The Healthy Muse
Top healthcare news from the week - physicians are leaning to the left, America wastes 1 in 4 bucks on healthcare, an update on digital health IPOs, & more.

1. Doctors are Shifting to the Left




Political Physicians.

The WSJ took a deep dive this week into physician political leanings. The reporters found that in 2018, about two thirds of political donations from doctors went to Democrats, which is, interestingly, the exact opposite of donations made in 1990.

Why the shift?

Plenty of reasons. The WSJ thinks the shift is being caused by more physician employment by health systems, more female physicians, more physicians in urban areas, and the increasingly leftward shift of educational institutions.

It’s probably not helping the overall Republican cause that Trump is somewhat shaky on his healthcare policy – as a reminder, the ACA is still currently in court, and the White House has no known healthcare backup plan (yet).

A trend to keep an eye on.

This policy uncertainty, combined with the above factors, probably explains most of the physicians’ political donations to Dems. If I had to guess (don’t put any money on me – I just lost some in Vegas), I would wager that most physicians are uncomfortable with the current political environment, which is driving the trend.

Don’t forget – just last year, the AMA narrowly voted to continue opposing Medicare for All (as opposed to adopting a new “neutral” position on the big-time disruptive healthcare proposal).




2. Humana Study Suggests that 1 in 4 dollars spent on healthcare is wasted




Wasted.

A JAMA study jointly conducted by Humana and UPMC found that approximately 1 in 4 bucks spent on healthcare – between $760 billion and $935 billion total – is wasted yearly among 6 defined categories:

  • Failure of care delivery (102.4b – 165.7b),
  • Failure of care coordination (27.2b – 78.2b),
  • Overtreatment or low-value care (75.7b – 101.2b),
  • Pricing failure (230.7b – 240.5b,
  • Fraud and abuse (58.5b – 83.9b); and
  • Administrative complexity (265.6b).

While the study cast a wide net for the total cost (essentially +/- $100 billion), the authors urged readers not to focus on the exact figures cited, but rather to discover directionally how much wasteful spending seems to be out there.

How to FIND the answers to the perceived waste is a whole ‘nother can of worms.

Humana weighs in.

In an Op-Ed on CNBC, Humana’s President and CEO emphasized the need to switch to value-based care, calling for an integrated healthcare delivery approach in order to counteract wasteful spending – namely, combining different healthcare delivery systems and services (e.g., pharmacy, home health, primary care) to ensure the best possible care outcome for each patient.

The bigger picture.

The shift from volume-based-care to value-based-care is speeding up, but the definition of what “value-based” reimbursement should include is lagging just a bit behind.

Better alignment between payors and providers at different sites of care, more efficient regulation, and cracking down on fraud could go a long way in themselves to lower wasteful healthcare spending.




3. One Medical Hires Bankers, Progyny Files for IPO, and an Update on Digital Health IPOs this year.




One Medical hires its bankers, eyes IPO in early 2020.

Yet another “digital” healthcare company has aspirations for the public markets. One Medical, which is essentially a high-tech urgent care platform with about 70 locations, has hired bankers (wimps – go for the direct listing) and is planning an IPO for early 2020. Notably, One Medical’s largest investor is Google, which might earn the company some cred on the ‘ole Street.

A Tech company, or just a healthcare services company with a splash of tech?

They’re gonna need every morsel of that credibility for public investors to look past a company that seemingly just operates as a primary care platform. It will be interesting to see what the company includes in its initial prospectus and roadshow to win institutional investors before any IPO – especially since primary care services typically command lower profit margins and subsequent low multiples.

Progyny, a fertility benefits company, files to go public.

In other IPO news, Progyny, which manages fertility type benefits at companies, just filed to go public. Fertility has been a hot market for private investment, so it’s interesting timing for a fertility player to exit to the public markets. The fertility firm claims to give employees better pregnancy outcomes as compared to the fertility industry’s average pregnancy rates.

Read Progyny’s S-1 Prospectus here.

Digital Health IPO performance woes.

One Medical and Progyny might face a tough time in the public markets given the current slaughter happening to IPOs. Livongo, Health Catalyst, Change Healthcare, Phreesia, Peloton, and SmileDirectClub all went public earlier this year.

All but one are down over 10% as of this writing. Most of that might be due to overall volatility in the markets, but the optimal time to IPO – especially for digital health companies – may well be in the past.

Digital Health IPO Performance - 2019



4. Hooters Shifts into…Drug Development?




This week’s bizarre healthcare story – Hooters and Cancer Drugs.

Major props if you saw this deal coming. This week, Chanticleer holdings announced their intent to merge with Sonnet BioTherapeutics. You might be asking yourself, “what’s Chanticleer Holdings? Some type of other science-y research company?” and you would be very wrong.

Chanticleer Holdings operates restaurants. Know of a restaurant named Hooters? That’s them. They’re planning to have Hooters girls double as lab technicians to create cost synergies for the merger.

Just kidding.

As part of the deal, Chanticleer is completely shifting into assisting Sonnet with its cancer drug development. Chanticleer is planning to spin off its restaurant holdings into a new public company. Markets seem to be big fans of the move – the Chanticleer stock shot up about 40% on the news.

Biotech and cancer drug development must be a pretty lucrative space if even Hooters is getting into it.




Tweet of the Week




Policy Corner, week of October 14




Revamping Stark and Anti-Kickback laws for the first time in 30 years.

There’s a ton of regulation that dictates what physicians can and can’t do with patient referrals, and what they can and can’t get paid for when they’re employed.

The Stark and Anti-Kickback statutes are the most important of these regulations, and these rules were put in place to protect patients and shield them from any providers that put their own greed above the needs of patients.

Remember when we talked about the transition to value-based care earlier, though? Well, the problem is that those old laws were designed for the fee-for-service reimbursement system – meaning that physicians are paid for services rendered (1 visit for $100; 1 x-ray for $50; etc. – you get the idea).

There are still a lot of fee-for-service arrangements out there, but quite a few plans between providers and payors are transitioning to value-based arrangements.

As compared to fee-for-service, there’s a lot of variation between different value-based plans. The variation has caused a lot of confusion when it comes to Stark and Anti-Kickback laws, since the way physicians are paid changes so much. Additionally, the old laws have probably prevented some new, innovative value-based arrangements from taking shape in the first place.

Since value-based payments have gained a lot of steam, HHS decided it was time to revamp the Stark and Anti-Kickback statutes to provide more clarify on what providers can and can’t do.

Read more about the potential implications of the changes here.

MORE: What are the other headwinds involved in the “volume to value” transition?

Public charge rule, which included Medicaid as determinant, blocked by judge.

This week, a federal judge blocked the White House’s contentious Public Charge rule, which would have used Medicaid as one of several public programs  to consider denial of green cards to immigrants based on how many ‘public resources’ that immigrant used.

New Trump rule would require migrants to have un-subsidized health insurance to enter U.S.

In a new development, the Trump administration plans to suspend migrant entry into the U.S. if that individual would financially burden the U.S. healthcare system. If upheld, that policy would take effect on November 3. Migrants would have to prove that they have some form of valid insurance – and subsidized ACA plans don’t count. Valid forms of health insurance include employer sponsored coverage, un-subsidized ACA plans, Medicare, and a few others.

Louisiana Abortion Case makes its way to Supreme Court.

The Supreme Court is pegged to hear an abortion case in Louisiana – June Medical Services v. Gee. The case surrounds whether it’s legal for a state to require a doctor performing an abortion to have admitting privileges at a nearby hospital.

The Latest Drug Pricing Stuff. Buttigieg’s proposal, and PhRMA claps back against Pelosi’s plan.

This week, presidential candidate Pete Buttigieg released a very ambitious drug pricing plan that would create a new public option (similar to plans we’ve seen unveiled at the state level like in Washington). Both this new public drug plan and Medicare would have the ability to directly negotiate drug prices with pharmaceutical companies, put a tax on those pharmaceutical companies, and cap out of pocket spending for both plans in the low hundreds of dollars.

Finally, read what the PhRMA CEO had to say about Nancy Pelosi’s drug pricing proposal. A small highlight: “If H.R. 3 becomes law, it is lights out for a lot of very small biotech companies that are pre-revenue and depend on attracting capital.”




Quick Hits

Biz Hits

  • The fines keep rolling in for Johnson & Johnson – a jury just ordered the pharma giant to pay an $8 billion fine related to a drug that caused a man (who took the drug as a child) to grow larger breasts later in life. The WSJ has a history (more of a laundry list) of all of JnJ’s massive fines over the years.
  • Similarly to last week’s announcement with Novartis, Microsoft and AstraZeneca join forces on artificial intelligence for healthcare.
  • Read more about the Google-Meditech electronic health record partnership. Why Meditech’s transition to Google Cloud is the ‘beginning of a bigger movement:’ CEO Howard Messing.
  • McGuire Woods Private Equity in Healthcare – an Updated Review of Selected Niche Investment Areas.
  • The new UnitedHealthcare app now gives millions of plan participants on-demand access to virtual visits.
  • MedNax announced the sale of its MedData business to Frazier Healthcare this week for $250 million in cash, and a contingent $50 million. The transaction is expected to close in the 4th quarter.
  • Here are 10 healthcare deals from Fierce Healthcare that made headlines this year.
  • CommonSpirit reported $600 million operating loss in fiscal 2019 on $21 billion in revenue, mostly related to transitional costs related to its merger.
  • The giant is expected to realize $2 billion in cost savings and is targeting a “normal” EBITDA margin of 8.0%.
  • Livongo scored a huge win with the Federal Employees Health Benefit Program – a contract for a population of approximately 5.3 million beneficiaries. The stock jumped 18% on the news. Good reason, too – the contract is the company’s largest agreement to-date.
  • Amazon’s Textract is now HIPAA-eligible as the tech giant expands its own AI portfolio.
  • Keytruda is set to become the world’s top-selling drug. Here’s a report of all the top-selling drugs.
  • The contract between Cigna and Mission Health is in jeopardy. HCA purchased Mission Health in early 2019.

State Hits

  • Colorado just became the latest state to propose running a public health care option through private insurers. It’s expected to launch in 2022. Colorado intends to “set” rates between 175% and 225% of what Medicare currently pays. Providers aren’t big fans of “rate-setting.”
  • Michigan wants to save $40 million by cutting PBMs out of Medicaid.
  • The Ohio Senate passed a bill this week to allow patients to learn hospital costs in advance.
  • D.C. may approve one of the highest soda taxes in the country.
  • The Sutter Health antitrust lawsuit began this week in California. The 24-hospital health system is accused of monopolistic practices.

Other Hits




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