HTN | Weekly Health Tech Reads | 7/23
July 23, 2023
Welcome to this week’s free weekly newsletter, where we share our perspectives on some of the key healthcare related news of the week.
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NEWS OF THE WEEK
Sharing our perspective on the news, opinions, and data that made us think the most this week
Summary: Elevance earnings followed UHG’s trend beating expectations and is up 6%. Overall, Elevance's benefit expense ratio (MLR) sits at 86.4%, a YoY decrease of 70 bps. On the Medicaid front, while YoY membership grew by 938k, QoQ membership decreased by 135,000 people (primarily due to redeterminations). The company notes it has reached out to 1.5 million members to assist with the Medicaid redetermination process.
- Focus on utilization trend: Elevance's utilization trend showed an impactful increase, but they downplayed its impact compared to UHG. They attributed the rise in operating gain to premium rate adjustments reflecting the cost of care and Medicaid growth. Their MLR decreased to 86.4% YoY due to these adjustments, but it's still higher than UHG's 83.2%.
- Elevance's focus on Carelon & Services is crucial for their operating margin growth, representing about 25% of both revenue and operating margin but contributing only 10% to the YoY quarterly gain increase. They see potential in various areas like full risk capabilities, home delivery, post-acute in-home care, DME offerings, and payment integrity, but execution risks need careful consideration to identify the right services for the highest value populations.
- Elevance faced challenges in their commercial business due to attrition in the Employer Group risk-based business, but government spaces (MA, Medicaid, and ACA) continued to grow. The commercial side of the business is witnessing changes with Humana's exit and UHG, and CVS/Aetna's growth. Startups selling to employers should consider longer sales cycles and the trend of employers consolidating from multiple TPA vendors to one.
- Medicaid redeterminations are a significant factor, with YoY membership growth but a QoQ decrease primarily due to redeterminations. Elevance has reached out to 1.5 million Medicaid members to help with the process, and insurers converting those leaving Medicaid into ACA plans will be worth watching. Elevance reported positive click-through rates in their digital reach-outs, but actual sign-up figures are pending confirmation. Their estimation indicates that 40-45% will stay on Medicaid, while 20-25% will opt for employer-sponsored plans, and another 20-25% will choose the ACA.
Summary: CMS released a Request for Information about a new episode-based payment model that will build upon lessons learned from other bundles' models including BPCI, BPCI-A, and CJR. It is a piece of the CMMI Strategic Refresh announced in 2021, intending to support specialists in adopting value-based care. This new model would begin in 2026 at the earliest.
- We thought HTNer Francois De Brantes' piece posted on LinkedIn provided for an insightful critique of the RFI, as well as the current state of innovation within CMMI. His post suggested that the questions CMS is asking about the proposed new model have been addressed in publicly available reports for years. Those reports include among others this playbook for medical specialty care bundles. It'll be interesting to see how CMS evolves the proposal from here. More broadly, it certainly feels like CMMI is facing more headwinds than ever.
HTN Slack Convo (h/t Lizzie Lebling)
CHART(S) OF THE WEEK
Sharing a visual or two from the week that made us think
The Weekly Gist shared a recent analysis of 30 years of historical data from Kaufman Hall and the American Hospital Association looking at hospital operating margins. The team highlights a pretty wild finding - 2020 and 2022 have been the only years in which a majority of hospitals (53%) posted a negative operating margin. This period of hospitals' financial distress is even worse than in the most recent periods of economic hardship (i.e. dot-com bubble burst and the 2009 Great Recession).
A round-up of other newsworthy items we noticed during the week
The FDA approved the first over-the-counter daily oral contraceptive, Opill - a groundbreaking, but long overdue approval. KFF provides a nice overview of outstanding questions re: the approval, such as cost, reimbursement and more.
Link / Slack
The Peterson Center launched a new $50 million nonprofit - the Peterson Health Technology Institute - that will provide independent evaluations of digital health technologies, analyzing solutions' economic, privacy, security, as well as health equity impacts.
Link / Slack (h/t Lisa Bari)
Utah passed an amendment that allows pharmacists to be paid for their clinical services, signally the start of hopefully a larger trend - as of today, pharmacists are not considered providers at the federal level, and thus haven't been paid for cognitive services by Medicare, only by individual payers/states that pass amendments such as this.
Link / Slack (h/t Bryce Platt)
Herself Health, a startup providing primary care to women 65+, raised $26 million to open two more clinics in the loveliest metro area in the US, the Twin Cities of Minneapolis & St. Paul. Those two clinics will open this year and Herself will add at least one new market in 2024.
Link / Slack
Torch Dental, a dental supply marketplace, raised $28 million to expand geographically into the South, Southwest and Midwest, as well as hire additional staff and expanding its services.
Link / Slack