JPM 2018 Insights

It was widely reported in early January 2018 that, for the first time in history, healthcare became the United States’ largest source of jobs, surpassing the manufacturing and retail sectors. For many, the surprise was not that it happened, but that it happened so quickly. What else was not surprising? The growth exhibited in JPMorgan 2018 earlier this month.

While it is impossible to know the real numbers, it felt like there were more than the 8,000 registered attendees and 50,000 ancillary visitors to San Francisco for the big show. What did we learn?

Marc O'Connor

Healthcare companies continue to expand their services through consolidation of all types

CVS/Aetna, Diplomat/National Pharmaceutical Services (PBM), Express Scripts/eviCore, McKesson/RxCrossroads, Cardinal/Medtronic Patient Care and many more mergers are recently completed or in the works. It looks like everyone in healthcare is trying to integrate vertically. What’s the motivation? Is it to provide more holistic solutions and value? Is it to demonstrate the growth analysts want to see? Is it about staying competitive or delivering a broader value message?

Sometimes these partnerships seem symbiotic. But not always. And they are not necessarily about more control of patients. CVS/Aetna is more about process; streamlining the interactions between Payers, PBMs and pharmacies in what can often be a contentious relationship.

Dan Michelson, CEO, Strata Decision Technology wrote in Becker’s Hospital Review, “The size and scale of these mergers is pretty stunning. Taking the pulse of the room, two things were clear. The first is there is no definition of scale anymore in this market. The second is that, despite this flurry of mergers, ‘getting really big’ is not the only destination.”

Each of these entities has their own rationale for consolidation. The ones that demonstrate themselves viable, as healthcare continues its grinding path to value, remain to be seen.

Provider integration is becoming a bigger talking point

Payers realize having real engagement and closer connectivity with providers is a valuable prospect. Payers also want providers to stay independent in the interest of competition. Pharmaceutical manufacturers want to improve patient access to their therapies and services like health IT want to connect to the big EHRs (a data play with some). I saw more focus on the provider relationship on more slides than in years past.

It is notable that visits per provider are decreasing as are hospital occupancy rates. More people are finding care somewhere else. This is the result of more than can be accounted for here, but high deductibles are a deterrent to care. More positively, medications are helping people avoid acute conditions. This seems like it should be a positive indication, yet overall healthcare spending continues to rise as does the number of rural hospitals closing their doors. 

“The current healthcare system is not suited to address the growing need for chronic care management.” – Humana CEO Bruce Broussard

Bruce Broussard produced one of the most succinct snapshots on the need for improvement in chronic care management I have seen. Flaws in incentives, structure, and capability are the root causes. More specifically he shared:

●      Incentives - Over 60% of traditional Medicare payments are still not tied to value or quality

●      Structure - Fragmented information makes it challenging to integrate the holistic health journey. Management of lifestyle activities is not easily integrated with the healthcare delivery system

●      Capability - Most providers have little experience in value-based care
 

Boris Lawdig with Insider Louisville summarizes Mr. Broussard’s presentations and comments here.

We believe a significant part of what we do, care management, will be a prime opportunity for patient-centric care to become more of a series of valuable, actionable items than a buzzword capable of improving care for the most difficult to treat, costly, chronically ill patients.

The grinding shift to value will continue

There are still plenty of carrots and sticks to fuel the shift from fee-for-service to value. These include ACO models (including shared savings), MCOs (star ratings) and the aforementioned payer desire to build connectivity with providers.

We believe, however, that the healthcare trend with the greatest potential to deliver gains in value is outcomes-based contracts between pharmaceutical manufacturers and payers. The first were announced within the last three years-think 2016’s Novartis/Entresto/Harvard Pilgrim arrangement or Amgen/Repatha/Harvard Pilgrim. As such, they are still in a stage of infancy and are little more than rebate programs based on simple, volumetric math. But the tail winds driving the shift to value remain, and we believe that smart, next-generation OBCs that center on care management, provider engagement, and associated adherence improvements have the potential to change the game.

Again, from Mr. Michelson, “...there was a consistent theme regarding the need to bring clinical and financial data together to truly understand value. The primary focus is to translate analytics not just into insights, but action.”

As I wrote prior to JPMorgan 2018, “Harvard Pilgrim’s deal with Amgen broke the dam. Many industry experts still do not believe this will be a big deal. We disagree. Plan sponsors will continue to demand these agreements, particularly for new, costly drugs. They should be a great thing for all concerned. These contracts create a direct agreement between payers and manufacturers. And with the right supplements, including care management services that improve adherence and generate patient data critical to the fair adjudication of OBCs, we may well be at the tipping point of real healthcare industry alignment.” Read more.

Marc O’Connor is chief operating officer for Curant Health.