Weekly Health Tech Reads | 9/15/24

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MEDICAL DEBT RELIEF

A deep dive into the plan to erase $4 billion of medical debt at hospitals in North Carolina

Earlier this summer, North Carolina announced a plan to relieve medical debt as part of Medicaid expansion in the state. By August, all 99 hospitals eligible in the state signed up for the program. Undue Medical Debt, formerly RIP Medical Debt, will administer the program. The program expects to reduce existing medical debt by $4 billion for ~2 million North Carolinians and prevent future medical debt.

STAT published an excellent article this week diving into the plan to relieve medical debt in North Carolina and the tradeoffs associated with it. It appears that the state has gotten every hospital to agree to participate in this program by paying the hospitals full price for the debt in exchange for helping to prevent future medical debt. For comparison, the article highlights how Cook County (Chicago) is attempting to erase $1 billion of medical debt for only $12 million, which equates to paying roughly a penny for every dollar of debt. When that’s the alternative, it makes sense why every eligible hospital in the North Carolina agreed to participate in this program so fast.

Read the STAT report

✍️ Going Deeper

The article highlights a nuance of the medical debt relief process — in order to erase medical debt, hospitals need to agree to have it paid off. In North Carolina, this program was necessary at least in part because two of North Carolina’s largest health systems, Atrium and Novant, have historically refused to let organizations like Undue Medical Debt pay off the existing medical debt for pennies on the dollar.

Going back to December 2023, Atrium and Novant were in the local news for refusing to work with Undue Medical Debt. The article highlighted a church in Winston-Salem, North Carolina that held a debt-burning ceremony in March 2023. The church had raised $15,000, and Undue Medical Debt helped them use that money to forgive $3.3 million in medical debt across 3,355 families. The article discusses how a similar effort in the Charlotte-area failed because Atrium and Novant wouldn’t sell their debt.

As a brief interlude, if you’re like me and you’ve never seen what a ceremony to burn millions of dollars of medical debt in a local church looks like, here’s a picture from that article:

At the time, Atrium and Novant argued that they wouldn’t work with Undue Medical Debt apparently because it would undermine existing charity care policies. It’s a bit hard for me to take that response at face value given here we are nine months later and Atrium and Novant are working with Undue Medical Debt to erase medical debt. The key distinction being that now the debt is being erased at full value, not pennies on the dollar.

I have to imagine that the outcome here is a very nice financial win for the systems in North Carolina that are getting paid $4 billion for this debt. I’d also imagine other systems are looking at this and saying to themselves, if the North Carolina health systems held out and received full value for these debts, why shouldn’t we do the same, particularly if this model is a key talking point for a presidential candidate?

For me, this story about medical debt in North Carolina presents a really good case study on the tradeoffs that inevitably need to be made when attempting to do the right thing in healthcare — the most politically feasible way to get large organizations to change the way they behave is to align that behavior with their financial best interest. Erasing medical debt seems like an unambiguously good thing to do for people in this country. But at what price tag? Buying it at pennies on the dollar seems like a no-brainer. Buying it at full value from health systems so that they are made whole financially seems like it will only exacerbate problems related to the cost of health care moving forward. It doesn’t seem like there is a good answer here.

PACE

Habitat Health receives $50 million for PACE clinics in California & beyond

Habitat was founded in 2023 and launched publicly in March 2024. It’s a co-creation of Kaiser Permanente and Town Hall Ventures, with the vision being to scale a PACE (Program of All-Inclusive Care for the Elderly) model nationally. The unique twist on the model is that Habitat intends to leverage partnerships with local providers to help the model scale, starting with Kaiser in California.

The news this week announced that Habitat has a leadership team in place and received $50 million from Town Hall, Kaiser, and New Enterprise Associates. Habitat will launch its first clinic in January 2025 — the first center appears to be located in Sacramento at a property that Kaiser purchased in 2020.

Read the Modern Healthcare coverage

✍️ Going Deeper

The PACE market is fascinating to me on a number of levels. It seems relatively well documented that PACE has been a meaningfully better clinical model for the health of frail elderly seniors who participate in the program. There’s been a growing wave of investment in the program since a federal rule change allowed for-profit entities to participate in PACE starting in 2019. Each enrollee generates around $108,000 in annual revenue for a PACE organization. Yet there are substantial challenges in enrolling members in these programs due to the complexity and less than 5% of people eligible for PACE nationally are enrolled in the program

In California, ~10% of the eligible market is enrolled in PACE. there are 20,000 participants across 91 centers. That implies that the average PACE center in the state is treating ~219 patients annually.

The Habitat press releases hint at the complexity of launching PACE centers: six months ago, when Habitat launched publicly, it said it would enter Sacramento and Los Angeles in 2025. Yet it now appears to be launching only one clinic in 2025 in Sacramento, with Los Angeles not mentioned in the press release. It also has no jobs posted for a Los Angeles location, so it seems nothing is opening imminently.

• For another data point on the complexity of a startup entering the PACE market, check out Seen Health. Seen seems like a cool approach to building a culturally competent care model for the Asian community in Los Angeles. It was founded in 2021 and is also in the process of entering the California PACE market with a center in the Los Angeles area. Seen was founded in 2021, submitted an LOI in 2022 to launch a PACE program, and received city approvals in October 2023 to renovate a 20,000+ sq ft warehouse in Alhambra and turn it into a PACE center. Architectural plans for the space were done by August 2023 (if you want to see how different PACE center layouts are from traditional primary care locations, page 31 of this city planning document is worth checking out). In all, it appears this will be a three-plus year process for Seen to launch this first PACE center.

I’d imagine that the investment thesis behind an effort like Habitat Health is that a local provider partnership (i.e. Kaiser) will enable the PACE center to launch and enroll members in the PACE center faster. In a model like PACE, where each member generates $110k of revenue a year, hitting 200 enrollees in a center (the average in California) means that center generates $22 million of revenue annually. So if you can speed up the j-curve for that center — i.e. get it through startup losses to a mature, profitable patient panel faster — it feels like a no brainer.

Thus far, the Habitat thesis seems to be playing out in Sacramento, although the Los Angeles miss seems to hint at the challenges inherent in scaling the model elsewhere.

MEDICARE ADVANTAGE

KFF analysis shows MA quality bonus payments declined to $11.8 billion in 2024 from $12.8 billion in 2023

The KFF analysis does a nice job walking through what quality bonus payments look like for 2024, highlighting among other things that bonus payments were relatively evenly distributed across plans based on the membership they have.

Read the KFF analysis

VP of Finance at Fabric, a virtual care platform for health systems. Learn more.
$150,000 — $275,000 | Remote

Chief of Staff at HealthSherpa, an ACA quoting and enrollment platform. Learn more.
$154,000 — $235,000 | Remote

VP of Growth Marketing at Talkiatry, a virtual mental health provider. Learn more.
$200,000 — $275,000 | Hybrid (NY)

Senior Manager, Community Health at Kaiser Permanente, an integrated managed care organization. Learn more.
$133k — $172k | Remote (OR or WA only)

Manager, Operations Excellence at Cityblock, a value-based primary care provider for dually eligible populations. Learn more.
$126k — $145k | Remote

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