Centene, Oak Street Health, Humana — here’s what went down at the 1st day of the J.P. Morgan health conference

The 41st annual J.P. Morgan Healthcare Conference opened Monday at the Westin St. Francis hotel in San Francisco, where a veritable who’s who of the healthcare industry is gathered to talk pricing, patients, public policy and much more. Modern Healthcare will be providing live updates throughout the four-day event.

For more from the conference, check out:

• Day 2
• Day 3
• Key takeaways

Humana added at least 625,000 Medicare Advantage members during open enrollment this year, representing 13.6% year-over-year growth and far outpacing competitors, Chief Financial Officer Susan Diamond said.

“The industry is expected to grow in the high-single-digits,” Diamond said. “We will see some share gains broadly given the strength of our results.”

The growth represents a stark departure from where Humana was this time last year, when it initiated a $1 billion cost-cutting plan after competitors took away market share.

Humana is the nation’s second-largest Medicare Advantage insurer with 5.1 million members as of Sept. 30. UnitedHealthcare is the nation’s largest Medicare Advantage carrier with 7 million members.

Approximately 400,000 of the members Humana gained during open enrollment signed up for Medicare Advantage plans, and 225,000 are dually eligible for Medicare and Medicaid, Diamond said. Half of the company’s new Medicare Advantage members switched from other private insurance carriers, an improvement from the 30% the company reported this time last year. Individuals who were previously enrolled in Medicare Advantage plans are more profitable than individuals aging into the program or those coming from traditional Medicare because their risk scores are cataloged, Diamond said.

Humana credited the growth to its reduced reliance on outside call centers, investment in captive agents and increased bonuses offered to independent agents for marketing its products. The company also focused on developing $0 premium plans.

The company’s primary care centers, operated under the CenterWell and Conviva brands, added approximately 10,000 patients to their rosters during open enrollment, double the amount during the same time last year, Diamond said.

Humana anticipates federal Medicare Advantage rates will rise up to 2% this year, less than half the rate they have increased over the past few years, Diamond said.

The insurer is waiting for the Centers for Medicare and Medicaid Services to release its final rule on how program audits are conducted. Regulators will decide in February whether to eliminate the fee-for-service adjuster and make other changes to risk-adjustment data validation, which insurers oppose.

If regulators remove the fee-for-service adjuster, the “industry is likely to resort to litigation to resolve it, which will tie us all up for a number of years,” Diamond said.

—Nona Tepper

CommonSpirit Health is making progress on its performance improvement goals, pursuing $500 million in cost savings for fiscal 2023.

The Chicago-based nonprofit system has achieved $1.3 billion of its four-year, $2 billion cost-savings goal since Catholic Health Initiatives and Dignity Health combined in 2019 to form CommonSpirit, according to a company presentation shared with investors Monday.

The system has said it sees the most potential savings in limiting purchased services, reassessing its real estate footprint, standardizing ancillary services and managing pharmaceutical spending. To increase efficiency, it has also consolidated vendors and, as of 2020, selected a sole group purchasing organization.

CommonSpirit has recently struggled with high labor costs and lower patient volumes, reporting a $1.85 billion net loss and a -3.8% operating margin for fiscal year 2022, which ended June 30. In October, it issued two bonds for about $1.5 billion to help cover expenses.

In its presentation, the system said it has reduced contract labor expenses by 35% since they peaked in March 2022.

The system also estimated it has $10 billion in accessible capital through issued or refinanced debt. 

—Caroline Hudson

Oak Street Health, the Chicago-based primary-care provider for Medicare-aged patients, plans to open 35 new clinics in 2023, adding to its current footprint of 169 centers in 21 states.

“We are going to be in all the big cities in the country,” said Oak Street Health CEO and co-founder Mike Pykosz. “Once we go to a big city, we go to the smaller submarkets around that city.”

Pykosz’s comments came as Bloomberg News, citing people familiar with the matter, reported that CVS Health was exploring an acquisition of Oak Street that would value it at more than $10 billion, including debt. Representatives for CVS and Oak Street declined to comment to Bloomberg News.

Oak Street is one of a rapidly growing number of corporate investor-backed providers that offer services such as transportation and mental healthcare to seniors with complex conditions to try to reduce hospitalizations. Pykosz estimated that Oak Street’s core demographic of older adults in suburban and urban areas earning up to 300% of the federal poverty level totals roughly 30 million Medicare beneficiaries.

“That creates a $350 billion market opportunity for us,” he said.

Oak Street, which launched in 2013, opened 40 centers last year as it continued to expand its direct-contracting network. “Taking full risk for shared savings fits our model much better,” Pykosz said.

The publicly traded company plans to add approximately 50,000 at-risk patients in 2023.

Oak Street reported $1.58 billion in revenue through the nine months ended Sept. 30, up 53% year-over-year. It recorded a $375.3 million net loss during that time, compared with a $274.3 million net loss in the prior-year period. Oak Street's growing net loss was in part due to $25 million of COVID-19-related expenses, Chief Financial Officer Tim Cook said.

—Alex Kacik

Teladoc Health is better prepared than rival telehealth providers to weather economic headwinds, CEO Jason Gorevic said.

“Many of the small competitors out there, whether they’re public or private, lack the scale to deliver strong financial results consistently,” Gorevic said. “There are a lot of virtual care companies out there that are more narrowly focused, smaller in scale and are nipping at the edges of single [software] solutions.”

Teladoc’s strategy is to sell suites of telehealth offerings to enterprise customers, he said. Three-quarters of its deals with health insurers, health systems and employers include more than one product, he said. The company unveiled an app at the CES electronics trade show last week that combines primary care, mental health and chronic disease management.

The firm had a difficult 2022 and recorded a $9.8 billion net loss for the first three quarters, largely because of a $9.6 billion goodwill impairment charge related to its $18.5 billion acquisition of digital health company Livongo Health in 2020.

Gorevic said Teladoc has $900 million on its balance sheet and positive cash flow and that the goodwill impairment charge doesn’t impact cash or liquidity. Teladoc’s 2022 revenue was approximately $2.4 billion, $1 billion of which came from BetterHelp, its direct-to-consumer mental health service.

Despite inflation and advertising costs, growing the direct-to-consumer telehealth service line remains part of Teladoc’s strategy, Gorevic said.

—Gabriel Perna

Centene’s exchange business is surging while its Medicare Advantage sign-ups slowed during open enrollment for 2023.

“We had soft growth in membership in Medicare as a result of our decision to focus on proprietary distribution channels, consistent with our plan in Medicare for focusing on long-term margin and overall quality,” CEO Sarah London said. London did not say how many Medicare Advantage customers chose its policies for 2023.

The insurer aims to boost Medicare Advantage profitability by signing up more dually eligible Medicare-Medicaid beneficiaries and by improving its star ratings, London said. Centene’s Medicare Advantage enrollment had increased 50% to 1.5 million over a two-year period through Sept. 30. The company has so far experienced better-than-expected sign ups from the health insurance exchanges and is achieving growth in the “high teens,” which likely raises its annual revenue projections, London said. Centene benefited from competitors exiting some markets and from the extension of enhanced federal subsidies and ongoing special enrollments, she said. The open enrollment period ends Jan. 15. The insurer had 2.5 million marketplace customers as of Sept. 30, before 2023 sign-ups began.

Centene is anticipating the eventual resumption of Medicaid eligibility redeterminations, which have been suspended during the continuing COVID-19 public health emergency. The company aims to transition Medicaid enrollees to alternate coverage when states resume reviews that are projected to remove millions from the program’s rolls, Chief Financial Officer Drew Asher said. Centene expects to lose $8 billion in Medicaid revenue once redeterminations are complete, including $4.5 billion this year, he said.

—Nona Tepper