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Looking out at the San Francisco skyline from the top floor of the Westin St. Francis on Day 3 of the 42nd Annual J.P. Morgan Healthcare Conference, the iconic Transamerica pyramid is not too far away. But my mind, being chock-full of value-based care presentations, quickly imagines the building as the shining pyramid of patient segmentation and risk stratification, envisioning the proper way to sort patients for effective intervention and total cost of care reduction. John Kao, CEO of Alignment Healthcare, shared today that only 12% percent of their Medicare Advantage membership accounts for approximately 74% percent of their institutional cost (hospital and facility costs), while conversely their “healthy” membership of 74% accounted for only 5% of their institutional costs. These days, institutional costs and pharmaceutical costs are almost equal, according to the Advisory Board, and together far outweigh professional physician and other provider costs. Therefore, keeping patients out of the hospital and post-acute facilities as medically possible and appropriate and effectively managing medications should result in a large reduction in the total cost of care, right? So, what’s not happening that should be?

So Obvious, But So Rare

The most expensive segment of the population often is the complex, polychronic patient on 10-20 pills per day who needs to be treated at home due to being frail, limited in mobility or cognitive function, or otherwise burdened. In talking with multiple leading companies, these patients typically have at least 5-7 times greater expense than the average patient. There is growing focus on this population segment, with companies like Landmark/Prospero and WellBe Senior Medical, but I was struck with a jaw-drop moment while listening to Jeff Kang, CEO of WellBe present today. Of course, there were the expected substantial medical expense reduction and the 30% – 35% reduction in hospital admissions by providing a ChenMed-like clinic experience in the patient’s home in the space of a 60 to 90 minute visit. That’s great, but that’s going to be table stakes.

The surprise came for me when Kang detailed how WellBe had dropped emergency room visits per 1,000 members by 30%. WellBe maintains employed paramedics on staff who respond within 30 minutes to Tier 1 urgent situations. The paramedics drive a SUV that is equipped with everything an ambulance carries (but they don’t provide transport to the ER if needed). By employing paramedics to sit around and be rapidly available for emergent/urgent response needs, WellBe can provide on-site resolution of many healthcare issues and avoid ER and transport costs, not to mention the likely follow-on admissions in fee-for-service based hospitals, resulting in thousands or tens of thousands of cost savings. By providing this and also the WellBe assigned physician’s direct phone number, WellBe reports that its patients achieve a feeling of personal health security. Let’s dwell on that for a moment. For those of us who have interacted with the healthcare system as patients or relatives of a patient, the system is not set up to make patients feel secure and well taken care of – and that’s why this reported patient experience stood out in my mind. 

The WellBe fully employed provider model also is well engineered to build retention. WellBe provides its health plan customers with a guaranteed decrement to base medical loss ratio (MLR), and the health plan provides the WellBe service to members as an incremental benefit. WellBe services are not a replacement of the primary care physician relationship, but the addition of this geriatric specialty focus. So, if a patient is thinking about changing health plans, they will lose the WellBe benefit – and access to the home visits and mobile paramedic response. So, a win-win, one for the patient with the access to their own geriatric focused physician (in addition to their primary care physician) and the mobile paramedic rapid response, one for WellBe with its asset-lite approach that does not require the building of expensive clinics, and one for the plan with greater patient satisfaction, potentially higher Star ratings, and a high barrier to member plan switching. Elegant, obvious and not common enough in today’s marketplace.

Moving Down the Pyramid

Beneath the at-home segment, there’s the high risk member segment that often is best treated in a longer visit in a primary care or multispecialty clinic with higher frequency of visits (best practices are at least once per month for relatively stable high risk polychronic patients). Examples of this approach are found with ChenMed, Oak Street Health and others, but rarely are found where many patients and physicians congregate these days – in hospitals and health systems. 

It was heartening to hear from Novant Health, with growing operations in North and South Carolina, that they teamed with Ochsner in the summer of 2023 to launch risk-bearing senior primary care clinics that are structured to give patients the time and attention they need. As with ChenMed, patient panels for physicians are between 300-500 members. This innovative approach has not generally been undertaken by health systems yet, so the Novant/Ochsner initiative was a breath of fresh air. Novant intends to continue to grow this model, which is intended to be part of its “remarkable healthcare experience.” Novant has been innovating with the creation of physician strategic councils, a management services organization partnership with Privia Health, partnerships with physicians on ambulatory care networks and other initiatives.

The Curious Tension Between Whole Person Care and Specialty Value-Based Care

The high risk member segment also can be segmented into chronic disease management initiatives, such as described at the conference in the kidney care sector by Strive Health, Somatus and Monogram, as well as undertaken by Duo Health. In some of these models, there is a pairing of both nephrologists and primary care physicians, supported by a pharmacist, social worker, nurse practitioners and nurses, behavioral health practitioner, nutritionist and various specialty physicians, such as pulmonary, endocrinology, palliative care and geriatric. Because of the high level of co-morbidities, this coordinated care “whole person” approach can address the broader range of patient needs in a single delivery approach. It also can reduce gaps in care where medical and other healthcare services are a la carte and must be obtained through patient initiative from various, disconnected care providers. As Strive Health noted, there always has been lots of information from these patients, but no one was integrating the information. 

Strive suggested that specialty value-based care (VBC) is the next wave. To date, the transfer of risk from health plans has been occurring initially to primary care, but primary care by itself can’t fully address the high-cost disease states of a polychronic patient and therefore certain disease states may be best managed through a specialty/primary care focused multi-specialty approach. 

High Cost Chronic Conditions and Risk

What are the top three or four highest cost conditions that may be best managed under a specialty VBC model? Strive suggested kidney care, cancer, cardiology and musculoskeletal/orthopedics diseases (MSK). I would agree, but also might consider adding in rheumatology as well, given the high drug cost and spend. We have seen a very high level of activity in the kidney care sector moving toward risk. Recently, in the past year we have started to see a resurgence of an earlier trend to create VBC/risk arrangements in oncology. We had worked with early models for that in the oncology sector years ago, only to see those efforts halted as a result of sector M&A consolidation occurring. 

Cardiology also could be a target for VBC/risk, but the form and design of the risk attribution will need to be carefully considered, as, similar to kidney care, cardiac care often is for polychronic patients who may have diabetes, obesity and MSK issues. On the MSK side, we are continuing to see aggregation of orthopedics groups, especially by private equity sponsors, and continuing work with bundled payment arrangements, but the presence of true risk-based arrangements in orthopedics/MSK continues to be limited. In Arizona, HOPCo (Healthcare Outcomes Performance Company) long has successfully taken risk on orthopedics, but that model has not spread more nationally – yet!

That said, the question remains as to how to best segment and also coordinate the care, so that we are not faced with a v.2 of the “old school” hospital paradigm where a patient is seen by a cardiologist who only cares about the heart, an orthopod who only cares about the elbow and a proctologist who can’t tell an elbow from an…well, you get it. We as an industry are continuing to experiment but have not yet achieved consistent performance and consensus on when “whole person care” works and when specialty care works best. 

This is still a larger problem systemically as well, as commercial employers, seeking to restrain costs, are accelerating efforts to designate and prefer “centers of excellence” (COE) that do certain things well but are not necessarily coordinating or quarterbacking whole person care. For certain things – like a joint replacement – this may work fine, but for multi-causal or multi-faceted disease states, one must wonder whether the COE approach is an end point or a stop gap solution.

The Multi-Specialty Group Solution

It does appear clear though that for the highest cost patients a coordinated care, multi-specialty team approach works very well. We also see this model not only in some of the examples noted above, but also in high-performing PACE programs that keep seniors independent and out of skilled nursing facilities, even though their disease burden qualifies them for that more expensive level of care. In their presentation, Privia Health noted their strategic focus on the building and growth of multi-specialty medical groups as their preferred go-to-market strategy. 

Privia’s market entry strategy generally is to enter with primary care physicians at a minimum and to add specialists to build a larger integrated multi-specialty medical group. This approach allows not only for coordinated care, but also addresses the critical issue of downstream costs. Parth Mehrotra, CEO of Privia, noted that more than 80% of costs sit downstream from the gatekeeper physician, such as specialist referrals, imaging, laboratory and other ancillary services. Having an integrated group that can provide real-time visibility and aligned compensation incentives allows for both quality and outcome, as well as financial management. In the almost 15 years that Optum has been acquiring physician organizations, they have focused also on multi-specialty clinic models where possible, such as with Kelsey-Seybold, CareMount, Polyclinic, Everett and others.

Physician Behavior Change

Often, the stated preference of buyers for multi-specialty, employed physician organizations is that the employee model allows for better physician alignment, visibility and accountability. But, Aledade made the point that behavior change is possible without owning the practice. In the Aledade model, they use their playbook, their mobile app and the 150 coaches Aledade has across 46 states to train and support their physicians. The combination of the app technology and the personal support from the coaches can address physician concerns and reduce inappropriate variability.

This standardization is an important point. Recall the 2014 blockbuster article by Atul Gawande during the ACA adoption that pointed out the broad range of variability in practices and pricing among McAllen, Texas physicians. It therefore was intriguing to listen to Monogram Health discuss that they are establishing a longitudinal care management system to systematize clinical interventions. They have created 12 high value protocols to be followed by their doctors, along with order sets to be used in such protocols. Monogram believes that its distinct clinical interventions improve quality outcomes and decrease the total cost of care. It will be interesting to follow their progress with this approach and see whether it can be more broadly applicable. 

As always, lots to consider from the three days so far of the J.P. Morgan Healthcare conference!