Hospitalogists, Raise your hand if you've been personally victimized by this year's Fantasy Football injuries disaster. Orthopods, when are you going to invent bionic hamstrings and knee ligaments? I digress. Today I was planning on sending out my normal Tuesday news send, but then I got sidetracked reading Astrana's Q2 report from a few weeks ago, so instead you're getting a dive into what's affecting one of the best advanced primary care players in the value-based care game. Hope you guys enjoy! Two quick updates from me before we get started: - Join my virtual event next week with Lumeris! It'll be an interactive discussion. Register here.
- Thanks to everyone who has applied to the Hospitalogy community after the mini-revamp. The response has been admittedly overwhelming and I'm excited for the future.
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The most important news from the week |
Astrana's Q2: Successfully Scaling VBC? |
Astrana Q2 2024 results linked here. I've talked to a lot of folks recently who are growing skeptical when it comes to value-based care for a number of reasons. Administrative burden. Attribution. Excessive number of quality metrics with no standardization. Rigid structure of contracts not allowing for appropriate care. Financial engineering in vertical integration. Care rationing. Programs not generating savings. etc. etc. And yet despite all of this cynicism (much of which holds quite a bit of merit argument-wise), there are advanced primary care and enablement players out there still walking the walk. And so Astrana's business model (along with a few others) is particularly interesting to me given their track record of profitable growth in VBC land. Astrana is not shying away from value-based care. In fact, it's bucking the trend and diving head-first into risk, getting closer to the premium dollar and full risk through acquisitions of clinics and other enablement players. So with that in mind, let's take a quick dive into Astrana's Q2 report. Here are 4 takeaways I found interesting and notable. Side note: what do you guys think of the revamped tear sheet format? |
Astrana is Thoughtfully Ramping New Market Entrance: Astrana continues to enter new markets, and in Q2 they entered Hawaii and Arizona through a couple of partnerships in various segments. Astrana's commentary on the new Elation Health partnership interested me as well as the two will look to co-develop technology for providers transitioning to risk (Billing, EHR). Adding to these growth vectors, Brandon Sim shared some interesting commentary around how Astrana thinks about deploying capital - in many cases over the past few years, turning down many potential acquisitions. - I think the way we think about it is we certainly turned down our share of partnerships, potential acquisitions, capital deployment opportunities in the past couple of years. Especially when there was what we perceived to be a bit of spread between what was being demanded based on the market conditions at the time and what we could reliably underwrite, given our care model and structure. I think now that, that has changed. And in addition to conditions changing, our capabilities have changed. We feel a lot more comfortable expanding at the pace that you're now seeing, because we have spent the past couple of years building out the systems, the automation, the infrastructure, the teams, the people and the muscle memory, frankly, in order to do this in a repeatable way at larger and larger scales. So you may recall a couple of years ago, we were talking about $5 million to $10 million acquisition, small tuck-ins, small IPA client improvements. Late last year, we talked about CFC, which we've now fully integrated and have had no issues doing so with a pretty seamless fashion. And we feel comfortable repeating that muscle -- using that muscle memory rather than repeating the motion, the Astrana flywheel I talked about earlier, to continue expanding across the margins and bringing what we're doing to more communities across the country as our mission. So I absolutely hear you. We'll continue to make sure that eyes don't get too aggressive, but we do feel that we are prepared, and we spent a lot of time in energy building infrastructure to make sure we're going to succeed and have a scalable platform.
- During the second quarter, we entered the state of Arizona through our Care Partners segment, partnering with an anchor primary care physician group with over 45 primary care providers serving over 50,000 patients across Medicare, Medicaid and Commercial lines of business. Astrana will serve as the Group's exclusive Care Enablement provider with providers anticipated to onboard into our Care Enablement platform by the end of 2024 and expected to begin participating in value-based arrangements in 2025.
- We entered the state of Hawaii as part of this [Elation Health] collaboration, partnering with a provider organization of over 100 primary care providers, serving just under 20,000 primarily Medicare patients in Hawaii. Operationally, we have already onboarded the organization onto our Care Enablement platform with full integration expected to be completed by the end of the third quarter of 2024. In addition, we expect to begin participating risk-bearing arrangements through our Care Partners segment in that state by 2025.
- Through the 3 new partnerships and the acquisition I discussed today, we continue to not only reinforce our existing markets in California, Nevada and Texas, but also plant meaningful foothold into 9 new states across the Hawaiian Islands, the South and the East Coast.
- So we really envisioned a bidirectional partnership. For example, we are working to jointly sell Elations electronic health record as well as our billing services, which are part of our Care Enablement platform, for example, to facility providers that are already bearing risk with us in some form or fashion, that's one. Two, certainly, we look to bring our risk-bearing capabilities and enablement capabilities to clinicians -- the 32,000 clinicians that are already on the electronic health record sold by Elation. So there's definitely a large opportunity, we believe, to organize and aggregate providers into risk-bearing entities, such as ACOs and CINs in that population. I believe that a large majority of the 32,000 clinicians do not yet participate meaningfully in value-based arrangement today. Certainly not all [ partial risk ], certainly not full risk. So we think it's just meaningful market capture opportunity in terms of helping providers who are on Elation, which is suited for value-based care, especially given the integrations we're building out with them to participate and move along their risk letter with us.
Utilization is in-line with expectations: Similar to other market commentary, while utilization is elevated, it's remaining at current levels. Astrana attributed this to the strength of its business model and ability to manage utilization, and I couldn't help but think of agilon when those comments were being made, but I have a hunch Astrana isn't making the same mistakes. - So I think we're seeing relatively stable utilization, as we mentioned earlier, as Chan mentioned earlier. Low to mid-single digits depending on line of business relative to last year, cost trend and they'll continue to stabilize for us, again, all the anticipated uptakes are included in 2024 guidance, if you reiterated. And the reasons for that are really what we believe to be the strength of the Astrana Care model. We've, for a long time, have not relied on excess revenue capture, right, from a v28 or risk coding perspective, in order to maintain the medical loss ratios that we do. We've had very, very tight integration between primary and specialty care providers as well as the hospital ecosystem, especially moving to full-risk arrangements. We think those and more, the hybrid affiliate and employee model, the access to care that we're providing by building these neighborhood sites, so on and so forth, really have allowed us to moderate utilization and revenue headwinds in a way that others maybe are not -- are struggling a little more with.
More information on where Astrana plans to build clinics with Anthem Blue Cross: - ...those clinics are exclusively for Astrana and one of our affiliated IPAs, who were participating in an Allied -- or sorry, participating in Anthem Blue Cross plan. We think that the ramp up will look, frankly, very similar, if not slightly better than the typical ramp-up given that there is -- we specifically chose to build those clinics in areas where we think there could be a lot of gains for Allied Pacific as well as for Anthem Blue Cross. So they were strategically chosen not necessarily in areas where we already have full saturation, but areas where we think there could be improvements in terms of access to high-quality care providers of that community. So given our presence in California and Anthem Blue Cross' presence in California, we actually do think that membership at those clinics will ramp up pretty nicely.
On the Collaborative Health System acquisition from Centene announced recently and tighter alignment with Centene: - The Collaborative Health System asset was acquired from Centene, but it was not a Centene-only asset. It was a payer-agnostic, multi-payer, multi-line of business enabling organization. We believe we collaborate very well with Centene organization. We have contracts. We have value-based arrangements today already with them, and we plan to jointly expand those relationships in order to serve additional markets and members in the communities that Centene serves as well. So that's something that we look more to expanding. But at the same time, as I mentioned earlier, it is a payer-agnostic, client business agnostic organization.
- Centene and CHS today have a relationship where they are delegating risk as well as a delegated functions to CHS, which we believe is very innovative, and we would anticipate that to continue post the close of the transaction, similar to how we work with Centene and its subsidiaries today in California. We think that allows for a great degree of collaboration, data sharing, data visibility and ultimately, better outcomes for patients because of the model, and that's something we're excited about. So as part of that, kind of we read through there. We also believe Centene to be a very good partner of ours. They're obviously a good partner of CHS, and we think that there's a lot of room to work together, as we already do to continue serving members in areas where both of our organizations want to better the health care delivery in those communities. So we are looking forward to continue doing that with Centene, in particular, but also some of the continuing relationship with CHS
That's it for this week! What's going on in your world of value-based care or segment of healthcare? What should I write about next? Respond with any thoughts or suggestions - business model breakdowns, state of various segments, and more. |
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Register for my Virtual Event on 9/24 |
Major changes are coming to healthcare, and we're diving into the heart of it on September 24! Join me, Lumeris' Rick Goddard, and Mercy's Michael Englehart for an interactive webinar where we'll tackle the hottest topics in value-based care, including: - Diversifying revenue through innovation and value-based contracts
- Proven growth and partnership strategies valuing quality over quantity
- Navigating vertical integration and the role of VBC in strategic response
- Insights on the outlook in late 2024 and beyond
Bring your questions, too! We'll have a live Q&A to cover your most urgent challenges. Healthcare's evolving fast—let's get ahead of it on this webinar together. See you there! |
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| Random personal anecdotes and musings from me |
Alright fam, Texas fans (me included) are drinking from the firehose of Kool Aid right now. Even when our Heisman frontrunning QB goes down with an apparent injury, we can't stop ourselves. Why? Because we have a literal apparent prodigy at QB behind him, and Texas fans are hyped out of their minds about it - along with being voted #1. I personally think there's a hell of a lot of rat poison being tossed around our program right now, and even though we're talented, Texas struggled through a lot of close games last year. Nevertheless, the program is headed in an incredible direction and it's a great time to be a Horns fan after years - and years - of suffering. I've done my waiting!! I deserve this!! |
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Thanks for the read! Let me know what you thought by replying back to this email. — Blake |
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