Gist Weekly: May 3, 2024

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Welcome back to another busy week for healthcare news! We’re honored to have you join us again to review the biggest stories of the week—and share what we think about them. Please subscribe to the Gist Weekly email.

In the News

What happened in healthcare recently—and what we think about it.

  1. Walmart Health shuts down, ending clinic and virtual care operations. On Tuesday, Walmart announced it will be closing its 51 Walmart Health Centers across five states as well as shuttering its virtual care offerings. Walmart launched the first of these centers in 2019 with the stated goal of “becoming America’s neighborhood health destination,” but, according to this week’s press release, no longer sees a path to profitability for its care business amid rising operating costs and a challenging reimbursement environment. Walmart is also ending its co-branded Medicare Advantage plan with UnitedHealth Group, which was part of a planned 10-year collaboration announced between the two companies in 2023. The retail giant will continue to operate its national network of more than 3K vision centers and 4.6K pharmacies, the latter of which offer immunizations as well as an expanding “Testing and Treatment” program that provides customers with access to tests for COVID, flu, and strep throat.
    • The Gist: This move is a sharp reversal for Walmart, which had shared last month that it was slowing down expansion plans for its health centers, but said it was still aiming to open more than 20 locations this year. As Walgreens’ VillageMD has also found, generating returns on standalone primary care services is very difficult, even with access to capital, lower-cost facility space, and a steady stream of foot traffic. Walmart has proven willing to experiment with retail healthcare and admit failure, having started and stopped various kinds of health clinics in its stores across the last decade and a half, including leasing them to other operators and positioning them to primarily serve employees. Over the years it has also been rumored to be interested in acquiring health insurer Humana, and more recently full-risk primary care provider ChenMed. However, this week’s announcement appears to signal that any dreams Walmart may have once had about disrupting healthcare have been put on hold, and it’s unclear what, if anything, the long-touted “sleeping giant” in healthcare may try next.
  2. UnitedHealth CEO testifies before Congress about Change cyberattack. On Wednesday, UnitedHealth Group (UHG) CEO Andrew Witty received intense scrutiny from federal lawmakers in a pair of hearings on the Change Healthcare cyberattack and UHG’s response. Appearing before both the Senate Finance Committee and a House Energy and Commerce subcommittee, Witty apologized to all those impacted by the incident and vowed that both he and UHG will not rest “until we fix this.” He confirmed that it was his decision to pay a ransom to the hackers and revealed that the source of the breach was a portal in Change’s systems that lacked multi-factor authentication, a standard cybersecurity protocol. Lawmakers expressed intense frustration that UHG failed to safeguard sensitive patient data and that it has yet to quantify the number of patients impacted. Witty said the company, as previously announced, is offering free credit monitoring and identify theft protections to concerned patients as well as zero-interest loans to affected providers.
    • The Gist: Given that Change’s primary function is to handle sensitive patient data, lawmakers accused UHG of having failed to practice “cybersecurity 101.” The Department of Health and Human Services has yet to publish a breach report on the incident, which, according to federal rules, UHG was supposed to file by April 21. Due to the unprecedented scale of the breach, UHG estimates it will take several months to identify and notify affected patients, which would only serve as the first step toward redress for those impacted. Members of both parties also questioned UHG’s size, suggesting that its dominance in the healthcare market makes it a target for hackers, adding fuel to the ongoing Department of Justice antitrust inquiry into the company. 
  3. Federal panel lowers recommended breast cancer screening age back to 40. On Tuesday, the US Preventive Services Task Force (USPSTF) finalized a recommendation that women at average risk of breast cancer should start receiving biennial mammography screenings once they turn 40. This decision, sparked by increasing rates of breast cancer among younger women, reverses a 2009 task force recommendation that raised the age from 40 to 50.
    • The Gist: In 2009, panel experts expressed concerns that earlier screening may lead to unnecessary treatments in younger women. But with breast cancer rates among women in their 40s rising by about two percent per year, the panel’s latest guidance is being met with criticism that it should be doing even more, including recommending that women be scanned annually instead of biennially, and that additional scans recommended for women with dense breast tissue be fully covered by payers as well. A similar increase in colorectal cancer rates in younger adults prompted the USPSTF to lower the recommended age for colonoscopies from 50 to 45 in 2021.

Plus—what we’ve been reading. 

  1. Large employers’ weight-loss drug coverage dilemma. Published recently in Politico, this piece uses North Carolina State Health Plan’s attempts to restrict weight-loss drug coverage to illustrate the expensive problem for employers posed by these popular medications. After the state attempted to save money by gating access to Wegovy and Saxenda, a similar drug, by requiring employees to first try a lifestyle management program to lose weight, Novo Nordisk, the drugs’ manufacturer, responded by refusing to pass along rebates for the medications—amounting to a 40 percent discount—unless the state offered unrestricted access to all employees with a prescription. Instead, the state plan’s board chose to stop covering the drugs altogether, as it feared its costs could increase to more than $1B over the next six years. The article suggests that drug manufacturers are willing to play hardball in the short term to prevent policies that could hamper long-term demand, leaving them locked in a circular battle with employers and pharmacy benefit managers over cost that may ultimately deny patients access to the weight-loss drugs altogether.
    • The Gist: With many employers facing similar challenges around managing their coverage of expensive weight-loss drugs, these kinds of clashes are likely to continue. Now that Wegovy has secured an expanded label to treat heart disease, employers will have an even harder time balancing both increasing costs and employee access demands. Pharmacy benefit costs for employers already increased 8.4 percent in 2023, and employers are projecting a 5.2 percent rise in healthcare costs per employee for 2024, in part due to increasing demand for weight-loss drugs. Although these drugs have shown tremendous potential to improve healthcare outcomes, questions of why their prices are so high, how best to balance spending and access, and who ultimately bears the cost remain unsettled.

Graphic of the Week

A key insight illustrated in infographic form.  

Reviewing Biden’s healthcare policy record

With Election Day about six months away, this week we analyze President Biden’s healthcare record as presidential campaigns shift into high gear. Biden has made progress in strengthening antitrust enforcement, expanding insurance coverage, lowering prescription drug costs, and increasing price transparency, but some of these accomplishments are in a vulnerable position should he lose reelection. For example, his executive branch efforts focused on increasing competition could be halted or reversed fairly easily, as they are largely not in line with presumptive Republican presidential nominee Donald Trump’s priorities. Biden has also worked to bolster the Affordable Care Act (ACA)’s insurance marketplaces by increasing enrollment and expanding access to subsidies. Although it’s currently unclear what changes Trump would try to make when it comes to these marketplaces, he remains at least rhetorically opposed to the ACA. Biden’s efforts to reduce prescription drug costs and increase price transparency likely have the most staying power, but Trump may explore different strategies to do both. Given that controlling rising healthcare costs has become a rare bipartisan issue, and that the affordability of healthcare is among voters’ top concerns this election cycle, we’re likely to see more from both campaigns on this front.

Biden policy graphic

On the Road

What we learned from our work in the real world. This week from Nora Kelly, Managing Director, at Kaufman Hall. 

Expanding our physician alignment playbook

On a recent call, a health system CMO summed up his mounting concerns with the future of his system’s large multispecialty practice: “We’re struggling with the cost of supporting our employed medical group and know our physicians aren’t that happy. Some yearn to be more autonomous like their independent peers. Others want the stability and predictability of employment, but they’re struggling with the demands on their time to meet our productivity, call, and documentation requirements.Maintaining a positive, aligned culture across our group is becoming more and more challenging.”

I’m seeing many health systems beginning to reassess their physician alignment options and explore new ways of working with physicians who want different things. There may always be some who are able to thrive in the employed practice, willing to give up some level of autonomy in exchange for more support, including increasingly for things like loan repayment and housing stipends in some markets. But what about physicians who would either like to move back to being independent, or who are determined to keep their independence but still appreciate many of the management and support functions that a larger organization can provide? Some physician enablement companies are helping health systems move beyond the binary mindset of employment versus independence by providing a third-road option for strategically aligned physicians who would like greater support and assistance with things like transitioning to value-based care models. If your health system is rethinking its physician alignment options and wants to explore some of these partnership models, I’d be happy to discuss more of what I’m seeing. Please don’t hesitate to reach out.

On Our Podcast

Gist Healthcare Daily—all the headlines in healthcare policy, business, and more, in ten minutes or less every weekday morning.

In addition to the news discussed above, our Gist Healthcare Daily podcast covered many of the week’s other big stories, including Kaiser Permanente’s 13.4M-person data breach, the Biden administration dropping its menthol cigarette ban, and the FDA’s move to regulate laboratory developed tests.

To stay up to date, be sure to tune in each weekday morning. Subscribe on Apple, Spotify, Google, or wherever fine podcasts are available.

Another week in the books. See you back here again next Friday! In the meantime, please visit our archive if you’d like to peruse past editions of this newsletter.

Best regards,

The Gist Weekly team at Kaufman Hall


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