Good morning, Welcome back to this week's healthcare news & analysis. For all you new folks, I cover the week's latest healthcare news on Tuesday mornings and dive deep into a topic on Thursday mid-day. It's amazing how interesting healthcare can be, eh?? Today we're looking at recent antitrust trends in hospitals and PBMs, price transparency fines, and interesting partnerships across hospital-at-home and more. Let's go! |
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First Ever Price Transparency Fines hit Georgia Health System |
CMS just issued the first EVER price transparency fines to two Georgia hospitals: - $883k to Northside Hospital Atlanta, and
- $214k to Northside Hospital Cherokee.
Those are actually significant fines - over $1M to the same health system, Northside Health - in Georgia. According to 2021 disclosures (or actually, 2019 disclosures considering that the link on Northside's website to 2021 audited financial statements redirects me to FYE 2019 statements - what gives there?), the fine amounts to just under 1% of Northside's operating income from 2019. 1% is enough to pay attention to considering every dollar counts in 2022. Back up: As a quick refresher, don't forget that the Trump Administration's CMS imposed a price transparency rule on hospitals back in 2019 requiring service providers to provide machine-readable prices (including, most importantly, prices negotiated for commercial insurer contracts, which are closely held trade secrets) for the 300 most common procedures. That ruling took effect starting in 2021. Since the fine was so low (a total of $110k in annual fees), CMS upped the fine to around $2 million annually for the largest hospitals. It's JUST big enough to be an annoying fine for systems. Madden's Musing: So…who's next? According to reports, just 6% of hospitals are compliant with the CMS ruling, meaning that they had both a machine readable file online for 300 common procedures that can be scheduled in advance. Beyond that, CMS has only issued 352 warnings letters. It's clear that many more hospitals are noncompliant than letters have been sent. Hospitals and health systems have clear incentives not to be compliant with the price transparency ruling. The combined administrative time as well as the perceived economic impact of disclosing negotiated commercial payor rates is more costly than paying CMS' fine. So here's my biggest question: Will the fines do enough to eventually force compliance among the largest players? I don't think so. |
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HCA runs into Antitrust Trouble |
If you're a hospital, you might as well chalk up any horizontal merger talks as an L. The FTC is hot on the trail of merging hospitals, and I've already seen several transactions get shut down in very recent memory: - Hackensack Meridian Health and Englewood Health called off their planned merger after an appeals court blocked the consolidation.
- Dartmouth Health and GraniteOne Health canceled their merger after antitrust review raised similar market concentration concerns
- Lifespan and Care New England announced an intent to merge into a 7-hospital system, but shut down talks again in February 2022 after an anticipated challenge by the FTC.
Welp…the FTC is now suing to block the transaction between HCA and Steward consisting of Steward's 5-hospital footprint in the Utah market. Madden's Musing: Not only is the Utah acquisition in limbo, but HCA is getting sued for its 2019 (2019!!) acquisition of Mission Health, which appears to be more than they bargained for when the hospital operator acquired the system (physician departures, etc). Interestingly, both lawsuits against HCA call out the fact that Mission Health was ALREADY a monopoly prior to HCA's acquisition so...maybe you should have been focusing on that? Moving over to the Utah transaction…ironically, Steward is expecting to use the proceeds from that sale to fund ACO expansion into Florida and Texas in particular outlined in this Beckers article. Apparently in the Utah market, Steward and HCA hold the number 2 and number 4 spots in market share, respectively in the "Wasatch Front" region (where 80% of Utah residents live). Of course, the burden of proof is on the FTC to block the acquisition, so we'll see where things shake out and whether this transaction being canceled has any effect on the recent Steward-CareMax deal announced last week. Like I touched on in Part 1 and Part 2 of our overview of health system mergers, it's tough sailing for horizontal hospital mergers. |
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Top 3 Performers: Privia, Talkspace, Augmedix Bottom 3 Sandbaggers: Pear Therapeutics, Convey, The Oncology Institute |
Amedisys' Contessa Health announced a cool partnership with local Dallas (!!) health system Baylor Scott & White. The joint venture will extend new at-home care models, including hospital-at-home, SNF-at-home, and other care to eligible patients starting in 2023. Although most of these programs are only available via waiver while the public health emergency continues on, it's clear that most provider organizations believe that at-home care models like HaH are here to stay. - When Amedisys purchased Contessa back in 2021, Amedisys claimed that its TAM nearly doubled from the $250 million acquisition, from about $44 billion to $73 billion! It's clear that Contessa is already paying dividends by forging new relationships with health systems akin to LHC Group's strategy. Amedisys has shifted its strategy to focus on Contessa as a core part of the business. Like I touched on in my LHC-Optum deal analysis, hospital-at-home is a huge path forward for home health, and focusing on high acuity in the home is a major opportunity if it's achievable.
Encompass plans to complete the spin-off of its home health division Enhabit by July 1. As part of the spin-off, Encompass disclosed some interesting guidance and operating expectations for the back half of 2022, including lowering guidance for its rehabilitation segment. - Along with the lowered guidance, Encompass noted higher costs per visit on Enhabit's side and said that it expects material improvement to the business in the second half of 2022. A lot of healthcare provider orgs seem to really be banking on a rebound in 2H 2022, so I'll be focusing on that when Q2 earnings releases come out.
According to a WSJ report (paywall), Cerebral spent $13 million on Tik Tok ads over a 5-month period. It was the 3rd largest spender on the platform behind HBO and Amazon over that timeframe!! That should give you a lot of context into why customer acquisition costs have skyrocketed - well capitalized players are competing for the same consumers and churn is high. - Virtual mental health, while great for patients, is not a business I would want to be in right now until some players get washed out.
Geisinger expanded its partnership with CERTIFY Health to implement face identification tech at its hospitals. Once a patient enters the hospital and checks in to the Geisinger system, that face will now be identified and attached to a health record. Geisinger will continue to integrate the feature across other biometric identity verification, including fingerprints, retinal scans, and more. I have to question whether ALL of that is necessary, but I do think it's an interesting value-add to cut down on fraud and misidentification. - Like I've said before, I think that players building solutions for health systems to get more efficient will be major winners in the near future.
Oak Street Health announced it's entering Colorado in fall 2022 and continues to prioritize de-novo sites over acquisitions. Pretty interesting strategy, but probably maintains quality and value of brand as opposed to a Carbon, which has grown primarily thru M&A. The Colorado sites will open in the Denver and Colorado Springs areas. - Oak Street is steadily growing an impressive footprint - 140 clinics across 20 states expanding to 170 by the end of the year (which was already tapered down in Q1 given tighter capital and labor).
The FTC once again is launching an inquiry into PBM practices, requiring the 5 largest pharmacy benefit managers to provide information and records regarding business practices including CVS, OptumRx, Express Scripts, and others. Will anything come of this? Probably not. but the FTC has had a lot more bite lately. Will the drug pricing merry go round ever end? - Along with the probe into PBMs, the FTC is also looking to restrict the use of non-compete agreements, which has major ramifications for physician employment and healthcare.
Humana is bringing its onehome value-based care model to Virginia after acquiring the coordinated home health company in 2021. UpHealth is an absolute clusterbomb. "CONCERNED STOCKHOLDERS urge UpHealth stockholders to STOP, LOOK, and LISTEN." might be one of the more bizarre headlines I've seen! |
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- This was a fantastic report from Sam Sirell and Woodside Capital Partners. It's a great overview of health tech valuations, commentary, and market maps for various segments. So good that even Rohan Siddhanti had to write a thread about it!
- Jonathan Bush posted a brief Medium article comparing the current state of healthcare between FFS providers 'taping together' digital health offerings to the new health tech services offerings of today. While I wouldn't say it's a perfect comparison (Mac vs. PC, I mean), the analogy works well enough to juxtapose traditional incumbents vs. newer players who might have a more sophisticated layer of patient relationship management.
- Jay Parkinson, a great Twitter follow, posted a thought piece on where more focused efforts should be related to controlling healthcare costs - the 95%.
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Here are some jobs that I'm curating for the healthcare industry. Use this link to submit your role to be featured if you're looking to hire. Care Innovation Director, Advocate-Aurora Health: The Care Innovation Director will be an integral part of our growing Strategy & Innovation team and will develop and implement a digital therapeutics formulary that supports the strategic direction of the organization. Research and communicate advances in digital technologies and care delivery options, lead the vetting of digital therapeutics adoption, and guide and support organization-wide adherence to the digital therapeutics formulary. Head of Growth Marketing, Teladoc: If you're a performance marketer with a knack for creativity and strategic thinking, we'd love to meet you. The Vice President of Growth Marketing will drive broad-scale adoption of Teladoc Health's physical, mental, and chronic condition management services. This leader will nurture a high performing team of 20+ growth marketers to set our strategy, exceed our revenue targets and deliver on our promise to help consumers live their healthiest lives. Product Marketing Lead, Humana: Humana's Primary Care Organization (PCO) is looking for an experienced and passionate Product Marketing Lead who is hyper customer focused with an ability to understand complex business models, and develop marketing strategies that drive desired business outcomes. This role will be supporting the Centerwell brand. As part of PCO, you will lead the development and implementation of marketing strategies, campaigns and programs. |
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- The Saudi Arabian LIV golf league kicked off this week on Youtube to a concurrent viewing of 100,000 folks. Who ya got winning, the Cleeks Golf Club, Iron Heads? Crushers? Niblicks? Lots of names to watch!! Side note…I have to think that the people attending these first events are paid actors…
- Speaking of golf, I'm playing a round today in Florida. The person who guesses the closest score gets a shoutout in next Tuesday's newsletter. Here's a hint: I play off a 5 (which is admittedly generous given where my game is currently).
- This was a great note on being more optimistic from Packy. I appreciate this guy.
- The Call of Duty Modern Warfare 2 campaign gameplay trailer dropped this week and it looked eerily similar to the first mission from COD4's campaign. Still, the graphics look stunning and even though Activision is totally catering to fan nostalgia, I'm looking forward to MW2.
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Thanks for the read! Let me know what you thought by replying back to this email. 'Til Thursday, — Blake |
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