Greetings! We’re pleased to bring you executive-level commentary and insights from another busy week in healthcare. Please subscribe to receive the Gist Weekly email.
In the News
What happened in healthcare recently—and what we think about it.
- Steward Health Care files for bankruptcy and intends to sell its hospitals. On Monday, Dallas, TX-based Steward Health Care, a for-profit health system comprising 31 hospitals across eight states, filed for Chapter 11 bankruptcy protections in the Southern District of Texas. Pre-bankruptcy, Steward claimed to have about $6B in annual revenue against $9B in total liabilities. It intends to sell its hospital assets to service its debt and has secured an up-to-$300M loan from its landlord and primary creditor, Medical Properties Trust, to continue funding operations in the meantime. Last month, Steward reached a preliminary agreement with Optum for the sale of its Stewardship Health physician group, but Massachusetts state regulators say Steward has yet to file the paperwork necessary for regulatory approval.
- The Gist: This news, one of the largest health system bankruptcies in decades, doesn’t come as a surprise given Steward’s recent financial struggles. The company’s complex structure—with more than 170 debtors, thousands of vendors, a mix of more profitable and less profitable care delivery assets,and a unique leasing arrangement with Medical Properties Trust—will likely be difficult to unwind smoothly. Despite Steward stating that it wants to keep its facilities open and sell them, there will be a risk of hospital closures and disruptions for the patients and communities that rely on them for care. Regulators in Massachusetts, where Steward accounts for about 7 percent of the state’s hospital capacity, seem particularly keen to intervene in order to protect access to care and avoid closures.
- Florida sues Biden administration over healthcare protections for gay and transgender people. On Tuesday, Florida’s attorney general, along with the Catholic Medical Association, filed suit in federal court to block the enforcement of a new rule published by the Department of Health and Human Services (HHS) on Monday that updates an anti-discrimination clause within the Affordable Care Act. The rule, which reverses a Trump-era policy and was announced late last month, prohibits federally funded healthcare providers and insurers from refusing to treat people on the basis of their sexual orientation and gender identity. Although it allows religious exemptions for providers and “does not require or mandate the provision of any particular medical service,” the plaintiffs allege that it will force providers and insurers to administer gender-affirming care against their will and in violation of their First Amendment rights.
- The Gist: The right of transgender people to access healthcare services has become an increasingly politicized issue, with 24 states, including Florida, having moved to restrict access to gender-affirming care for transgender youth specifically. The Supreme Court already ruled in 2020 that sex-based discrimination prohibitions apply to transgender status, but the rule’s ultimate impact will be determined by litigation. Given that this anti-discrimination policy was first issued under President Obama, reversed under President Trump, and then reinstated and expanded under President Biden, its implementation will also depend on the result of the upcoming presidential election.
- HHS finalizes disability access rule for healthcare providers. Late last week, HHS published a final rule strengthening access protections for people with disabilities in healthcare environments, the first update to these regulations in decades. The rule, which will go into effect on July 1, requires healthcare providers to modify facilities and medical equipment to accommodate patients’ physical and sensory needs, for example ensuring that patients in wheelchairs can use an examination table or scale. It also establishes new accessibility standards for digital healthcare platforms, including websites and apps, and bans the consideration of disabilities in decision-making regarding organ transplantation and life-extending treatments.
- The Gist: As health systems continue to focus on consumer access initiatives, this rule highlights an important aspect of accessibility that often goes overlooked.With 13 percent of Americans experiencing some form of disability, it’s important for healthcare providers to consider the myriad ways in which disabilities can limit access to care, starting with the digital platforms patients must navigate in order to seek care. With one study finding that only 41 percent of surveyed physicians were “very confident about being able to provide the same quality of care to disabled patients,” many provider organizations will likely have to invest resources to comply with these new standards.
Plus—what we’ve been reading.
- An analysis of accountable care organization performance. Published by the Congressional Budget Office (CBO) last month, this report reviews recent research findings about factors that have either helped or hindered Medicare accountable care organization (ACO) cost performance over the last 12 years. ACOs led by independent physicians, those with a high share of primary care providers, and those whose initial baseline sending was higher than the regional average have been associated with greater cost savings. But a lack of resources necessary for providers to participate, weak incentives for providers to reduce spending, and a model design that allows providers to selectively enter and exit a program based on their anticipated level of financial bonus or loss have all undermined the potential savings generated. The report recognizes that Medicare ACOs have found success capturing the low-hanging fruit of potential cost savings, but that there are plentiful opportunities to increase the impact of these programs through targeted policy changes.
- The Gist: Medicare ACO model design attempts to strike a balance between achieving wider provider participation and generating net savings. Although ACO programs are starting to deliver some cost savings to Medicare, they have not reached their intended scale. Medicare’s largest ACO model, the Medicare Shared Savings Program, generated $1.8B in savings in 2022, which is just 0.2 percent of total Medicare spending. Many health systems have only mildly embraced Medicare ACOs as the level of potential cost-savings often fails to compensate for foregone fee-for-service revenue. CMS will need to continue to iterate on ACO model design if it hopes to achieve its goal of having every Medicare beneficiary in one by 2030, as it’s not even halfway there yet.
Graphic of the Week
A key insight illustrated in infographic form.
Third time’s not the charm for Walmart’s healthcare delivery ambitions
With Walmart’s announcement last week that it plans to shutter its Walmart Health business, this week’s graphic takes stock of the company’s healthcare delivery journey over nearly the past two decades. In about 2007, Walmart launched “The Clinic at Walmart,” which leased retail space to various third-party retail clinic companies, and then later health systems, to provide basic primary care services inside Walmart stores, with the ambition of eventually becoming “the largest provider of primary healthcare services in the nation.” However, low volumes and incompatible incentives between Walmart and its contractors led most of these clinics to close over time. In 2014 Walmart partnered with a single company, the worksite clinic provider QuadMed, to launch “Walmart Care Clinics.” These in-store clinics offered $4 visits for covered Walmart employees and $40 visits for the cash-paying public. Despite these low prices, this iteration of care clinic also suffered from low volumes, and Walmart scrapped the idea after opening only 19 of them. The retail giant’s most recent effort at care delivery began in 2019 with its revamped “Walmart Health Centers,” which it announced alongside its goal to “become America’s neighborhood health destination.” These health centers, which had separate entrances from the main store, featured physician-led, expanded primary care offerings including X-ray, labs, counseling, and dental services. As recently as April 2024, Walmart said it was planning to open almost two dozen more within the calendar year, until it announced it was shutting down its entire Walmart Health unit, which included virtual care offerings in addition to 51 health centers, citing an unfavorable operating environment. Despite multiple rebranding efforts, consumers have thus far appeared unwilling to see affordability-focused Walmart as a healthcare provider. Almost two decades of clinic experimentation have shown the company is willing to try things and admit failure, but it remains to be seen if this is just the end of Walmart’s latest phase or the end of the road for its healthcare delivery ambitions altogether.
On the Road
What we learned from our work in the real world. This week from Ryan Gish, Managing Director, at Kaufman Hall.
Taking a two-fold approach to strategic plan refreshes
I recently called up a health system CSO to check in on the development of their 2030 strategic plan refresh. “That project is on the back burner for now,” she admitted. “Don’t get me wrong, we still care about strengthening our five pillars, and that comprehensive strategy work is vital for generating consensus across our organization, but right now we need to be developing more actionable steps to drive near-term revenue.”
We discussed how both approaches to strategic planning have merit, but that systems are currently in a critical window of time to truly differentiate themselves from their competitors, most of whom have likely adopted similar, comprehensive five-year strategic goals centered around things like improving their consumer experience and strengthening their workforce. The strategic plan systems need today is one that is more targeted and focused on what’s going to yield top-line revenue growth—including things like expanding access, doubling down on clinical documentation improvement, and critically assessing the service portfolio for promising near-term opportunities. Creating this plan doesn’t mean abandoning work on an over-arching five-year plan—those pillars are still vital—but rather focusing on two linked plans that each lay out different goals on separate timelines, but in a complimentary manner. If your organization is trying to balance your larger five-year planning process with your more targeted, nearer-term strategic needs, I’m happy to share more about how organizations are focusing on these in tandem. 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 President Biden extends ACA coverage to DACA recipients, Mississippi’s Medicaid expansion effort collapses, and Oregon leverages Medicaid dollars to help beneficiaries cope with climate change.
To stay up to date, be sure to tune in each weekday morning. Subscribe on Apple, Spotify, Google, or wherever fine podcasts are available.
Thanks for taking the time to read another issue. We’ll be back with more next week but, in the meantime, please visit our archive if you’d like to peruse past editions of this newsletter.
Best regards,
The Gist Weekly team at Kaufman Hall
