The Annual J.P. Morgan Healthcare Conference kicked off Monday virtually. Reporters Tara Bannow, Jessica Kim Cohen, Nona Tepper and Ginger Christ will provide updates and daily observations here throughout the conference. You can also find additional stories on ModernHealthcare.com or Twitter.
Thursday, Jan. 14
Three more states are now aiming to claw back funds that they say Molina Healthcare’s Medicaid plans did not spend on medical care, according to CEO Joe Zubretsky.
California, Ohio and Michigan all submitted additional risk-sharing payments to the CMS in late December. Seven other states where Molina offers Medicaid plans have also enacted temporary retroactive rate refunds. California seeks to recoup payments from July 2019, and Michigan aims to take back funds from October 2019, Zubretsky said. He did not mention Ohio’s timeline request for back payments. He said he believes CMS will approve the charges, which he called “aggressively overreached” with states aiming to claw back whatever they can to cover the costs brought by the COVID-19 pandemic.
“Many of these will be extended into 2021, as they relate to COVID and the pandemic itself extending to 2021,” Zubretsky said. “We believe they’re temporary.”
The surprise increase in risk-sharing payments will take about $3.50 out of Molina fourth-quarter earnings per share price. Zubretsky expects the costs to continue into 2021. At the end of the year, he expects patient deferrals and caring for COVID-19 medical costs to negatively impact the insurer’s stock price by $2 per share.
On the bright side, the company received a one-time boost from the federal government over the ACA’s risk-corridor lawsuit. Zubretsky did not clarify how much the insurer received from the case, but said he expected it to add $1 to the company’s fourth-quarter earnings price per share.
He added that the company added another 100,000 Medicaid members in the fourth quarter of 2020. However, growth in the total number of Medicaid members the company insurers was offset by its exit from Puerto Rico. Molina counts 3.5 million members as part of its rolls. Going forward, he expects states restarting their Medicaid eligibility redetermination requirements to positively impact Molina’s bottom line.
“We did assume protracted and measured approach by states rolling members off the books, with the earliest they’d do it being May 1 instead of March 1,” Zubretsky said. “They’d do it in a very measured way, it could be a temporary phenomenon that could increase our outlook for ‘21.”
The company also expects to hear back about a bid it submitted to provide its managed-care services to Oklahoma’s Medicaid population “very soon,” Zubretsky said. In Kentucky, he expects the company’s Medicaid membership to remain steady, with a court ruling that required a sixth additional health plan to the state’s Medicaid program not to impact the company’s earlier novation of the Passport Medicaid contract. He said Molina has incorporated Passport’s 320,000 Medicaid members into its 2021 guidance.
“If continuity of care is really important to state, then we have every reason to believe we’ll keep most of the Passport members,” Zubretsky said.
When it comes to the company’s ACA offerings, he said he expects marketplace revenues to break even for 2020, and turn a mid-to-single-digit pre-tax profit in 2021. Molina is starting this year with 500,000 marketplace members on its rolls.
He said he expects to earn $23 billion in premium in 2021, a 25% increase over 2020. In addition to including revenue from Passport, these numbers include profits gained from its recent acquisitions of Magellan Health.
The company is still waiting to hear from New York authorities about its $380 plan to acquire Affinity Health Plan. Molina has received federal anti-trust approval, Zubretsky said. He expects the acquisition to close by the end of the second quarter. If approved, he expects that to add up to $650 million to Molina’s bottom line.
“Diversification is the best risk-management strategy one can execute,” Zubretsky said.
Wednesday, Jan. 14
Intuitive Surgical, the company credited with popularizing robotic surgery, is planning its next steps by creating tools that will help hospitals analyze data from their surgical systems.
The products are meant to allow surgeons and their teams use patient outcome data to evaluate robotic surgical performance. Intuitive Surgical, which released the da Vinci system in the early 2000s, has been piloting the tools to see if it will help develop better surgical techniques.
Intuitive Surgical doesn’t plan to monetize all of its software analytics tools.
“I don’t expect them to be revenue generators,” CEO Gary Guthart said, referring to them as “strong supporters of the ecosystem.”
The idea is that physicians aren’t interested in purchasing a piece of equipment; they’re interested in purchasing something that will improve surgical procedures—and providing data to inform that process helps the company tap into that.
Intuitive Surgical expects its 2020 revenue to be down 3% year-over-year on account of lower utilization linked to low procedure volumes during the COVID-19 pandemic.
It hasn’t posted revenue guidance for the 2021 year, with executives citing various challenges to forecasting earnings in the near-term. That not only include the pandemic, but also a trend in which regulatory agencies in recent years have been taking longer to review and approve robotic-assisted surgery products, according to Guthart.
“That’s an issue broader than Intuitive, but it has some longer-term implications in terms of how long it takes to bring innovations to market and what it costs to do that,” he said. “We have to configure ourselves to do that well.”
Walgreens is pulling out all the stops to turn around its slumping finances and stay relevant, even launching credit cards and a new startup company.
Deerfield, Ill.-based Walgreens Boots Alliance announced Wednesday it’s partnering with Synchrony and Mastercard to launch credit cards and a prepaid debit card in the coming months.
The pharmacy chain also is launching a new healthcare delivery model designed to lower costs and improve patient outcomes, Chief Financial Officer James Kehoe said during a presentation at this year’s virtual J.P. Morgan Healthcare Conference. He said Walgreens has a team of about 200 people working on the “company within a company,” which is expected to launch in the fourth quarter.
Walgreens posted a $440 million operating loss on $36.3 billion in revenue in the quarter ended Nov. 30, 2020. That represented a big downward swing from the company’s $1 billion operating gain in the prior-year period.
Kehoe said Walgreens expects to launch its reloadable debit card around May, followed by a co-branded credit card with Synchrony around September. In addition to benefiting customers, he said the cards will “build a significant flow of income” for Walgreens. The cards will connect with Walgreens’ new customer loyalty program, myWalgreens, which launched November 2020.
“We’re really excited about this,” Alex Gourlay, Walgreens’ co-chief operating officer, said during the company’s presentation. “It not only drives accretion, but we believe it drives more stickiness, more loyalty and more customers to the Walgreens platform.”
More nebulous was Kehoe’s “teaser” about Walgreens’ forthcoming start-up. He said it’s designed to simplify the healthcare system for patients with multiple conditions. It will incorporate medication, provider and insurance information in a portal with both digital and physical entry points.
“Ultimately it will only be a success if it improves health outcomes and enhances the patient experience and lowers healthcare costs,” Kehoe said.
Despite Walgreens’ capacity to vaccinate up to 25 million people against COVID-19 per month, the company only expects to vaccinate about 30 million people against the coronavirus by the end of the summer, Gourlay said. He predicted mass vaccination for COVID-19 will take place in March or April.
Cerner has saved millions of dollars thanks to changes in its operating model to improve its margin, according to company executives.
Cerner’s approaching a cumulative $300 million in annualized cost reductions since launching a set of 165 cost cutting, portfolio management and business simplification efforts two years ago, according to Brent Shafer, Cerner's CEO. As part of that project, Cerner’s also simplified its portfolio, restructuring 25,000 features it offers into around 400 products.
The company is considering divestitures in 2021 as it continues to refine its portfolio and sell businesses that executives don’t think will drive growth, as well as further invest into areas executives are prioritizing, such as Cerner’s data business—developing products that build on secondary use of clinical data held in its systems.
“This has been a significant area of focus for us on an 18-month basis,” Donald Trigg, Cerner's president, said of the company’s data business.
Cerner in 2019 announced its Learning Health Network, a program that automatically collects de-identified patient data from systems, including the EHR, to share with researchers at health systems, universities and pharmaceutical and life sciences companies. Today, there are 55 organizations participating in the network, representing 92 million patients over more than 500 million encounters.
Cerner in April offered free access to de-identified COVID-19 patient data to some health systems and research centers studying the virus and vaccine development, which today includes nearly 500,000 patient records, Shafer said. The dataset is stored on a company research tool that’s part of Cerner’s collaboration with AWS, Amazon’s cloud arm.
Shafer said Cerner’s ability to aggregate clinical data “positions us for growth in adjacent markets,” such as providing real-world evidence for clinical trials.
“While much of this growth is being driven organically, we also see opportunities to accelerate growth inorganically,” he said, citing the company’s investment in Elligo Health Research and planned $375 million acquisition of Kantar Health. “Both complement our data-as-a-service growth opportunity.”
Tuesday, Jan. 12
During the first two weeks of the COVID-19 crisis, Henry Ford Health System officials watched net revenue drop to half its normal levels. Robin Damschroder, chief financial officer of the Detroit-based system, said revenue remained at those low levels for four weeks.
But, then Henry Ford recovered.
At the end of its most recent third quarter on Sept. 30, Henry Ford reported operating income of $264 million, up 178% year over year. The health system’s strong performance was due almost entirely to federal COVID-19 relief funding, to the tune of $357.2 million in CARES Act grants.
At the end of 2020, Damschroder credited the CARES Act funding, FEMA relief and swift management action with helping Henry Ford achieve a positive “net COVID-19 impact of $382 million.”
Damschroder expects 2021 to continue to challenge the health system, with higher costs related to coronavirus care, significant reimbursement and labor pressures, and the opening of several new facilities generating an operating margin of 0.5%. Henry Ford also expects changes to the 340B drug pricing plan to decrease its bottom line by $35 million.
“We’ve faced tough times before, we will again, we do prevail, and we believe we will this time as well,” Damschroder said.
Next week, the health system plans to open a $155 million destination cancer center. Henry Ford CEO Wright Lassiter III said the health system is also working “very aggressively” with Acadia Health to consolidate two of its behavioral health facilities into a single site in Detroit. They are waiting for a certificate of need from the state. Henry Ford has also entered into an academic research partnership with Michigan State University, although Lassiter declined to comment on how the agreement would impact Henry Ford’s bottom line.
“During the pandemic, Henry Ford has been busy,” Lassiter said. “Busy responding to a crisis in our community and busy planning for the future.”
He noted that Detroit experienced the highest number of coronavirus cases and deaths across the state of Michigan, with the virus disproportionately impacting the city’s Black residents. While Black residents comprise 14% of Detroit’s population, Lassiter said they accounted for 40% of the city’s COVID-19 deaths. He added that Henry Ford has been working with the city officials and the governor’s task force about how to reopen the state safely.
The hospital system expects to experience pent-up demand for patient visits during the second and third quarters of 2021 and return to normal growth rates in 2022. That year, the health system expects operating margins to reach up to 3.5%.
“The Board and I are open to partnerships outside the state of Michigan,” Lassiter said, noting that Henry Ford is open to partnering with health systems outside the U.S.
In March, Henry Ford opened the first internationally-licensed hospital in Saudi Arabia. In October, the provider opened its first hospital in southern India. Lassiter said Henry Ford plans to open another hospital in southern India in the next couple of years.
Cigna Corp. CEO David Cordani is keeping track of two trends in 2021: consolidation between specialty pharmaceutical companies and insurers and integration in medical and mental health services.
Both of those issues have been popping up regularly in conversations with employer clients. Companies want to restrain the costs of specialty pharmaceuticals—which Cordani said represent the highest area of healthcare spend—and addressing the mental health needs of their employees. Cigna was responsible for 37.2 million behavioral health patients at the end of the third quarter of 2020.
“How do you redefine loneliness, depression, stress and have additional product innovation?” Cordani said.
The Bloomfield, Conn.-based insurer recently restructured all of its behavioral health tools under its Evernorth brand to further integrate its medical and mental health services for its commercial customers. Cigna also completed its integration of Express Scripts into its Evernorth business. By the end of the third quarter, it fulfilled 381 million pharmacy prescriptions, a 22% increase compared with the same period of the previous year.
This year, Cigna’s health services portfolio brand Evernorth will expand its relationship with Amazon Prime and will use Express Scripts to provide patients home delivery from pharmacies in their network. Although Cigna technically competes with Amazon for its pharmacy business, Cordani said he views the company’s partnership with the e-commerce giant as positive and the future “may give rise to further collaboration with them.”
“Amazon is partner, and Amazon is a competitor,” Cordani said.
The company also aims to grow its pharmacy service portfolio in 2021, which could drive membership its commercial and Medicaid businesses. Cordani believes states may carve out sections of their Medicaid population and partner with Cigna to support their behavioral and pharmaceutical needs.
“We do believe derivatives, or state’s subsets of the Medicaid population, could present an additional opportunity for our book of business,” Cordani said.
Cigna hasn't felt the strain of deferred care, since 85% of its commercial customers are self-funded. About 85% of the company’s Medicare Advantage customers are also enrolled in some form of value-based care.
Going forward, the company is focusing on growing its Medicare Advantage membership. By the end of 2021, it expects to increase its Advantage membership 15%. By the end of 2024, Cigna aims to have captured half the Medicare Advantage market, with Cordani counting on the company’s expansion in new and existing markets and a new PPO plan to drive growth. The company counted 1.6 million government customers at the end of its third quarter, a designation that includes Medicare Advantage, Medicare supplement, and Medicare Part D plans for seniors, Medicaid plans, and individual health insurance plans both on and off the public exchanges.
He expects the Biden administration to expand subsidies for the Affordable Care Act exchanges and called the Trump administration’s rules around price transparency and Medicare D rebates as wholly unhelpful to consumers and payers and costly for the federal government to administer.
“We would expect the new administration to look at the more recent acts of the current administration and see if they think it’s prudent,” Cordani said.
Allscripts Healthcare Solutions continues to work toward a margin improvement plan it announced in 2019.
Allscripts has set two targets as part of its plan to improve the company’s adjusted earnings before interest, taxes, depreciation and amortization margin. The company’s long-term target is an 18-20% margin for its core clinical and financial solutions segment, as well as a more than 30% margin for its data, analytics and care coordination segment.
For 2020’s fourth quarter, Allscripts expects its overall margin to be in the range of 20.5-21.5%, up from 13.7% in the first quarter of the year.
“We’ve made a lot of changes,” Black said. “We made them very quickly. We made them very efficiently.”
Allscripts plans to recalibrate its margin target for the data, analytics and care coordination segment, since that business includes two subsidiaries that Allscripts sold in 2020—part of a “portfolio reset” Allscripts pursued last year to better focus its products, according to Black. With cash from the divestitures, Allscripts repurchased more than $280 million in stock in 2020.
The two businesses that Allscripts sold, CarePort Health and EPSi, collectively represented less than 10% of the company’s consolidated revenue.
Allscripts plans to invest in its provider business, as well as its payer and life sciences division, said Rick Poulton, the company’s president.
Black called out the payer and life sciences division, which Allscripts rebranded as Veradigm in 2018, as a segment that distinguishes the company from its competitors in the EHR market. Veradigm struck some significant deals in recent years, including agreements with Microsoft and Allscripts competitor NextGen Healthcare.
Allscripts in 2021 also plans to expand its footprint in the ambulatory space and internationally, as well as to encourage adoption of its interoperability tools.
“Our future growth is going to come from a number of different areas, but specifically around the data and assets that we have,” Black said.
AMN Healthcare's preliminary fourth quarter 2020 revenue figures project an 8% increase over their initial expectations. The increase reflects “strong demand” for the company’s services in all sectors, namely its nurse staffing segment, the company said.
AMN Healthcare expects consolidated fourth-quarter revenue to be between $623 million and $628 million, up from the $575 million to $585 million in revenue the staffing firm projected in November when it released third quarter financials. In the fourth quarter of 2019, AMN Healthcare recorded revenue of $587 million, 6% lower than the projections for the last quarter of 2020.
During the company’s session at the conference Tuesday, AMN Healthcare CEO Susan Salka said the company is seeing increased pandemic-driven demand across the board for clinicians. Likewise, she said there is a greater supply of clinicians entering the traveler industry.
“It’s very positive for the industry overall that we have so many first-time travelers,” Salka said, adding, “Supply is growing but it’s not nearly enough to keep up with the very high demand the industry is seeing.”
In March, LabCorp became the first commercial lab to launch a COVID-19 PCR test. Five months later, the company was conducting at least 275,000 tests per day, and returning results in up to two days.
The testing company has kept up the past and expanded its coronavirus-related contributions, according to CEO Adam Schechter. LabCorp has been involved in more than 400 different trials related to COVID-19. In December, the Burlington, N.C.-based company received emergency use authorization for an at-home COVID-19 test, named Pixel, which now makes up 7% of its bottom-line, Schechter said. LabCorp is currently working with the Centers for Disease Control and Prevention to sequence the virus so officials can understand how it mutates over time.
“2020 was a big year for LabCorp,” Schechter said. “We were involved in almost every aspect of the pandemic.”
During its most recent third quarter ended Oct. 27, LabCorp reported $3.9 billion in revenue, up 33% from $2.93 billion during the same time in 2019. A large portion of organic revenue growth, or 32.6%, came from LabCorp’s COVID-19 testing. Despite the bump from PCR and antibody testing, LabCorp’s base diagnostic business was down 1.9% year over year due to patients avoiding labs because of the pandemic and lower Medicare and Medicaid pricing. Schechter said he expects the company’s base diagnostic business to pick up during the second half of 2021 once the weather warms and more vaccines have been administered.
He does not expect demand for coronavirus testing to end once a large number of the population has been vaccinated since there is still so little data on who is immune to the virus and for how long.
“This time next year, if you have a fever, didn’t feel well and went to a physician, I think they’d still do a PCR test on you,” Schechter said.
Schechter said he does not expect the federal emergency authorization period to extend beyond March, which would mean the government would no longer cover the upfront cost of PCR tests for consumers. He expects pricing for the company’s tests to return to where they were before the coronavirus and cost about $51 each. Reimbursement for these tests will then either come out of consumers’ or payers’ pocketbooks.
“I do think it will move back into the commercial area versus the government paying for it, and then certainly they’ll be additional competition for pricing,” Schechter said.
The pandemic has underscored the need for hospitals and healthcare systems to have state-of-the-art testing systems, Schechter said, with providers questioning if they want to make the equipment investment and driven interest in LabCorp’s services. Going forward, he said the company sees significant opportunities for the acquisition of hospital and local labs. He also expected the company’s partnership with Walgreens to continue. The company now has 250 sites “fully open or very close to being open” and, over the next two years, is on track to build out around 600 sites, Schechter said.
“I believe we’ll have more deals this year than in previous years,” Schechter said.
But, the greatest growth opportunity for LabCorp lies in drug development, with the company investing in its late-stage pre-clinical trial systems to attract larger pharmaceutical customers. Six years ago, the company paid $5.6 billion to acquire drug development giant Convance. Although Schechter said merging the two companies has taken “much longer than I expected,” the COVID-19 pandemic has underscored the value proposition for having one company that can offer clinical trials, testing and drug development. LabCorp recently signed a large oncology customer, Schechter said, although he did not disclose its name.
“As we focus on specialty areas like oncology, you can get to market much faster, and that’s where having a combined company makes a big difference,” Schechter said.
Ascension is going all-in on ambulatory surgery centers. The health system said Tuesday it plans to double its current footprint over the next two years.
Ambulatory surgery is among the business units the St. Louis-based system announced at the J.P. Morgan Healthcare Conference it has targeted for growth. The company’s presentation says it currently has 61 ambulatory surgery centers in addition to its 145 hospitals, 53 senior living sites and eight health plans.
It’s part of Ascension’s broader strategy to expand its ambulatory footprint—not just surgery centers, but pharmacy, imaging and laboratories, said Eduardo Conrado, the system’s chief strategy and innovations officer. Ascension also plans to beef up its post-acute and at-home care offerings. Together, that covers up to 60% of the total cost of care at Ascension, Conrado said.
On the pharmacy side, Ascension is scaling its retail business with two regional distribution hubs. The system is expanding its existing hub in Michigan and building another in Austin, Texas for specialty and mail-order drugs that’s expected to open April 1, Conrado said.
Ascension on Jan. 6 issued a request for proposals to find a partner for its lab segment. The health system wants to standardize its lab practices, lower costs and become more consumer friendly, Conrado said.
The $90 million investment Ascension made into its revenue-cycle vendor, R1 RCM, in 2016 is now valued at more than $1.8 billion, said Elizabeth Foshage, the system’s chief financial officer. She added that in the first five years of that relationship, R1 has produced more than $325 million in “operational value,” or lower costs and improved collections.
CVS Health said Tuesday it has given more than 700,000 COVID-19 vaccines in long-term care facilities—about 10% of total vaccines administered.
More than 40,000 long-term care facilities picked the pharmacy chain to handle its vaccination, Karen Lynch, the company’s executive vice president, told a virtual audience at the J.P. Morgan Healthcare Conference. Lynch said the company expects to ramp up its COVID vaccinations to between 20 million and 25 million once the federal program opens up.
CVS CEO Larry Merlo said the typical long-term care facility has 80 residents. This week, CVS will host over 10,000 clinics in those facilities, which will cover about 1 million vaccinations. He said delivering the shots to those facilities is not considered mass vaccination.
“When we get into the retail phase, we’ll do almost 1 million vaccines a day,” said Merlo, who will hand over the CEO reins to Lynch in February.
Lynch, who is also Aetna’s president, said more than 6 million people who tested positive for COVID at CVS locations are not currently CVS pharmacy customers, which provides the company a “tremendous opportunity” to expand its customer base.
Pfizer plans to keep its prices for the COVID-19 vaccine low throughout the pandemic, but down the line could raise the cost to align with other vaccines, CEO Albert Bourla said.
Pfizer expects to manufacture 2 billion doses of the vaccine in 2021.
Pfizer, like Moderna, has priced the COVID-19 vaccine low compared to other vaccines on account of the COVID-19 crisis. In the future, after the pandemic begins to subside, Pfizer might raise the cost to align with “prices that reflect the cutting-edge technology” used in the product, according to Bourla.
The COVID-19 vaccines developed by Pfizer-BioNTech and Moderna are among the first vaccines to leverage messenger RNA, also known as mRNA.
A COVID-19 vaccine might continue to be used after the pandemic if new strains of the virus emerge or research indicates booster doses are needed on a continuous basis.
When posting earnings results for 2020’s fourth quarter, which Pfizer will release in February, the company will report on revenue from the COVID-19 vaccine separately from the rest of the company’s results. The company’s guidance to date has assumed no revenue from the COVID-19 vaccine.
Excluding any revenue impact from the vaccine, Pfizer experts to see compound annual revenue growth rate of at least 6% through 2025, as well as double-digit growth on the bottom line, according to Bourla. The company posted $12.1 billion in revenue for 2020’s third quarter, down 4.3% year-over-year.
Pfizer is continuing to look at how mRNA technology could be used in other vaccines. For the past three years, the company has been researching whether an mRNA vaccine could be used for influenza.
“We think that mRNA can completely disrupt the flu market,” Bourla said.
Athenahealth on Tuesday announced a multiyear agreement with Humana to add the health insurer’s member data into Athenahealth’s electronic health record system.
Adding health plan data to patients’ medical records will help healthcare providers with care management, such as identifying gaps in care and easing electronic prior authorization, according to the companies. They plan to build automatic alerts for annual appointments and tools that automatically remind users to schedule blood pressure screenings and eye exams for diabetes patients.
The companies didn't disclose financial details of the agreement.
Athenahealth is also working with UnitedHealthcare to bring tools related to cost estimates, referral management and pre-visit preparation into the EHR.
“We’re very happy about these relationships with these two very influential payers,” said Athenahealth CEO Bob Segert at the J.P. Morgan Healthcare Conference. “We expect to see that continue to extend to other payers as we continue to roll out these capabilities.”
Epic Systems Corp., a competitor to Athenahealth, last year signed a contract with Health Care Service Corp. for a data platform that links the health insurer’s health plans with provider organizations, with similar goals of improving care management and prior authorization.
Athenahealth, which went private in 2019 after an acquisition by two private equity firms, on Tuesday also shared a snapshot of its 2020 earnings results.
Athenahealth expects to earn nearly $1.9 billion in operating revenue for 2020, up from $1.8 billion in 2019 and $1.7 billion in 2018. The company expects to see $404 million in bookings for 2020, up from $358 million in 2019 and $335 million in 2018.
In 2017, the last full year Athenahealth reported earnings results as a public company, it posted $1.2 billion in revenue, up from $1.1 billion in 2016. Bookings were $293 million for 2017, compared with $348 million the prior year.
“We expect operating revenue to grow at double digits on an as-reported basis in ‘21,” Segert said, with bookings expected to be in the range of $460 million to $480 million in 2021. “Athenahealth is a transformed business. We have a focused growth strategy.”
Private equity firm Veritas Capital and Evergreen Coast Capital, an affiliate of hedge fund Elliott Management, purchased Athenahealth in 2019 for $5.7 billion—closing out a tumultuous, monthslong question over whether Athenahealth would sell itself. The firms combined the company with Virence Health, a value-based care business Veritas acquired from GE Healthcare in 2018.
AdventHealth said Tuesday its Epic install is still on track to go live systemwide by the end of 2022, but it’s going to come at a steep cost.
Leaders with the Altamonte Springs, Fla.-based health system, which has nearly 50 hospitals, revealed at the J.P. Morgan Healthcare Conference it will cost $660 million to build out and deploy the new electronic health record platform. AdventHealth announced early last year it would transition to Epic from a combination of Cerner Corp., Athenahealth and Homecare Homebase.
“Our desire to connect one seamless network for consumers is very important to us,” said Paul Rathbun, AdventHealth’s chief financial officer said during the company’s virtual presentation. “We believe that to accomplish that we’re going to have to change our EMR system.”
Of that $660 million, $370 million is capital costs, Rathbun said. The remaining $290 million is one-time operating costs to deploy the system, he said. He added installing Epic will help the system connect with its non-employed providers in each market.
“That will drive a seamless consumer experience,” Rathbun said.
Epic is one of the most widely used health record platforms, but it’s also notoriously expensive. Boston’s Mass General Brigham spent $1.2 billion on its Epic install, and its Epic implementation comprised a chunk of Mayo Clinic’s $1.5 billion investment in new technology a few years ago.
AdventHealth is in the build phase of its Epic install and plans its first rollout in fall 2021.
Monday, Jan. 11
Blue Shield of California has invested $100 million to scale a healthcare database in California, a plan its CEO believes should be emulated at a national scale.
Paul Markovich, the insurer's CEO, praised a plan in California Governor Newsom’s recent budget proposal to integrate data from the state’s Medicaid program, health insurance marketplace and healthcare and retirement benefit program to the state’s health information exchange, named ManifestMedEx. The plan will advance the idea of creating a universal electronic health record that is updated in real-time, secure, accessible on an open platform.
“This capability should be operated by a nonprofit as a social utility,” Markovich said. “It shouldn’t be owned by anyone; it should be a societal thing. I would think about it like the internet; nobody owns the internet.”
Blue Shield of California has experience creating large healthcare databases. In 2014, the insurer partnered with Anthem Blue Cross to create one of the nation’s largest health information exchanges to offer providers statewide access to more than 9 million patient records. Markovich is essentially calling for other insurers to join the public system in California and scale the database to a national level. He said the initiative will drive better patient outcomes, efficiencies across the entire health care system and grow the U.S. economy.
“Healthcare has not improved or increased its productivity year over year, and because it represents almost 20% of the economy, when you have that big of a sector of the economy with negative productivity, it’s very difficult to get the entire economy to grow.”
The California state legislature will need to approve the $227 billion budget plan by June.
He said healthcare companies would need to aggregate their patient records, integrate their information systems and translate the data into an easy-to-understand format for hospitals and consumers. The undertaking would require cooperation similar to how stakeholders across the financial industry came together 30 years ago to create a set of standards for transferring money between banks, Markovich said. Opponents of the plan could include Kaiser Permanente, which has developed its own electronic data sharing system, major hospital systems, the California Hospital Association; and tech providers like Epic.
“Hopefully, we can all come together and make it work,” he said.
In making a case for sharing patient data, Markovich pointed to a few initiatives that Blue Shield of California has recently implemented that could save health plans $100 billion annually if scaled across the industry. He said Blue Shield of California is piloting a real-time claims process, shared decision-making, eliminating HEDIS pursuit, and introducing pay-for-value models.
He said state lawmaker Jim Wood has said he will seek legislation to make a similar system a national priority.
“California will be a leader in this space,” Markovich said.
Oak Street Health aims to expand its network of primary care facilities for seniors as the population ages.
Since opening its first clinic in 2013, the Chicago-based company—which operates a network of primary care centers that focus on caring for those 65 and older—has grown to 79 different centers across 16 states. At the end of the most recent third quarter on September 30, Oak Street Health reported $800 million in revenue, up 72% year over year. CEO Mike Pykosz said he views Oak Street Health’s revenue opportunity at $325 billion.
“Better patient results, lower hospitalizations and higher margins,” Pykosz said.
Oak Street offers primary care, transportation and insurance education to people on Medicare. Through CMS’ value-based payment models, the company receives a set fee to care for all its patient needs, who make up about 16% of the U.S. population but account for more than a third of total healthcare spending nationwide. While the company is on the hook to cover any specialist costs related to its senior population, Pykosz said the company experiences cost savings by treating individuals’ needs as they arise, rather than waiting for an individual to visit an emergency department.
“We don’t have to lower specialty spend. It’s a powerful lever to keep patients healthier and to lower overall costs,” Pykosz said.
Unlike other providers that had to cancel profitable elective procedures earlier this year, Pykosz said it wasn’t impacted financially by the COVID-19 pandemic because of its capitation payment model. Pykosz said Oak Street Health never stopped accepting patients and was able to spin up a company-wide telehealth system quickly, although only about half of the company’s patients felt comfortable using the digital system. In April, during the height of the pandemic’s first wave, he said the company reported an increase in patient visits compared to February.
“We were able to have consistent engagement throughout the year, with similar levels in 2019,” he said.
Because the company operates a standard model across all its sites, he said that it was easy for Oak Street to implement a cleaning protocol once it was safe for a care center to open. One major change caused by the pandemic has been how the company sells its services to consumers. Before COVID-19, Pykosz said Oak Street would hold events in its community rooms. Company salespeople are now calling prospective members. The company is also investing in digital marketing and TV ads.
Pykosz said he expected Oak Street would be able to start holding in-person events in the second half of 2021, and, at that point, the company will “really accelerate the pace of patient acquisition.”
By scaling a standardized system, Pykosz said Oak Street Health can add more specialty programs for patients, like care for end-stage renal disease, and “really invest and help keep them healthy and help avoid acute episodes.” He said the company is in the process of rolling out a new program there. The company is also able to gather more data on patients to refine its system for understanding who is at risk for a disease, why they are vulnerable and when to intervene.
Pykosz said Oak Street Health opened 28 new centers in 2020, and “we’re excited to accelerate the pace going forward.”
Zimmer Biomet is looking to acquire and sell business segments as part of a plan to build a more focused long-term strategy and rebrand the company’s image.
Zimmer Biomet in recent years has been adding emerging digital technologies to its portfolio, launching a surgical robotic system that personalizes knee implants, a smartwatch app to help patients manage postoperative hip and knee replacement recovery, and a system— dubbed OrthoIntel—that gathers and connects data from those two products, according to CEO and President Bryan Hanson.
Now, the company is actively looking toward possible acquisitions to scale its business, as well as reviewing and possibly selling areas that “aren’t as germane to the strategy (and) that aren’t as financially attractive.”
As part of streamlining its business, “we’re going to be working on rebranding the company,” Hanson said. “I don’t mean changing the name or the label on a box. I’m talking about: ‘What do people think about when they think about Zimmer Biomet?’”
Hanson wants to shift the brand’s image toward being an innovator, and away from being thought of as a nearly 100-year-old equipment company.
He said Zimmer Biomet plans to roll out a “smart implant” for joint replacements, which the company could be first to market with. The company’s vision is to offer an implant in concert with the hip and knee replacement recovery app—a project it launched with Apple, dubbed MyMobility—so that if a patient calls with an issue, for example, a surgeon could review up-to-date data on the patient’s steps and rehabilitation plan.
“It’s going to be more difficult in the future for players to compete in this market,” Hanson said of orthopedic devices. “It’s not just robotics—it’s also the data informatics around robotics.”
Humana expects a decline in patient visits to the doctor during the final months of the year will impact its revenue in fiscal 2021.
Medicare patient visits in November and December declined 15%, and physicians didn't include risk codes that Humana usually sees for doctor appointments. That's making it hard for the insurer to price these visits appropriately, Humana's Chief Financial Officer Brian Kane said during the company's presentation.
Kane said Humana has priced conservatively and plans to go after “every documentation that we can appropriately to ensure that we’re getting paid appropriately for the risks that we’re taking.”
CEO Bruce Broussard added that the company’s brokers and partners will ask individuals about their health needs to help Humana proactively address members’ potential illnesses.
“Sometimes it’s helpful in risk adjustment; sometimes it’s not,” Broussard said.
The decline in utilization has helped offset increased coronavirus costs, which Humana on Jan. 8 bumped up to an estimated $1.5 billion in 2020, an increase over its previous estimation of $1 billion. The change does not impact its earnings guidance for 2020.
“It’s not material to our revenue numbers overall, but it could be more material to our profit numbers because of relatively low margins in the business,” Kane said.
The company expects to end its fiscal 2020 with up to 475,000 new Medicare Advantage members. That's up from a projected 400,000 increase, thanks to anticipated sales and member retention.
Broussard said that members involved in value-based relationships with their providers--like Medicare Advantage--generally experienced less degradation in risk codes than those in the fee-for-service world. He pointed to the company’s dedicated senior clinics, where providers receive a fixed payment to care for each of the 200,000 members who frequent these sites.
“We see our senior dedicated clinics oriented to value-based, holistic care producing better quality outcomes, better cost and better customer satisfaction,” Broussard said.
Over the past decade, Broussard said the number of individuals enrolled in Medicare Advantage plans has grown to 40% of the population, creating a “bipartisan voting bloc” in favor of the program. The expansion of enrollment is due, in part, to industry attitudes changing from simply looking to add members to their plan to companies aiming to actually improve members’ health, particularly around the social determinants of health for vulnerable populations. He does not expect any significant changes to Medicare under the Biden administration.
“We hear [Medicare Advantage] as an example of a program that should be carried out in other parts of the health system,” Broussard said.
Going forward, Humana plans to invest in health services like its senior clinics, catering what it builds based on the needs of individual markets. The company is also interested in acquiring specialty pharmaceutical companies, regionally-based Medicaid plans and digital care services for its Medicare population. Humana also plans to continue to invest in its home care services, both through its ownership of Kindred and by acquiring other tech companies that allow it to provide value-based post-acute management at home.
“Our approach continues to be geographic-oriented based on the needs of the marketplace,” Broussard said.
Northwell Health will provide Whole Foods Market employees with low to no-cost primary care, under a deal announced at the conference.
The partnership between New Hyde Park, N.Y.-based Northwell subsidiary Northwell Direct and Whole Foods covers seven Northwell locations in the New York City region that Northwell says are easily accessible for Whole Foods employees and their dependents. Unlike some other Northwell Direct partnerships, this one will not include on-site clinics.
The COVID pandemic spurred Northwell Direct to dramatically scale up its sales team, said Joe Moscola, Northwell’s chief people officer. As a result, the Whole Foods is an example of more than 200 companies in the deal pipeline, which includes both national and local brands, he said.
The services will be included with employees’ existing healthcare benefit coverage options, and will allow them to see Northwell providers without having to pay deductibles or copayments.
A spokesperson could not say how many employees the new program covers, only that it’s available to eligible Whole Foods employees and their dependents. Whole Foods employees with access to the Northwell primary care plan can choose to use other primary care providers, however, they’ll have to pay higher out-of-pocket costs.
Northwell was hit hard by the pandemic, a crisis that’s hit “every line” of its financials, Chief Financial Officer Michele Cusack said during the company’s presentation on Monday. She said it will take a couple years for the health system to get back to its historical financial performance.
Despite having received $1.3 billion in federal coronavirus relief grants—$1 billion of which will be recognized in 2020—Cusack said Northwell’s operating margin will be close to break even. The health system’s goal is still a 2% operating margin, but Cusack said it will take time to get back there.
R1 RCM aims to add another $4 billion in new patient revenue in 2021, with the revenue cycle management company counting on outside acquisitions and tech investments to increase new patient revenue from $3 billion in 2020.
During the conference, CEO Joe Flanagan said he expected to grow the Chicago company’s total revenue to $1.4 billion in 2021, with a cash flow of $330 million. Flanagan said the projection assumes its health system customer’s patients volumes will reach about 95% of what they were before the COVID-19 pandemic.
“As we hopefully see a return to normal, there should be some opportunity for us to take advantage of that growth,” Flanagan said.
Long-term, he said the company, previously known as Accretive Health, expects to grow its cash flow by 30%, with global demand to outsource revenue scheduling, billing and collection services creating a $110 billion market. Health systems are increasingly seeking to digitize and automate their revenue cycles to drive efficiency, accuracy and offer patients a more consumer-oriented experience, he said. As payment models grow in complexity, and the pandemic continues to drive demand for self-service, touchless systems, Flanagan said calls for R1’s systems have grown too.
“We don’t really see anything significantly different from the mode of opportunity going into COVID, but I would say the intensity of discussions, a bias for actions, [conversion] on investing time in getting an outcome is higher among providers,” Flanagan said.
Recent customer wins include a contract with LifePoint Health in Tennessee in October and a deal with Penn State Health in April. Flanagan said the company just started transitioning employees from LifePoint at the time of its announcement and that the move is “well on track.” R1 anticipates its launch time for both LifePoint and Penn State to be 12 months.
Once complete, the company expects the two systems to generate $5 billion in combined new patient revenue and start contributing to R1’s bottom line by 2022.
Going forward, Flanagan said he expects mergers and acquisitions to represent a crucial part of the company’s growth strategy. Over the past few years, the company has acquired other revenue management companies RevWorks, as well as SCI Solutions, a provider of software-as-a-service scheduling and patient access systems. Over the next few years, Flanagan said R1 aims to scale its cloud systems.
“We see continued opportunity to vertically integrate areas where we currently use third-parties,” Flanagan said.
To finance these moves, R1 announced last week that a joint investment vehicle owned by Ascension Health Alliance and TowerBrook Capital Partners will convert 8% of the convertible stock they hold to common shares. As part of the agreement, the joint investors will receive 139 shares of common stock and $105 million in cash. Flanagan said the move will simplify the company’s ownership structure and enable the company to better prepare for strategic acquisitions.
“We’ve got good alignment at the Board with Ascension and Towerbrook,” Flanagan said. “What I think it does do is, without a doubt, is enable us to think about more efficient ways to finance growth.”
Correction: An earlier version of this story incorrectly stated R1 acquired Quorum Health Corp. This error has been corrected.
Royal Philips wants to see its health technology sales grow by 5-6% through 2025, hoping that incremental increases in five areas will contribute to the increase.
The company's healthcare technology business primarily focuses on diagnosis and treatment, connected care and personal health. The three segments in 2019 posted year-over-year comparable sales growth of roughly 4.5% across the categories; the company posted roughly $23.7 billion in total sales for the year.
Strictly year-over-year, the $23.7 billion figure represented 7.5% sales growth. The company will post full-year 2020 revenue in the coming weeks.
Philips officials are pursuing five strategies to bolster sales growth, each of which the company expects to contribute by a fraction of a percent.
Growing customer interest in telehealth and informatics tools will contribute 0.2% growth to the targeted 5-6%, according to the company. The company’s services business will contribute 0.2%. Increasing share of high-growth businesses and improving low-growth businesses, in part through expanding into new geographic markets, will contribute 0.3% and 0.2%, respectively.
Contributions from previous mergers and acquisitions (0.2%) also factor in.
“We have a number of investments that we have made, for example, in connected care around telehealth that are now coming to fruition,” the technology conglomerate’s CEO Frans Van Houten said of evolving customer interests. Before COVID-19, “many customers were doing pilots—telehealth, eICU or remote patient monitoring—but the speed at which it scaled was disappointing.”
Generally speaking, the company’s stand-alone equipment and software sales have been growing in the mid-single-digits year-over-year, while sales of its solutions—applications of devices, software and services sold a package—have grown in the double-digits.
“Leveraging data and data science at scale is helping us to deliver that,” Van Houten said.
The massive cyberattack that struck Universal Health Services in the fall will put a noticeable dent in the hospital chain’s bottom line, its finance chief said Monday.
UHS’ Chief Financial Officer, Steve Filton, said at the J.P Morgan Healthcare Conference Monday that the company will call out the specific impact of the attack in its fourth quarter financial results, which it will release at the end of February. King of Prussia, Pa.-based UHS temporarily took all of its U.S. information technology networks offline in October 2020 after discovering the malware intrusion.
“I think it will wind up being a material number,” Filton said, adding it will be isolated to the fourth quarter.
Investor-owned UHS is still catching up on billing and coding even months after the attack, which included systems that contain its medical records, laboratories and pharmacies.
“Intellectually we know we’re very reliant on our information technology,” Filton said. “You don’t realize how much you are until something disrupts that.” While UHS is in compliance with the price transparency rule that took effect Jan. 1, Filton said he doesn’t think it will change patients’ decision-making when it comes to where they get care.
As for payers and providers, he said they largely know the rates in their respective markets. That said, there could be instances where insurers pressure UHS to lower its rates or, vice versa, UHS pushes insurers for higher payment if it sees its competitors getting more money.
“My view is this is largely much ado about nothing,” Filton said.
Intermountain Healthcare isn’t letting its ill-fated planned merger with Sanford Health inhibit its appetite for growth.
Bert Zimmerli, the Salt Lake City-based system’s chief financial officer, said Monday at the J.P. Morgan Healthcare Conference that while there’s nothing in process with Sanford, based in Sioux Falls, S.D., Intermountain has “a lot of additional lines in the water.”
“For the right opportunity, we’re willing to go further east,” Zimmerli said, telling his virtual audience to expect news on that front in the future.
Intermountain CEO Dr. Marc Harrison said potential partners need to be strong systems, preferably the top one or two players in their markets.
“We’re not interested in turnarounds, particularly,” he said.
Zimmerli is one of the very few executives in his industry who spoke favorably about the Trump administration’s controversial rule, which took effect Jan. 1, that requires hospitals to post publicly their negotiated rates with insurers. He said Intermountain was fully compliant by the deadline and believes it will make the health system better in serving consumers.
“They deserve to have transparency around costs and benefits,” he said. “So we’re supportive and we believe it will be positive.”
Intermountain had a strong, 6.5% operating margin in the 11 months ended Nov. 30, 2020, even excluding the hundreds of millions of dollars’ worth of COVID-19 federal relief grants the health system received. Excluding the federal government’s advanced Medicare payments, the health system had 397 days of cash on hand during the same 11-month period, executives shared.
Medtronic is moving forward with its shift to put "the tech into medtech," initiating seven "tuck-in" acquisitions in 2020 valued at more than $1.6 billion.
Geoff Martha, who took the helm as Medtronic's CEO in April, said medical device manufacturers like Medtronic traditionally innovate by building on advancements within electrical and mechanical technologies. Medtronic’s vision is to bring in digital advancements from the tech sector, such as artificial intelligence, algorithms for personalized care and remote monitoring into the company’s products.
“We believe that by translating recent advancements from the tech world to medtech we’ll meaningfully expand the scope of our opportunities,” Martha said.
He added that as medical device companies launch products for procedures and services that target further upstream in patient treatment plans, they’re hoping to “bump off” pharmaceutical companies in disease areas such as cardiovascular care.
Medtronic in November posted $7.6 billion in revenue for its fiscal 2021 second quarter, down slightly from $7.7 billion reported during the same period the previous year.
Medtronic expects its earnings to be flat year-over-year for its fiscal 2021 third quarter on account of effects from the COVID-19 pandemic, according to Martha, but said he’s “optimistic this will be short-lived.”
Advocate Aurora Health will not meet its ambitious goal of more than doubling the health system's revenue by 2025, citing the COVID-19 pandemic.
“Our focus, our direction has not changed,” CEO Jim Skogsbergh said during the health system's presentation. “Obviously, we’ve been slowed down.”
That said, Skogsbergh said he believes the pandemic has underscored the argument for scale, which the health system will continue to pursue with like-minded organizations interested in value-based care. Advocate Aurora, based in Milwaukee and Downers Grove, Ill., recently scrapped plans to merge with Michigan’s Beaumont Health, which would have created a 34-hospital, $17 billion system. Currently, Advocate Aurora has 26 hospitals and more than $12 billion in annual revenue, making it the country’s 11th-largest not-for-profit health system by revenue.
Dominic Nakis, Advocate Aurora’s chief financial officer, noted that the pandemic has lowered the health system’s operating cash flow, from $930 million in the third quarter of 2019—a 9.9% margin—to $554 million in the third quarter of 2020, a 5.8% margin.
Skogsbergh said Advocate Aurora will be “in substantial compliance” with the Trump administration’s new requirement that health systems disclose their contracted rates for certain services. “We have a little bit more to do,” he said. Nakis added he thinks it will be difficult for consumers to use the data.
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