United States: Looking Forward/Looking Backward – Day 1 Notes From The Jpmorgan Healthcare Conference

A large amount of wind, much discussion about the U.S healthcare, and the public getting soaked again – if you were thinking about Washington, DC and the new Congress, you're 3,000 miles away from the action. This is the week of the annual JP Morgan Healthcare conference in San Francisco, with many thousands of healthcare operators and investors flooding Union Square again only to be greeted by one of the worst storms and floods in the recent history of the Bay Area.  Can't help thinking about the coincidence of nature providing us with a metaphor for the possible upcoming repeal of the Affordable Care Act.

As usual, the conference provides a keen opportunity to take the pulse of  the healthcare sectors, and we wanted to share with you some of the interesting points from Day One of the conference:

Medicare Advantage:  One of the main themes of the conference was Medicare Advantage as an important target line of business.  We heard that from hospital systems, from traditional Medicaid health plans (such as Centene and Molina) and from Blues plans. Blue Cross Blue Shield of Michigan announced their launch yesterday of an end-to-end administrative support solution for health plans looking to operate a Medicare Advantage plan. Everyone's consensus in the hallways was that Medicare Advantage was the least likely to be changed or hurt by the new Congress and administration, and that population health management and coordinated care works in Medicare Advantage.

Going for Scale: In the face of uncertainty, healthcare companies are reaching for scale.  We saw growth as a key objective across sectors, with many acquisitions and joint ventures being featured in conference presentations. Expect accelerated consolidation to continue in 2017.  We also believe that we will continue to see sophisticated joint ventures to be completed in multiple lines of business and geographies, both for market share and to reduce integration risk.

Telehealth is Now:  Many hospital systems have started providing meaningful amounts of care through telehealth and other web-based modalities.  Kaiser's presentation noted that, of the approximately 100 million annual primary care interactions, an astonishing 52% of them were virtual in the past year.  Kaiser reported 22 million e-visits with doctors.  And workflows are being improved with technology. Advocate now has one million patients in disease registries which are updated daily.  Registry changes trigger electronic alerts to providers and workflows to address patient needs.

The Effect of ACA Repeal:  Several institutions characterized ACA as providing "access to the front door" of American healthcare.  Surprisingly, multiple health systems announced that they were financially neutral on the possible repeal and replacement of the ACA, noting that the benefits of the uninsured now having coverage under the ACA has been to some significant degree reduced or counterbalanced by reimbursement cuts.  To prepare for ACA, health systems are primarily not focusing on possible change, but on improving current operations and reducing expenses. This approach works well not only in the event of political change, but it also positions systems better longer term for population health management and coordinated care.

Rounding Out the Ambulatory Care Network:  Conference attendees were buzzing about the acquisition of ambulatory surgery center operator Surgical Care Affiliates at a valuation of $2.3 billion by UnitedHealth's OptumCare, complementing the Optum physician network and its earlier acquisition of urgent care center operator MedExpress.  Following the first wave of physician group acquisitions, many strategically minded companies are completing more robust ambulatory care networks to create access points and lower-cost solutions that will support risk and value-based contracts.  SCA also brings hospital partnerships with Texas Health Resources, Advocate Health and Indiana University Health.  This also can provide additional customers and distribution channels for Optum's technology and service line offerings.  Similarly, in HCA's conference presentation, they noted HCA's recent acquisitions of urgent care centers and technology companies to drive efficiency.   Envision also noted AmSurg's ambulatory surgery centers as a benefit of their transaction.

Mental Health:    Kaiser is working on predictive modeling for mental health, so as to create outreach when mental health crises in members is likely to occur.  They also are beginning an advertising campaign to help destigmatize mental health. All useful, but still no clear solutions for the mental health illness burden our country faces. Time for a moon shot on depression and anxiety?

We're Not That Different:  Dr. Mario Molina of Molina Healthcare gave an excellent presentation about Molina's Medicaid and Medicare business.  An interesting statistic he cited was that half of all Medicare beneficiaries in the U.S. have an annual income below $24,000. Both Dr. Molina and Michael Neidorff commented about the large number of U.S. citizens below 400% of the U.S. poverty level who are obtaining healthcare through Medicare, Medicaid and the exchanges.  The other interesting comment from Neidorff was that the potentially contemplated shift of Medicaid to state block grants could hurt states growing in population (and would likely be acceptable for states with stable or shrinking population).

Getting It Done for the Right Price:  Here's a shout out for Shawn Leavitt of Comcast who has responsibility for the healthcare benefits and cost for Comcast's approximately 150,000 employees. He and his team have recontracted, squeezed out waste and decreased total healthcare cost, even with an increasing workforce and a better benefit package.  They have increased primary care physician involvement and decreased unneeded emergency room, inpatient and specialty usage. As he put it, a health plan has to do 5 Things Right: provide the right care in the right setting provided by the right providers at the right time at the right price.   They are a good example for other employers as to what can now be done using technology and provider alignment strategies.

Getting Closer to Patients/Consumerism: Consumerism continued to be one of the top three trends discussed at the conference, but with some interesting twists.  Northwell Health developed their own customer relationship management software system to better manage their lifelong relationship with patients.  Many hospital systems have had great success in adoption by patients of apps to help with patient navigation/access, education and other workflows. Advocate was positive in their discussion of the Walgreens retail clinics now operated by Advocate.  Consumerism has moved from possibility to reality, and execution is now the key.

Maximizing Healthy Life: Moving from episodic care to life care was another theme shared by Kaiser, but we were fascinated by Geisinger's announcement of Springboard Health (more on that tomorrow in my Day 2 Notes).

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