Someone asked me last week what it was like to attend the JP Morgan Healthcare Conference in San Francisco, which started its annual run today. Outside the conference hotel right now is the obligatory lunchtime sidewalk protest with chants of “Personal Health, Not Corporate Wealth,” while inside healthcare industry investors and operators together are chanting “pop health” instead.  The conference again is well attended, with a broad representation of for-profit and non-profit companies from the health services, health information technology and life sciences sectors.  In a sense, it’s the old-style Times Square of the healthcare industry – stand in one spot at the conference long enough and you’ll see almost every major organization walk by.

So, what are we seeing? Here are some quick takeaways from the morning’s sessions:

Continued Partnering and Consolidation – Everyone is looking to continue to partner and acquire, with an increasing focus on Medicare Advantage populations. We are seeing continuing and increasing hospital acquisitions as hospitals reach for scale and try to spread the cost of the necessary investments in population health infrastructure and information technology.  The Barnabas/Robert Wood Johnson merger is expected to hear from the New Jersey Attorney General’s office in the next 30 days, while the Advocate/Northshore transaction is on hold in Illinois pending the outcome of a court hearing on antitrust in the second quarter of 2016.  We are getting the sense that the health insurance mega-mergers are being factored into revised 2016 strategic plans for other health insurance companies and health systems and driving further consolidation and convergence.

Innovative Delivery Approaches:

  • Advocate announced today that it would operate the 56 Walgreens retail clinics in the greater Chicago area.
  • Dignity is partnering with Emerus to launch micro hospitals to expand access and also is partnering with Adeptus for free standing emergency rooms. This follows Dignity’s trend of expanding access points through their recent occupational health clinic acquisition of U.S. HealthWorks.

Commitment to Population Health Management – Continuing assurances of interest in, and commitment to, population health management in the healthcare industry, but it is clear that much of the industry has not figured out its preferred approach yet or made its final “build/buy” decision. There is a major multi-billion dollar market opportunity here for multiple companies to grow and help to manage risk, population health management infrastructure and aligned physician networks.

Genomic Testing – Independence Health (a Blue Cross Blue Shield plan) announced today that it would be covering genomic testing for its members, pursuant to a partnership with NantHealth. Details to follow…

Increasing Focus on Behavioral Health – While not the number one priority on anyone’s list here at the conference, we are seeing more and more healthcare industry participants acknowledge the need to fix our behavioral health delivery system if we are going to achieve the improved outcomes and reduced healthcare costs that are desired. Acknowledged in several presentations that behavioral health carve-outs are not working, companies are looking for solutions. Molina, which recently acquired PHS to bolster its behavioral health solutions toolset, noted that there is a doubled incidence of behavioral health issues in the Medicaid population.

Hospital Finances – It was notable today how large the investment portfolios and days cash on hand have grown for the largest nonprofit hospital systems. It was noted that significant “dry powder” would be needed for transitioning to risk-based contracting and population health management infrastructure, but, reading between the lines, we expect to see significant continuing horizontal and vertical acquisition strategies, as well as continued growth in provider-sponsored health plan initiatives.  One note of concern, many of the investment portfolios had investment strategies that included international markets and hedge fund allocations (generally around 8% international markets and up to 10-20% hedge funds).  While not questioning the investment strategies of the health systems, the recent volatility in the global markets from China’s stock market issues and the slowing economic growth in China could lead to greater uncertainty or reduced investment returns.  While it certainly is possible to realign portfolios, if a hospital system does not do so and suffers losses in 2016, our question is whether that will have the effect of slowing their transition to risk and population health management?  A true example of globalization and its impacts is how worries about China can lead to changes at your local community hospital.

Medicaid – A lot of focus on Medicaid today, with some points listed below:

  • Centene is working on closing its merger with HealthNet. California regulatory approval is pending and expected potentially in the first quarter of 2016.
  • Multiple hospital systems have noted that they need to have a Medicaid delivery strategy, as more and more states shift fee for service Medicaid patients into managed Medicaid programs.  Expect to see more focus on Medicaid patient engagement, acquisitions of Medicaid health plans and provider networks and population health management infrastructure.
  • As noted by multiple companies today, the dual eligible Medicare/Medicaid opportunity continues to be interesting long-term. Short-term results have been disappointing as there has been significant opt-out by members of the managed Medicare Advantage benefits in favor of the traditional fee for service Medicare benefits.  That is a structural issue and is perhaps short-term, as companies develop Medicare Advantage infrastructure and are able to better retain members by more fully engaging them in their benefits and health decisions.