Wall Street is still selling off health care stocks

https://www.axios.com/newsletters/axios-vitals-64abbaf8-c86f-4ac1-8561-525b0fd33c25.html?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosvitals&stream=top

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Yesterday, UnitedHealth Group posted $3.5 billion of profit in the first quarter — its second-most profitable quarter ever — and collected more than $60 billion of revenue, Axios’ Bob Herman reports.

Yes, but: UnitedHealth’s stock price tanked by 4%, which consequently dragged down shares of the other major health insurers and hospital chains. Cigna’s stock price plummeted 8%, and Anthem and Humana were close behind. HCA tumbled 10%.

Driving the news: Wall Street remains fearful of “Medicare for All” becoming a reality, and UnitedHealth CEO Dave Wichmann tried to get ahead of the message by telling investors that single-payer would “jeopardize” people’s care.

  • Many investment bank analysts were perplexed by the sell-off, considering that UnitedHealth has more cash than it knows what to do with.
  • Steven Halper of Cantor Fitzgerald wrote to investors: “What more can you ask for? Take advantage of poor sentiment.”

The big picture: Medicare for All discussions matter far more to Wall Street right now, and that makes the industry’s Q1 financial reports a lot less important.

 

 

 

WINNERS AND LOSERS FROM HEALTHCARE’S Q4 EARNINGS SEASON

https://www.healthleadersmedia.com/finance/winners-and-losers-healthcares-q4-earnings-season

Healthcare companies have reported their earnings from the final quarter of 2018, revealing some success stories and some ongoing struggles.

Earnings season for Q4 2018 has concluded for companies across the healthcare industry, from insurers, for-profit providers, telemedicine companies, and others in between.

Given the challenging market conditions during the final quarter of last year, including the surprise federal ruling that struck down the Affordable Care Act as unconstitutional, many companies reported weaker earnings than they did earlier in 2018.

However, some were buoyed by new intitiatives and product performance that sustained a level of success they intend to carry into 2019.

Below is a list of healthcare’s winners and losers from the 2018 Q4 earnings season:

WINNERS:

UnitedHealth Group

  • The Minnetonka, Minnesota-based insurer led the pack again, ending 2018 on an upswing thanks to Optum’s record-breaking performance.
  • The PBM subsidiary recorded year-end revenues above $100 billion for the first time ever.
  • Based United expects to achieve revenues above $240 billion in 2019.

Centene Corp.

  • 2018 was a strong year for the St. Louis-based insurer, finishing with more than $60.1 billion in revenues.
  • Managed care membership reached 14 million, an increase of 15% year-over-year.
  • Centene’s net earnings for Q4 2018 were $241 million, an increase of $11 million year-over-year.

Anthem Inc.

  • IngenioRX, Anthem’s PBM slated for debut in 2020, is now expected to launch in Q2.
  • The subsidiary is expected to achieve gross annual savings north of $4 billion, including more than 20% returned to shareholders.
  • Anthem added 37,000 medical enrollment members in Q4, and saw its operating gain grow by 30% year-over-year.

 

MIDDLE:

Teladoc

  • The Purchase, New York-based telemedicine company produced revenues of $122 million and saw total visits rise by 70% while net losses fell.
  • The company still has sizable net losses to account for, posting a net loss of nearly $25 million in Q4 and $97.1 million for the full year.
  • Despite some positive financial metrics, Teladoc’s issued a tepid financial guidance for 2019.

CVS-Aetna

  • While we still wait on final federal approval for the megamerger set to drastically change the healthcare landscape, CVS Health posted its earnings report from a difficult Q4.
  • The Aetna merger played a role in rising revenues by 12.5% for CVS in the last quarter of 2018, but it also hampered some crucial metrics.
  • CVS suffered a net loss of $421 million in Q4 2018 and $596 million during the full year.
  • However, CEO Larry Merlo said he believes CVS’ acquisition of Aetna provides the company with “long-term value” in a rapidly transforming market.

Cigna Corp.

  • As with CVS, a megamerger couldn’t save Cigna from a down quarter to wrap up 2018.
  • The Philadelphia-based insurer produced $14.3 billion in total quarterly revenues and $144 million in net income, but failed to meet earnings estimates after closing its deal with Express Scripts.
  • Overall, Cigna capped off 2018 with total adjusted revenues of $48 billion, a 15% year-over-year increase, along with a net income of $3.6 billion.

LOSERS:

Community Health Systems 

  • Amidst lingering divestiture activity, CHS posted a net loss of more than $325 million.
  • CHS recorded a net loss attributable to shareholders of $328 million in Q4 2018, down from a net loss of more than $2 billion during Q4 2017.
  • On one positive note, the the Franklin, Tennessee-based for-profit hospital operator did manage net operating revenues of $3.5 billion, an increase of nearly $400 million year-over-year.

Tenet Healthcare Corp.

  • Tenet experienced a net loss of $5 million in Q4 and saw its full year operating revenues decline 4.5%.
  • The Dallas-based company’s quarterly adjusted EBITDA fell 34.6% year-over-year.
  • CEO Ron Rittenmeyer praised the “significant progress” Tenet made to “create a more efficient, agile enterprise with new leadership.”

Magellan Health

  • Segment profit fell to $16 million in Q4, down 83.8% year-over-year, and only reached $228 million in 2018, a 26.7% drop.
  • Net revenues for 2018 did increase more than 25%, a lone bright spot for Magellan.
  • CEO Barry Smith remains confident despite the significant financial declines over the past year.

 

 

 

 

Stand-alone ERs are crazy expensive

https://www.unitedhealthgroup.com/content/dam/UHG/PDF/2017/Freestanding-ER-Cost-Analysis.pdf?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosvitals&stream=top

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Freestanding emergency departments, which provide emergency medical care but are physically separate from hospitals, charge many times more than other providers for the same care, according to a new analysis by UnitedHealth Group.

  • (Standard disclaimers apply: Yes, the nation’s biggest insurer has some skin in the game here on ER costs. But there’s also plenty of other evidence that ER costs are indeed very high.)

How it works: Freestanding ERs often don’t provide treatment for common emergencies like trauma, strokes and heart attacks, per my colleague Caitlin Owens.

  • Only 2.3% of visits to freestanding emergency departments are for actual emergency care.
  • The number of these facilities increased from 222 in 2008 to 566 in 2016.
  • In Texas, the average cost of treating common conditions at a freestanding emergency department is 22 times greater than treatment at a doctor’s office, and 19 times more than at an urgent care center.
  • If the location of care was changed to one of these cheaper alternatives, it’d save more than $3,000 per visit.
  • Freestanding emergency departments are disproportionately located in affluent areas that have access to other providers, and in Texas, less than one in four receive ambulances.

The bottom line: It is much, much cheaper to go see your family doctor if you have a fever — the most common diagnosis at Texas freestanding emergency departments.

 

 

UnitedHealth’s Optum revenues surpass $100B for 1st time

https://www.beckershospitalreview.com/payer-issues/unitedhealth-s-optum-revenues-surpass-100b-for-1st-time.html?origin=cioe&utm_source=cioe

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Growth in UnitedHealth Group’s health services business Optum helped the health insurance company beat Wall Street estimates for the fourth quarter ended Dec. 31, according to Reuters.

Five things to know:

1. Revenues for Optum, which is UnitedHealth’s fastest-growing unit and includes an in-house pharmacy benefits manager, topped $100 billion for the first time in the year ended Dec. 31. Optum grew revenues by 11.1 percent year over year to $101.3 billion, the company said Jan. 15.

2. While Optum may face heightened competition this year after Aetna and Cigna scored deals with large benefit managers, Piper Jaffray analyst Sarah James told Reuters: “We view [the Optum results] as a positive sign given the increasingly competitive nature of the pharmacy benefits management market. We believe 2019 could be a big year at OptumHealth … and see potential for specialty [drugs] to double earnings by 2021.”

3. For the fourth quarter, the country’s largest health insurer posted $27.56 billion in revenues from its Optum unit, up 13 percent year over year. 

4. Still, UnitedHealth’s medical care ratio — or the amount of premiums used to cover medical expenses compared to overhead costs — fell short of expectations at 82.2 percent, according to Reuters. Higher costs in UnitedHealth’s government-sponsored Medicaid business were partially to blame, analysts told the publication.

5. UnitedHealth’s insurance business, UnitedHealthcare, increased sales by 11.1 percent in the fourth quarter, for a total of $46.2 billion. Net earnings to shareholders fell 16 percent to $3 billion in the fourth quarter, compared to $3.6 billion a year prior.

 

 

8 things for healthcare executives to note in 2019

https://www.beckershospitalreview.com/hospital-management-administration/2018-the-year-that-was-8-things-for-healthcare-executives-to-note-in-2019.html?origin=bhre&utm_source=bhre

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Hospital executives quit on the spot. Corporate giants took healthcare into their own hands. Flu hit the country hard. Nurses wanted to cut ties with Facebook. These and four other events and trends shaped the year in healthcare — and the lessons executives can take from them into 2019.

Flu-related deaths hit 40-year high

Roughly 80,000 Americans died of flu and related complications last winter, according to the CDC, along with a record-breaking estimate of 900,000 hospitalizations. That made 2017-18 the deadliest flu season since 1976, the date of the first published paper reporting total seasonal flu deaths, according to the CDC’s Kristen Nordlund.

The milestone flu season reflected a couple of trends. No. 1: Fee-for-service remains the dominant payment model in healthcare. Flu-related hospitalizations triggered financial gains for health systems and hospital networks. No. 2: A deadly flu season gave more weight to concerns about a flu pandemic, which weighs heavily on the minds of CDC Director Robert Redfield, MD, and Bill Gates, among others.

JP Morgan-Berkshire Hathaway-Amazon rocks healthcare

Not even one month into 2018, three corporate giants combined forces to lower healthcare costs for 1.2 million workers. Since the Jan. 30 announcement, Amazon, Berkshire Hathaway and JPMorgan Chase made several important hires: Surgeon, writer and policy wonk Atul Gawande, MD, started work as CEO of the health venture July 9. Soon after, Jack Stoddard, general manager for digital health at Comcast Corp., was appointed COO. More questions than answers remain about this corporate healthcare disruption, including how extensively the new entrants will redesign healthcare for their employees and how much they will collaborate with traditional healthcare providers.

While Dr. Gawande and Mr. Stoddard continue to build their healthcare-centric team to pursue an ambitious mission, remarks from a member of the old guard illustrate the frustration fueling these corporate giants’ foray into healthcare. “A lot of the medical care we do deliver is wrong — so expensive and wrong,” Charlie Munger, vice chairman of Berkshire Hathaway, said in a May interview with CNBC. “It’s ridiculous. A lot of our medical providers are artificially prolonging death so they can make more money.”

While someone briefed on the undertaking said the alliance does not plan to replace existing health insurers or hospitals, it will be fascinating to see how this partnership forces legacy providers to behave differently. Chief executives Jamie Dimon, Warren Buffett and Jeff Bezos are clearly dissatisfied with the way their employees’ healthcare has been accessed, delivered and priced to date.

Sudden executive resignations

The practice of two-week notice became less standard for hospital and health system leaders this year — especially CEOs. Becker’s covers roughly 100 executive moves per month, and the rate at which we wrote about executives abruptly leaving their hospitals in 2018 stood out from the norm. Executives normally provide ample notice of their departure from an organization, much more than the baseline of two weeks that’s expected for any industry or occupation. But in 2018 many more executives resigned immediately, withholding explanation for their sudden departure or bound by non-disclosures to keep it confidential. For the first time, we began publishing round-ups of executives who departed with little notice. Two months into the year, we had nearly a dozen to report.

Healthcare consistently has a high executive turnover rate — 18 percent in 2017. But 2018 was a year in which leadership churn became even more volatile with the swift and mysterious nature of executive exits. The uptick in unexplained resignations occurred during the #MeToo movement, but we don’t have the right information to draw any correlation between them. The frequency of “effective immediately” resignations will normalize this practice if it persists in 2019, which could prove detrimental to hospitals for a host of reasons. Transparency is important in healthcare; highly paid executives quietly walking away from their posts does not bode well for community affairs or physician engagement. It goes back to a lesson from media relations 101: “No comment” is the worst comment.

Health system-backed drug company receives warm welcome

Several leading health systems kicked off 2018 by uniting to create a nonprofit, independent, generic drug company named Civica Rx to fight high drug prices and chronic shortages. The pharmaceutical entrant — backed by Intermountain Healthcare, HCA Healthcare, Mayo Clinic, Catholic Health Initiatives, Providence St. Joseph Health, SSM Health and Trinity Health — is led by CEO Martin Van Trieste, former chief quality officer for biotech giant Amgen. The company’s focus will be a group of 14 generic drugs, administered to patients in hospitals, that have been in short supply and increasingly expensive in recent years. The consortium has declined to name the drugs in development, but said it expects to have its first products on the market as early as 2019.

Intermountain CEO Marc Harrison, MD, exercised measure when describing the new drug company’s mission, noting that responsible pharmaceutical companies will fair fine, but those that have been unprincipled in the past with price increases or supply issues should watch out. Civica Rx may be starting with 14 drugs, but it has noted that there are nearly 200 generics it considers essential that have experienced shortages and price hikes.

Based on reactions from providers and on The Hill, the potential for Civica Rx to quickly gain participants and policy advocates seems rich. For instance, even before Civica Rx applied to the FDA for permission to manufacture drugs, the idea of the company caught hospitals’ interest nationwide. Dr. Harrison said approximately 120 healthcare companies — representing about one-third of hospitals in the U.S. — contacted Civica Rx organizers with interest in participating. Furthermore, lawmakers and regulators were quick to throw support behind the venture even though Congress has done little to get drug pricing under control. Dr. Harrison noted to Modern Healthcare that, as of November 2018, the collaborative “received tremendous bipartisan encouragement from elected officials and from regulatory agencies to continue with our efforts.”

Guns and shootings cemented as a healthcare issue

Gun violence was never outside the realm of health and wellness, but in 2018 the medical community passionately declared the issue as one within their jurisdiction. When the National Rifle Association tweeted Nov. 7 that “Someone should tell self-important anti-gun doctors to stay in their lane,” physicians were quick to respond with detailed, graphic stories and images of their encounters treating the aftermath of gun violence. The #ThisIsOurLane social media movement coincided with tragedy Nov. 19, when a man fatally shot a physician, pharmacist and police officer in Mercy Hospital in Chicago.

With the right resources, clinicians can become ardent advocates to better patients’ social determinants of health, including responsible gun ownership and use. Leavitt Partners released poll findings in spring 2018 in which physicians said they see how social determinants influence patients’ well-being, but do not yet have the resources to help with things like housing, hunger, transportation and securing health insurance. If the fervor of #ThisIsOurLane — and attention paid to it — is any indication, physicians deeply care about nonmedical issues that affect patients’ health. With the right resources, the medical community stands to become a powerful catalyst for change for a broad range of issues.

If health systems are serious about success under value-based payment models, they will empower clinicians with the support, partnerships and tools needed to intervene and improve social determinants of health for the good of their patients.

Media coverage of surprise billing

In late 2017, the American Hospital Association released an advisory notice encouraging members to prepare for a yearlong media investigation into healthcare pricing, conducted by Vox Media Senior Correspondent Sarah Kliff. The AHA’s memo illustrated how poorly prepared hospital executives and media teams are in fielding questions about pricing, especially facility fees.

“When I have tried to conduct interviews with hospital executives about how they set their prices, I find that many are reluctant to comment,” Ms. Kliff wrote. By the end of her 15-month project, Ms. Kliff had read 1,182 ER bills from every state and wrote a dozen articles about individual patient’s financial experiences with hospitals (she was also on maternity leave from June through September). Her work produced some effective headlines. Case in point: “A baby was treated with a nap and a bottle of formula. His parents received an $18,000 bill.” In that case, the hospital reversed the family’s $15,666 trauma fee after Ms. Kliff published her report.

As of Jan. 1, Medicare requires hospitals to disclose prices publicly — but this change is unlikely to greatly benefit patients and consumers since list prices don’t reflect what insurers, government programs and patients pay. Furthermore, price transparency is but one of the problems Ms. Kliff encountered in her extensive reporting. Others include high prices for generic drug store items ($238 for eye drops that run $15 to $50 in a retail pharmacy), out-of-network physicians tending to patients who are visiting in-network hospitals, and ER facility fees. Hospitals reversed $45,107 in medical bills as a result of Ms. Kliff’s reporting. Based on the change spearheaded by her work and the Congressional attention paid to medical billing practices, hospitals and health systems shouldn’t quit their AHA-advised preparation on their own billing practices just yet. They also shouldn’t chalk much progress up to CMS-mandated price postings, because that information does not answer the questions Ms. Kliff set out to answer, including how hospital set their prices. There will only be more questions like this — from journalists, patients and lawmakers.

Optum scaring the crap out of hospitals

Which business is keeping hospital leaders up at night? Many executives will tell you it’s not Amazon, not CVS, not One Medical — but Optum, the provider services arm of UnitedHealth Group. Optum was a key driver of the 11.7 percent gain UnitedHealth Group’s stock saw in 2018, which made it one of the top performers in the Dow Jones Industrial Average, according to Barron’s. Through its OptumCare branch, Optum employs or is affiliated with more than 30,000 physicians — roughly 8,000 more than Oakland, Calif.-based Kaiser Permanente.

Aside from directly competing for patients, Optum wants to hire or affiliate with the same MD-certified talent. It offers physicians three ways to do so: direct employment, network affiliation or practice acquisition. “OptumCare Medical Group offers recent medical school graduates the opportunity to practice medicine and become a valuable partner in their local community minus the hassles associated with the ever-changing business side of healthcare,” the company writes on its employment website.

It’s not just the physician force that makes Optum a serious concern for hospitals. Part of the challenge is that the $91 billion business has a hand in several healthcare buckets, expanding its presence as either a serious competitor/threat or a potential collaborator in multiple arenas since it is not easily categorized. For instance, consider the mountain of data Optum sits upon, with valuable insights related to utilization, costs and patient behaviors. “Because they are connected to UnitedHealth, they probably have more healthcare data than anyone on the planet,” the CEO of a $2.5 billion health system said.

Mark Zuckerberg lost face with nurses

For as much as we talk about the collision of Silicon Valley and healthcare, one of the year’s most vivid clashes came down to a dozen California nurses and Mark Zuckerberg, the chairman and CEO of Facebook and world’s third-richest person. San Francisco General Hospital and Trauma Center was renamed the Priscilla Chan and Mark Zuckerberg San Francisco General Hospital and Trauma Center in 2015 after Mr. Zuckerberg and his wife, Priscilla Chan, MD, gave $75 million to the organization.

Soon after the Facebook-Cambridge Analytica ordeal came to light, a dozen nurses protested and demanded Mr. Zuckerberg’s name be stripped from their hospital. His name is hardly synonymous with the protection of privacy, they argued. But philanthropy proves to be more of an art than a science. By November, even as a San Francisco politician pressed for the removal of the name, hospital CEO Susan Ehrlich, MD, said: “We are honored that Dr. Chan and Mr. Zuckerberg thought highly enough of our hospital and staff, and the health of San Franciscans, to donate their resources to our mission.”

The dispute illustrates the tension hospital and health system executives must deal with as cash-rich tech giants and venture capitalists make more high-profile forays into healthcare. Hospitals can use the cash, sure, but the alignment of value systems may present some challenges. 2018 was a year in which several tech companies faced problems with transparency, holding leaders publicly accountable, and diversity in hiring, among other issues. A dozen nurses protesting their hospital sharing a name with Mark Zuckerberg? That’s not the last time we’ll see clinicians urging wealthy but problematic tech icons to back off. Hospital executives will need to be adept in handling that tension and exercise urgency in their response.

 

Optum a step ahead in vertical integration frenzy

https://www.healthcaredive.com/news/optum-unitedhealth-vertical-integration-walmart/520410/

Vertical integration is all the rage in healthcare these days, with Aetna, Cigna and Humana making notable plays. 

If the proposed CVS-AetnaCigna-Express Scripts and Humana-Kindred deals are cleared by regulators, the tie-ups will have to immediately face UnitedHealth Group’s Optum, which has been ahead of the curve for years and built out a robust pharmacy benefit manager (PBM) business already along with a care services unit, employing about 30,000 physicians and counting.

UnitedHealth formed Optum by combining existing pharmacy and care delivery services within the company in 2011. Michael Weissel, Group EVP at Optum, told Healthcare Dive the company began by focusing on three core trends in the industry: data analytics, value-based care and consumerism.

Since then, the company has been on an acquisition spree to position itself as a leader in integrated services.

“For the longest time, the market assumed that they were building the Optum business [to spin it out] and what is interesting in the evolution of the industry is that that combination has now set a trend,” Dave Windley, managing director at Jefferies, told Healthcare Dive.

“United has now set the industry standard or trend … to be more vertically integrated and it seems less likely now that United would spin this out … because many of their competitors are now mimicking their strategy by trying to buy into some of the same capabilities,” he said.

Weissel said Optum will continue to push on the three identified trends in the next three to five years, with plans to invest heavily in machine learning, AI and natural language processing.

The question will be whether and how the company can keep its edge.

What Optum is

Optum is a company within UnitedHealth Group, a parent of UnitedHealthcare. Optum’s sister company UnitedHealthcare is perhaps more well known within the industry and with consumers.

However, Optum, a venture that encompasses data analytics, a PBM and doctors, has been gradually building its clout at UnitedHealth Group.

In 2017, the unit accounted for 44% of UnitedHealth Group’s profits.

In 2011, UnitedHealth Group brought together three existing service lines under one master brand. Services are delivered through three main businesses within a business within a business:

  • OptumHealth – the care delivery and ambulatory care capabilities of OptumCare, as well as the care management, behavioral health, and consumer offerings of Optum;
  • OptumInsight – the data and analytics, technology services and health care operations business; and
  • OptumRx – its pharmacy benefit service.

The company focuses on five core capabilities, including data and analytics, pharmacy care services, population health, healthcare delivery and healthcare operations. Services include but are certainly not limited to OptumLabs (research), OptumIQ (data analytics), Optum360 (revenue cycle management), OptumBank (health savings account) and OptumCare (care delivery services).

The Eden Prairie, MN-headquartered company has recently expanded its care delivery services, with much of the growth coming from acquisitions. The past two years have seen Optum expand its footprint into surgical care (Surgical Care Affiliates), urgent care (MedExpress) and primary care (DaVita Medical Group).

It’s a wide pool, but the strategy affords UnitedHealth the opportunity to grab more revenue by expanding its market presence. For example, the DaVita acquisition, which is still pending, allows OptumCare to operate in 35 of 75 local care delivery markets the company has targeted for development, Andrew Hayek, OptumHealth CEO, said on an earnings call in January.

Optum’s strategy of meeting patients where they are and deploying more ambulatory, preventative care services works in concert with its sister company UnitedHealthcare’s goal of reducing high-cost, unnecessary care services, when applicable. If Optum succeeds in creating healthier populations that use lower levels of care more often, that benefits the parent company UnitedHealth Group as UnitedHealthcare spends less money and time on claims processing/payout.

The strategy has been paying off so far.

Three charts that show UnitedHealth’s financial health as it relates to Optum

Optum’s presence has grown as it has steadily increased its percentage of profits for UnitedHealth Group.

Credit: Healthcare Dive / Jeff Byers

In 2011, the first year Optum was configured as it looks today, the company contributed 14.8% of total earnings through operations to UnitedHealth Group with $1.26 billion. That’s about 29 percentage points lower than in 2017, when Optum brought in $6.7 billion in profits on $83.6 billion in revenue.

Broken down, it’s clear that pharmacy services make up the lion’s share of the company’s revenue. In 2017, OptumRx earned $63.8 billion in revenue, fulfilling 1.3 billion prescriptions. OptumRx’s contributions to the company took off in 2015 when Optum acquired pharmacy benefit manager Catamaran.

Credit: Healthcare Dive / Jeff Byers

In recent years, OptumHealth has grown due to expansion in care delivery services, including consumer engagement and behavioral and population health management. The care delivery arm served 91 million people last year, up from 60 million in 2011.

OptumInsight has grown largely due to an increase in revenue cycle management and operations services in recent years.

On Wall Street, UnitedHealth Group is performing well and has seen healthy growth since 2008. The stock peaked in January and took a dive when Amazon, J.P. Morgan and Berkshire Hathaway — industry outsiders yet financial giants — announced they would create a healthcare company.

Credit: Healthcare Dive / Jeff Byers

While these charts suggest a dominant force, the stock activity shows that investors believe there’s still more room for competition, if the new entrants play their cards right.

Where Optum could lock out and rivals could cut in on competition

UnitedHealth started down this strategic path many years ago and the rest of the industry just now seems to be catching up.

“Optum’s been the leader in showing how a managed care organization with an ambulatory care delivery platform and a pharmacy benefit manager all in house can lower or maintain and bend cost trend and then drive better market share gains in their health insurance business,” Ana Gupte, managing director of healthcare services at Leerink, told Healthcare Dive. “I think they have been the impetus in the large space for the Aetna-CVS deal.”

Because the company is multi-dimensional, Optum’s competition will be varied. If all the mergers making news — including the Walmart’s rumored buyout of Humana — close, here’s what competition could look like:

Perhaps oddly, its largest revenue contributor, OptumRx, seems to have the largest vulnerability for competition in the coming years.

Optum’s competitive advantage in the PBM space is driven largely by already realized integration. Merging data across IT systems is no easy task, and Optum has spent years harmonizing pharmacy data across platforms to assist care managers in OptumCare to see medical records for United members.

Anyone with experience implementing EHR systems can tell you such integration doesn’t happen over night.

If the Cigna-Express Scripts deal closes, the equity can compete with OptumRx, but the technology investment needed to harmonize data and embed Cigna’s service and pharmacy information into Express Scripts servers will take time, Windley said. Optum, on the other hand, has invested in the effort and integration for years.

Gupte says the encroaching organizations in the PBM space have the ability to realize the efficiencies and savings and the integrated medical that Optum has been realizing across OptumRx and the managed care organization.

Optum’s leg up in PBM space could last two to three years over the competition, she said.

On the care delivery side, OptumHealth has been purchasing large physician groups for a variety of services. There are only so many large physician groups putting themselves on the market, and Optum has been making bids for them.

There’s still a bit of white space to fill in its 75 target markets, but analysts note Optum may have the competition on lock in this space

Even if CVS-Aetna closes, OptumCare is a $12 billion business with many urgent and surgery care access points. If CVS-Aetna is finalized, the company will have about 1,100 MinuteClinics capable of realizing efficiencies with Aetna, but, as Windley notes, they likely won’t have primary care or surgery care elements.

There’s also a lot of time and capital needed for building out and retrofitting retail space to medical areas.

On the surgical care services, “I don’t see either Cigna, Aetna or Humana getting into that business,” Gupte said. “That will be one element of their footprint on care delivery that will be unique and differentiated for them.”

Urgent care has the potential for outsider competition, she added. However, Optum is using its MedExpress business to treat higher acuity conditions and have an ER doctor on staff in each center. Compared to the typical types of conditions treated in retail clinics or those that would be feasible over time, Gupte believes services that could be seen in CVS or Walmart would be lower acuity, chronic care management services.

“[Optum has] been so proactive and so strategic I don’t think there’s going to be a lot of reactive catchup they have to do,” Gupte said. “I think it’s going to be hard for the other entities to play catch up, outside of the PBM.”

One potential issue will be harmonizing the disparate businesses so patients can be effectively managed across the various organizations, Trevor Price, founder and CEO of Oxean Partners, told Healthcare Dive.

“I think the biggest challenge for Optum is operationalizing the combined platform,” Price said. “The biggest question is do they continue to operate as individual businesses or do they merge into one.”

What’s next?

Optum will continue to explore ground in the three core trends it has identified.

Out of the three, consumerism has the longest path to maturity in healthcare, Weissel said, adding he believes consumerism is going to change healthcare more than any other trend over the next decade.

“There is a wave coming, and this expectation that we will move there,” he said. “Increasingly, this aging of people who become very comfortable in a different modality is going to tip the balance with how people will want to interact with healthcare. I know there’s pent up demand already.”

That means the company is putting bets into the marketplace around consumer building and segmentation models as well as thinking about how to connect data to allow patients to schedule appointments, view health records, sign up for insurance, search for providers or renew prescriptions online.

Consumer-centric projects currently underway include digital weight loss programs — including streaming fitness classes — and maternity programs to track pregnancy. The company is also experimenting with remote patient monitoring to understand the impacts on those with heart disease or asthma and to search for service opportunities.

Optum will pursue investments as well as acquisitions to push into the consumer space.

“When it comes to acquisitions to Optum overall, we’re always in the marketplace looking to extend our capabilities, to extend our reach in the care management space to fill in holes or gaps that we have,” Weissel said. “That’s a constant process in our enterprise.”

 

 

 

 

A Brief Look at Medicare Market Share for Six Major Metro Areas

https://www.markfarrah.com/mfa-briefs/a-brief-look-at-medicare-market-share-for-six-major-metro-areas/

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Medicare Advantage plans continue to be an attractive option for the rapidly increasing senior population.  As of November 2018, total Medicare Advantage (MA) membership stood at over 21.6 million, representing approximately 34% of the 63.7 million Americans eligible for Medicare.  Health plan enrollment and market share data are important metrics for health insurers to assess in order to identify opportunities and make better business decisions about products and services.  Companies not only look at their own market positions but also routinely analyze competitor membership to evaluate relative market share.  Industry analysts often assess market share at the county or metropolitan statistical area (MSA) level in order to gain a more complete competitive picture of the market.  This brief presents an overview of Medicare market demographics and market share data, with a focus on health plan market position for six major metropolitan statistical areas (MSAs) in the U.S.

Competition and Market Share

For the purposes of this brief, MFA first looked at the competitive mix in the Medicare and Medicare Advantage markets through analysis of enrollment figures from the Health Coverage Portal™ and Medicare Business Online™ by metropolitan areas in the United States. 

  • Seniors have a choice between coverage offered by original Medicare and Medicare Advantage (MA).  While potential market size is an important metric, understanding the insurance preferences of seniors requires a closer look at enrollment within each area.  How seniors are behaving as consumers varies greatly among the metropolitan areas.  To shed more light on these differences, Mark Farrah Associates calculated the penetration rate for original Medicare & Medicare Advantage plans.  Penetration rate is calculated by dividing the number of plan members by the number of those eligible for Medicare.  The penetration rate provides the overall market share which can be used to analyze seniors’ choice between sticking with original Medicare and choosing a Medicare Advantage plan.
  • There is a greater degree of variability across the top 6 MSAs when considering original Medicare vs. Medicare Advantage penetration rates, per the chart above. The Chicago MSA has the highest original Medicare rate at just over 70.9% with the lowest Medicare Advantage penetration rate (24.1%). Similarly, Philadelphia is well below the national average with a Medicare Advantage penetration rate of 28.1%.  One reason for the lower Medicare Advantage penetration in both Chicago and Philadelphia is the popularity of Medicare Supplement plans in both Illinois and Pennsylvania. On the other hand, Miami is currently sitting with only 41.5% of those eligible enrolled in original Medicare with the highest penetration rate of the 6 MSAs in the Medicare Advantage market at 53.5%. Los Angeles also records above average Medicare Advantage popularity with almost a 48% penetration rate.
  • Based on MFA’s county estimates, the above table provides the top Medicare Advantage companies and their corresponding market share in each of the top MSAs. UnitedHealth Group appears to have a strong foothold in 5 of the MSAs above, except for the Philadelphia MSA. Humana also has a large presence across the selected MSAs.

Conclusion

Eligibility, geographic location, income levels and overall health status of a population are just a few determinants of Medicare penetration in a particular area.  While further demographic insight would be required to discern why Medicare and Medicare Advantage penetration is higher in some areas more than others, it is clear that the competitive mix among these MSAs indicates varying degrees of consumer choice.  Nonetheless, the Medicare market continues to grow as more and more Americans of the Baby Boom generation enter retirement age.  As always, Mark Farrah Associates will monitor enrollment trends and industry shifts in this highly competitive segment.