Hello, and welcome to this week’s edition of the Gist Weekly. As always, we appreciate your continued readership and invite you to forward this email to friends and colleagues—please encourage them to subscribe as well!
In the News
What happened in healthcare recently—and what we think about it.
- Harris proposes Medicare home health expansion. During an appearance on The View on Tuesday, Vice President Kamala Harris announced a new healthcare policy goal to expand Medicare coverage to include home health aide visits and other home-based care services. The Democratic presidential nominee explained that the policy is meant to help the “sandwich generation” of working-age parents who may be providing unpaid care to both their young children and aging parents. Harris claimed her proposal would be paid for by expanding Medicare’s drug negotiation program and regulating pharmacy benefit managers. Currently, Medicare’s coverage of home-based care is highly limited and excludes long-term care, while Medicaid coverage is dependent on a very strict asset limit.
- The Gist: In an election that has not featured healthcare coverage expansion as a major theme, this is one of the first concrete healthcare policy items proposed by either candidate. Depending on the generosity of the benefits, Medicare coverage of long-term home-based care could cost $40B annually and would require Congressional action, meaning a Democratic trifecta may be needed for it to become a reality. Additionally, there is a chronic shortage of home healthcare workers, although Medicare coverage could potentially induce more workers into the sector. Despite these challenges, this policy proposal targets a significant shortcoming in our healthcare system, as 88% of seniors would prefer aging at home to living in a facility, and millions of Americans have exited the formal workforce in order to care for aging or disabled relatives.
- Large not-for-profit health systems join to launch new company. On Tuesday, four prominent not-for-profit health systems—Dallas, TX-based Baylor Scott & White Health; Houston, TX-based Memorial Hermann Health System; Winston-Salem, NC-based Novant Health; and Renton, WA-based Providence—announced the formation of a new, for-profit company, Longitude Health. Longitude will begin as three operating companies that will function as startups focused on improving access to complex pharmaceuticals, coordinating care for Medicare Advantage patients, and streamlining billing processes. Its stated goal is to add more operating companies and bring in additional health systems and investors over time. The participating health systems have made undisclosed financial contributions to Longitude, and an executive from each system will serve on its board.
- The Gist: Although initial press releases can only get into so much detail about how Longitude will actually tackle these pressing issues, the weight of the names backing Longitude lends credence to its potential. Providence’s CEO pointed to Truveta and Civica as examples of successful health system collaborations that serve as inspiration for Longitude, but its broader problem-solving mandate is also reminiscent of Haven, the unsuccessful venture to improve employer-sponsored healthcare formed by Amazon, Berkshire Hathaway, and JPMorgan Chase. Longitude may have a leg up on Haven by drawing on the deep industry expertise of its founding members and focusing on issues core to their business operations. These health systems know exactly how hard it can be to create meaningful improvements to our healthcare system, which is a good place to start, albeit no guarantee of success.
- CMS announces initial list for $2 generic drug program. On Tuesday, the Centers for Medicare & Medicaid Services (CMS) revealed a preliminary list of the prescription drugs intended for inclusion in the Medicare $2 Drug List Model. The voluntary model, developed in response to Biden’s 2022 executive order to lower prescription drug costs, encourages Medicare Part D plan sponsors to offer the selected drugs for a flat $2 per drug per month copay without utilization management requirements. The list of 101 generic drugs covers a breadth of common, chronic conditions, as 95% of seniors with prescription drug coverage received at least one of these drugs in 2023. CMS paired the release of this list with a Request for Information, seeking input from stakeholders by Dec. 9, 2024, on the selected drugs and other aspects of the model. The pilot could launch as soon as Jan. 2027.
- The Gist: The Biden administration has made prescription drug price affordability for seniors one of its signature healthcare issues, having already set a $2K annual cap on Medicare out-of-pocket drug spending and a $35 monthly insulin price cap. Although many generic drugs already have copays less than $2, 54% of seniors in 2022 were prescribed at least one generic drug with a copay above that price, and seniors would save more than $4B annually if all generics were capped at $2. However, the ultimate impact of this program depends on which drugs comprise the final list, the degree of voluntary uptake among plan sponsors, and the discretionary priorities of CMS come 2027, which will be well into the next president’s administration.
Plus—what we’ve been reading.
- Holding out for a blockbuster smoking treatment. Published last month in Stat News, this piece dives into the challenges smokers face when trying to quit. About 5 in 6 Americans who tried to quit smoking in 2022 failed, partially due to the lack of effective drugs meant to aid them. A new class of medicine to treat this addiction has not been approved in almost two decades—“a situation that in most other areas of medicine would be unacceptable,” as one expert put it. Although pharmaceutical companies’ disinterest can be attributed to profitability and coverage concerns, the Food and Drug Administration’s (FDA) conservative approach to approving new smoking cessation treatments has not incentivized action either. The author calls for the FDA to adopt an outlook akin to its position on treatments such as depression, which is focused on reducing the severity of a disease rather than eliminating it.
- The Gist: Although the combination of scientific complexity, regulatory hurdles, and financial disincentives have ground the development of new, effective smoking cessation drugs to a halt, the same could have been said of obesity until the recent breakthrough of GLP-1 drugs. Both conditions are significant drivers of serious, high-cost health conditions and mortality, meaning the introduction of a revolutionary smoking cessation drug, much like GLP-1s, could shift the paradigm for healthcare utilization. There’s another lesson to learn from GLP-1s: scientific discovery can occur as much by happenstance as linear progress, so smokers and scientists alike can only hope to get as lucky again.
Graphic of the Week
A key insight illustrated in infographic form.
A closer look at provider subsides
This week’s graphic dives into a growing challenge facing health systems’ physician enterprises. According to Kaufman Hall’s Physician Flash Report, the median physician subsidy increased 3% between Q2 2023 and Q2 2024, bringing the subsidy up to nearly $300k per full-time equivalent physician. When looking at both physicians and advanced practice providers (APPs), the median subsidy per provider was a more palatable $232.1K, but that figure is also 3% higher than last year. Increasing expenses, particularly labor costs, are notable factors driving these losses. Additionally, subsidies vary greatly by specialty, with median physician surgical subsidies more than double those of primary care physicians. Across specialties, provider subsidies were much lower than physician subsidies, with median subsidies in the surgical provider workforce cut by roughly one third when accounting for APPs. As provider subsidies continue to rise, many systems are placing a greater emphasis on APP productivity as a way to manage their returns on investment in the physician enterprise space.
This Week at Kaufman Hall
What our experts are saying about key issues in healthcare.
The volume of hospital and health system merger & acquisition (M&A) activity showed significant growth in Q3 2024, influenced in part by transactions related to the Steward Health Care bankruptcy.
In its Q3 M&A Activity Report for hospital and health system transactions, Kaufman Hall’s Merger & Acquisitions practice group discusses how transactions related to the Steward bankruptcy reflect current market conditions for M&A activity, and also addresses health system efforts to grow through expansion into new, geographically distinct markets and ongoing portfolio realignment for large, national health systems.
On Our Podcast
The Gist Healthcare Podcast—all the headlines in healthcare policy, business, and more, in ten minutes or less every other weekday morning.
Interviews are returning to the Gist Healthcare podcast starting next week. In the coming weeks, host J. Carlisle Larsen will discuss the future of Medicare Advantage, as well as look at a novel postpartum hospital-at-home program that’s being piloted in Massachusetts.
This Monday, Dan Diamond, national health reporter for the Washington Post, joins JC to talk about how healthcare policy has played a role in the 2024 election.
To stay up to date, be sure to tune in every Monday, Wednesday, and Friday morning. Subscribe on Apple, Spotify, Google, or wherever fine podcasts are available.
Thanks for reading! We’ll see you next Friday with a new edition. 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.
Best regards,
The Gist Weekly team at Kaufman Hall
