with up to 4M doses available immediately.

The sooner the better: new data show that since vaccinations began in late December, new cases among nursing home residents have fallen more than 80 percent—a hopeful glimpse at the future that lies ahead for the general population once vaccines become widely available.