The No. 1 lesson from the 2021 JP Morgan Healthcare Conference: Healthcare is ‘too vital to fail’

Chronic Conditions | HENRY KOTULA

The annual J.P. Morgan Healthcare Conference is one of the best ways to diagnose the financial condition of the healthcare industry. Every January, every key stakeholder — providers, payers, pharmaceutical companies, tech companies, medical device and supply companies as well as bankers, venture capital and private equity firms — comes together in one exam room, even when it is virtual, for their annual check-up. But as we all know, this January is unlike any other as this past year has been unlike any other year.

You would have to go back to the banking crisis of 2008 to find a similar moment from an economic perspective. At the time, we were asking, “Are banks too big to fail?” The concern behind the question was that if they did fail, the economic chaos that would follow would lead to a collapse with the consumer ultimately picking up the tab. The rest is history.

Healthcare is “Too Vital to Fail” 

2020 was historic in too many ways to count. But in a year when healthcare providers faced the worst financial crisis in the history of healthcare, the headline is that they are still standing. And what they proved is that in contrast to banks in 2008 that were seen by many as “too big to fail,” healthcare providers in 2020 proved that they were “too vital to fail.” 

One of the many unique things about the COVID-19 pandemic is we are simultaneously experiencing a health crisis, where healthcare providers are the front line in the battle, and an economic crisis, felt in a big way in healthcare given the unique role hospitals play as the largest employer in most communities. Hospitals and health systems have done the vast majority of testing, treating, monitoring, counseling, educating and vaccinating all while searching for PPE and ventilators, and conducting clinical trials. And that’s just the beginning of the list.

Stop and think about that for a minute. What would we have done without them? Thinking through that question will give you some appreciation for the critical, challenging and central role that healthcare providers have had to play over the past year.

Simply stated, healthcare providers are the heart of healthcare, both clinically (essentially 100 percent of the care) and financially (over 50 percent of the $4 trillion annual spend on U.S. healthcare). Over the last year they stepped up and they stepped in at the moment where we needed them the most. This was despite the fact that, like most businesses, they were experiencing calamitous losses with no assurances of any assistance. 

Healthcare is “Pandemic-Proof”

This was absolutely the worst-case scenario and the biggest test possible for our nation’s healthcare delivery system. Patient volume and therefore revenue dropped by over 50 percent when the panic of the pandemic was at its peak, driving over $60 billion in losses per month across hospitals and healthcare providers. At the same time, they were dramatically increasing their expenses with PPE, ventilators and additional staff. This was not heading in a good direction. While failure may not have been seen as an option, it was clearly a possibility. 

The CARES Act clearly provided a temporary lifeline, providing funding for our nation’s hospitals to weather the storm. While there are more challenging times ahead, it is now clear that most are going to make it to the other side. The system of care in our country is often criticized, but when faced with perhaps the most challenging moment in the history of healthcare, our nation’s hospitals and health systems stepped up heroically and performed miraculously. The work of our healthcare providers on the front line and those who supported them was and is one thing that we all should be exceptionally proud of and thankful for. In 2020, they proved that not only is our nation’s healthcare system too vital to fail, but also that it is “pandemic proof.” 

Listening to Front Line at the 2021 J.P. Morgan Healthcare Conference 

There has never been a more important year to listen to the lessons from healthcare providers. They are and were the front line of our fight against COVID-19. If there was a class given about how to deal with a pandemic at an institutional level, this conference is where those lessons were being taught.  

This year at the J.P. Morgan Healthcare Conference, CEOs, and CFOs from many of the most prestigious and most well-respected health systems in the world presented including AdventHealth, Advocate Aurora Health, Ascension, Baylor Scott & White Health, CommonSpirit Health, Henry Ford Health System, Intermountain Healthcare, Jefferson Health, Mass General Brigham, Northwell Health, OhioHealth, Prisma Health, ProMedica Health System, Providence, Spectrum Health and SSM Health.

I’ve been in healthcare for 30 years and this is my fifth year of writing up the summary of the non-profit provider track of the conference for Becker’s Healthcare to help share the wisdom of the crowd of provider organizations that share their stories. Clearly, this year was different and not because the presentations were virtual, but because they were inspirational. 

What did we learn? The good news is that they have made many changes that have the potential to move healthcare in a much better direction and to get to a better place much faster. So, this year instead of providing you a nugget from each presentation, I am going to take a shot at summarizing what they collectively have in motion to stay vital after COVID.

10 Moves Healthcare Providers are Making to Stay Vital After-COVID

As a leader in healthcare, you will never have a bigger opportunity to drive change than right now. Smart leaders are framing this as essentially “before-COVID (BC)” and “after-COVID (AC)” and using this moment as their burning platform to drive change. Credit to the team at Providence for the acronym, but every CEO talked about this concept. As the saying goes, “never let a good crisis go to waste.” Well, we’ve certainly had a crisis, so here is a list of what the top health systems are doing to ensure that they don’t waste it and that they stay vital after-COVID:

1. Take Care of Your Team and They’ll Take Care of You: In a crisis, you can either come together as a team or fall apart. Clearly there has been a significant and stunning amount of pressure on healthcare providers. Many are fearing that mental health might be our nation’s next pandemic in the near future because they are seeing it right now with their own team. Perhaps one of their biggest lessons from this crisis has been the need to address the mental, physical and spiritual health of both team members as well as providers. They have put programs in place to help and have also built a tremendous amount of trust with their team by, in many cases, not laying off and/or furloughing employees. While they have made cuts in other areas such as benefits, this collective approach proved incredibly beneficial. And the last point here that relates to thinking differently about their team is that similar to other businesses, many health systems are making remote arrangements permanent for certain administrative roles and moving to a flexible approach regarding their team and their space in the future. 

2. Focus on Health Equity, Not Just Health Care: This was perhaps the most notable and encouraging change from presentations in past years at J.P. Morgan. I have been going to the conference for over a decade, and I’ve never heard someone mention this term or outline their efforts on “health equity” — this year, nearly everyone did. In the past, they have outlined many wonderful programs on “social determinants of health,” but this year they have seen the disproportionate impact of COVID on low-income communities bringing the ongoing issue of racial disparities in access to care and outcomes to light. As the bedrock of employment in their community, this provides an opportunity to not just provide health care, but also health equity, taking an active role to help make progress on issues like hunger, homelessness, and housing. Many are making significant investments in a number of these and other areas. 

3. Take the Lead in Public Health — the Message is the Medicine: One of the greatest failings of COVID, perhaps the greatest lesson learned, is the need for clear and consistent messaging from a public health perspective. That is a role that healthcare providers can and should play. In the pandemic, it represented the greatest opportunity to save lives as the essence of public health is communication — the message is the medicine. A number of health systems stepped into this opportunity to build trust and to build their brand, which are essentially one in the same. Some organizations have created a new role — a Chief Community Health Officer — which is a good way to capture the work that is in motion relative to social determinants of health as well as health equity. Many understand the opportunity here and will take the lead relative to vaccine distribution as clear messaging to build confidence is clearly needed.

4. Make the Home and Everywhere a Venue of Care: A number of presenters stated that “COVID didn’t change our strategy, it accelerated it.” For the most part, they were referring to virtual visits, which increased dramatically now representing around 10 percent of their visits vs. 1 percent before-COVID. One presenter said, “Digital has been tested and perfected during COVID,” but that is only considering the role we see digital playing in this moment. It is clear some organizations have a very narrow tactical lens while others are looking at the opportunity much more strategically. For many, they are looking at a “care anywhere and everywhere” strategy. From a full “hospital in the home” approach to remote monitoring devices, it is clear that your home will be seen as a venue of care and an access point moving forward. The pandemic of 2020 may have sparked a new era of “post-hospital healthcare” — stay tuned.

5. Bury Your Budget and Pivot to Planning: The budget process has been a source of incredible distrust, dissatisfaction and distraction for every health system for decades. The chaos and uncertainty of the pandemic forced every organization to bury their budget last year. With that said, many of the organizations that presented are now making a permanent shift away from a “budget-based culture” where the focus is on hitting a now irrelevant target set that was set six to nine months ago to a “performance-based culture” where the focus is on making progress every day, week, month and quarter. Given that the traditional annual operating budget process has been the core of how health systems have operated, this shift to a rolling forecast and a more dynamic planning process is likely the single most substantial and permanent change in how hospitals and health systems operate due to COVID. In other words, it is arguably a much bigger headline than what’s happened with virtual visits.

6. Get Your M&A Machine in Motion: It was clear from the presentations that activity around acquisitions is going to return, perhaps significantly. These organizations have strong balance sheets and while the strong have gotten stronger during COVID, the weak have in many cases gotten weaker. Many are going to be opportunistic to acquire hospitals, but at the same time they have concluded that they can’t just be a system of care delivery. They are also focused on acquiring and investing in other types of entities as well as forming more robust partnerships to create new revenue streams. Organizations that already had diversified revenue streams in place came through this pandemic the best. Most hospitals are overly reliant on the ED and surgical volume. Trying to drive that volume in a value-based world, with the end of site of service differentials and the inpatient only list, will be an even bigger challenge in the future as new niche players enter the market. As I wrote in the headline of my summary two years ago,It’s the platform, stupid.” There are better ways to create a financial path forward that involve leveraging their assets — their platform — in new and creative ways. 

7. Hey, You, Get into the Cloud: With apologies for wrapping a Rolling Stones song into a conference summary, one of the main things touted during presentations was “the cloud” and their ability to pull clinical, operational and financial dashboards together to monitor the impact of COVID on their organization and organize their actions. Focus over the last decade has been on the clinical (implementing EHRs), but it is now shifting to “digitizing operations” with a focus on finance and operations (planning, cost accounting, ERPs, etc.) as well as advanced analytics and data science capabilities to automate, gather insight, manage and predict. It is clear that the cloud has moved from a curiosity to a necessity for health systems, making this one of the biggest areas of investment for every health system over the next decade.

8. Make Price Transparency a Key Differentiator: One of the great lessons from Amazon (and others) is that you can make a lot of money when you make something easy to buy. While many health systems are skeptical of the value of the price transparency requirements, those that have a deep understanding of both their true cost of care and margins are using this as an opportunity to prove their value and accelerate their strategy to become consumer-centric. While there is certainly a level of risk, no business has ever been unsuccessful because they made their product easier to understand and access. Because healthcare is so opaque, there is an opening for healthcare providers to build trust, which is their main asset, and volume, which is their main source of revenue, by becoming stunningly easy to do business with. This may be tough sledding for some as this isn’t something healthcare providers are known for. To understand this, spend a few minutes on Tesla’s website vs. Ford’s. The concept of making something easy, or hard, to buy will become crystal clear as fast as a battery-driven car can go from zero to 60.

9. Make Care More Affordable: This represents the biggest challenge for hospitals and health systems as they ultimately need to be on the right side of this issue or the trust that they have will disappear and they will remain very vulnerable to outside players. All are investing in advanced cost accounting systems (time-driven costing, physician costing, supply, and drug costing) to truly understand their cost and use that as a basis to price more strategically in the market. Some are dropping prices for shoppable services and using loss leader strategies to build their brand. The incoming Secretary of Health and Human Services has a strong belief regarding the accountability of health systems to be consumer centric. The health systems that understand this are working to get ahead of this issue as it is likely one of their most significant threats (or opportunities) over the next decade. This means getting all care to the right site of care, evaluating every opportunity to improve, and getting serious about eliminating the need for expensive care through building healthy communities. If you’re worried about Wal-Mart or Amazon, this is your secret weapon to keep them on the sideline.

10. Scale = Survival: One of the big lessons here is that the strong got stronger, the weak got weaker. For the strong, many have been able to “snapback” in financial performance because they were resilient. They were able to designate COVID-only facilities, while keeping others running at a higher capacity. To be clear, while most health systems are going to get to the other side and are positioned better than ever, there are many others that will continue to struggle for years to come. According to our data at Strata, we see 25 percent operating at negative margins right now and another 50 percent just above breakeven. They key to survival moving forward, for those that don’t have a captive market, will be scale. If this pandemic proved one thing relative to the future of health systems it is this — scale equals survival. 

When Will We Return to Normal?

Based on what the projections that these health systems shared, the “new normal” for health systems for the first half of 2021 will be roughly 95 percent of prior year inpatient volume with a 20 percent year-over-year drop in ED volume and a drop of 10-15 percent in observation visits. So, the pain will continue, but given the adjustments that were already made in 2020, it looks like they will be able to manage through COVID effectively. While there will be a pickup in the second half of 2021, the safe bet is that a “return to normal” pre-COVID volumes likely won’t occur until 2022. And there are some who believe that some of the volume should have never been there to begin with and we might see a permanent shift downward in ED volume as well as in some other areas.

With that said, I’ll steal a quote from Bert Zimmerli, the CFO of Intermountain Healthcare, who said, “Normal wasn’t ever nearly good enough in healthcare.” In that spirit, the goal should be to not return to normal, but rather to use this moment as an opportunity to take the positive changes driven by COVID — from technology to processes to areas of focus to a sense of responsibility — and make them permanent.

Thanking Our “Healthcare Heroes”

We’ll never see another 2020 again, hopefully. With that said, one of the silver linings of the year is everything we learned in healthcare. The most important lesson was this — in healthcare there are literally heroes everywhere. To each of them, I just want to say “thank you” for being there for us when we needed you the most. We should all be writing love letters to those on the front line who risked their lives to save others. Our nation’s healthcare system has taken a lot of criticism through the years from those on the outside, often with a blind eye to how things work in practice vs. in concept. But this year we all got to see first-hand what’s happening inside of healthcare — the heroic work of our healthcare providers and those who support them. 

They faced the worst crisis in the history of healthcare. They responded heroically and were there for our families and friends.

They proved that healthcare is too vital to fail. They proved that healthcare is pandemic-proof.

Thank you to our healthcare heroes.

Hospital buy-ups of physician practices under fresh FTC scrutiny

FTC takes tech scrutiny to heart of Silicon Valley

Dive Brief:

  • The Federal Trade Commission sent orders to six health insurance companies to obtain patient-level claims data for inpatient, outpatient, and physician services from 2015 to 2020, the agency said Thursday.
  • The FTC wants to figure out how hospitals’ acquisitions of physician practices has affected competition.  
  • The agency sent orders to some of the nation’s largest insurance companies, including UnitedHealthcare, Anthem, Aetna, Cigna, Florida Blue and Health Care Service Corporation.

Dive Insight:

This action is part of a larger effort underway at the agency to consider new questions and areas of study to help it understand the ultimate impact of mergers. The hope is that those studies will yield evidence to better equip the agency to legally challenge mergers in the future. 

Health economists cheered the news online following the FTC’s Thursday’s announcement about studying physician practice buy-ups. 

Martin Gaynor, former director of FTC’s Bureau of Economics, tweeted: “This is a big deal – a huge # of physician practices are now owned by hospitals.” Gaynor is a health economist at Carnegie Mellon.

“Important step to advance FTC’s understanding of the market and could improve their ability to win cases,” Emily Gee, a health economist at the Center for American Progress, tweeted.

In the orders, the FTC asks the insurers for data such as the total billed charges of all health providers, total deductibles, copays and coinsurance paid by the patient. It also asks for data tied to each inpatient admission and outpatient and physician episodes during the time period in question, which will likely result in a barrage of data for the agency to review.   

“The study results should aid the FTC’s enforcement mission by providing much more detailed information than is currently available about how physician practice mergers and healthcare facility mergers affect competition,” the agency said in a statement. 

This area of study expands the agency’s current work. One area already of interest within this broader retrospective merger review program is the scrutiny of labor markets. 

The agency has traditionally focused on how healthcare tie-ups affect prices. But the agency has signaled that it is increasingly interested in how mergers and acquisitions ultimately affect workers’ wages, including nurses.

One area of concern for the FTC is states’ willingness to greenlight COPAs, or certificates of public advantage (COPAs), which essentially shield mergers from federal antitrust regulators in exchange for prolonged state oversight.

In 2019, the agency sent orders to five insurance companies seeking data to study the impact of COPAs.  

Pandemic propels health systems to mull insurer acquisitions, partnerships

4 Reasons Strategic Partnerships are Important for Business - Glympse

Nearly a year after the first confirmed case of COVID-19 in the U.S., some of the nation’s largest health systems made a case for the need to accelerate toward value-based arrangements and potentially acquiring or partnering with health plans to become an integrated system.

Amid new records for deaths and cases from the novel coronavirus, executives gathered virtually for J.P. Morgan’s 39th annual healthcare conference, which typically draws prominent healthcare leaders to San Francisco at the start of each year.

The pandemic has been a heavily discussed topic during the digital gathering. One theme has been health systems either acknowledging they are on the hunt for health insurer acquisitions and partnerships or advocating for such arrangements as result of the challenges.

Anu Singh, managing director and the leader of the mergers, acquisitions and partnerships practice at consultancy Kaufman Hall, said it’s a natural migration for health systems, though it does come with some risk.

“If you want to move into the realm of being a population health manager, and take greater responsibility for your patient bases, you’re going to have to be thinking about maintaining their health,” Singh said. “And that’s typically something that, at least traditionally and historically, has been driven a little bit more by the health plan.”

For Utah’s Intermountain Healthcare, the lessons of the pandemic are clear: The industry needs to move away from a system that rewards volume. Intermountain is a fully integrated system that manages both providers and an insurance unit.

“It is becoming increasingly apparent that systems that are well integrated, especially systems that understand how to take risks, have prospered in the face of the terrible burden, caring for people in the midst of the first pandemic in 100 years,” Intermountain CEO Marc Harrison said Monday.

From his vantage point, Harrison said it has been interesting to watch the consternation around telehealth visits.

“Lots of folks who are really still caught in the volume-based system are actively switching patients back from tele- or distance to in-person visits so they can maximize revenue,” he said. “I understand that. But that’s a really great example of poorly aligned incentives.”

Intermountain has managed to stay in the black as many other systems have struggled financially as a result of the pandemic driving down patient volumes. It reported net income of $167 million through the first nine months of 2020, compared with $919 million the year prior.

Another integrated system, Baylor Scott and White Health, the largest nonprofit system in Texas, said such diversification has helped buoy its finances as hospital and clinic operations bottomed out in the spring due to the virus.

Baylor Scott and White illustrated this point by showing how operating income for its clinical segment took a nosedive in the spring while operating income for its health plan remained relatively steady.

The theme of integrated health systems also seemed to be on the minds of investors. CommonSpirit Health executives were asked during their presentation if buying or creating a health plan was on their radar as the system has a sizable footprint of 140 hospitals across the country.

“I think this is a interesting question, one that of course we’ve discussed many times strategically,” CFO Daniel Morissette said, noting the system does have a number of regional plans. “At this time, we have no plan of having a national CommonSpirit branded plan.” However, Morissette said the system would consider a partnership opportunity.

On the other hand, Midwest-based Advocate Aurora Health said it is actively on the hunt for a potential insurer deal as part of its long-term strategy.

“We do believe that having health plan capability, not necessarily having our own, but partnering for health plan capability, is going to be critical to our success, and we are taking steps to do that,” CEO Jim Skogsbergh said during the virtual conference.

Kaufman Hall said in its latest report that it expects more payer-provider partnerships as a result of the pandemic. “Limitations on fee-for-service payment structures exposed by the pandemic may increase the number of payer-provider partnerships around new payment and care delivery models,” according to the report.

Singh of Kaufman Hall said it’s not surprising that some may lean more toward a partnership due to the risks of starting a new venture, especially an insurance unit that can have “catastrophic loss”. Systems with less experience of moving toward implementing value-based initiatives may be more vulnerable to such risk.

It’s why he thinks partnerships may be a good fit, at least at first. Payers and providers can work together to improve the health of certain populations and then share in the cost savings.

Notes for the 39th Annual J.P Morgan Healthcare Conference, 2021

https://www.sheppardhealthlaw.com/articles/healthcare-industry-news/

2021 JP Morgan Healthcare Conference | Zoetis

Sitting in the dark before 6 am in my Los Angeles house with my face lit up by yet another Zoom screen, wearing a stylish combination of sweatpants, dress shirt and last year’s JPM conference badge dangling around my neck for old times’ sake, I wonder at the fact that it’s J.P. Morgan Annual Healthcare Conference week again and we are where we are. Quite a year for all of us – the pandemic, the healthcare system’s response to the public health emergency, the ongoing fight for racial justice, the elections, the storming of the Capital – and the subject of healthcare winds its way through all of it – public health, our healthcare system’s stability, strengths and weaknesses, the highly noticeable healthcare inequities, the Affordable Care Act, Medicaid and vaccines, healthcare politics and what the new administration will bring as healthcare initiatives.

I will miss seeing you all in person this year at the J.P. Morgan Annual Healthcare Conference and our annual Sheppard Mullin reception – previously referred to as “standing room only” events and now as “possible superspreader events.” What a difference a year makes. I admit that I will miss the feeling of excitement in the rooms and hallways of the Westin St. Francis and all of the many hotel lobbies and meeting rooms surrounding it. Somehow the virtual conference this year lacks that je ne sais quoi of being stampeded by rushing New York-style street traffic while in an antiquated San Francisco hotel hallway and watching the words spoken on stage transform immediately into sharp stock price increases and drops. There also is the excitement of sitting in the room listening to paradigm shifting ideas (teaser – read the last paragraph of this post for something truly fascinating). Perhaps next year, depending on the vaccine…

So, let’s start there. Today was vaccine day at the JPM Conference, with BioNTech, Moderna, Novovax and Johnson & Johnson all presenting. Lots of progress reported by all of the companies working on vaccines, but the best news of the day was the comment from BioNTech that the UK and South Africa coronavirus variants likely are still covered by the BioNTech/Pfizer vaccine. BioNTech’s CEO, Prof. Uğur Şahin, M.D., promised more data and analysis to be published shortly on that.

We also saw continued excitement for mRNA vaccines, not only for COVID-19 but also for other diseases. There is a growing focus (following COVID-19 of course) on vaccines for cancer through use of neoantigen targets, and for a long list of infectious disease targets.  For cancer, though, there continues to be a growing debate over whether the best focus is on “personalized” vaccines or “off the shelf” vaccines – personalized vaccines can take longer to make and have much, much higher costs and infrastructure requirements. We expect, however, to see very exciting news on the use of mRNA and other novel technologies in the next year or two that, when approved and put into commercialization, could radically change the game, not only as to mortality, but also by eliminating or significantly reducing the cost of care with chronic conditions (which some cancers have become, thanks to technological advancement). We are fortunate to be in that gap now between “care” and “cure,” where we have been able with modern medical advances to convert many more disease states into manageable chronic care conditions. Together with today’s longer lifespans, that, however, carries a much higher price tag for our healthcare system. Now, with some of these recent announcements, we look forward to moving from “care” to “cure” and substantially dropping the cost of care to our healthcare system.

Continuing consolidation also was a steady drumbeat underlying the multiple presentations today on the healthcare services side of the conference – health plans, health systems, physician organizations, home health. The drive to scale continues, as we have seen from the accelerated pace of mergers and acquisitions in the second half of 2020, which continues unabated in January 2021. There was today’s announcement of the acquisition by Amerisource Bergen of Walgreens Boots Alliance’s Alliance Healthcare wholesale business (making Walgreens Boots Alliance the largest single shareholder of Amerisource Bergen at nearly 30% ownership), following the announcement last week of Centene’s acquisition of Magellan Health (coming fast on the heels of Molina Healthcare’s purchase of Magellan’s Complete Care line of business).

On the mental health side – a core focus area for Magellan Health – Centene’s Chief Executive Officer, Michael Neidorff, expressed the common theme that we have been seeing in the past year that mental health care should be integrated and coordinated with primary and specialty care. He also saw value in Magellan’s strong provider network, as access to mental health providers can be a challenge in some markets and populations. The behavioral/mental health sector likely will see increased attention and consolidation in the coming year, especially given its critical role during the COVID-19 crisis and also with the growing Medicaid and Medicare populations. There are not a lot of large assets left independent in the mental health sector (aside from inpatient providers, autism/developmental disorder treatment programs, and substance abuse residential and outpatient centers), so we may see more roll-up focus (such as we have seen recently with the autism/ABA therapy sector) and technology-focused solutions (text-based or virtual therapy).

There was strong agreement among the presenting health plans and capitated providers (Humana, Centene, Oak Street and multiple health systems) today that we will continue to see movement toward value-based care (VBC) and risk-based reimbursement systems, such as Medicare Advantage, Medicare direct contracting and other CMS Innovation Center (CMMI) programs and managed Medicaid. Humana’s Chief Executive Officer, Bruce Broussard, said that the size of the MA program has grown so much since 2010 that it now represents an important voting bloc and one of the few ways in which the federal government currently is addressing healthcare inequities – e.g., through Over-the-Counter (OTC) pharmacy benefits, benefits focused on social determinants of health (SDOH), and healthcare quality improvements driven by the STARS rating program. Broussard also didn’t think Medicare Advantage would be a negative target for the Biden administration and expected more foreseeable and ordinary-course regulatory adjustments, rather than wholesale legislative change for Medicare Advantage.

There also was agreement on the exciting possibility of direct contracting for Medicare lives at risk under the CMMI direct contracting initiative. Humana expressed possible interest in both this year’s DCE program models and in the GEO regional risk-based Medicare program model that will be rolling out in the next year. Humana sees this as both a learning experience and as a way to apply their chronic care management skills and proprietary groups and systems to a broader range of applicable populations and markets. There is, however, a need for greater clarity and transparency from CMMI on program details which can substantially affect success and profitability of these initiatives.

Humana, Centene and Oak Street all sang the praises of capitated medical groups for Medicare Advantage and, per Michael Neidorff, the possibility of utilizing traditional capitated provider models for Medicaid membership as well. The problem, as noted by the speakers, is that there is a scarcity of independent capitated medical groups and a lack of physician familiarity and training. We may see a more committed effort by health plans to move their network provider groups more effectively into VBC and risk, much like we have seen Optum do with their acquired fee for service groups. Privia Health also presented today and noted that, while the market focus and high valuations today are accorded to Medicare lives, attention needs to be paid to the “age in” pipeline, as commercial patients who enroll in original Medicare and Medicare Advantage still would like to keep their doctors who saw them under commercial insurance. Privia’s thesis in part is to align with patients early on and retain them and their physicians, so as to create a “farm system” for accelerated Medicare population growth. Privia’s Chief Executive Officer, Shawn Morris, also touted Privia’s rapid growth, in part attributable to partnering with health systems.

As written in our notes from prior JPM healthcare conferences, health systems are continuing to look outside to third parties to gain knowledge base, infrastructure and management skills for physician VBC and risk arrangements. Privia cited their recent opening of their Central Florida market in partnership with Health First and rapid growth in providers by more than 25% in their first year of operations.

That being said, the real market sizzle remains with Medicare Advantage and capitation, percent of premium arrangements and global risk. The problem for many buyers, though, is that there are very few assets of size in this line of business. The HealthCare Partners/DaVita Medical Group acquisition by Optum removed that from the market, creating a high level of strategic and private equity demand and a low level of supply for physician organizations with that expertise. That created a focus on groups growing rapidly in this risk paradigm and afforded them strong valuation, like with Oak Street Health this past year as it completed its August 2020 initial public offering. Oak Street takes on both professional and institutional (hospital) risk and receives a percent of premium from its contracting health plans. As Oak Street’s CEO Mike Pykosz noted, only about 3% of Medicare dollars are spent on primary care, while approximately two-thirds are spent on hospital services. If more intensive management occurs at the primary care level and, as a result, hospitalizations can be prevented or reduced, that’s an easy win that’s good for the patient and the entire healthcare system (other than a fee for service based hospital). Pykosz touted his model of building out new centers from scratch as allowing greater conformity, control and efficacy than buying existing groups and trying to conform them both physically and through practice approaches to the Oak Street model. He doesn’t rule out some acquisitions, but he noted as an example that Oak Street was able to swiftly role out COVID-19 protocols rapidly and effectively throughout his centers because they all have the same physical configuration, the same staffing ratio and the same staffing profiles. Think of it as a “franchise” model where each Subway store, for example, will have generally the same look, feel, size and staffing. He also noted that while telehealth was very helpful during the COVID-19 crisis in 2020 and will continue as long as the doctors and patients wish, Oak Street believes that an in-person care management model is much more effective and telehealth is better for quick follow-ups or when in-person visits can’t occur.

Oak Street also spoke to the topic of Medicare Advantage member acquisition, which has been one of the more difficult areas to master for many health plans and groups, resulting in many cases with mergers and acquisitions becoming a favored growth vehicle due to the difficulties of organic membership growth. Interestingly, both Oak Street and Humana reported improvements in membership acquisition during the COVID-19 crisis. Oak Street credited digital marketing and direct response television, among other factors. Humana found that online direct-to-consumer brokers became an effective pathway during the COVID-19 crisis and focused its energy on enhancing those relationships and improving hand-offs during the membership enrollment process. Humana also noted the importance of brand in Medicare Advantage membership marketing.

Staying with Medicare Advantage, there is an expectation of a decrease in Medicare risk adjustment revenue in 2021, in large part due to the lower healthcare utilization during the COVID crisis and the lesser number of in-person visits during which HCC-RAF Medicare risk adjustment coding typically occurs. That revenue drop however likely will not significantly decrease Medicare Advantage profitability though, given the concomitant drop in healthcare expenses due to lower utilization, and per conference reports, is supposed to return to normal trend in 2022 (unless we see utilization numbers fall back below 90% again). Other interesting economic notes from several presentations, when taken together, suggest that while many health systems have lost out on elective surgery revenue in 2020, their case mix index (CMI) in many cases has been much higher due to the COVID patient cases. We also saw a number of health systems with much lower cash days on hand numbers than other larger health systems (both in gross and after adjusting for federal one-time stimulus cash payments), as a direct result of COVID. This supports the thesis we are hearing that, with the second wave of COVID being higher than expected, in the absence of further federal government financial support to hospitals, we likely will see an acceleration of partnering and acquisition transactions in the hospital sector.

Zoetis, one of the largest animal health companies, gave an interesting presentation today on its products and service lines. In addition to some exciting developments re: monoclonal antibody treatments coming on line for dogs with pain from arthritis, Zoetis also discussed its growing laboratory and diagnostics line of business. The animal health market, sometime overshadowed by the human healthcare market, is seeing some interesting developments as new revenue opportunities and chronic care management paradigms (such as for renal care) are shifting in the animal health sector. This is definitely a sector worth watching.

We also saw continuing interest, even in the face of Congressional focus this past year, on growing pharmacy benefit management (PBM) companies, which are designed to help manage the pharmacy spend. Humana listed growth of its PBM and specialty pharmacy lines of business as a focus for 2021, along with at-home care. In its presentation today,  SSM Health, a health system in Wisconsin, Oklahoma, Illinois, and Missouri, spotlighted Navitus, its PBM, which services 7 million covered lives in 50 states.

One of the most different, interesting and unexpected presentations of the day came from Paul Markovich, Chief Executive Officer of Blue Shield of California. He put forth the thesis that we need to address the flat or negative productivity in healthcare today in order to both reduce total cost of care, improve outcomes and to help physicians, as well as to rescue the United States from the overbearing economic burden of the current healthcare spending. Likening the transformation in healthcare to that which occurred in the last two decades with financial services (remember before ATMs and banking apps, there were banker’s hours and travelers cheques – remember those?), he described exciting pilot projects that reimagine healthcare today. One project is a real-time claims adjudication and payment program that uses smart watches to record physician/patient interactions, natural language processing (NLP) to populate the electronic medical record, transform the information concurrently into a claim, adjudicate it and authorize payment. That would massively speed up cash flow to physician practices, reduce paperwork and many hours of physician EMR and billing time and reduce the billing and collection overhead and burden. It also could substantially reduce healthcare fraud.

Paul Markovich also spoke to the need for real-time quality information that can result in real-time feedback and incentivization to physicians and other providers, rather than the costly and slow HEDIS pursuits we see today. One health plan noted that it spends about $500 million a year going into physician offices looking at medical records for HEDIS pursuits, but the information is totally “in the rearview mirror” as it is too old when finally received and digested to allow for real-time treatment changes, improvement or planning. Markovich suggested four initiatives (including the above, pay for value and shared decision making through better, more open data access) that he thought could save $100 billion per year for the country. Markovich stressed that all of these four initiatives required a digital ecosystem and asked for help and partnership in creating one. He also noted that the State of California is close to creating a digital mandate and statewide health information exchange that could be the launching point for this exciting vision of data sharing and a digital ecosystem where the electronic health record is the beginning, but not the end of the healthcare data journey.

CHI Franciscan, Virginia Mason officially merge: 5 things to know

Virginia Mason-CHI Franciscan merger raises concerns about Catholic limits  on care | Local | yakimaherald.com

CHI Franciscan and Virginia Mason officially formed an 11-hospital health system Jan. 5. The system, Virginia Mason Franciscan Health, will be part of Chicago-based CommonSpirit Health.

Five things to know: 

1. The merger comes as Virginia Mason Memorial in Yakima, Wash., ended its affiliation with Virginia Mason. The Yakima hospital’s board said it wanted to become an “independent, local healthcare system” instead of joining a larger system. The board’s decision came after a group of retired physicians affiliated with Virginia Mason Memorial argued a merger would result in fewer specialty services, fewer specialized physicians and lower quality patient care. Virginia Mason health system officials disagreed, arguing the merger could improve healthcare locally.

2. The combined Virginia Mason Franciscan Health will have more than 300 care sites in western Washington. That includes primary and specialty care clinics, surgery centers, the Benaroya Research Institute, the Bailey-Boushay House and the Virginia Mason Institute.

3. The organization will initially be led through a dyad CEO model by Ketul Patel and Gary Kaplan, MD. Mr. Patel’s title is CEO of Virginia Mason Franciscan Health and president of the Pacific Northwest Division of CommonSpirit Health. Dr. Kaplan’s title is CEO of Virginia Mason Franciscan Health. More details about the new system’s leadership team will be released in coming weeks, the executives said in a Jan. 4 phone interview with Becker’s Hospital Review.

4. The combination will bring Virginia Mason under the CommonSpirit umbrella, which is a Catholic health system. During the Jan. 4 interview, Dr. Kaplan said the merger will mean two services will end at the newly combined Virginia Mason Franciscan Health: elective abortions and “Death with Dignity” services. All other comprehensive aspects of end-of-life and palliative care, as well as access to women’s and LGBTQ+ services, will remain available, Dr. Kaplan said.

5. The deal, announced in July 2020, will result in a health system with more than 18,000 workers, including almost 5,000 employed physicians and affiliated providers. CHI Franciscan is based in Tacoma, Wash., and Virginia Mason is based in Seattle.

Centene’s $2.2B deal for Magellan adds focus on behavioral health

Dive Brief:

  • Centene has entered into a definitive agreement to acquire Phoenix, Arizona-based Magellan Health for $2.2 billion, or $95 per share, the payer said Monday. Magellan will operate independently under the Centene umbrella.
  • Executives said the combination will result in one of the nation’s largest behavioral health platforms as the two will provide behavioral services to about 41 million members in the U.S.
  • The deal also boosts Centene’s already established footprint in government sponsored health plans with the addition of 5.5 million lives and another 2.2 million to add to its pharmacy benefit management platform.

Dive Insight:

The deal is designed to boost Centene’s ability to market a “whole health” approach for its members. The COVID-19 pandemic has underscored the need to care for more than just a member’s physical health by also caring for their mental health, the company said Monday.

“This has become even more evident in light of the pandemic which has driven a dramatic rise in behavioral health needs,” Centene CEO Michael Neidorff said in statement. Both boards unanimously approved the deal.

Magellan Health provides managed care and pharmacy services for an array of clients that include health plans, unions and third-party administrators. Centene has been a client of Magellan’s in years past.

Magellan leans on analytics and other technologies in an attempt to improve health outcomes and lower costs. In addition to behavioral health, Magellan focuses on high-cost or complex patients for its clients. In its presentation to investors on Monday, Centene said 71% of total healthcare costs in the U.S. are spent on complex patients, illustrating the need for the deal.

For its healthcare management services, Magellan typically enters into risk-based contracts with its clients where it assumes all or a substantial portion of the risk in exchange for a per member, per month fee. Or, Magellan will enter into an administrative services only agreement in which it reviews utilization and claims administration and manages provider networks, according to its latest 10-Q filing.

The deal is expected to close in the second half of the year pending regulatory approvals. CEO Ken Fasola and other Magellan executives will continue their leadership roles.

Last year, Centene completed its blockbuster acquisition of rival WellCare, a $17 billion deal that catapulted the company to the fourth-largest insurer by membership when including Aetna, which is now part of CVS Health. The deal also doubled Centene’s Medicare Advantage footprint. Centene’s core business is Medicaid managed care and it is the largest insurer on the Affordable Care Act exchanges.

CHI Franciscan, Virginia Mason ink definitive agreement to combine

Virginia Mason and CHI Franciscan Announce Merger

Two hospital systems in Washington state, CHI Franciscan and Virginia Mason Health System, have signed a definitive agreement to combine through a joint operating company that would be a subsidiary of Chicago-based CommonSpirit Health. 

The two organizations inked the agreement Dec. 21 and made it public Dec. 23. The parties signed a letter of intent to explore a combination in July.

The combination would create a nine-hospital system. Two of the hospitals would be from Seattle-based Virginia Mason and seven would come from Tacoma, Wash.-based CHI Franciscan, which is part of CommonSpirit Health.

News of the planned merger prompted Virginia Mason’s 256-bed hospital in Yakima, Wash., to part ways with the health system before it combined with CHI Franciscan. The board of Virginia Mason Memorial said it wants to become an “independent, local healthcare system” instead of joining a larger system. 

The two health systems said they expect the transaction to be finalized around Jan. 1, 2021, pending regulatory approval. 

7 hospital mergers called off in past year

Garner Health Law Corporation

There were several hospital mergers that, at some point in their lifetime, were called off in the past year. 

Below are seven hospital mergers called off since December 2019, beginning with the most recent:

1. Sanford, Intermountain halt merger talks
Sanford Health indefinitely suspended discussions in early December about a planned merger with Salt Lake City-based Intermountain Health because of the abrupt exit of Sanford’s longtime president and CEO, Kelby Krabbenhoft. Sanford and Intermountain announced in October they had signed a letter of intent to merge, with completion of the deal expected in 2021. The combination would create a $15 billion, 70-hospital system. In its statement issued Dec. 4, Sanford said it will pause current merger and acquisition activity while it addresses other organizational needs. 

2. Advocate Aurora, Beaumont cancel merger
Advocate Aurora Health, which has dual headquarters in Milwaukee and Downers Grove, Ill., and Southfield, Mich.-based Beaumont Health called off their merger plan Oct. 2, about five months after signing a letter of intent to combine. The proposed merger faced criticism from some Beaumont physiciansnurses and donors. In August, the Beaumont board of trustees confirmed it would delay a vote on the planned merger. The trustees decided to postpone the vote after seeing the results of a survey, completed by 1,500 of the system’s 5,000 physicians, that revealed a lack of confidence in Beaumont’s leadership and concerns about its proposed merger with Advocate Aurora. The merger of Beaumont and Advocate Aurora would have created a $17 billion system with 36 hospitals.

3. California hospital ends merger talks with Dignity Health
County officials overseeing Ventura (Calif.) County Medical Center ended merger talks with San Francisco-based Dignity Health in July after leaders from both parties deemed an affiliation too risky. County Health Care Agency Director Bill Foley said Dignity officials considered it a risk to take on public hospitals, while county managers were concerned they would give up control but still face risk for buildings and finances. County officials were also concerned VCMC would lose its designation as a public hospital under either a lease or a contract with Dignity, which would put roughly $150 million in annual funding at risk. 

4. Beaumont, Summa Health cancel $6.1B merger plan  
Southfield, Mich.-based Beaumont Health called off a proposed merger with Akron, Ohio-based Summa Health in late May. They ended talks about five months after signing a definitive agreement, under which Summa Health would have become a subsidiary of Beaumont. The proposed deal, which had already received all necessary regulatory approvals, would have created a nonprofit system with 12 hospitals and $6.1 billion in annual revenue. 

5. 4 Chicago hospitals call off $1.1B merger plan  
Chicago-based Advocate Trinity Hospital, Mercy Hospital and Medical Center, South Shore Hospital and St. Bernard Hospital signed a letter of intent in January to combine into a single health system and build at least one new hospital and several community health centers. The hospitals called off the deal in late May after government funding for the $1.1 billion plan fell through. 

6. Geisinger, AtlantiCare sever merger
Danville, Pa.-based Geisinger and Atlantic City, N.J.-based AtlantiCare severed their merger in March, about five years after the two systems combined. The separation of the two organizations is expected to take up to 18 months, the two organizations said in March. 

7. Wisconsin health systems call off merger
La Crosse, Wis.-based Gundersen Health System and Marshfield (Wis.) Clinic Health System abandoned plans in December 2019 to merge into a 13-hospital rural healthcare network. The two systems said they “mutually decided to remain independent” after several months of productive and collaborative discussions.

UMass Memorial, Harrington file merger plans

https://www.wbjournal.com/article/umass-memorial-harrington-file-merger-plans

Harrington Hospital in Southbridge

UMass Memorial Health Care and the Harrington HealthCare System have filed paperwork for regulatory approval for their plans for Harrington to become part of the UMass Memorial system.

Worcester-based UMass Memorial said Tuesday the two hospital systems filed the first in a series of required filings with state regulatory agencies for their proposed marriage. The review process, to include Massachusetts Health Policy Commission and Attorney General’s Office, is expected to take up to four months.

UMass Memorial and Harrington first said in January they intended on Harrington being folded into the much larger UMass Memorial system, which is the largest employer in Central Massachusetts. Harrington, whose main hospital is in Southbridge, has remained one of a small and shrinking number of independent hospitals in the state.

The two systems already collaborate through a system allowing Harrington care providers to consult remotely with UMass Memorial specialists in caring for critically ill patients. Harrington will also be brought into UMass Memorial’s electronic patient records system as part of the planned integration.

UMass Memorial has committed to operating Harrington’s hospital campuses in Southbridge and Webster as acute-care hospitals for at least five years. Upon regulatory approval, Harrington will join UMass Memorial’s Medical Center in Worcester, Marlborough Hospital and Clinton Hospital.

An investment firm snapped up nursing homes during the pandemic

https://www.washingtonpost.com/local/portopiccolo-nursing-homes-maryland/2020/12/21/a1ffb2a6-292b-11eb-9b14-ad872157ebc9_story.html?fbclid=IwAR2O7OAWs8sCQMk6bk7jiwW2oTeguaqiBnjLxLf8rYOhD05oaAnGnqYf_Oc

Private Equity Fundraising Set Record in 2019: PitchBook | ThinkAdvisor

An investment firm has bought more than 20 nursing homes during the coronavirus pandemic, leading to disruptions at multiple facilities that weakened care for vulnerable residents amid the worst health crisis in generations, interviews and documents show.

From April through July, the New Jersey-based Portopiccolo Group — which buys troubled nursing homes and tries to make them profitable — paid hundreds of millions of dollars to acquire facilities in Maryland, Virginia and elsewhere.

The purchases drew scant scrutiny from regulators despite poor safety records at dozens of the company’s other nursing homes, including hefty fines for infection-control lapses and shortages of staff.

Many of Portopiccolo’s existing facilities were struggling to contain outbreaks of the coronavirus when its leaders went seeking new properties, state health records show. At a Virginia nursing home, staff hosted a hallway dance party for residents in April, weeks after federal guidelines had cautioned against such events. Conditions were so bad at one North Carolina facility that it was placed on a federal watch list even after the Centers for Disease Control and Prevention dispatched a strike team to help.

At its new nursing homes in Maryland, Portopiccolo’s operating companies made major changes to insurance and time-off benefits, failed to buy enough supplies and protective equipment and asked some employees to keep working after testing positive for coronavirus, said 14 current and former employees from four of the eight facilities.

Many veteran staffers quit as a result of the changes, said the employees, most of whom spoke on the condition of anonymity because they feared reprisals. Those who remained found themselves tending to dozens of residents at a time, the employees said.

“It was hair on fire,” said Katrina Pearthree, a former social worker at two facilities purchased by Portopiccolo over the last 15 months. She resigned from her job after losing health insurance coverage and disagreeing with new managers on patient care.

Portopiccolo spokesman John Collins denied that caregiving suffered and said that while benefits changed, they remained competitive within the industry. The firm, he said, wants to fill the gap left by nursing home owners exiting the industry because of the pandemic.

“Our company was founded by people who share a passion for caring for the sick, elderly and forgotten,” Collins said in a statement. “Any attempts to characterize our work or the work of our teams differently is flat out wrong.”

Elder-care advocates say Portopiccolo’s record of fines at other facilities, and the timing of its acquisitions, should have raised red flags for regulators, especially as the virus decimated the country’s nursing home population.

But the Centers for Medicare and Medicaid Services (CMS), the main federal agency regulating nursing homes, said the only way it tracks ownership changes is when facilities report the information for Medicare enrollment.

President-elect Joe Biden has said he wants to increase federal oversight through mandatory audits of nursing home cost reports and ownership data. Typically, such monitoring has fallen to state regulators, said Charlene Harrington, a professor emerita of sociology and nursing at the University of California at San Francisco. But even before the coronavirus crisis, she said, most states did a poor job.

In Maryland, the commission that oversees changes in nursing home ownership said the sale of a facility requires little more than “timely notification.” Virginia officials said they don’t closely monitor such sales, either.

“Your history indicates what you’re going to do in the future,” said Richard Mollot, executive director of a national advocacy group called the Long Term Care Community Coalition. “There needs to be more oversight of these purchases.”

‘From bad to worse’

Portopiccolo founders Simcha Hyman, 31, and Naftali Zanziper, 38, bought their first nursing home in 2016 after selling their medical supplies company to a private equity firm. They have since purchased more than 70 facilities in nine states, including 18 in Virginia. The nursing homes are run by operating companies set up and financed by the firm, including Peak Healthcare, Accordius Health and Pelican Health — a trend first reported by the business magazine Barron’s.

For years, Hyman and Zanziper described Portopiccolo as a private equity firm. But that description, along with the group’s promise to swiftly turn “distressed assets” profitable, was removed from the Portopiccolo website in early December after inquiries from The Washington Post about the firm’s nursing home acquisitions.

Collins said the label “private equity” — which typically describes groups that raise funding from private investors — is inaccurate. He declined to explain why the group described itself that way for months, including in news releases, and still does on its LinkedIn page.

Atul Gupta, a professor of health-care management at the Wharton School at the University of Pennsylvania, said it is possible Portopiccolo is trying to rebrand itself because of the increasingly negative stigma tied to private equity groups — which have been criticized for slashing costs at nursing homes, then selling them off to new owners. Studies, by Gupta and others, show that private equity ownership correlates with declines in staffing and quality of care.

Collins declined to say how many facilities Portopiccolo owns, how many it has sold or how much the firm has profited. Neither Peak Healthcare nor Accordius Health responded to multiple requests for comment.

An analysis of federal data shows that nearly 70 percent of facilities Portopiccolo owned before the pandemic have Medicare ratings of one or two stars out of five — based on patient-care metrics such as staffing ratios and infection control.

Two Portopiccolo facilities last month were placed in a federal monitoring program for having “a history of serious quality issues”; two others were listed as candidates because of severe deficiencies. Prior to the pandemic, the firm’s facilities in North Carolina were fined more than $480,000 for violating state and federal rules, federal data shows.

One facility placed in the monitoring program was the Citadel Salisbury, a one-star nursing home in Salisbury, N.C., where more than 150 staff and residents have contracted the virus, according to state data. Employees and residents alleged in a lawsuit filed in Rowan County Superior Court that Portopiccolo, which bought the facility from Genesis HealthCare on Feb. 1, left the nursing home woefully unprepared for the pandemic.

Employees testified in sworn affidavits that managers from Accordius, the operating group, prohibited staff from wearing masks in March, saying that doing so would scare residents. Nurses sometimes had to care for more than 50 residents at a time, employees alleged.

The lawsuit asks that the facility be required to improve conditions or be closed or put under new ownership. But lawyers for Portopiccolo asserted that staffing and equipment have been adequate. Hyman, Zanziper and Accordius executives sought to downplay their role at the Citadel, claiming in a motion to dismiss that daily operations were the responsibility of staff on site.

At the same time, Portopiccolo sued the families in federal court, arguing that they had signed agreements that preclude litigation against the nursing home.

Such arbitration clauses have become increasingly common at for-profit nursing homes, studies show, and have been criticized by consumer advocates as well as lawmakers as a way for facilities to avoid accountability. Biden said he wants to restore an Obama-era ban on the practice that was overturned by the Trump administration.

In June, North Carolina officials identified a slew of violations at the Citadel that they said placed residents in immediate jeopardy,” including a systemic failure to control infection and failing to inform the families of those who tested positive. Some found out their relatives had the virus from an emergency room physician. One man said he learned his aunt had died only when a funeral director called, asking what to do with her body.

Two hundred miles away in Virginia, staff shortages at Accordius Health in Harrisonburg were so dire before the pandemic that residents sometimes went days without showers, inspection records show.

“This place has gone from bad to worse,” one resident told an inspector. “They cut costs at our expense.”

After Accordius took over the facility in 2019, Ruth Simmers-Domzalski said, she noticed fewer staff members tending to her mother-in-law, Mary Domzalski, whose family twice found her lying on soiled bedsheets. On April 6, the facility held a hallway dance party where residents interacted without masks.

Domzalski, 88, attended. Three weeks later, she died of covid-19.

When asked about the event, Collins said the dance party did not conflict with federal guidelines at the time. CMS said on April 2 that all nursing home residents should cover their noses and mouths while interacting with staff; nearly a month before, it told facilities to cancel all group activities.

Tumultuous takeovers

Portopiccolo declined to say how many nursing homes it has bought during the pandemic, but The Post used CMS records to identify at least 22 facilities — eight in Maryland — that reported that Hyman and Zanziper had become owners since April.

Three of the Maryland facilities were bought from Genesis HealthCare, one of the largest skilled-nursing operators in the country. Amid plummeting occupancy rates and ballooning expenses, Genesis told stockholders this year that the firm would “improve its liquidity position” by selling off nearly two dozen of its roughly 400 nursing homes.

One was the Sligo Creek Center in Takoma Park, Md., where Pearthree, 59, worked part time as a social worker.

She had spent 18 years full time at another Genesis nursing home, the Fox Chase Rehabilitation Center in Silver Spring, leaving months after Portopiccolo bought it in 2019.

That sale was a “nightmare,” said Pearthree, recalling that new managers failed to secure local suppliers, leaving employees scrambling for medication and food. One afternoon, she said, staff members were unable to access digital patient records because Peak Healthcare had not put a new software system in place.

Less than a year after she left Fox Chase, Pearthree found herself facing another Portopiccolo takeover — this time amid a pandemic.

Again, the transition was chaotic. Peak did not actively recruit employees or offer them competitive packages prior to the takeover, leading to the departure of longtime staffers, including the administrator and director of nursing, said Pearthree and a senior Sligo Creek employee who spoke on the condition of anonymity because she feared reprisals. The former administrator and director of nursing did not respond to requests for comment.

Pearthree, a graduate student who worked 30 hours a week, was told she would have to increase her hours to keep her health insurance, she and Collins said.

Pearthree and the current employee also said Peak stopped providing hazard pay for contract employees and laid off a group of nonmedical staff Genesis had assembled to take temperatures and wipe down surfaces at the onset of the pandemic.

The facility has been cited twice by Maryand regulators since Peak took over, state inspection records show — in June for failing to test all residents and staff, and in August for failing to consistently inform family members of viral outbreaks.

Collins said staffing gaps were part of a nationwide shortage of nursing home workers and disputed the accounts from Pearthree and the current employee, saying supplies at both Sligo and Fox Chase were adequate and benefits were fair.

Eleven workers at three other Maryland nursing homes acquired by Portopiccolo during the pandemic said they lost paid time off and were offered more limited insurance packages. One worker who has asthma and high blood pressure said her bimonthly health insurance co-pay increased from $67 to $113 when Peak took over.

At Peak Healthcare Chestertown, on Maryland’s Eastern Shore, employees said the company offered a more limited benefits package than the facility’s previous owners, Autumn Lake, including less paid time off for new employees and no paid time off on major holidays.

The company scrimped on supplies, including cutlery, cleaning materials and clothing for residents, said employees at three facilities, who also spoke on the condition of anonymity out of fear of retribution.

Three employees at another facility said nurses have had to use hand soap to clean residents and rip up towels or bedsheets to dry them off.

“We risk our lives every day, and we don’t have proper supplies,” said one geriatric nursing assistant who brings her own gloves to work. “At what point do we put the patients first?”

Collins denied there were shortages, adding that at Chestertown, the budget for supplies had actually increased. He also denied that employees lost time off to which they were entitled, but said he could not address specific claims without knowing the names of the employees.

Reducing operating costs appears to be part of Portopiccolo’s business strategy, according to documents reviewed by The Post. In 2019, while acquiring three nursing homes in North Carolina, the group said it expected to save $360,000 by lowering expenses associated with employee benefits and insurance and $410,000 by cutting equipment and transportation costs. These measures, outlined in a mortgage loan contract, had allowed Portopiccolo to save more than $50 million across 37 facilities.

Collins said Portopiccolo has invested more than $6.7 million to purchase cleaning supplies and protective equipment since the start of this year. In comparison, Genesis, which operates about three times as many nursing homes, said that as of September, it had spent about $40 million more than normal on cleaning supplies and protective equipment.

Little government scrutiny

A recent study by the Long Term Care Community Coalition identified 15 states as having some good oversight practices for nursing home purchases, including requiring companies to disclose what other assets they own. Of the nine states in which Portopiccolo operates, none made the list.

“If your facilities in other states have very low staffing or a history of citations, you should not be allowed to purchase another one,” said Mollot, executive director of the coalition. “But states have a very hands-off approach to anything that happens outside their borders.”

Maryland Department of Health spokesman Charles Gischlar said the agency saw “no reason to change” the way it tracks shifts in nursing home ownership during the pandemic.

The Maryland Health Care Commission, another entity meant to oversee the sale of nursing homes, last year started asking prospective owners to affirm that they have not been convicted of a felony within the past 10 years or penalized more than $10 million because of their ownership of nursing homes.

But this requirement, which was designed “to keep out poor performers,” has not deterred a single transaction, said Paul Parker, a director at the commission.

For each facility that Hyman and Zanziper bought in Maryland, they declared to state regulators that they would not make substantive changes to services, staffing or bed ratios. State officials did not respond to questions asking how they ensured this would be true.

Gupta, the Wharton professor, said there should have been a moratorium on nursing home sales when the pandemic started because the changes that follow any acquisition can hamper a facility’s pandemic response.

But federal and state lawmakers never considered such a move.

“Nobody knew what was going on, nobody was in control,” Gupta said.

Joani Latimer, Virginia’s long-term-care ombudsman, said her office has been concerned by Portopiccolo’s pattern of buying facilities with low CMS ratings. Such facilities need more investment — not less — for conditions to turn around, she said.

“It’s not a process that you can just streamline to machine-like efficiency,” she said. “These are human needs with human challenges.”

Officials at the Virginia Department of Health, however, said they did not pay particular attention to Portopiccolo’s acquisition this year of Accordius Health at Courtland in Southampton County and Accordius Health at Waverly in Sussex County.

Such deals are “a business decision between the parties involved,” said Kimberly Beazley, director of the state Office of Licensure and Certification. “And we do not regulate business decisions made by facilities.”

Weeks with no hot water

Multiple employees at Portopiccolo-owned facilities, including one who worked in the kitchen at Chestertown, said their new managers had so much trouble filling staffing gaps this spring that employees were asked to work after learning they had the virus.

“It was a disaster,” said the Chestertown employee, who said she tested positive May 15 and declined when asked to come to work three days later. “People were still testing positive, and we were being asked to reapply for our jobs because this new company was coming in.”

Kent County Health Officer William Webb said local officials intervened that month after learning that a different employee at the facility who also had coronavirus was still working. “It was very concerning to me at the time, and we made sure to put a stop to it,” he said.

The facility’s water heater was broken from July to September, which meant there was no hot water for dishes or hand-washing. State inspectors fined the facility $730,000 for not fixing or reporting the problem, which they said posed “immediate jeopardy” to residents’ health. Collins said the firm is disputing the fine.

Webb said Peak’s decision not to promptly replace the water heater was “especially difficult” because the facility had seen scores of coronavirus cases and more than a dozen deaths in April and May. “If you’re in the business,” he said, “[you know] ample hot water is the core of any infection prevention program.”

When Peak took over managing the facility, roommates Patricia Sparkman, 82, and Brenda Middleton, 79, were isolated in their ground-floor room after testing positive for the virus.

Sparkman said in an interview that staff members left after the transition. Those who remained seemed less able to help, she said, including with basic tasks like bringing her water.

Middleton’s daughter, Tina Hurley, said the family moved Middleton a few months later to Peak Healthcare at Denton, about 30 miles away, so they could visit more frequently. But that facility had also been acquired by Portopiccolo on May 1.

Hurley said her mother is rarely checked on in Denton and has fallen several times while trying to get things for herself. At one point, she added, Middleton injured her leg but went without care from the facility’s doctor for days.

“I wouldn’t have brought her here if I knew how bad it would be,” Hurley said.

For Pearthree, the social worker at Sligo Creek, the breaking point came when she was asked to transfer back to Fox Chase in mid-May as director of social work. By then, Peak was operating both facilities.

She found residents she had known for years alone in their rooms, she said, confused and despondent in some cases. Relatives of those who died, she added, were given little information about how or when their loved ones had gotten sick.

When she raised concerns with managers, she said, she was brushed aside.

“The families felt betrayed by us,” Pearthree said. “And that was the part that overwhelmed me.” She sent a resignation letter in June.

Collins said Fox Chase administrators were unaware of her resignation and said Pearthree was terminated after she stopped coming to work. But the executive director of Fox Chase left Pearthree a voice mail on June 3 acknowledging her resignation and pleading with her to return.

“You do your job great and I like that,” the director said in the voice mail, which Pearthree shared with The Post.

Collins said that Portopiccolo leaders see their employees as “health care heroes.”

“We remain committed to putting care first,” he added.

Days before Thanksgiving, as all but one of the firm’s Maryland facilities reported new coronavirus outbreaks to the state, the firm closed on deals worth $37.7 million to acquire four more facilities in Florida.