Weekly Health Tech Reads | 7/14/24

MA overpayments revisited, FTCs interim report on PBMs, Sanford & Marshfield Clinic merging, and more

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Kevin O'Leary
July 14, 2024

 

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NEWS

The WSJ revisits Medicare Advantage overpayments for diagnoses that were not treated

The Wall Street Journal released a report into Medicare Advantage coding practices, finding that CMS paid insurers $50 billion for diagnoses that weren’t actually treated. The report highlights both data and anecdotal stories that are cause for concern regarding insurer-driven diagnoses in the Medicare Advantage market.

This prompted a swift response from AHIP, calling the analysis flawed and outdated. Among other things, AHIP noted that CMS has already made significant changes to the risk adjustment process since 2021, the last year of the WSJ analysis.

✍️ Going Deeper

The debate over the usefulness of HRAs and chart reviews is not new in the Medicare Advantage world. Going back to 2021, an OIG report called out HRAs and chart reviews, noting that 20 MA plans drove an outsized share — roughly $5 billion — of payments from diagnoses collected only via HRAs and chart reviews.

There have also been a number of lawsuits over the years brought against payors accusing them of fraud — by inflating diagnoses, not removing invalid diagnoses, or discouraging care. This 2022 New York Times piece highlighted the challenge well in this chart, illustrating how nine of ten leading MA insurers had faced fraud or overbilling accusations:

While much of this conversation feels like revisiting an issue that’s been known for years, I think the chart below from the WSJ article is worth pausing on. It details how a number of conditions diagnosed by insurers went untreated between 2018 and 2021:

If I’m reading that chart right, it suggests that only 17% of people who were diagnosed with HIV by MA insurers received treatment versus 92% who were diagnosed by a doctor. It also suggests that only 29% of people diagnosed with Parkinson’s receive treatment versus 73% of those diagnosed by a doctor.

Assuming the data here are accurate, that seems like a problem, right?

What I can’t reconcile for myself from the article is why such a massive delta exists between provider-diagnosed and insurer-diagnosed for these conditions. HIV and Parkinson’s seem like major, life-altering diagnoses that I’d imagine most people would start treatment for. And yet, somehow, only 170 people out of every 1,000 that were diagnosed with HIV by an MA insurer HRA are receiving treatment? What is a reasonable explanation for the 830 people who apparently are not getting standard treatment after being diagnosed with HIV? As noted in the article, it seems like it’d be a severe level of substandard care — which seems like a massive understatement.

Not surprisingly, UHG and Humana disagreed with the numbers, suggesting their treatment rates are much higher than the WSJ reported. And without a sufficient explanation for why those treatment rates are so low, I’m inclined to believe that.

Either way, this conversation again underscores the structural and operational challenges posed by a system that compensates insurers (and providers, too, in this vertically integrated world) based on the diagnosis codes they submit. As noted above, the OIG raised similar issues back in 2021, which are again being raised here based on pre-2021 data. It’ll be interesting to watch how this conversation changes in the coming years based on the changes CMS already has and presumably will continue to implement.

NEWS

FTC releases an interim report on the anti-competitive practices of PBMs; plans lawsuit over insulin prices

The FTC released an interim staff report on the state of PBMs, finding that consolidation in the industry has led to increased revenue for PBMs and increased costs for consumers. The report focused on two specific drugs, highlighting how organizations pay their affiliated pharmacies more than unaffiliated pharmacies for the same drugs. The analysis suggests that these two drugs alone resulted in $1.6 billion in excess revenue paid to pharmacies that are affiliated with the three largest PBMs over a three-year period between 2020 and 2022.

The report has faced some criticism, with one of the five FTC commissioners even dissenting from its release. The critique is essentially that the report was politicized, based on a few anecdotes, and that it lacks the analytical rigor one might expect from an FTC report. Personally, I find the report to be a helpful and informative dive into the state of the PBM industry, and Lina Khan’s statement about the report's release and addressing some of the criticisms was a compelling read.

Despite the pushback, the WSJ reported on Wednesday that the FTC is planning to sue the three largest PBMs — OptumRX (UHG), Express Scripts (Cigna), and Caremark (CVS) — over manufacturer rebates paid for insulin. The FTC is apparently also investigating the three largest insulin markers as well.

DATA

Rock Health highlights 1H 2024 digital health investing activity

The Rock Health team published their usual 1H review of venture capital activity in the digital health space, noting that 2024 is on pace to exceed 2019 and 2023. The report provides helpful context regarding the state of the market, including the uptick in early-stage deals. The biggest surprise to me in the report is that Rock Health found that only ~34% of deals involve companies leveraging AI. It seems like every company raising money these days touts leveraging AI in some form.

PS: We’re looking for a couple partners to host a casual event or two for folks to connect out there. It’s a good way of getting in front of lots of smart, engaged people in the space. Reach out!

Other Top Headlines:

  • CMS released the 2025 Physician Fee Schedule on Wednesday, prompting pushback from provider groups who are unhappy with the expected 2.9% hit to reimbursement if the rule is finalized as is.

    • This Nixon Gwilt post did a nice job highlighting some key takeaways for digital health innovators from the proposal, including changes to care management codes in primary care, digital mental health therapeutics, telehealth for SUD, and the definition of “direct supervision”.

    • NAACOs released a statement on the proposed rule with a mixed reaction, citing “looming crises” around benchmarking and reporting requirements that will cause providers to leave ACOs.

  • A federal judge in Texas stayed two key provisions of CMS’s 2025 Final Rule related to broker compensation. This Modern Healthcare piece does a nice job summarizing the uncertainty that this decision will likely add to the 2025 Open Enrollment period.

  • South Dakota-based Sanford Health and Wisconsin-based Marshfield Clinic announced their intent to merge and form a $10 billion health system. For Sanford, this marks the fourth attempt to expand via merger after three failed attempts in recent years (Fairview, Intermountain, and UnityPoint). For Marshfield, this marks its third attempt at a merger in the same period (Essentia, Gunderson). Marshfield and Essentia called off merger discussions earlier this year, with Marshfield’s financial struggles causing Essentia to back away. It seems like a logical combination, with Sanford in search of market expansion and Marshfield in need of a partner that can help right the ship.

  • Geisinger, the health system owned by Kaiser’s VBC platform Risant, announced a new $880 million value-based care initiative eleven-story tower and an expanded emergency department in Danville, PA. The addition is scheduled to open in 2029 and follows a $900 million capital project to build another eleven-story tower at another medical center. It’d be interesting to be a fly on the wall in Risant strategy sessions… nothing screams “building a national value-based care platform” quite like investing $1.8 billion in two eleven-story hospital expansions in Pennsylvania towns.

  • An administrative judge in North Carolina ruled this week rejecting BCBS NC’s appeal of the North Carolina state health plan’s decision to switch to Aetna as its TPA after an RFP that was decided a year and a half ago. This ruling ends the appeal process for BCBS NC, meaning that BCBS NC’s 40+ year relationship with the North Carolina state health plan will come to an end in 2025.

  • Prime Therapeutics data suggests GLP-1 adherence is low. It looked at a population of 3,364 commercially insured individuals and saw that 47% were adherent after 180 days, dropping to 29% at one year, and 15% at two years. Weekly injections had higher adherence rates — Wegovy was 24% and Ozempic was 22% — versus daily injections — Saxenda and Victoza were 7%.

  • A federal judge in Texas temporarily blocked the FTC’s rule banning non-competes. Technically, this ruling was only related to the plaintiffs who brought the case, but it is expected that it will be expanded nationwide before the FTC rule goes into effect.

  • This STAT article presents an interesting look into the market for medically tailored meals paid for by Medicaid. It suggests that Medicaid is paying organizations like Homestyle Direct to send out Jimmy Dean’s frozen breakfast sandwiches and other seemingly fast food-esqe meals to Medicaid recipients as “medically tailored meals”.

  • Fortune reported that Walmart has been in conversations with insurers, including Humana, to sell its shuttered Walmart Health clinics.

  • Walmart sold its telehealth business, MeMD, to Fabric for an undisclosed amount. This marks the third acquisition that Fabric has made in a little over a year, following Zipnosis and Gyant. Walmart originally acquired MeMD in 2021, and MeMD today apparently serves 30,000 employers with 5 million employees.

  • CMS released the revised Medicare Advantage Star Ratings for 2024, with over 60 plans from 40 insurers receiving an increased rating. Thirteen plans saw a rating increase from 3.5 to 4.0 stars, as highlighted in this helpful Healthcare Dive summary.

Funding Announcements

  • HarmonyCares, a home-based primary care platform, raised $200 million. HarmonyCares was known as US Medical Management (USMM) prior to a rebrand in October 2022. Centene sold a majority stake in USMM back in November 2021 to a group of investors, led by Rubicon Founders.

  • Mental health provider Headway raised $100 million at a $2.3 billion valuation. In October 2023, Headway announced a $125 million raise at a $1 billion valuation.

  • Regard, an AI-based platform that helps health systems increase revenue by identifying missed diagnoses in medical records, raised $61 million at a $350 million valuation. Regard has an impressive list of health system customers including Banner, Sentara, Montefiore, and Cedars-Sinai.

  • Hopscotch Health, a rural primary care provider, raised $50 million. The company noted that it now has 15,000 patients across 10 clinics in Western North Carolina.

  • K Health, a virtual primary care provider, raised $50 million. The latest funding values K Health at $900 million. K Health plans to be profitable next year and has hopes of a future IPO.

  • Octagos Health, a cardiac device monitoring platform, raised $43 million.

  • Courier Health, a CRM for the life science industry, raised $16.5 million.

  • Synthpop, an AI platform for automating admin workflows, raised $5.6 million.

  • Heartbeat Health, a virtual-first cardiology provider, raised a growth round.

Reads from the Community

What Does the End of Chevron Deference Mean for Federal Health Care Programs? by Matthew Krueger, Judith Waltz, Jarrod Brodsky, Ilana Meyer, and Callie Ericksen
A helpful summary from folks at Foley & Lardner of the implications of SCOTUS overturning Chevron. It highlights the higher likelihood of future legal challenges for federal agencies, including HHS and others. CMS’s efforts to implement minimum staffing requirements at nursing homes were mentioned as a particularly likely area where we’ll see these issues. Read more.

How Payment Caps Can Reduce Hospital Prices and Spending: Lessons from the Oregon State Employee Plan. by Roslyn Murray, Christopher Whaley, Erin Fuse Brown, and Andrew Ryan
An interesting deep dive from the Milbank Memorial Fund looking at Oregon’s efforts to mandate a cap on hospital payments for the employee state health plan. It saw a 25% reduction in outpatient prices and a 3% reduction in inpatient. Interestingly, inpatient didn’t decrease as much because cheaper hospitals initially increased prices to the cap. Ultimately the report estimates the state health plan saved 4% due to the effort. Read more.

Transforming Healthcare Innovation Through Automation and Structural Change by Vig Chandramouli and Terra Nova Research
A nice summary of how Chandramouli, a partner at Oak HC/FT, is viewing the automation investment opportunity in healthcare. It covers off on key trends and examples of companies they’re excited about (Abridge, Notable, Trovo Health, Regard, Syllable, Main Street Health, and CareBridge). Read more.

Operations Associate at Tandem, a prescription concierge service. Learn more.

Supervisory Health Insurance Specialist at CMS, the Centers for Medicare and Medicaid Services. Learn more.

Staff Software Engineer, Platform at Luminai, an AI platform for automating business workflows. Learn more.

VP of Commercial Operations at Garner Health, a data analytics platform directing employees to high-value care. Learn more.

Partner, Corporate Development, Healthcare Technology at a16z, an investment firm. Learn more.

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