J.P. Morgan Healthcare Conference: Day 1 notebook

The 2015 J.P. Morgan Healthcare Conference in San Francisco got off to a feverish start Monday. Here are some quick observations and news tidbits.

Investor-owned hospital companies HCA and LifePoint gave glowing predictions for their 2014 full-year finances. Less certain is what those chains would do if the U.S. Supreme Court invalidates a key component of the healthcare law.

HCA CEO Milton Johnson did not immediately address the King v. Burwell case, which has the potential to take away premium subsidies from people who buy health insurance on the federal exchange. But one analyst said HCA is mostly “optimistic on workarounds if necessary.”

When I asked LifePoint CEO Bill Carpenter if his company had some kind of plan in case the justices did strike down subsidies, he said there is. But executives will “keep our heads down” and stay hopeful the Supreme Court won't make the “wrong decision” and overturn premium subsidies.

HCA operates mostly in urban markets. LifePoint is the opposite, operating sole community hospitals in smaller rural towns. But both have a large chunk of their hospitals in southern states, most of which use the federal exchange.

Advocate Health Care CEO Jim Skogsbergh told investors the pending merger with NorthShore University HealthSystem requires approval from the federal government, which is expected by March. The new $7 billion organization would be the largest in the Chicagoland area, but it would still have only a 22% market share, which Skogsbergh said was symptomatic of the “fragmented” delivery system in the region.

Executives at Banner Health, Phoenix, said they are similarly in the final stages of a pending deal. Banner is acquiring University of Arizona Health Network. Banner Chief Financial Officer Dennis Dahlen said he and others are “relatively confident it will close” in the next 60 days. But UAHN has had far more financial problems than originally thought. Last year, UAHN lost almost $66 million. Dahlen said much of the red ink was associated with one-time charges, including the installation of its Epic Systems Corp. electronic health-record system.

Partners HealthCare CFO Peter Markell defended his system's acquisition strategy in Boston. Partners, the parent of Massachusetts General Hospital and Brigham and Women's Hospital, is in the process of scooping up several hospitals in the area, but the state attorney general has gotten involved. Markell said Partners is not adding hospitals to raise prices, a charge raised by critics. The system is trying to broaden its patient population to implement value-based care strategies, he said.

Catholic hospital system Trinity Health announced a new transaction Monday. It created a joint venture with Heritage Provider Network to build care-coordination networks across the country. Trinity and Heritage will work with health insurers to build risk-based payments for the care networks.

In the next three to five years, Centene Corp. will stand as one of the four to five remaining big players in the health insurance industry, Centene CEO Michael Neidorff said.

He said UnitedHealth Group and Anthem will be around, and there will be some combination of Aetna, Cigna Corp. or Humana. The other small-cap insurers would consequently be gobbled up.

It was a bold prediction, given that Centene relies heavily on Medicaid, while the other big payers have other massive business lines such as the employer group and Medicare Advantage. However, Neidorff provided little detail as to how Centene would pursue domestic mergers and acquisitions this year. Analysts widely believe 2015 will feature some consolidation among insurers.

The Centers for Disease Control and Prevention has labeled this year's flu season as potentially severe. That doesn't mean health insurers have seen an uptick in claims from patients contracting the disease.

“It's too early to say it's peaked or not,” Centene's Neidorff said. “Hopefully, it has peaked and won't be an issue.”

Cigna CEO David Cordani was diplomatic when describing the flu season, saying “there's an elevation” of flu cases compared with past year's. He did not say how it was affecting Cigna's medical cost figures.

Bob Hugin, CEO of pharmaceutical giant Celgene Corp., said cancer drug Revlimid will continue to be a main source of revenue growth this year, representing more than a quarter of sales. But another cancer drug is becoming just as important to Celgene's lineup.

By 2020, Hugin said he expects Abraxane sales will hit $2.2 billion. Abraxane is an injectable drug that treats breast and pancreatic cancers. Celgene bought the company that made Abraxane in 2010.

The creator of that profitable wonder drug? Dr. Patrick Soon-Shiong, one of the richest people in healthcare who now heads a separate digital technology company and is leading cancer genomics at Providence Health & Services in Renton, Wash.

Follow Bob Herman on Twitter: @MHbherman