The Annual J.P. Morgan Healthcare Conference kicked off Monday virtually. Reporters Tara Bannow, Jessica Kim Cohen and Nona Tepper will provide updates and daily observations here throughout the conference. You can also find additional stories on ModernHealthcare.com or Twitter.
Reporter's notebook: J.P. Morgan's 2022 health conference
Thursday, Jan. 13
Babylon wants AI, automation to be core part of its clinical care
Telehealth company Babylon Health is working to develop artificial intelligence that automates various clinical tasks, with a goal of creating tools that more regularly monitor patients, said Ali Parsa, the company’s chief executive officer.
“I genuinely believe there will come a day—maybe a long way away—[where] a lot of what we do will be done by AI,” Parsa said. Diagnosis and treatment won’t just be about what a patient’s doctor determines, but also, “what your AI thinks,” he said.
Babylon, which last year went public through a merger with a special purpose acquisition company, posted $74.5 million in revenue for 2021’s third quarter, the most recent quarter it’s issued earnings results. That’s a massive jump from $15.8 million in revenue from the same period in 2020. The company also posted a net loss of $66 million, compared to $38 million in the year-ago quarter.
AI, when used to regularly monitor patients, ideally could help flag healthcare issues earlier—making care more proactive and reducing the need for more expensive interventions used in emergencies, according to Parsa.
Parsa added that a significant source of healthcare costs are tied to physicians, nurses and other labor, suggesting that there’s opportunities for savings by automating some clinical tasks.
He cited a study Babylon published in 2020 that found its AI virtual assistant could provide triage and diagnostic information in primary care with accuracy comparable to physicians.
“We hope one day we can create an artificial intelligence that will be there with you 24/7 and help you or guide you through your entire healthcare journey,” Parsa said, although the company’s early in that journey. “For now, human beings are an important part of the healthcare delivery, and will remain so for a long time.”
Parsa also spoke to how Babylon is thinking about value-based payment arrangements.
“Our pitch to our clients is that you’re already spending … on paying for crises and emergencies,” he said. “Just give us those costs, we’ll proactively manage to avoid those crises and emergencies, and save money—therefore, our profit will be by the savings.”
Executives from telehealth giant Teladoc Health presenting at the conference Monday also shared that the company was shifting toward more value-based payment arrangements. -- Jessica Kim Cohen
Wednesday, Jan. 12
Alignment Healthcare reports Medicare Advantage miss
Alignment Healthcare’s Medicare Advantage membership fell below expectations for 2022, with CEO John Kao blaming the short-term miss on a competitive market dominated by insurers with unsustainably low prices.
The insurtech, which went public in mid-2021 and whose stock price has retained the most value among other young insurers that entered the public markets last year, aimed to grow membership by 20% year-over-year, but instead grew its number of enrollees 16% to 92,700 at the start of 2022.
“Long-term, we’ll get a lot of these members back,” Kao said during the annual J.P. Morgan Healthcare Conference on Wednesday. “I think this is nothing new to us, I dont think it’s an anomaly, this is the market. It’s very competitive and I think people who are just buying business will go by the wayside or significantly ratchet back their benefits next year.”
The company’s news mimicked other announcements this week, with both Humana and Cigna saying that their Medicare Advantage books of businesses missed expectations. Clover Health, meanwhile, said it grew its Medicare Advantage membership 25% but noted that two-thirds of its revenue now comes from software sales.
Alignment expects to end 2021 with up to $1.14 billion in revenue on profits of $130 million. During the fourth quarter, the company said inpatient utilization has so far been 5% better than expected. Kao added that he believes insurers that are underpricing their products to gain business will end up dumping patient risk onto providers through global capitated arrangements, which will threaten their networks. He said that a third of Alignment’s business comes from global capitation contracts.
“If, in fact, the strategy is to just dump the risk on providers, we’ve seen the providers are not going to sit there and just take it,” he said.
He added that he does not feel the need to build de novo clinics, but instead partners with community-based providers. The company ended the third quarter with $500.4 million cash on hand, and Kao said Alignment has changed its investment strategy to focus on acquiring clinicians. He aims to have about half a dozen providers in each market where Alignment is active.
“We were very active at looking at health plan acquisitions consistent with our beach head expansion strategy and we’ve taken a step back,” Kao said. “Protecting our balance sheet is paramount. I think we’re in a good position from a cash perspective, given our focus now and the realities of the marketplace, focusing on a lot of practice acquisition and provider kinds of deals makes a lot of sense for us.”
The company does not expect immediate changes to risk adjustment in 2022, after the Build Back Better plan stalled in Congress, Kao said. But Medicare Advantage carriers submitting patient diagnoses at significantly higher prevalence rates than among fee-for-service Medicare will continue to remain a target for federal audits, he added.
“That creates an outlier opportunity and people are going to be at risk for that, in my humble opinion,” Kao said. -- Nona Tepper
How Transcarent achieved unicorn status in record time
On December 15, Transcarent CEO Glen Tullman received a term sheet from a venture capitalist offering to invest in his digital health and benefits management startup. Less than a month later, Tullman’s company pocketed another $200 million, making the 11-month-old startup reportedly the fastest digital health company to ever achieve unicorn status. Tullman said he hadn’t planned to pursue additional investments until mid-2022.
“We were able to raise just over $200 million in record time and I couldn’t be happier about some of the new partners and existing partners we added on,” Tullman said during the annual J.P. Morgan Healthcare Conference on Wednesday.
Kinnevik and Human Capital led Transcarent’s Series C round, with participation from Ally Bridge Group and previous investors General Catalyst, GreatPoint Ventures, Threshold Ventures and Merck Global Health Innovation Fund.
New health system investors Northwell Health, Intermountain Healthcare and the Rush University Medical Center also participated and reflect the new, growing market for Transcarent, which is currently focused on providing care navigation services for 80 self-insured employers that represent 1 million covered lives. With the Series C cash, Transcarent aims to add government, labor unions and third-party administrators as customers in 2022, as well as expand its service breadth to cover new ground, like in-home care .
“We’re very interested in health systems to not only partner in providing care but as customers,” Tullman said. He added that Transcarent already counts insurers as customers and will likely have announcements about who these clients are “soon, but, by and large, we’re staying hunkered down and focused on our bread and butter, which is self-insured employers.”
Unlike most digital health companies that charge businesses a subscription fee, Transcarent offers employers three payment models–a per member per month subscription fee, a fee-for-service model or full-risk approach, where the startup pays providers upfront and partners with employers without charging them a monthly fee.
Tullman credited Transcarent’s fundraising speed with the company's flexible payment structure and his previous experience as founder of Livongo. In August 2020, Livongo and Teladoc Health announced an $18.5 billion merger, a record deal in digital health.
“What we’ve done starts with building true, trusted partnerships with members, with employers and with providers,” Tullman said. “Providers have been left out in many cases and we’re not leaving them out anymore.” -- Nona Tepper
Quest Diagnostics says COVID-19 tests will be permanent part of portfolio
COVID-19 testing will become a permanent part of Quest Diagnostics’ menu of tests, said Steve Rusckowski, the company’s chairman, chief executive officer and president.
COVID-19 testing volumes will continue into 2022, even as they likely decline compared to last year, Rusckowski said.
He added that the future of COVID-19 testing may look more like testing for the flu, where patients and physicians will want to test for various respiratory illnesses after detecting symptoms. He also suggested antibody tests that attempt to identify whether a patient has previously been infected with COVID-19 will “play an increasing role in how we manage immunity going forward.”
“This virus, as we all I believe now know, is not going away anytime soon,” Rusckowski said.
Quest Diagnostics posted $2.8 billion in revenue for 2021's third quarter—the most recent quarter it’s issued earnings results—down 0.4% year-over-year, and $652 million in operating income, down 9.3%.
Quest Diagnostics considers itself a company focused on “diagnostic information services,” and not just clinical laboratory testing, according to Rusckowski.
That includes what the company refers to as advanced diagnostics, encompassing molecular and genetic testing. Quest Diagnostics is also investing in direct-to-consumer testing—a growing area that’s accelerated due to the pandemic—which the company expects to account for $250 million in revenues by 2025.
Labcorp, a competitor in the clinical laboratory testing space, in a Tuesday presentation at J.P. Morgan’s conference highlighted cell therapy, gene therapy and liquid biopsy as new areas for growth. The company posted $4.1 billion in revenue for 2021's third quarter, up 4.3% year-over-year, and $766.9 million in operating income, down 26.8%.
Labcorp last year rebranded Covance, a contract research organization and drug development company that it acquired in 2014, as Labcorp Drug Development.
The company’s drug development arm develops biologics, biosimilars, and cell and gene therapies.
“We do see significant synergies between drug development and diagnostic testing,” said Labcorp Chairman and CEO Adam Schechter on Tuesday.
Oncology is one of the company’s “pillars for growth” in both diagnostic testing and drug development, according to Schechter.
“We develop the diagnostic test, we bring in the drug development, we develop the drug, we launch the drug in the marketplace,” Schechter said.
He also cited Labcorp’s plan to buy cancer genomics company Personal Genome Diagnostics as an example of a “strategic tuck-in” that will advance the company’s long-term growth. —Jessica Kim Cohen
Tuesday, Jan. 11
Bright Health to curtail growth of insurance business
Bright Health Group plans to implement "disciplined pricing" and limit geographic expansion of its insurer arm in 2022, after medical costs skyrocketed for the insurtech earlier in the year thanks to the COVID-19 pandemic and new members gained through the special enrollment period, Chief Executive Officer Mike Mikan said during the J.P. Morgan Healthcare Conference on Tuesday.
He said it was too early to tell how the Biden administration’s requirement that insurers cover over-the-counter consumer tests would impact the company’s bottom line. The company's net loss widened 400% year-over-year to $296.7 million at the end of the third quarter.
“We think testing is a good thing, good for consumers and good for us to get beyond the pandemic,” Mikan said. “Ultimately, it will be endemic. We believe there are potentials for revenue offsets and that’s kind of how we take it as of now.”
The company’s NeueHealth provider arm will instead provide the lion’s share of the growth in 2022 through continued partnership with external payers and the Centers for Medicare and Medicaid Innovation’s direct contracting program, he said. Mikan declined to comment on direct contracting membership, although the company expects to “meaningfully expand” the program to cover multiple states in 2022.
In 2021, the company expects NeueHealth to generate $2 billion in revenue, with a third of the cash coming from external payers like Oscar Health and Cigna, which recently invested $550 million in Bright Health Group to help bail out the company. The company plans to grow from 75 to 100 NeueHealth clinics by the end of the year, and grow the number of affiliated providers it has take on patients' downside risk.
In three years, the startup plans for its earnings before interest, taxes, depreciation and amortization to break even. -- Nona Tepper
Cigna falls short on Medicare Advantage membership for 2022
Cigna’s Medicare Advantage growth fell short of its target for 2022 and will be lower compared with the growth across its commercial book of business, Chief Executive Officer David Cordani said during a presentation during the J.P. Morgan Healthcare Conference on Tuesday.
“For 2022, all while we improve the value proposition of our Medicare Advantage offering by taking revenue and affordability enhancements, we saw posture from many players in the marketplace cause our relative posture to knock down a notch in certain markets,” Cordani said.
Medicare Advantage represents just 5% of the company’s overall revenue, he said. Eighty-five percent of Cigna’s revenue, meanwhile, comes from acting as a third-party administrator of self-funded customers. The business mix could help explain the company’s investment strategy going forward. Unlike most insurers, Cordani said owning primary care facilities and physicians was not a priority for the payer.
“We dont believe we need to own,” Cordani said. “We seek to partner to enable value-based care. We are willing to own in select geographies if we deem right in an access and affordability profile.”
Instead, the company is interested in using its Cigna Ventures arm to invest in pharmaceutical assets, behavioral health, virtual health and home health services, he said.
The company also plans to continue to push consumers to switch to biosimilars. Last year, Cigna unveiled a promotion to pay members $500 to switch to biosimilars, after quietly updating its drug formulary to force all patients over 6 years old to switch from at least two biologic originators. Although the formulary change was forced onto almost all of its 14 million members, Cordani said Evernorth’s pharmacy team had “meaningful resources ready to roll” and was prepared to evaluate the move on an individual member basis with individual physician insight.
“This is not as simple as a brand to generic change, this needs to be thought out brand to brand,” Cordani said, adding: “One patient, one physician at a time, our organization is extremely excited about this.”
During the presentation, Cordani also noted that the company’s Evernorth health services division has already set up some home testing services, “so we’ve already gotten ahead” of the Biden home testing rule. He said up to 15 over-the-counter tests could offset the cost of one lab test, and that finding infections earlier through more convenient testing could be beneficial to the insurers’ bottom line. But, “it’s to be determined for us to see how it manifests itself,” he said.
Because the insurer focuses primarily on the commercial market, Cigna has not been as affected by care deferrals during the pandemic as other insurers that focus more on Medicare Advantage, Cordani said. In 2022, he expects medical costs to be slightly above baseline. The company has no plans to divest large-scale assets ahead. -- Nona Tepper
ProMedica plans to sell Medicaid business to Anthem
ProMedica is getting out of the Medicaid business, selling that division to Anthem, the not-for-profit health system announced Tuesday at the J.P. Morgan Healthcare Conference.
The Toledo, Ohio-based system’s Medicaid program, the largest source of revenue under its Paramount health plan, has been under strain since the state of Ohio rejected Paramount’s bid for a Medicaid managed care contract. Under the deal with Anthem, the publicly traded insurer would buy ProMedica’s Medicaid assets in cash on top of a contingent cash payment based on Paramount’s current Medicaid membership. The parties expect the deal to close in the first quarter of 2022, pending regulatory approval.
Anthem has been expanding its Medicaid footprint through a series of recent transactions. The company reported its Medicaid membership had increased 21% year-over-year as of Sept. 30, 2021.
Steve Cavanaugh, ProMedica’s chief financial officer, said that the deal would allow ProMedica to continue to run the plan sort of like a third-party administrator. More importantly, he said the companies would partner closely with Anthem on a care delivery model that would allow members in Northwest Ohio to continue to receive care similar to what they’re getting today.
“We think this is a really good transaction for the system,” Cavanaugh said. “First of all, it’s going to provide significant value for the business that we’ve created for the 30 years we’ve had a health plan. We think this transaction will provide financial and operational stability for Paramount and a long-term continuing involvement with Medicaid, which is important to us.”
Medicaid comprises $1.5 billion of Paramount’s roughly $2 billion in revenue, but it’s the lowest margin portion of the business, so Cavanaugh said he expects ProMedica’s health plan business will continue to be “reasonably profitable.”
The deal, subject to state and federal regulatory approvals, is reportedly part of an agreement by the health system to drop its legal action against Ohio’s Medicaid agency, according to the Toledo Blade. Cavanaugh said ProMedica has filed all necessary regulatory notices and has so far gotten favorable receptions during the review process.
“They’re being very cooperative and collaborative so far,” he said.
Slides ProMedica shared during its virtual presentation show Paramount generated a 4.2% operating margin in the first nine months of 2021. ProMedica’s senior division continues to suffer during the pandemic, having posted an 8.9% loss margin during that period. The health system’s provider division reported a 3.2% margin as of Sept. 30, 2021. -- Tara Bannow
Abbott CEO shares details on consumer wearable, with plans to launch in Europe
Abbott is jumping into the consumer wearables market this year, with plans to start selling a continuous glucose monitor to consumers without diabetes.
The consumer product, first announced at the Consumer Electronics Show in Las Vegas last week, will take Abbott’s continuous glucose monitoring sensor that’s currently marketed for diabetes care management and extend it to consumers who don’t have diabetes, but are interested in tracking metrics like glucose, ketones and potentially alcohol levels.
Abbott’s vision is for the wearable patches, which will be sold under the brand name Lingo, to help consumers manage nutrition, weight, sleep, and other aspects of health and well-being.
“We put a stake in the ground,” said Robert Ford, Abbott’s chairman and CEO. “It’s time to now start to think about our platform, and think about beyond diabetes.”
Multiple digital health startups already have been selling continuous glucose monitors to consumers interested in nutrition and exercise, but there hasn’t been clear evidence that the technology improves health for people without diabetes.
Ford cited consumers’ interest in wearables and monitoring as a future driver of growth for the company, but also acknowledged that it will take time to roll out the product, as it’s a “completely different business model than diabetes.” Abbott’s continuous glucose monitors for diabetes accounted for $968 million in sales in 2021’s third quarter, 8.9% of the company’s $10.9 billion in total quarterly sales.
Abbott plans to release Lingo products starting in Europe this year, Ford said.
Abbott has been pushing to integrate digital technology into medical technology products across its portfolio.
Abbott is one of the major manufacturers of COVID-19 tests, manufacturing more than 100 million tests each month, according to Ford. That includes at-home tests that pair with a mobile app that verifies the patient’s test result, so that users can display their test result to others. Ford said testing needs from schools, offices and people testing before congregating continues to offer opportunities for the company. --Jessica Kim Cohen
Omicron patients staying in UHS hospitals longer
Even though patients with omicron aren’t as sick as those with previous COVID-19 variants, they’re staying in Universal Health Services’ hospitals longer, the company’s finance chief said Tuesday.
That’s because for-profit UHS is struggling to find providers who can accept COVID-19 patients once they’re ready to be discharged from acute-care hospitals, Steve Filton, the company’s chief financial officer, said Tuesday morning during a virtual presentation at the J.P. Morgan Healthcare Conference. Rehabilitation centers and nursing homes face the same staffing problems as acute-care hospitals, he said.
“So they’re staying longer than really is clinically justified or clinically necessary and that’s exacerbating the labor issues from our perspective,” Filton said.
UHS’ share value dipped almost 3% Tuesday morning following Filton’s presentation. The company, based in King of Prussia, Pennsylvania, has 27 acute-care hospitals and 335 inpatient behavioral health hospitals.
UHS continues to use a significant amount of contract labor to handle the influx of COVID-19 patients, and the cost of bringing on those workers has spiked within the past 3 to 6 months. The problem is worsened by the fact that a portion of staff members are sidelined after becoming infected with the coronavirus.
“We’re facing the worst we’ve seen from a rate perspective,” he said. -- Tara Bannow
CVS boosts earnings projection on strong COVID-19 vaccine, test demand
Stronger than expected demand for COVID-19 vaccines and testing caused CVS Health to boost its financial outlook for 2021 just ahead of its presentation Tuesday morning at the J.P. Morgan Healthcare Conference.
The pharmacy giant released a financial filing that upped its projected earnings per share last year, noting that its full-year 2021 results aren’t ready yet.
CVS Chief Financial Officer Shawn Guertin explained that a particularly strong performance in the Woonsocket, Rhode Island-based company’s retail segment in the fourth quarter of 2021 accounted for 80% of the outperformance.
Within that, Guertin said more than half of the outperformance came from COVID-19 vaccines and boosters. Demand for the vaccines last year was much higher than CVS expected. COVID-19 testing also contributed, both traditional PCR tests and over-the-counter tests, demand for which “took off” in December, he said.
“Retail is really the story of the outperformance,” he said.
The Biden administration’s rule that requires commercial insurers to cover up to eight over-the-counter COVID-19 tests per member per month will both help CVS and cost it money, Guertin said. Paying for the tests will be an added expense to CVS’ Aetna business, although swapping the less expensive over-the-counter tests where people previously would have received PCR tests might save the insurer money, he said. That said, the mandate will benefit CVS’ retail business.
“We really need to understand the details a little better and look at this overall,” Guertin said. “It’s one of the key things we’re working on.” -- Tara Bannow
Monday, Jan. 10
Teladoc is ramping up value-based contracts with customers
As telehealth giant Teladoc Health strikes more contracts with customers that span primary care, chronic care and other products, it’s been moving toward more value-based payment arrangements, according to the company’s Chief Executive Officer Jason Gorevic.
Gorevic said Teladoc’s conversations with potential customers have shifted from being done with a purchasing manager to the C-suite level, since Teladoc is positioning itself not as a vendor that provides a single service, but as a “strategic partnership” that plays various roles in patient care.
“As a result of these dynamics, we’re also able to begin shifting toward more value-based arrangements,” Gorevic said.
So far, that’s involved taking on risk for diabetes management and other areas of chronic care, as well as considering value-based arrangement for Teladoc’s new virtual primary-care service.
Telehealth companies that provide single solutions—like video visits for urgent care or a single specialty—tend to work in fee-for-service contracts, according to Gorevic. Since Teladoc sells services related to primary, mental health and chronic care, that gives them the opportunity to contract in other ways.
In 2021, three-quarters of sales were for multiple products, according to Gorevic.
Teladoc’s vision is to provide care across a patient’s health needs—not a one-off product that only addresses a small segment of patient care.
“We’ve been building for that for many, many years,” Gorevic said. “Our product offering has evolved from a suite of point solutions to a whole-person offering.”
Teladoc in recent years has extended its capabilities through acquisitions of companies like Livongo and InTouch Health; competitors like Amwell have also been pursuing acquisitions. Teladoc may acquire more companies as it expands into new areas of specialty care, as well as partnering with other organizations and developing capabilities in-house, Gorevic said.
Teladoc estimates it hit $2.03 billion in revenue for full-year 2021, according to a preliminary review of financial results—surpassing its expected outlook of $2.015 billion to $2.025 billion. The company expects to reach $2.6 billion in revenue for full-year 2022.
Teladoc’s primary strategies for growth are adding new members to its platform, both through signing new customers and adding more members from its existing customers; cross-selling additional products to customers who have already signed contracts for one of the company’s products; and increasing engagement among existing members, according to Gorevic.
As of 2021, more than 40% of telehealth members with Teladoc have access to at least one other company product, compared to less than 10% in 2017, according to Teladoc’s presentation. Teladoc plans to continue that trend—expecting to expand revenue per member by roughly 25% each year. --Jessica Kim Cohen
Zimmer Biomet focusing on proving safety of ‘smart’ knee implant before clinical decision support
Zimmer Biomet executives have said the company’s “smart” knee implant could pave the way for implantables that inform orthopedic care—but that will take time.
Zimmer Biomet last year released a “smart” knee implant—a first of its kind to be cleared by the Food and Drug Administration—embedded with a sensor and that counts the steps a patient takes, their walking speed and range of motion. But while some orthopedic surgeons said they were excited by the development, they’re also waiting for clinical evidence before they decide whether to use it.
The implant so far is cleared to provide data to physicians and patients, but that data hasn’t been shown to provide clinical benefits yet.
“It is absolutely going to be a game changer,” said Bryan Hanson, chairman, president and chief executive officer of Zimmer Biomet. But “it will take some time.”
The exciting potential of the knee implant isn’t that it collects data, he said, but that analyzing that data may be able to augment patient care. Zimmer Biomet is planning to collect and study data on patient outcomes over time to figure out what insights physicians and patients would be able to glean from the data, according to Hanson. In the long-term, that could result in Zimmer Biomet creating clinical algorithms that detect or even predict problems.
But that’s not where Zimmer Biomet is focusing first. For now, the company’s priority is collecting safety data.
“We want to make sure people know and feel confident that if you have a sensor on an implant—and you have a stem on an implant as a result of that sensor—there’s no negative outcome,” Hanson said. “We feel confident in getting that accomplished. That’s what we’re going to be focused on.”
Zimmer Biomet doesn’t have a set timeframe for when it expects to submit clinical algorithms or decision-support capabilities to the FDA.
Zimmer Biomet for the past several years has been refocusing its business to incorporate digital technologies and data, tying in mobile apps, wearables and surgical robotics.
Zimmer Biomet in recent years has spent more on research and development related to robotics and data, and has tripled the number of employees with backgrounds in those areas, according to Hanson. In cases where Zimmer Biomet doesn’t invest in-house, it’s struck partnerships with such companies as Apple, Microsoft and Canary Medical.
“Over the last four years, we’ve dramatically shifted where we spend our research and development dollars,” Hanson said. -- Jessica Kim Cohen
Centene consolidates pharmacy platforms as it prepares for new PBM
Centene executives outlined ways they plan to cut costs and improve profitability in 2022, including an update on when they’ll outsource administrative pharmacy functions.
Centene late last year said it was seeking a pharmacy benefit manager, after settling multiple allegations that the insurer’s PBM had overcharged state Medicaid departments for drugs.
Centene is currently consolidating onto one pharmacy benefit manager platform that’s used across its health plans, said vice chairman Sarah London, which will replace the multiple PBM platforms it has today. Centene will structure that consolidated PBM platform to focus on capabilities that the company wants to remain in-house, such as member and provider engagement.
Those components are critical for differentiating member experience from other insurers, according to London.
“Then, being able to outsource the more administrative, commoditized functions to our partner,” she said. Centene plans to launch the process to select a new PBM this summer.
Other areas in Centene’s “value creation plan” for shareholders include standardizing call center management and reducing the company’s real-estate footprint.
While health insurers have increasingly been moving into owning care delivery assets, London said Centene tends to lean toward partnering with outside organizations that provide clinical care. That allows Centene to focus on developing care models and coordinating that care, while also partnering with innovative providers and startups, she said.
There are some cases in which Centene has decided to own care delivery. Centene last week completed its acquisition of Magellan Health, a managed-care company that provides a behavioral health platform and specialty care. Magellan Health will continue to operate independently, according to Centene.
“We … believe [the Magellan Health acquisition] will enhance our ability to offer tailored programs for more specialized and acute behavioral subpopulations,” London said. -- Jessica Kim Cohen
Humana CEO addresses Medicare Advantage ‘churn’ amid stock slump
Humana President and CEO Bruce Broussard said the for-profit health insurer is “very bullish” on the long-term potential of Medicare Advantage, even as the company recently cut its forecast for expected net new MA members this year.
“It’s really where the healthcare industry is going,” Broussard said, citing Medicare Advantage’s focus on value-based care and social determinants of health. “We are big believers in the Medicare Advantage program.”
Humana last week cut its outlook for expected net new members in Medicare Advantage plans for 2022 from a range of 325,000 to 375,000 members to an updated range of 150,000 to 200,000 members. The company on Thursday attributed the updated forecast to experiencing more terminations than expected during this year’s annual election period.
Broussard at a Goldman Sachs conference Thursday cited pricing competition from other insurers as one reason for the higher than expected terminations.
Humana’s shares dropped on the news, falling from $455.83 at Wednesday’s market close to $367.52 at Thursday’s close. Shares closed at $385.18 today.
Broussard at J.P. Morgan’s conference on Monday said sales are increasingly taking place over the phone; sales over the phone tend to sell on price, rather than the services, care coordination and other values in a Medicare Advantage plan, he said. In 2022 and 2023, Broussard said Humana will focus on demonstrating and improving the “value proposition” of its Medicare Advantage plans, citing the insurer’s clinical programs in primary care and home care.
“We do believe that integrating care into the plan is an important value proposition,” Broussard said. “We find that coordination of care is significantly improved as a result of that.”
Humana also plans to home in on retaining members, which will involve ensuring that members are engaged with the various services that they have access to as part of their plan.
The “churn” that Humana experienced in Medicare Advantage was primarily attributed to people who had been members in the plan for a year or less.
Susan Diamond, chief financial officer at Humana, said the insurer plans to review data on enrollment in health plans this year to figure out where the company should invest.
“Which plans are winning in the market? How do we stand up to those on a benefit-value basis [and] net worth?” she said. “We’ll also continue to evaluate our marketing and distribution strategies.” -- Jessica Kim Cohen
Oak Street’s CEO shares more DOJ investigation details
Oak Street Health’s CEO worked to downplay the ongoing U.S. Justice Department investigation into his company on Monday, noting that the program in question brings in less than 10% of new patients.
Chicago-based Oak Street disclosed in Novemberthat the federal government was checking into possible violations of the False Claims Act in its arrangements with third-party marketing agents over free transportation services the primary care provider offers to adult Medicare patients.
Oak Steet CEO Mike Pykosz explained before a virtual audience at the J.P. Morgan Healthcare Conference that the inquiry concerns his company’s relationship with third-party insurance agents and advisors who help older adults pick Medicare Advantage plans.
“We have engaged and we compensate some agents to help educate older adults about Oak Street,” he said, “and when it is requested by an older adult, they will connect an older adult with our team if they’re interested in learning more about Oak Street Health.”
Pykosz said it’s a relatively small program, and the number of patients it brings in is in the single digits. It’s also only about a year old, he said.
When Oak Street started out, it didn’t have a marketing department, relying instead on a “field of dreams approach to marketing: ‘If you build it, they will come,’” Pykosz said. When that didn’t work, he said the company turned its focus toward educating people about the care Oak Street delivers.
Pykosz also highlighted Oak Street’s current and future growth during his presentation. Since opening its first centers on Chicago’s north side in 2013, the company has expanded to major markets like New York City, Detroit, Philadelphia, Atlanta and Houston. Oak Street added 24 centers in its first five years as an organization, but that growth accelerated to 50 new centers in 2021. The company expects to add 70 new centers this year, bringing its total footprint to 199 by the end of 2022.
Oak Street expects its 2021 revenue will be $1.4 billion, based on guidance issued in November, which would represent 61% year-over-year growth. The company has 4,800 employees, including 500 primary care providers.
Oak Street projects its new acquisition, the telehealth startup RubiconMD, will lose $10 million in adjusted earnings before interest, taxes, depreciation and amortization in 2022 given the timing of synergy work. Tim Cook, Oak Street’s chief financial officer, said the company expected that going into the deal. -- Tara Bannow
Ascension’s revenue 97% fee-for-service, expected to stay that way
Ascension’s revenue comes almost entirely from fee-for-service models, and the health system said that ratio will remain above 90% for at least the next three years.
The COVID-19 pandemic laid bare the pitfalls of fee-for-service payment, but provider presentations at the J.P. Morgan Healthcare Conference Monday morning show health systems are at very different places with respect to their transitions away from the paradigm that’s blamed for contributing to today’s out-of-control healthcare costs.
At St. Louis-based Ascension, a massive, 142-hospital system with north of $25 billion in annual revenue, roughly 97% of revenue still comes from fee-for-service models, Liz Foshage, the health system’s chief financial officer, said during the company’s virtual presentation. She said COVID-19 highlighted the vulnerabilities that exist for providers that rely on fee-for-service revenue, especially when non-urgent procedures were suspended at the outset of the crisis.
Ascension is looking to build its participation in value-based payment models by, for example, investing in Medicare Advantage plans and Medicaid managed care, Foshage said.
Foshage blamed health insurers and the government for her system’s lack of value-based care adoption.
“As we continue to gain these capabilities, we hope to see less dependence on that fee-for-service model and more value-based care,” she said. “But given the way the governmental payers pay and how hard it has been to really get meaningful risk-based payment methodologies from both the commercial and governmental payers, we expect 90% plus of our revenue still to be in the fee-for-service model over the next 3 years.”
Leaders with Intermountain Healthcare, by contrast, said during their own virtual presentation that the amount of revenue the health system draws from value-based care has surpassed its fee-for-service revenue.
Intermountain’s premium and capitation revenue was 39% of total revenue in 2016. That year, 55% of revenue came from patient services delivered on a fee-for-service basis. That’s compared with 48% premium and capitation revenue and 45% patient services revenue in 2020.
“As we all know, fee-for-service can lead to some perverse incentives,” said Bert Zimmerli, Intermountain’s chief financial officer. “And we’re all about growing in a value-based way.”-- Tara Bannow
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