Friday’s news was full of stories about merger discussions between Partners HealthCare and Harvard Pilgrim Health Care. No one denied the reports, so we can assume there’s some truth to the rumors. But why would these organizations contemplate a merger and how likely is it to happen?
From Partners’ perspective:
After growing for decades by taking over other providers, Partners has run out of options for major acquisitions. The state blocked Partners’ attempt to buy South Shore Hospital, for example. Meanwhile, Partners’ biggest rival, Beth Israel is becoming more formidable as it combines with Lahey. In some ways a Partners/Harvard Pilgrim merger would be analogous to the proposed Aetna/CVS combination, which was pursued only after Aetna’s planned purchase of Humana was rejected on antitrust grounds.
After buying Neighborhood Health, Partners is comfortable with the idea of owning an insurer. But they want one that’s bigger and focused on the commercial market rather than Medicaid.
The shift to value based care means providers need more of the capabilities typically found within health plans. This becomes a buy v. build decision.
From Harvard Pilgrim’s perspective:
Even though it’s not the number one player in the market, it too may be too big to get away with acquiring a significant competitor, e.g., Tufts Health Plan.
The Partners account itself actually has about 100,000 members. Shifting that business away from Blue Cross could be significant even on its own. (Although it kind of reminds me of the Cheech and Chong sketch where Chong proclaims himself a “good customer” –of himself).
Cheech & Chong's Next Movie | "I'm a good customer" - YouTube
Possibly, Harvard Pilgrim could gain an exclusive relationship with Partners, where the only way to get care at Partners is by purchasing a Harvard Pilgrim plan. That doesn’t seem likely, but who knows?
It’s not unusual for health plans and providers to consider tying up. Remember, Harvard Pilgrim’s predecessor, Harvard Community Health Care was a staff model HMO with its own physicians and care facilities. More recently, you see combined payers and providers (“payviders”) emerging in the Medicare Advantage space. There is a certain appeal to combining health insurance and delivery in one entity–Kaiser is Exhibit A– but ultimately it’s not such a superior model.
I don’t think a merger of Harvard Pilgrim and Partners has a compelling rationale and I don’t see it happening. More likely is some kind of limited alliance or joint venture.
The average consumer might not know it, but health plans are often mired in complexity and inefficiency as they struggle to configure and deploy new offerings. A surprising number of plans rely on spreadsheet-based systems to manage their plan benefit packages — a surefire formula for driving up labor costs and making errors. Some have spent tens of millions of dollars trying and failing to automate theses processes.
In this podcast interview, Simplify Healthcare CEO Mohammed Vaid shared his perspective on this problem and its solution.
(0:14) What are some of the main inefficiencies you see with health plans?
(3:44) Are these problems widely recognized within the plans?
(5:08) Have they become more of an issue recently?
(7:12) What approaches have been taken to address these problems?
(10:12) What are the more promising ways to address these issues, perhaps starting with benefits?
(12:12) To what extent have such enlightened solutions been implmented? Are there success stories out there?
(14:10) Tell me about Simplify Healthcare and how your company gets involved. What’s the experience like for a customer?
Abortion: A drug on the market to induce abortion appears to be highly effective against Cushing’s syndrome, a condition that can be fatal. Due to mifepristone’s association with abortion, there are tight restrictions on its use and it’s less likely to be prescribed off-label or developed for other conditions.
Orphan drugs: Because Cushing’s only affects about 10,000 people in the US, treatments are eligible for orphan drug status, which provides seven-year market exclusivity for the manufacturer and therefore a chance to make an attractive profit. The orphan drug law can also be abused by jacking up prices on low-cost products.
Drug price levels: The price for Korlym (as the Cushing version of the drug is known) is about $550, compared with $80 for the abortion drug. And the abortion drug is only needed once, whereas the Cushing drug might be needed up to 3x/day forever. The manufacturing cost is presumably close to zero.
Drug price increases: Korlym came on the market at about $220 per pill, but the manufacturer has boosted the price substantially every year, with no end in site. Meanwhile the price of the abortion pill has stayed the same or dropped.
Pharmacy benefit management: The article duly notes that the prices quoted are “before any discounts or rebates.” Pharmacy benefit managers (PBMs) negotiate discounts and rebates. Depending on what’s happening behind the scenes, it’s possible that the big boosts in list price have not been matched by an equal run-up in actual price realization by the manufacturer, and it’s likely that there are significant differences from one PBM to the next. Meanwhile the PBMs may be benefiting from higher prices, which could boost their own revenues from rebates and other incentives and fees.
Funding of drug development: Corcept Therapeutics, which developed Korlym, is developing a variety of other drugs, which may help more people with Cushing’s or treat aggressive forms of cancer –or may fail completely and help no one. One way the company rationalizes the high price of Korlym is as a source of funding for new drug development. But is there a reason Cushing patients and their insurers should be the source of such funding? Would the company charge less if it didn’t have other drugs in development?
The role of generic drugs: Teva has filed a patent for a generic version of the drug, now that the exclusivity period is coming to an end. That could lower prices for those paying the bill and dent Corcept’s profits and stock price.
How pharma tries to block generics from coming to market: Generic companies need to compare their product with the branded product to get it approved. But the branded company can sometimes interfere with that. Corcept’s CEO implies in the article that Teva may have obtained Korlym for testing through nefarious means. Corcept’s CEO says Teva won’t have an impact on Korlym soon because the issued will be tied up in court for years.
Conflict of interest: The original idea for Corcept was to develop mifepristone for major depression. But a co-founder left the company in 2007 after Congress investigated his conflict of interest.
Patient advocacy: Corcept is a funder of a patient advocacy group for Cushing’s. These groups can be useful for patients and their families as advocates for treatment and reimbursement and for raising awareness and educating people. Of course the drug manufacturers have an interest in how it goes.
Every one of these topics merits extensive discussion –or at least a blog post of its own. Thanks to Kaiser Health News for bringing all these issues to the surface.
The Affordable Care Act continues to be controversial, eight years after its passage, and a hostile Administration and Congressional majority have managed to undermine it, even if they haven’t been able to repeal it. Regardless, the ACA (aka Obamacare) has shifted the discussion on health insurance. Policy makers and the public increasingly assume that affordable coverage should be available to everyone and that pre-existing conditions should not be a factor in rate-setting or eligibility.
With uncertainty and dysfunction at the federal level, states are looking into using Medicaid “buy-in” as a way to achieve their policy goals. There are two main approaches being discussed: allowing individuals to enroll in traditional Medicaid by paying a premium or allowing individuals to buy Medicaid managed care policies on the marketplace.
A Health Affairs blog post provides a framework for evaluating these buy-in proposals. They outline six goals that policymakers may have in mind when instituting these programs:
Improve coverage for the current individual market
Provide options for people living in regions with limited choices of health plans
Improve the viability of the private insurance marketplace
Reduce premiums for consumers in the private insurance market
Provide people with a guarantee of coverage with state-mandated consumer protections
Improve the financial viability and contracting power of the Medicaid Agency
These are all worthy goals, but I would add another, systemic one. We read over and over again that the main reason healthcare spending is so much higher in the US than elsewhere is that prices are so much higher. Private health plans and Medicare haven’t done much to address this issue. Only Medicaid consistently pays low rates, so it seems that a way to bring down overall spending is to pay Medicaid rates, something that all of these buy-in approaches would achieve.
Providers won’t be happy with Medicaid rates and I don’t blame them. But a “Medicaid reset” would do the job of price reduction more than any other policy I can think of.
To succeed in value based care, providers must reduce unwarranted variance in utilization and cost. Medical devices and drugs are good places to focus, since they represent big slices of the spending pie that are rarely optimized. In this podcast interview, Lumere CEO Hani Elias describes how his company deploys evidence based software and services to help health system clients take on variation.
(0:12)What are some of the key challenges in healthcare?
(1:31) What do you mean by “unwarranted” variation?
(2:45) Are you able to tell which variation is appropriate and which is not?
(4:30) How does the decision making process differ between drugs and devices?
(6:42) Drug and device companies are large and are influential with physicians. How do you operate effectively in that environment?
(8:45) How do you differentiate from others who work on reducing cost and improving quality?
(10:30) What’s new, and what’s the same in this administration in Washington compared to the prior one?
Saul Marquez’s weekly Outcomes Rocket podcast features interviews with healthcare leaders sharing lessons on best practices to improve outcomes and business success. I’m featured in the latest edition, discussing hot topics, how to tackle costs, value based care, and suggested areas of focus for 2018.
Patient payments are a real friction point in the US healthcare system. Patients don’t understand what they owe, and doctors usually can’t help them figure it out. HealthiPASS is doing its best to solve these problems with a consumer-friendly approach that pays off financially for providers.
In this podcast interview, HealthiPASS CEO, Rajesh Voddiraju answers my questions about how it all works.
(0:17 )What are the problems with patient payments today?
(2:40) What have physician offices been doing about it about it? How successful are those efforts?
(6:30) How does HealthiPASS work?
(11:50) With the four steps it sounds like you are allowing the physician office to educate the patient about the extent of their financial obligations under high deductible plans. Is that right?
(13:09) How does the system interact with existing practice management systems? What is the impact on the office workflow?
(18:51)The value proposition for physician offices is pretty clear, but what about for patients? Is it in a patient’s interest to use this system?
“Beware the Ides of March” –Soothsayer to Julius Caesar
“Fear not the Ideas of March” –Health Business Blog to the wonkosphere
If you see something say something
Your friendly neighborhood drug dealer
Count on Drug Channels to make sense of even the most convoluted pharmacy business models –and convoluted they are. This time the topic is the emerging trend of point-of-sale (POS) rebates. Did you know that many pharmacy benefit plans act like reverse insurance, with the sickest members subsidizing the healthiest? POS rebates start to right this wrong and bring forth uncomfortable questions such as: Where have the rebates been going until now?
Managed Care Matters shares its perspective that the Administration’s efforts to undermine the ACA have yielded bitter fruit on the marketplaces. Some premiums are up by 30% and meanwhile Congress is doing little or nothing.
Two years ago you couldn’t read the news without hearing about the disastrous premium increases due to “Obamacare,” but the media is silent now.
So what’s going on? Our blogger has a theory: The media is being manipulated and chasing bright, shiny objects.
Skimpy is as skimpy does
InsureBlog likes CMS’s proposal to restore the maximum policy length of short-term medical plans to 12 months from three. That’s even though some news outlets call the plans “skimpy” and some healthcare policy analysts consider such plans to be leeches on Obamacare, because they may siphon the healthiest people out of the marketplace risk pool and drive up premiums.
Location location location
When my son was a toddler, we trained him to say “location location location” when asked, ‘what are the three most important things about real estate?’ I still remember him driving a realtor crazy when one tried to pitch us on a house we didn’t like.
Now, Workers Comp Insider has decided that location is destiny in healthcare, too, declaring ‘It’s the Zip Code Stupid.’ Insider cites a recent JAMA Internal Medicine study that shows geography is “the biggest X-Factor in today’s American Hellzapoppin version of healthcare.”
Location: Wonk zone
The Hospital Leader (not to be confused with the Dear Leader) helpfully explains that “We need creative solutions” really means “the problem we are trying to solve has no answer.” Case study: Hospitals, hospice and SNFs – The big deceit.
A pending bill seeks to establish a state-based individual mandate in New Jersey. But a provision targeting employees of small businesses could inhibit Association Health Plans from selling insurance that does not comply with small group rules. Xpostfactoid explains.
Who knew? Health Care Renewal informs us that the ostensibly libertarian Washington Legal Foundation has become a front for healthcare corporate leaders –and leaders from other fields— to operate with impunity. The foundation’s campaign to abolish the Responsible Corporate Officer Doctrine failed, but the damage was done. (Hat tip to Health Care Renewal for anticipating today’s theme by including “methinks” in its cover note.)