Healthcare’s vertical mergers kick-started a massive industry shift in 2018. Will it pay off?

Mergers and acquisitions deals consolidation

Two massive megamergers in CVS-Aetna and Cigna-Express Scripts dominated the conversation around mergers and acquisitions in healthcare.

Whether you think the mergers will help or hurt consumers, both deals have sparked a distinct shift across the industry as competitors search for ways to keep pace. It also frames 2019 as the year in which five big vertically integrated insurers in CVS, UnitedHealth, Cigna, Anthem and Humana begin to take shape.

Combined, the mergers totaled nearly $140 billion.

Both CVS and Cigna closed their transactions in the fourth quarter with promises that their new combined companies would “transform” the industry. Unquestionably, it’s already triggered some response from other players. Whether those companies can make good on their promises to improve care for consumers remains to be seen, and the payoff may not come for several years, as 2019 is likely to be a year of initial integration.

While CVS and Cigna hogged most of the spotlight, several other notable transactions across the payer sector could have smaller but similarly important consequences going forward.

WellCare acquires Meridian Health Plans for $2.5B

In May, WellCare picked up Illinois-based Meridian Health Plans for $2.5 billion, acquiring a company with an established Medicaid footprint with 1.1 million members. The deal boosted WellCare’s membership by 26%.

But the transaction also thrust WellCare back onto the ACA exchanges. Meridian has 6,000 marketplace members in Michigan.

Importantly, the acquisition gave WellCare a new pharmacy benefit manager in Meridian Rx. CEO Kenneth Burdick said it would provide “additional insight into changing pharmacy costs and improving quality through the integration of pharmacy and medical care.”

WellCare also makes out on CVS-Aetna transaction

WellCare was also a beneficiary of the CVS-Aetna deal after the Department of Justice required Aetna to sell off its Part D business in order to complete its merger.

The deal adds 2.2 million Part D members to WellCare, tripling its existing footprint of 1.1 million.

Humana goes after post-acute care

2018 was the year of post-acute care acquisitions for Humana. The insurer partnered with two private equity firms to buy Kindred Healthcare for $4.1 billion in a deal that was first announced last year. It used a similar purchase arrangement to invest in hospice provider Curo Health Service in a $1.4 billion deal.

Both acquisitions give Humana equity stake in the companies, with room to make further investments down the road. Kindred, in particular, is expected to further Humana’s focus on data analytics, digital tools and information sharing and improve the continuity of care for patients even after they leave the hospital.

Not to be outdone, rival Anthem also closed its purchase of Aspire Health, one of the country’s largest community-based palliative care providers.

UnitedHealth keeps quietly buying up providers, pharmacies

With ample reserves, UnitedHealth is always in the mix when it comes to acquisitions. This year was no different. The insurance giant snapped up several provider organizations to add to its OptumHealth arm. In June, it was one of two buyers of hospital staffing company Sound Inpatient Physicians Holdings for $2.2 billion. It also bought out Seattle-based Polyclinic for an undisclosed sum. The physician practice has remained staunchly independent for more than a century.

Most notably, UnitedHealth is still in the process of closing its acquisition of DaVita Medical Group. DaVita recently dropped the price of that deal from $4.9 billion to $4.3 billion in an effort to speed up Federal Trade Commission approval.

The Minnesota-based insurer is also clearly interested in specialty pharmacies to supplement its PBM OptumRx. UnitedHealth bought Genoa Healthcare in September, adding 435 new pharmacies under its umbrella. Shortly after, it bought up Avella Specialty Pharmacy, a specialty pharmacy that also offers telepsychiatry services and medication management for behavioral health patients.

Centene invests in a tech-forward PBM

Perhaps in an effort to keep pace with Cigna and CVS, Centene has made smaller scale moves in the PBM space, investing in RxAdvance, a PBM launched by former Apple CEO John Sculley. Following an initial investment in March, Centene sunk another $50 million into the company in October and then announced plans to roll the solution out nationally. Notably, CEO Michael Neidorff has said he is pushing the PBM to move away from rebates and toward a model that relies on net pricing.

“You talk about ultimate transparency—that gets us there,” he said recently.




Where the Opioids Go

A map using size to show the relative opioid needs that are met by countries around the world in which North America is enormous and Africa and Asia are tiny

While the United States faces an epidemic of narcotic addiction, most of the world dies in pain.

The rate of death from opioid overdoses in the United States has more than doubled over the past decade. Amid a deluge of reports on the national crisis, it’s easy to lose sight of the fact that in much of the world many people die in preventable pain, without access to morphine for end-of-life care.

This is the finding of a global commission published in The Lancet, which includes analysis of the global distribution of narcotics. The above map shows a relative distribution of how much of the need for opioids is met in various places.

The focus of the report is addressing a relatively new target in global health, “serious health-related suffering” as a measure of the need for care. Palliative care, specifically, “should be focused on relieving the serious health-related suffering that is associated with life-limiting or life-threatening conditions or the end of life,” the authors write.

The idea is that suffering isn’t always preventable, but a few cents’ worth of morphine can make an enormous difference. Some 45 percent of the 56.2 million people who died in 2015 experienced serious suffering, the authors found. That included 2.5 million children. More than 80 percent of the people were from developing regions, and the vast majority had no access to palliative care and pain relief.

The authors conclude that the American opioid-overdose epidemic must be addressed in the same stroke as the narcotic famine: “A well-functioning and balanced global system must both prevent nonmedical use and misuse of medicines and ensure effective access to essential medicines for palliative care, including opioids for pain relief.”

That would involve including morphine in something called an Essential Package of palliative care and pain-relief interventions “to remedy the abyss in access to care.” These medications could be administered not just by doctors and nurses, but also by trained community health workers. The packages would be integrated into national health systems as part of universal health coverage, with the global scale helping make the model cost-effective.

They recommend immediate-release oral and injectable morphine for severe pain, which costs pennies per dose. At that rate, the “pain gap” could be closed for $145 million. This is less than some American pharmaceutical companies spend in any given year on marketing. To that end, the commission recommends prohibiting drug companies from marketing to patients or care providers—as the U.S. epidemic was driven by heavy marketing of powerful, expensive narcotics to address relatively moderate pain.

The United States stands as an outlier among wealthy countries in that it does not have a universal health-care system. As the country debates whether health care is a right, many objections come down to different understandings of what constitutes care—what it means to have a right to life and pursuit of happiness. The concept of serious health-related suffering may come to play in that discussion. Even the most austere fiscal conservatives have been reluctant to say that people with acute emergencies should be turned away from hospitals to die in the streets.

Access to morphine at the end of life would seem an area of agreement that transcends ideology—where the suffering of millions of people could be prevented at very little cost. Yet on a global scale, that’s not happening.

Doctors want to give their cancer patients every chance. But are they pushing off hard talks too long?

A new generation of immune-boosting therapies has been hailed as nothing short of revolutionary, shrinking tumors and extending lives. When late-stage cancer patients run out of other options, some doctors are increasingly nudging them to give immunotherapy a try.

But that advice is now coming with unintended consequences. Doctors who counsel immunotherapy, experts say, are postponing conversations about palliative care and end-of-life wishes with their patients — sometimes, until it’s too late.

“In the oncology community, there’s this concept of ‘no one should die without a dose of immunotherapy,’” said Dr. Eric Roeland, an oncologist and palliative care specialist at University of California, San Diego. “And it’s almost in lieu of having discussions about advance-care planning, so they’re kicking the can down the street.”

End-Of-Life Policy Solutions: A Cautionary Note

In a new special issue of Health Affairs focused on health care around the end of life, we see that health care costs rise as patients approach death and/or after they are diagnosed with a life-limiting disease. This relationship holds across many diseases, ages, and types of health care systems and countries. Whether describing the cost-savings associated with palliative and hospice care, training primary care physicians to have conversations about prognosis and care planning, or the need to better understand patients’ preferences for treatment or comfort, most the papers in the issue take an optimistic stance regarding the impact of informed patient choice and transparency. That is, if only the barriers to real communication could be brought down or the proper incentives established, inappropriate care at the end of life would decline dramatically. As I’ll explain, while some optimism may be warranted, there are many forces pulling in the opposite direction.

What all these strategies for better end-of-life conversations have in common is the assumption that if people talked realistically about their prospects and preferences, or if physicians could take the time necessary to explain things clearly, patients and families would come to accept their prognosis and not seek costly treatments; they would avoid intensive care units (ICUs) and accept palliative and hospice care earlier in the end-of-life process. There are significant barriers, however, to shared decision making in the face of unfamiliarity and ambiguity. Simply understanding prognostic predictions requires sophisticated numeracy, which most of us don’t possess. Physicians’ approach to practice and communication style are other important variables that go into the mix.

Over the last few decades, improving advance care planning has been the mechanism widely promoted to ensure that patients receive the type of end-of-life care they want. Whole communities have been the targets of “The Conversation Project,” a program that encourages families to establish an actionable plan for end-of-life care. Since physicians are so often in the position of explaining to their patients what a diagnosis means and what treatment options are available, numerous programs have been directed at improving their communication skills on these delicate topics, all with the goal of reducing the rate of inappropriate end-of-life care. Increased access to palliative care, concurrent with disease modifying treatment, has also been advocated to allow for patients’ gradual transition from costly, aggressive treatments with limited chances of arresting disease progression.

However, it is likely that all physicians have had more than one patient caught in a paradox of understanding their prognosis while not being able to internalize its meaning for their own lives. They continue to live with some degree of denial and make choices as if each new sign of worsening disease is a minor setback or side effect from which they will recover. While this is probably more prevalent among younger patients, families of older patients sometimes play the role of “denier by proxy” — continuing to press for treatment long after health care professionals (and at times the patient) think warranted.

Since stated advance care preferences are acknowledged to be unstable over the course of an illness, physicians are likely to be wary of making assumptions about what patients want as they approach end-of-life health care decisions. Many physicians will remember a surprise remission or recovery and may be loath to propose options that preclude that same opportunity to another patient lest they feel responsible for a terminal phase that could have been delayed. Any indication of patients’ ambivalence might lead physicians to offer treatments that might not be offered were there no ambiguity. Physicians’ fears of foreclosing options may be as great as those of patients and families, so all conspire to do what the other wants.

This natural ambivalence is amplified by very real changes in the effectiveness of treatments for even advanced disease. Even though small and incremental, there are enough examples to shift the tone of the discussion, engendering doubt about patients’ resolution to forego further treatment. Personalized medicine, with molecular or genetic targeting, has achieved some tantalizing successes, raising hopes of patients and physicians alike while complicating discussions about palliative and hospice care.

Perhaps in consideration of this discussion, we should be more tolerant of the slow progress advance care planning has made and the difficulty of getting physicians to have in-depth and definitive conversations about care preferences. It may not just be the inadequacy of the financial incentives or the poor training physicians receive in holding such conversations. Nor is it necessarily the fractionated process of referring patients from one part of the health care system to the other that keeps patients from hospice. Ambivalence, hope, and denial may all serve to alter our willingness to make definitive decisions to stop treatment and to embrace palliative care. This combination can undermine patients’, families’ and physicians’ decisions to pursue palliation and comfort care. This makes it so much easier to fall into the inertia of ongoing treatment, hospitalization, and even ICU admission, particularly in light of the growing availability of such services.

If this is the case, our calculus about cost savings from advance care planning, physician training, and palliative care may not be as large as research suggests. Patients, families, and physicians volunteering to participate in research studies may not be representative of the entire population approaching end-of-life decision making. While research clearly points to a way to reducing inappropriate care at the end of life, in the US, at least, these initiatives are unlikely to put a halt to the relentless rise of disease-oriented treatment at the end of life in the foreseeable future. Financial incentives in our health care system conspire with the legitimate reluctance of patients, families, and physicians to give up hope for life extension.

On the other hand, there is reason to be somewhat optimistic since the changes discussed in this special issue of Health Affairs are prone to make a difference. However, the scope of the difference is likely to leave plenty of room for further interventions, although what types these will be remains to be seen.

High costs give palliative care increased industry interest

While a nascent industry of for-profit companies is eyeing palliative care, some believe a more viable response would be for health systems to build out internal capacities.

Efforts to improve palliative care are growing as both providers and payers struggle to control costs and provide quality end-of-life care. A recent Kaiser Family Foundation report found roughly 25% of Medicare dollars are spent on beneficiaries in the last year of life for services including hospitalization, post-acute care and hospice.

Palliative care is medical care that’s been customized to meet the needs of people with complex and serious illnesses. The goal is to reduce stress and improve the quality of life for both the patient and their family through pain relief, symptom control and help managing care and basic living tasks. “Palliative care teams are able to pull everyone together into the same room — not only the family but also the many different sub-specialists — and actually have a conversation about what is medically appropriate for this patient, so that the care plan becomes rational and appropriate,” says Center to Advance Palliative Care Director Diane Meier.

Today, nearly all hospitals with more than 300 beds and roughly two-thirds of hospitals with more than 50 beds have palliative care teams. While the size of the U.S. palliative care market is hard to pin down, the combined hospice and palliative care market totals $31 billion and is growing at an annual rate of 1.4%, according to research firm IBISWorld.


Nonacute Care: The New Frontier

Image result for New Frontier

What happens outside the hospital is increasingly important to success, so healthcare leaders need to influence or control care across the continuum.

If you’re running a hospital, one irony in the transformation toward value in healthcare is that your future success will be determined by care decisions that take place largely outside your four walls. If you’re running a health system with a variety of care sites and business entities other than acute care, the hospital’s importance is critical, but its place at the top of the healthcare economic chain is in jeopardy.

Certainly, the hospital is the most expensive site of care, so hospital care is still critically important in a business sense, no matter the payment model. But if it’s true that demonstrating value in healthcare will ensure long-term success—a notion that is frustratingly still debatable—nonacute care is where the action is.

For the purposes of developing and executing strategy, one has to assume that healthcare eventually will conform to the laws of economics—that is, that higher costs will discourage consumption at some level. That means delivering value is a worthy goal in itself despite the short-term financial pain it will cause—never mind the moral imperative to efficiently spend limited healthcare dollars.

So no longer can hospitals exist in an ivory tower of fee-for-service. Unquestionably, outcomes are becoming a bigger part of the reimbursement calculus, which means hospitals and health systems need a strategy to ensure their long-term relevance. They can do that as the main cog in the value chain, shepherding the healthcare experience, a preferable position; but physicians, health plans, and others are also vying for that role. Even if hospitals or health systems can engineer such a leadership role, acute care is high cost and to be discouraged when possible.