The health care industry is being transformed, one deal at a time

The health care industry is being transformed, one deal at a time

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More than 200 health care deals representing $72.6 billion were announced in the first quarter of 2018, kicking off what will be an active year for deal making in the U.S. Consolidation plans, pent up private equity demand, new entrants, and other market forces will continue to motivate industry players to reflect, reevaluate their business models, and make strategic bets on deals and partnerships.

New business models are emerging. Their common goal is to drive down costs, create value, and compete more effectively. These deals position major players to transition to a system based on value of care versus the volume of services — a system that better aligns with what consumers have come to expect from their health care experience.

Four archetypes of new health care deals are emerging. As I described in a recent PwC Health Research Institute report, they include:

  • Vertical integrators such as Cigna and Express Scripts, which hope to build efficiencies of scale and condense the value chain
  • Employer activists such as Amazon, Berkshire Hathaway, and JPMorgan Chase, who seek a better health care offering for their employees
  • Technology invaders such as Google or Uber aiming to gain better footholds in the industry
  • Health retailers such as Amazon looking to gain market share by better understanding consumer desires and behavior and provide some types of health care directly

If these new models gain steam, disruption will follow.

An arduous journey

Current health care deals have to close in one of the most complex and regulated markets in the world. Before these companies can actually effect change, they will have to create entirely new infrastructures, drive behavior change, and bring on the right leaders to help them navigate twists and turns for years. New entrants — many from fast-paced industries that have long put data analytics and the customer experience at the center of their businesses — will have to endure a grueling pace on the path to change.

The health care industry will transform, but we will likely see more plans on the shelf than in the market. Changes will be slow, but several trends will be more visible this year:

The landscape will keep changing. Announcements of more deals will put pressure on other companies to secure their own acquisitions. Activity begets more activity, and consolidation prompts other companies to acquire — and then likely divest — as they reshape their business. And it’s no secret that private equity has a surplus of cash and its eyes on health care.

Companies will learn to compete differently. As large organizations continue to merge — and they will — small organizations will reposition themselves as more nimble, customer-centric options. They will leverage their size to invest more into building relationships with consumers, winning loyalty points from them along the way.

The customer experience will evolve and drive deals. There is little question among most experts and patients that significant improvements to health services’ customer experience are needed. Health care as an industry has the lowest Net Promoter Score, a tool used to gauge the loyalty of a firm’s customer relationships, of any industry: Health care’s score is 15, compared with tech’s impressive 60. Many companies are looking at ways to use data and technology to improve patients’ experiences.

New models must foster new cultures. For all the reasons it is difficult to enter the health services market, it is even more difficult to create real change that affects the sector’s most important stakeholder: consumers. As companies continue to find ways to deliver more values-based care through acquisition and partnerships, they will also have to explore ways to drive a culture shift. Taking care of doctors so they can spend more time with patients and less time with paperwork and electronic health records, and empowering consumers with the right tools and information to actively participate in their own care, all have distinct roles in the future health economy.

The health services industry can expect to see steady deal making in what will prove to be an exciting time. But amidst all the excitement, we will need to remain cautiously optimistic that this increased consolidation will create value, as the system is incredibly nuanced and slow to change. New entrants will need to have endurance and commitment to succeed.

 

 

‘What The Health?’ Campaign Promises Kept, Plus ‘Nerd Reports’

https://khn.org/news/podcast-khns-what-the-health-campaign-promises-kept-plus-nerd-reports/

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President Donald Trump managed to fulfill — at least in part — two separate campaign promises this week.

To the delight of anti-abortion groups, the administration issued proposed rules that would make it difficult if not impossible for Planned Parenthood to continue to participate in Title X, the federal family-planning program. And Congress cleared for Trump’s signature a “right-to-try” bill aimed at making it easier for patients with terminal illnesses to obtain experimental medications.

Also this week, the National Center for Health Statistics and the Congressional Budget Office issued reports about Americans both with and without health insurance and the cost of subsidizing health insurance to the federal government.

And May’s “Bill of the Month” installment features some very expensive orthopedic screws.

This week’s panelists for KHN’s “What the Health?” are Julie Rovner of Kaiser Health News, Margot Sanger-Katz of The New York Times, Sarah Kliff of Politico and Alice Ollstein of Talking Points Memo.

Among the takeaways from this week’s podcast:

  • The Trump administration’s proposed rule to cut Title X reproductive health funding for groups that perform abortions was designed to meet demands from the president’s religious supporters, but it could backfire by mobilizing liberal voters.
  • The changes being considered might also open the door for some religious-based groups that don’t support abortion — or perhaps even contraception — to get federal Title X funding.
  • Conservatives’ campaign to get a “right-to-try” bill through Congress has been driven in large part by individual patient stories.
  • New data released by the Centers for Disease Control and Prevention this week shows the uninsured rate did not grow in 2017, despite a number of changes that the Trump administration made to the marketplace and federal promotion of it.

Plus, for “extra credit,” the panelists recommend their favorite health stories of the week they think you should read, too.

 

What Barbershops Can Teach About Delivering Health Care

What Barbershops Can Teach About Delivering Health Care

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Heart disease is the most common killer of men in the United States, and high blood pressure is one of the greatest risk factors for heart disease. Despite knowing this for some time, we have had a hard time getting patients to comply with recommendations and medications.

recent study shows that the means of communication may be as important as the message itself, maybe even more so. Also, it suggests that health care need not take place in a doctor’s office — or be provided by a physician — to be effective.

It might, as in this study, take place in a barbershop, an institution that has long played a significant social, economic and cultural role in African-American life. A setting that fosters both confidentiality and camaraderie seems like a good place to try reaching men to talk about hypertension.

Years ago, researchers ran an experiment in which they trained barbers to check blood pressure and refer people with high levels to physicians. One group received this intervention; a control group received pamphlets handed out by barbers. Blood pressure values were only minimally improved in the intervention group. This was thought to be because even when patients were referred to primary care physicians, those doctors rarely treated their condition appropriately.

The more recent study went further, removing physicians almost entirely from the process. The control group consisted of barbers who encouraged lifestyle modification or referred customers with high blood pressure to physicians. In the intervention group, barbers screened patients, then handed them off to pharmacists who met with customers in the barbershops. They treated patients with medications and lifestyle changes according to set protocols, then updated physicians on what they had done.

The results were impressive. Six months into the trial, systolic blood pressure (the higher of the two blood pressure measures) in the control group had dropped about 9 mm Hg (millimeters of mercury) to 145.4, which is still high.

In the intervention group, though, blood pressure had dropped 27 mm Hg to 125.8, which is close to “normal.” If we define the goal of blood pressure management to be less than 130/80, more than 63 percent of the intervention group achieved it, compared with less than 12 percent of the control group.

It gets better. The rate of cohort retention — measuring how many of the patients remained plugged into the study and care throughout the entire process — was 95 percent.

The barbershop customers were part of a population that is traditionally hard to reach. More than half of participants lived in households earning less than $50,000 a year, and more than 40 percent in households earning less than $25,000. On average, they were overweight or obese, about a third smoked, and more than a fifth had diabetes. Yet the improvement in blood pressure was more than three times that of the average of previous pharmacist-based interventions seeking to improve blood pressure, and many of those had focused on populations easier to reach.

One reason this trial succeeded where others failed is that it adapted its intervention to overcome barriers. When barbers weren’t consistently screening customers by measuring their blood pressure, pharmacists stepped in to do that. When labs slowed things down, pharmacists brought measuring tests to the barbershops.

The larger implications of this study shouldn’t be ignored. Getting barbers involved meant health messages came from trusted members of the community. Locating the intervention in barbershops meant patients could receive care without inconvenience, with peer support. Using pharmacists meant that care could be delivered more efficiently.

Of course, this study is limited by the usual sorts of questions. Who will pay for this in the real world? Who would do the training necessary to scale it up? Who would be responsible?

But those concerns reflect the shortcomings of our current health care system, not those of the study. Health care reimbursement in the United States usually focuses on the clinical encounter, at a physician office or hospital. This reflects a belief that care is best offered there, even when evidence says otherwise. Coverage and payment focus on the individual patient, not on the community, even when research shows that the latter is more effective. Care often requires the participation of a physician, even when studies prove that it can be delivered well in many cases by midlevel practitioners.

It’s important to remember that we have the health care system we do because of history and economics, not because of studies that show it’s optimally designed. Changes are most often made within the current framework; those that buck the system are usually met with more resistance.

Retail clinics may provide better access, but many professional organizations oppose them. Lifestyle changes may do more to improve health than drugs. But getting the system to recognize that diet and exercise might prevent diabetes, for example — and to pay for that intervention — requires huge efforts and decades of time.

If we really want to improve health on a large scale, especially with populations distrustful of the health care system, it seems we need to go to where they are; to use people they trust to deliver messages; and to allow care to occur without much of the infrastructure usually demanded for billing. Such efforts may not be traditional, but they may deliver much better results.

 

Short-Term Plans Could Bring Long-Term Risks to California’s Individual Market

Short-Term Plans Could Bring Long-Term Risks to California’s Individual Market

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The Trump administration is considering changes to federal rules regulating short-term, limited-duration insurance (“short-term plans”) that could result in the expansion of these plans in California.

This report, written by Georgetown University’s Center on Health Insurance Reforms, provides an overview of short-term plans and the current market for these plans in California. It explains how changes to federal policy around short-term plans might affect California’s individual health insurance market and describes policies that various states are pursuing in response to these changes.

Key points include:

  • Short-term plans are exempt from the Affordable Care Act’s consumer protections. Insurers can deny coverage based on preexisting conditions, not cover certain services, and limit what they will pay for services. For example, many short-term plans currently available in California do not cover maternity and newborn care, mental health and substance use services, and outpatient prescription drugs. They also limit the total amount that plans will pay per day in the hospital and for particular services, such as surgeon fees, in addition to imposing a maximum the plan will spend toward claims covered by the policy.
  • Short-term plans are rare right now in California, but that could change. There is only one insurer currently selling approved short-term plans in California, and fewer than 10,000 policies in effect across the state. But if the Trump administration changes federal rules, and there is no change in California law, enrollment in short-term plans is likely to grow. Under these conditions, the Urban Institute projects that over 600,000 Californians would enroll in short-term plans in 2019.
  • Enrollment in short-term plans could contribute to destabilizing Covered California and increasing premiums. Short-term plans are likely to siphon off healthier and younger consumers from Covered California, which would increase premiums for those remaining in the ACA-compliant market.
  • States are taking action. Colorado, Massachusetts, Michigan, New Jersey, New York, and Rhode Island have taken steps to ensure that short-term plans don’t destabilize their individual health insurance markets. A bill is currently pending in the California legislature banning short-term plans altogether.

The full report is available under Related Materials below.