Welcome to another edition of the Gist Weekly. Please feel free to forward this edition to friends and colleagues, and encourage them to subscribe as well.
IN THE NEWS
What happened in healthcare recently—and what we think about it.
- House Oversight Committee criticizes PBM pricing tactics. On Tuesday, the House Committee on Oversight and Accountability released a report outlining how the nation’s three largest pharmacy benefit managers (PBMs)—CVS Caremark, Express Scripts, and OptumRx, which together control about 80% of the US prescription market—have “monopolized the pharmaceutical marketplace” and inflated prescription drug costs at the expense of patient care. The report summarizes the committee’s 32-month investigation into the role PBMs play in rising healthcare costs. Coinciding with the report’s release, the committee held a hearing on Tuesday to solicit testimony from the top executives at the three largest PBMs. Met with intense criticism by lawmakers, these executives and other spokespeople for the PBM industry insisted that PBMs pass significant savings to their customers and attempted to shift the blame for high drug prices to pharmaceutical companies.
- The Gist: The wave of scrutiny directed toward PBMs continues to increase, with this report coming on the heels of a Federal Trade Commission (FTC) interim report that reached similar conclusions. At least six states have filed price-fixing suits against PBMs, and the FTC is rumored to be preparing its own lawsuit concerning how PBMs negotiate with drugmakers. A bipartisan group of House lawmakers this week also introduced a new PBM reform bill—more expansive than one last year that passed the full House, as well as a Senate committee, but never became law—that aims to improve drug pricing transparency, protect independent pharmacies, and lower drug costs for consumers.
- Humana’s CenterWell plans to open primary care centers at Walmarts. On Wednesday, Humana announced that CenterWell, its healthcare services arm, reached an agreement with Walmart to lease clinical space and open 23 senior-focused primary care centers next to Walmart Supercenter locations in six metro areas across Florida, Georgia, Missouri, and Texas. Walmart Health, which the retail giant shuttered in late April, operated or had plans to open centers in each of these markets. Humana’s primary care centers, which will be managed under its CenterWell Senior Primary Care and Conviva Care Center brand names, are expected to open in the first half of 2025. Financial terms of the deal were not disclosed.
- The Gist: Humana continues to expand its primary care delivery network, having increased its footprint of centers from about 200 in 2022 to nearly 300 across 15 states as of March 2024. By steering its Medicare Advantage beneficiaries toward these centers, Humana may find more success than Walmart Health’s abandoned primary care venture, which relied mostly on volume from cash-pay patients. Walmart’s backpedal from healthcare delivery, which also includes selling off its telehealth business last month, is, at least for now, vaguely reminiscent of the retail giant’s original healthcare delivery strategy of leasing space to clinic operators that retain their own branding.
- Federal judge upholds FTC noncompete rule, diverging from a previous district court ruling. On Tuesday, Judge Kelley Brisbon Hodge of the Eastern District of Pennsylvania denied a request for injunction against the FTC’s rule that would ban almost all employee non-compete agreements nationwide. Judge Hodge ruled that the plaintiff in this case, ATS Tree Services, failed to demonstrate both that it would be subject to irreparable harm from the rule and that the FTC is exceeding its statutory authority by implementing this rule. The latter part of this opinion diverges from another recent district court ruling issued by Judge Ada Brown of the US District Court for the Northern District of Texas in early July, which granted its plaintiffs a preliminary injunction on the grounds that “the FTC lacks substantive rulemaking authority with respect to unfair methods of competition.” Judge Brown committed to ruling by the end of August on the plaintiffs’ request that the ban—which is set to take effect on September 4—be permanently enjoined.
- The Gist: Judge Hodge’s ruling to allow the noncompete ban to proceed is not expected to sway Judge Brown’s anticipated decision to either invalidate the rule or issue a permanent injunction. However, conflicting rulings at the district court level increase the likelihood of appeal, leaving the ultimate fate of the ban in the hands of appellate court judges, if not the US Supreme Court. As these legal battles play out, employee noncompete agreements, which are especially common for physicians, will continue to be governed by a patchwork of state laws.
Plus—what we’ve been reading.
- Allowing younger patients to die on their own terms. Recently published in the Atlantic, this piece explores the difficulties many providers have with broaching end-of-life conversations with younger patients battling late-stage cancer diagnoses. As these diagnoses continue to skew younger, many physicians are understandably struggling with how to be honest with millennial patients about their prognoses during what should be the prime of their life. The article contrasts the more candid conversations physicians can have with older patients about death against the willful optimism about “promising options” that they often direct toward younger patients even as treatments repeatedly fail. The author, a palliative-care physician, illustrates a compassionate approach that balances acknowledging the different life stressors that younger terminal patients commonly face with the honesty that all patients deserve when receiving dignified end-of-life care.
- The Gist: This article serves as a reminder of how medicine resides in a unique place between science and humanity. When standard treatments fail to cure patients, especially younger ones, providers often suggest more aggressive approaches. However, difficult treatments with low prospects of success should be presented with honesty and incorporate patients’ expressed desires about how they want the rest of their life to look. Discussing end-of-life care preferences and advanced directive plans with all patients—regardless of age—at an early point in the treatment process, and then continuing to check in about them throughout the care journey, is essential to providing empathetic care that incorporates patients’ evolving wishes.
GRAPHIC OF THE WEEK
A key insight illustrated in infographic form.
Emergency departments leading the volumes rebound in 2024
In this week’s graphic, we highlight the most recent data from software and analytics firm Strata Decision Technology to assess how hospital volumes have changed since 2022. Year-to-date 2024 hospital volumes have substantially increased across all admission types relative to 2022,with emergency department (ED) volumes rising the most at 13.7%. After facing considerable declines during the pandemic, monthly ED volumes have been at their highest levels since the pandemic began, with February 2024 seeing nearly 29% more ED visits than February 2022, which was a particularly slow month for EDs. Notably, the acuity of patients visiting the ED has also increased slightly since before the pandemic, countering the idea that non-emergent cases are driving the utilization increase. The current trend of ED volumes suggests that pandemic-induced changes to emergency department usage are not lasting, and that the ED remains a key channel for patients to access care.
ON THE ROAD
What we learned from our work in the real world. This week from Max Timm, Senior Vice President, at Kaufman Hall.
Articulating the value of a provider-sponsored health plan
The head of a health system-sponsored health plan called me recently to talk through potential changes his system is considering in regard to its health plan. “We haven’t been hitting our membership growth goals since the pandemic, and now there’s talk of us getting out of the insurance business altogether, so we can focus more on our core competencies. How can I make a compelling case of the broader strategic and economic value our plan generates?”
Many health systems started insurance plans with the goals of getting closer to the premium dollar, increasing the portion of total healthcare spend rendered within the system, and diversifying their revenue streams, but are currently struggling to scale profitably. As a result, some systems are grappling with whether to double down on their health plan or pursue other options, including exiting the insurance business altogether. The first step in evaluating these decisions should be to quantitatively define the enterprise value of a covered life to the system. A provider-sponsored health plan may perform poorly on closely tracked performance metrics like per-case reimbursement, while still generating a net benefit to the system by retaining premium dollars and capturing a greater share of patients’ total healthcare spend. The second step should be to evaluate pathways to reach a membership threshold at which the health plan would deliver sustainable financial returns to the system. If there is not a viable path in the market to reaching those growth goals, or if a system is unwilling to devote the resources required for that growth, the theoretical value of having a health plan is diminished. If your organization is at a crossroads with its provider-sponsored health plan, or needs help assessing its value and path to success, please don’t hesitate to reach out.
ON OUR PODCAST
Gist Healthcare Daily—all the headlines in healthcare policy, business, and more, in ten minutes or less every weekday morning.
In addition to the news discussed above, our Gist Healthcare Daily podcast covered many of the week’s other big stories, including:
- Ascension sells nine Illinois hospitals to Prime Healthcare.
- Steward Health Care finds buyers for some of its hospitals but fails to drum up any qualified bidders for others.
- Pharmacy group and providers sue UnitedHealth over Change Healthcare outage.
Subscribe on Apple, Spotify, Google, or wherever fine podcasts are available.
We’ll be back with a new edition next Friday. In the meantime, check out our Gist Weekly archive if you’d like to peruse past editions. We also have all of our recent “Graphics of the Week” available here.
Kind regards,
The Gist Weekly team at Kaufman Hall
