The visionary executive of a technology-oriented Medicare Advantage company outlines the future in this sector and the importance of being a leader of Asian descent in healthcare.
Andrew Toy, president and chief technology officer at Clover Health, the Franklin, Tennessee–based technology-oriented Medicare Advantage company, grew up in Hong Kong and says that he first developed an interest in technology as a child writing code at age 6. "I've always been obsessed with computers," he says.
Toy eventually moved to the U.S. to attend Stanford University, graduating with a bachelor's and master's in computer science.
Though he currently works in health insurance, Toy's executive career has been defined by his abilities and passion as a technologist, including service in leadership roles at Google, MTV Networks, and Morgan Stanley. "I've been in the technology [industry], but I wanted to do something that was both mission-oriented, to help people, and where I could build a great business. And so, healthcare really stood out there. … We need to bring great healthcare to more people, and we need to empower physicians more as well. There's a huge opportunity to use technology to do that."
In October 2020, Social Capital Hedosophia Holdings Corp. III, a Silicon Valley–based special purpose acquisition company (SPAC), announced a plan to merge with Clover Health in a reported $3.7 billion deal. In mid-January, Clover had its SPAC IPO on the Nasdaq.
The company has had a rollercoaster few months, facing sharp criticism by short-sellers in a public letter released in February while also seeing its stock price rise in June due to "meme stock" trading led by Reddit traders.
Beyond Clover's prospects, Toy delved into thought leadership in May by penning an essay on LinkedIn titled "I don't want to apologize for being Asian anymore," following an uptick in violence against the Asian American and Pacific Islander (AAPI) community.
Toy tells HealthLeaders, "What I want to emphasize to everybody is that there's a difference between having a society where everyone can have great opportunities and violence in the streets against Asians. While I do appreciate that we had AAPI month in May and I feel incredibly sympathetic about the violence, I do want to call out to everybody that it takes active violence in the streets to bring attention to the Asian community in particular. It underlies how early we are in the journey as a society against implicit and systematic biases."
"Having a distributed workforce is a great thing to do as a human and a business leader where you see talent, you value it, and it helps you provide better capabilities. For healthcare leaders, we should see our customers and patients the same way. Why wouldn't you want to help as many people as possible?"
Following are highlights from Toy's conversation with HealthLeaders about Clover's prospects in the Medicare Advantage sector.
"The reason I didn't found a technology company or a SaaS startup is because I thought it would be hard to make a lot of changes in healthcare as a technology vendor. Instead, what I said was, 'Let's build great technology but move it and build it within a managed care company.' By building it within the payer, there's a lot of interesting factors."
"We can hold the medical risk, focus on collecting a lot of data, and build it into our tool, Clover Assistant, which is used by primary care physicians to give better, personalized data-driven care. If we have a wide network, we can pay fairly. In fact, we pay more for primary care than the majority of payers, and we don't put our physician partners at downside risk. Because when physicians deliver data-driven, personalized primary care, they will look at our Medicare eligibles better."
"I took a bit of an unusual choice instead of founding a company that worked within Google Health, Amazon, or Microsoft. I truly believed you had to be within the healthcare industry, and specifically a payer, to then build great technology and have the fulcrum to make a difference."
"There's a lot of misaligned incentives that cause friction between payers and providers, between payers and members; it's difficult. But if you can align those incentives, if you can have dollars flow correctly, and we all want to deliver that personalized care, we think we can do things at scale, which has always been Clover's goal."
"We are certainly doing things differently, and that can be disconcerting to people who have done things another way. What I say is, we are making this work. I know this is not what the traditional path has been and it can seem threatening to people who say, 'I tried rolling out technology and it's hard.' Yes, it's hard, but we are focused on technology as an enabler."
"I think people in that retail environment support and are willing to believe and bet on a grand plan. They want something audacious, someone who's going out there saying, 'We're an incredible, $150 billion company.' They see Clover as being different, and we are different. That's a great thing as opposed to when people say, 'Oh, you're just a Medicare Advantage plan.' No, we're not."
Editor's note: This story was updated on October 18, 2021.
Finance executives evaluate the role of private equity in the healthcare industry and forecast how the dynamic will evolve. When private equity firms invest in healthcare, who benefits?
Healthcare has long been a target for private equity (PE) firms seeking high returns in a critical segment of the economy. This trend started more than a decade ago as PE firms acquired hospitals and acute care sites before looking at physician practices and other assets. According to an article in Buyouts Insider, PE investors switched their focus around 2018 from hospital acquisitions to less-costly, smaller specialty groups.
Bain & Company's 2021 Global Healthcare Private Equity and M&A Report found that investors are pursuing new "buy-and-build" strategies in less-penetrated segments of the provider sector. The report found that there is increased focus among PE firms on areas that are promoting the shift toward home-based and outpatient care, along with "risk-bearing targets," like Medicare Advantage providers operating under capitation models and behavioral health providers.
Understanding the financial impact of PE investment in healthcare has become a point of concern among industry executives, including hospital CFOs, as recent studies have pointed to higher prices.
To better understand PE's involvement in the healthcare sector, HealthLeaders spoke with several industry leaders and investors for insights on the current dynamic and whether PE investors are friends or foes to the mission of healthcare.
A PE-invested hospital weighs in
Altus Health System is an integrated health network based in Pearland, Texas, operated by ZT Corporate, a Houston-based private equity firm that specializes in healthcare investments. Altus recorded an annual revenue of $4.42 million in 2021, according to Dun & Bradstreet.
Kraig Killough serves in a dual role as president of Altus Community Healthcare, operated by ZT Corporate, where he is a managing director, overseeing the company's growth strategy. Sheheryar Shah serves as corporate chief investment officer at ZT.
Killough says that in the mid-2000s, ZT identified a lack of coordination between healthcare providers, and the firm has been pursuing a goal of establishing acute care health systems across Texas. Altus currently has two hospitals located in Baytown and Houston, along with 12 freestanding ERs.
He says another focus for ZT and Altus is the future of healthcare technology, and notes that there is "tremendous amount of [growth] opportunity" around a roll-up strategy based on technology and the "basics of community health."
A roll-up, according to Killough, is when PE firms acquire companies that can allow for economies of scale, consolidate management and cash flow, add value to a system, and provide expanded geographical reach.
Killough says that in the past, PE took a top-down approach of buying hospitals and health systems, whereas now, PE is undergoing a bottom-up approach of filling in gaps by pursuing specialty groups and physician practices.
His thoughts are in line with a JAMA study released in February 2020 that found more than 350 physician practices were acquired by PE firms between 2013 and 2016. The research indicated that PE firms see ample business opportunities in the physician practice space, expecting annual returns greater than 20%, though there remain "unknown implications for care delivery and patient outcomes."
PE provides physician practices with a backstop to improve their cash cycle and back-office processes, such as with management reporting and compliance work, Shah says.
The only way to solve the "$4 trillion problem in American healthcare" is through more innovation and disruption, Killough says, requiring a partnership between PE and physicians. He adds that the pandemic has given PE a renewed focus on healthcare, reiterating that investors can be the "wick" to move such innovations and initiatives forward.
Shah says that in healthcare, physicians don't need venture capital to operate, so consolidating different businesses in the same modality through a roll-up strategy becomes easier for investors over time. As an example, Shah points to dental practices, which can have multiple practices in geographical locations and be combined in a roll-up strategy to drive higher margins with consolidated operations.
Reflecting on how the dynamics between PE and healthcare have evolved over the past decade, Shah points to how the Affordable Care Act gave investors confidence to double down on the industry as a core investment sector.
Beyond the physician practices, Shah says he is also eyeing growth in health technology, wellness services, and biopharmaceuticals, which demonstrated that the previously slow-moving vaccination development processes can be accelerated by additional investment.
"[Most people] have an Apple Watch® and can monitor their blood pressure for pretty much the whole day. Five years back, that was something you had to plug in like a machine in your arm," Shah says. "Those macroeconomic trends have helped PE double down in healthcare. As a matter of fact, Q4 2020 was the most active quarter in PE healthcare transactions across all sectors. So, that's a testament to the fact that the market is still strong, and the investors feel very strongly about healthcare as an investment."
Shah pushes back on criticism that PE's interest in healthcare is a cynical financial play.
"From a cultural standpoint, I think one thing that mainly changes with the involvement of a PE firm is visibility into the performance of those particular healthcare businesses and holding internal teams accountable on those metrics. It becomes a more metric-driven exercise," Shah says. "One thing I want to be clear about is that no PE firm or their executive officers get involved in how delivery of care is being administered. At the same time, a patient is the most important piece, so the idea is always to deliver world-class level care."
The physician practice angle
Given that PE money has increasingly moved away from acute care facilities and hospitals toward physician practices, it's important to understand what factors are at play for leaders in that space.
"I think it depends on the situation, but over the last year with those [physician] practices that maybe didn't fare as well from COVID-19 downturn and patient volume, [they] might be looking at [PE] as a kind of the upside of, 'All right, we finally have somebody that can actually invest in resources for us,' " Akash Madiah, CFO of Medical Group Management Association (MGMA), says.
Short-term financial windfall must be weighed against the long-term implications for physician practices, according to Madiah, such as whether they are going to be part of the eventual sale in three to five years.
One outlier is Steward Health Care, the Dallas-based physician-owned company.
In June 2020, Steward reached an agreement to buy back control from Cerberus Capital Management, L.P., a New York–based PE firm. Steward, which manages 35 community hospitals across nine states, was owned by Cerberus for a decade.
After the transaction was announced, Steward CEO Dr. Ralph de la Torre issued a statement that healthcare was in a "transformational moment" due to COVID-19.
"I want to thank Cerberus for their support in growing Steward Health Care into a national system caring for millions of patients around the country. We look forward to achieving the next level of patient-centric care, through a doctor-owned structure that unites all aspects of care delivery and prevention in ways never before contemplated."
Madiah says the missions of PE and healthcare can be compatible but adds that it relies on the structure of the deal. He acknowledges that PE may have the stigma of not having an "altruistic motive," but says if a struggling medical practice can secure the necessary financial resources from an investment and streamline the administrative burden, then it can prove to be a positive decision.
He says that PE must consider how to make a transaction advantageous for a medical group beyond the initial financial windfall, with a particular focus on easing the administrative burden for smaller providers.
Madiah says he has heard from medical group executives operating surgical, orthopedic, and optometry practices who are pondering their options as COVID-19 subsides. Ophthalmology practices, in particular, have been a prime target for PE in recent years, as acquisitions of the specialty practices doubled from 2017 to 2018, according to a Health Affairs study published in June 2020.
Just as investors have factors to consider when pursuing a potential deal, Madiah says that independent physician leaders must do their due diligence. He says that executives must decide whether the pandemic has been a tipping point and marks a time to engage with larger acquirers, like PE firms.
"I've heard of those instances, but again, you have to be very clear on what you want as a provider when you're entering into those transactions," Madiah says.
Balancing opportunity with compatibility
This is an "exciting moment in time" for the healthcare investor community, according to Rafael Cofiño, a partner at Great Hill Partners, a Boston-based PE firm.
Cofiño says he is bullish on PE's prospects going forward, more so than in the past decade, noting that while healthcare moves slowly, technology is breaking down the traditional brick-and-mortar localized care delivery system, expanding access and lowering costs.
"I think [technology] opens up a lot of opportunities going forward for healthcare, and I think PE will bring the capital, the know-how, and the alignments of how to help [healthcare organizations] build assets of scale."
With healthcare accounting for nearly one-fifth of the national GDP, there is a range of opportunities for healthcare investors, Cofiño says, whether involving more traditional providers and care delivery methods, or increasingly around biotech solutions.
Changes are also accelerating across the industry, he says, pointing to regulatory requirements that make it harder to be a small, independent provider. Meanwhile, COVID-19 exposed the weaknesses that small providers face in a fee-for-service environment, which will likely boost the shift toward value-based care (VBC).
These dynamic shifts have amplified the need for healthcare companies to maintain sufficient capital resources on hand to fend off competition and seize opportunities as they present.
"We think the role that the healthcare investors will play probably goes up in importance, both to drive and create the next-generation companies and be an important change agent to enable some of these providers to evolve down that lane," Cofiño says.
He offers examples of PE-supported success across the industry related to oncology and kidney care, which helped companies scale evidence-based care solutions to benefit the patient. Shifting to settings with lower costs of care can be good for a healthcare company, Cofiño adds, and also resonates across the industry if competitors start to mimic this behavior to avoid losing market share.
While PE firms are adept at sizing up opportunities and pursuing them, when it comes to healthcare, ensuring that the missions of the acquiring and acquired organizations are transparent and well aligned is crucial.
Cofiño says compatibility relies on cultural alignment between healthcare organizations and the PE firm, noting that the economic model has to support the care mission.
"As with anything, there are never perfect examples, but I think we're seeing some strong evidence of some of these models working quite well for [something I like to call] the '3 Ps,'— good for the patient, good for the provider, and good for the payer," Cofiño says.
Addressing the PE community, Cofiño says there is more work to do, stating that the alignment between the mission and the economics is key. He says PE firms must find a way to build economic models that don't simply look for shortcuts that lead to near-term profits while causing long-term damage to the healthcare ecosystem.
"There needs to be a recognition that this is not just about profit-and-loss statements, but there is a human element in caring for people," Cofiño says. "We're big believers that if you align those two aspects, frankly, you'll be able to build larger and much more sustainable businesses, which is ultimately the Holy Grail."
Following the trendlines in PE investment
Following the money is a critical component of understanding any business model, especially PE, which has evolved in healthcare.
Bill Hanlon is managing director at H2C Securities Inc. (H2C), a strategic advisory and investment banking firm focused on healthcare.
Hanlon says that anything with a material impact on the cost and quality of care is an attractive growth area for PE firms. He says that he has noticed over time that wherever Medicare reimbursement is going, PE is pursuing as well, and notes that firms are adept at exploiting changes in reimbursement, namely behavioral health services.
Kevin Taggart, managing partner of Mertz Taggart, a healthcare M&A firm, agreed with this point during a Behavioral Health Business webinar; he expects 2021 to be "a big year" for PE investment in mental health services.
Forward-looking, Hanlon says large PE firms are somewhat limited in their healthcare pursuits because the deals are going to involve organizations that have large, installed bases of fixed assets, like hospital chains or long-term care companies. He says that this presents an additional challenge since the general perception is of the hospital as a cost center, which may not be the best place to invest for the long-term future because of the focus on reducing costs.
Meanwhile, Hanlon says mid-tier and smaller-sized PE firms are looking to be nimble and quick with the opportunities available, noting that there are still areas to consolidate, particularly in specialty areas.
"PE has found a formula that says, 'If we can roll-up quickly, we can get in and out and move this investment from the smaller to larger owners and get the returns we need in the funds,' " Hanlon says. "[PE] is looking for those mom-and-pops or fragmented businesses that still have roll-up opportunities."
Stewart Jamieson, a vice president at H2C, says PE has provided benefits to healthcare organizations seeking additional capital and fundamental processes, though he notes that there are "bad actors" in the space.
Echoing Hanlon's point that PE will adapt to changing dynamics and reimbursement structures, Jamieson says the move away from acute care hospital settings has made urgent care facilities a bigger target for PE. He adds that PE firms also prefer investing in small businesses as opposed to larger medical groups or hospitals due to how innovative those companies are, which allows for the investors to have a quick and meaningful impact.
Bill Watts, a vice president at H2C, says PE has been an overall positive force on healthcare, especially through the pandemic.
Watts says that PE investment has allowed postacute companies to grow and test new business models, and that these investors are trying to find cost-effective care settings for the patient and are not looking for unprofitable areas to manage. He predicts that more investments will head toward in-home care and telehealth.
He says that PE has become more aggressive in looking at large-platform companies that are increasingly specialized, meaning more small and medium-sized businesses are likely to get rolled up.
"It's almost hard to find a platform company that doesn't have a PE sponsor standing behind it, and I think we're going to see a bifurcation," Watts says. "Some investors are going to be sophisticated and specialized, whereas you have others, like BrightSpring [Health Services] backed by KKR that just bought Abode Healthcare, that are looking more broadly. They're looking at all of the different services around the patient and trying to capture that whole continuum of care."
What happens when the money runs out?
To some, the "horse is already out of the barn" as it relates to PE investment in healthcare. There are instances where PE is helpful and beneficial to the bottom line of providers, but there are potential downsides to PE involvement in healthcare.
In August 2020, a JAMA study found hospitals acquired by PE firms experienced increases in net income as well as improvement in quality metrics.
Compared to non-acquired hospitals, PE-bought provider organizations saw a mean increase in annual net income of more than $2.3 million, an increase of $407 in total charge per inpatient day, and an increase of $0.31 in total charge to cost ratio.
On the quality side, JAMA found that the aggregate quality score for acute myocardial infarction increased 3.3%, while the aggregate score for pneumonia increased 2.9%.
Chuck Salvo is managing director at ToneyKorf Partners, a New York–based healthcare management advisory firm. Prior to joining ToneyKorf, Salvo served as senior vice president of physician services at Brookdale University Hospital Medical Center, a Brooklyn-based nonprofit facility.
Salvo says within the PE industry, there are a lot of talented individuals who can bend the cost curve and fund beneficial initiatives like telehealth, and companies like One Medical and Oak Street Health, which cater to underserved patient populations.
However, Salvo says that since PE firms have a term of exit, typically within five to seven years, to meet shareholder obligations, it is fair to raise a concern about what happens when the money runs out.
"I have a feeling that the rural areas are going to be the ones that have the most difficulty if they take PE money and it does not pan out as hoped," Salvo says. "There's not going to be anybody coming in behind them to say, 'We'll take this off your hands and we'll keep it open.' "
Salvo's concerns echo an Annals of Internal Medicine study published in September 2020 that found PE-owned hospitals are, on average, more likely to be located in low-income, rural areas.
These hospitals had fewer full-time equivalent employees per occupied bed compared to non-acquired hospitals, a finding that researchers said "[raised] concern." However, the study did not conclude whether PE investment negatively impacted patient care.
Parting advice for healthcare leaders
The industry is in a mature stage of PE involvement in core hospital services, according to Salvo, and every hole is being mined across the healthcare continuum due to lingering segmentation.
"I don't see [PE investment] stopping until every single data point on the care continuum has been evaluated and mined for whatever inefficiencies might be there," he says.
Salvo urges provider leaders to consider what they need out of a PE transaction, secure concessions around quality, and ensure that the new management will continue to invest as the industry moves away from FFS.
"I think there's a possibility that a firm or an investor that is playing the long game will understand that and [a healthcare executive] won't get everything they're asking for, but I think [negotiating with a potential PE investor] is vital to the long-term sustainability of the hospital," Salvo says. "It also will help from a public perception standpoint, because I don't think that any PE investment in a community or a rural hospital is going to be viewed from the public standpoint as a positive."
Salvo warns that it will be tough for stand-alone hospitals to survive in this burgeoning environment and forecasts a coming battle among health systems consolidating to scale up with large payers, while PE firms pursue investments to gain further footing in the industry.
Photo: Kraig Killough serves in a dual role as president of Altus Community Healthcare, operated by ZT Corporate, where he is a managing director. Credit: Paul Ladd/Getty Images.
Editor's note: This article was updated on Monday, August 16, 2021.
It's important for business leaders and payer executives to understand what's changed due to the pandemic and stay focused on where they can go in the future.
While the challenges and changes that were borne out of the COVID-19 pandemic primarily centered on issues faced by provider organizations, payers and employers were not spared.
It's important for business leaders and payer executives to understand what's changed due to the pandemic and stay focused on where they can go in the future.
Darryl Baker, CFO of Redirect Health, shares how employers should approach their health benefits design coming out of the pandemic.
This transcript has been edited for clarity and brevity.
HealthLeaders: In your conversations with employers or business leaders, what are they focused on coming out of the pandemic as it relates to healthcare?
Baker: One thing I view as a positive change coming out of the pandemic is that the market has become more open to virtual solutions rather than in-person solutions. When I think about healthcare and, specifically, programs that businesses set up for their employees, [they] have historically gravitated towards models that were focused on in-person care delivery. This pandemic has highlighted to the marketplace that there are other ways of receiving competent, thoughtful, and quality medical attention virtually.
To that point, virtual care, generally, is a lower-cost way of providing and receiving medical care in businesses whose health plans have been designed around what I'll call the 'old model' of in-person care. They may be missing out on opportunities to create forward-thinking solutions that gravitate more towards virtual care or at least begin the healthcare journey in a virtual manner.
Prior to joining Redirect Health, I was a CFO of businesses, including those in the healthcare industry. When it came to purchasing health benefits for employees at my previous companies, I would defer to the HR people. Historically, we would work with health benefits brokers who would bring a menu of options. As a CFO, it's an uncomfortable position to be in when you're being told by your broker that your option is an increase in costs for a solution that is not necessarily better than what you've been utilizing.
Since joining Redirect, it has become completely clear and apparent to me that there are options for businesses. I didn't realize that these options existed; that businesses can create health benefits solutions for their employees that are not necessarily centered around the traditional options: Blue Cross Blue Shield, UnitedHealth Group, Cigna Corp., or Humana Inc.
HL: If I'm a small to midsize employer, what are the best ways to get a better handle on healthcare benefits design? What should insurers keep in mind during these conversations as well?
Baker: Finance leaders need to be more proactive in the conversations with their health benefits brokers. It's important for finance leaders to understand the dynamic [between brokers and health plans], to challenge the broker, and ask questions like, 'What are my options?' It's important for finance leaders to be educated on these options, such as self-funding, which has not historically been available to smaller companies.
The key takeaway for me is that finance leaders need to be educated on this. And I'll admit, I was not [educated] prior to Redirect; I would just take what the broker gave me and say 'Thank you very much.' The reality is that the brokerage community is going to be key in this shifting landscape with respect to how employees and their families get access to medical care through their employers.
We are seeing big players getting into this space; Amazon has recently announced the Amazon Care initiative, and the company intends to roll it to outside businesses in the state of Washington. JPMorgan Chase has announced the Morgan Health initiative, which is focused on helping employers come up with creative solutions and reduce costs. These are big players in this space; they're getting active in transforming how healthcare is delivered through employer-sponsored coverage.
Related: Former Haven Healthcare Alum Joins Flume Health as COO
HL: How can businesses ensure that their employees are financially literate as they examine their healthcare benefits packages?
Baker: At a macro level, I think that as a nation, we are just awful consumers of healthcare. I think the reason why is because the system has basically said, 'Here's your insurance benefit, you're covered, here's your insurance card, and here's what the network is. Go get your care.' It's like handing your employee an open credit card and saying, 'Go get it done.'
[This dynamic] has made us uninformed consumers. What we need to do is to educate people and inject more consumerism into the healthcare system, and we need to develop solutions that, like car insurance, are truly insurance. Routine blood labs, annual physicals, X-rays, and MRIs, which are relatively low-cost and low-risk, shouldn't require insurance to pay for them.
We need insurance to protect us from catastrophic situations, specialty medication needs, and hospitalizations. In order to educate consumers and employees, we need to help them think of healthcare as something that they consume and price shop.
HL: What would you say to the insurance executives listening to this podcast in terms of what they could do to orient their businesses to be more helpful or proactive in these conversations with employers?
Baker: It's imperative for all players in the healthcare ecosystem to start to view from a consumer and traditional marketplace lens. The healthcare marketplace is unlike any other marketplace that I've observed, and I am a big believer in markets. The key takeaway for me is to start thinking about healthcare as a marketplace where there are providers, consumers, and also these third-party payers.
Let's put the patient and the provider at the center of the healthcare universe. The payer has a role to play, but if we focus on the patient-provider relationship, patients being more informed consumers, and providers helping their patients to navigate the system, I think we're going to see a tremendous amount of efficiency, reduction in waste, and unnecessary spending going away.
I would like to see the economics of what's currently wasted in healthcare spend going back into the pockets of the American workforce. If we can reduce the cost of healthcare for our employees, presumably, employers can put those savings back into the pockets of their employees. To me, that would be a systemically huge infusion into the broader marketplace, so I think it's incumbent on all players to take a critical lens and work collectively to ensure that we're delivering the highest quality healthcare at the appropriate price.
The move towards remote work provided hackers with more opportunities to infiltrate healthcare organizations, according to Fitch.
Continuous threats from ongoing cyber attacks will place "material revenue and expense pressures" on nonprofit hospitals, according to a Fitch Ratings report released Thursday afternoon.
Fitch stated that the healthcare sector remains a "target-rich environment" due to a large amount of sensitive data related to patient care and operations.
Healthcare was the most targeted industry for cyber attacks in 2020, a trend accelerated by the COVID-19 pandemic, according to Fitch. The move towards remote work provided hackers with more opportunities to infiltrate healthcare organizations.
The report stated that these data breaches and attacks resulted in the average cost to recover patient records rising by 16% year-over-year, according to estimates from the Department of Health and Human Services (HHS).
"Ransomware pay-outs and efforts to protect or “harden” healthcare systems and cyber defenses are affecting hospital financial flexibility by increasing on-going operating expenses," the report stated. "Attacks may also hinder revenue generation and the ability to recover costs in a timely manner, particularly if they affect a hospital’s ability to bill patients when financial records are compromised or systems become locked. The recovery time and costs associated with breaches of critical data not only pose significant financial burdens but also hamper the ability of healthcare institutions to provide care, which could ultimately have human costs."
Fitch's report is the latest insight into the digital vulnerabilities facing healthcare providers.
In late October 2020, the Cybersecurity and Infrastructure Security Agency (CISA), the Federal Bureau of Investigation, and HHS released a joint advisory warning hospitals and health systems about an "increased and imminent cybercrime threat."
In preparation for potential cybercrime threats, the three federal agencies urged Healthcare and Public Health organizations to maintain "business continuity plans" to minimize service interruptions, warning that without these processes in place, hospitals "may be unable to continue operations."
Kelly Rozumalski, a vice president at Booz Allen Hamilton, said 5G will bring "huge opportunities" to healthcare, but added that with "innovation comes risk."
The embrace of 5G network technology is expected to have major implications for the American economy, specifically the healthcare industry.
As healthcare organizations emerge from a pandemic that challenged the traditional tenets of care delivery and led to the mainstream adoption of telemedicine, some organizations and leaders are examining what 5G could mean for addressing vulnerabilities going forward.
In June, the Department of Defense issued a request for prototype proposal to members of the National Spectrum Consortium for research and training related to 5G telemedicine and medical training.
Related: athenahealth Exec: Healthcare Tech Will Build on Telehealth, Remote Care
Kelly Rozumalski is a vice president at Booz Allen Hamilton, leading the consulting firm's "secure connected health initiatives and health cybersecurity portfolio."
Rozumalski spoke with HealthLeaders about the nationwide shift to 5G, which she said will bring "huge opportunities" to healthcare, but added that with "innovation comes risk."
This transcript has been edited for clarity and brevity.
HealthLeaders: At a high level, what are your expectations for how 5G will impact the healthcare industry?
Rozumalski: 5G will soon revolutionize global telecommunications. It will forge connections between physical devices and the digital world that share, compute, and actionize information with unprecedented speed, size, and responsiveness.
Telecommunications networks will become virtualized and incorporate open-source software, driving down costs, and will be easily tailored to specific users' operational needs. This technology will empower diverse sectors, including healthcare, to adopt new operating models, gaining novel insights, and driving efficiencies.
HL: What changes related to nationwide 5G should hospital and health system executives be aware of? How about those in the payer community?
Rozumalski: 5G will change how healthcare professionals train, interact with patients and deliver treatment. Patients will likely increasingly use at-home monitoring and treatment devices traditionally found in hospitals, gathering vast quantities of data that can be used by their providers and the health sector. Physicians could use 5G devices to collect and access rich data from anywhere and serve distant patients.
A few specific examples of the benefits of 5G in a healthcare setting include:
Real-time monitoring: Health monitoring through connected medical devices can generate real-time data about patients that providers can use to improve health outcomes. At scale, analytics applied to these massive volumes of patient data could lead to new or improved treatments.
AR/VR training: 5G also enables augmented reality (AR) and virtual reality (VR), combined with multi-access edge compute (MEC), to simulate complex medical scenarios, improving the physician training experience, and ultimately, resulting in better patient outcomes.
Clinical review: Physicians could use handheld devices to access within seconds high-resolution digital imagery, videos, 3D models, and patient records without needing to use a terminal.
Surgery: 5G can meet data-intense, millisecond-latency requirements necessary for telesurgery, allowing doctors to remotely operate responsive, high-precision surgical robots.
HL: How is clinical training likely to be altered by 5G capabilities? Additionally, how will the industry build off of technological solutions and telehealth services that went into the mainstream over the past year?
Rozumalski: While the adoption of telemedicine and telehealth has accelerated over the past year at an extremely fast pace, it has been impacted by a lack of adequate digital connectivity supporting the large amount of data required to provide real-time virtual healthcare.
Providing low latency and greater bandwidth, 5G technology will enable the more effective delivery of healthcare – including augmented reality training for telemedicine and medical training. Imagine connecting remote sites to 5G telemedicine services to enable collaborative medical training like never before with operational support through immersive augmented reality and virtual reality experiences.
It’s possible with 5G’s high bandwidth and ultra-reliable low latency capability, which streams real-time audio/video indoors and out without loss of quality. With this solution, we will also see an improved 3D rendering of complex anatomy. This is especially useful for medical centers with a widely distributed and rural customer base.
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HL: Are there any potential downside risks to the expansion of 5G and what can healthcare executives do to mitigate them?
Rozumalski: 5G will bring huge opportunities. But, with this innovation comes risk. The deployment of exponentially more and varied mission-critical internet of things (IoT) devices will present threat actors with new opportunities to disrupt the economy, public health, and safety. These devices will generate massive volumes of data that can be stolen, destroyed, or manipulated.
Virtual networks customized for specific sectors and organizations will encourage new targeted threats against them. New software and hardware supply chains will make untrusted components common in the 5G ecosystem. These risks are especially critical in the healthcare space, where medical information is highly valuable to cybercriminals and data must be protected to preserve patient privacy and safety.
In addition, while 5G has the ability to operate in high band frequencies to provide faster traffic (enhanced mobile broadband), the higher frequencies have a shorter range and are in licensed spectrum. 5G also has the ability to operate in other lower frequencies (mid-band and low band) that include unlicensed spectrum. In a hospital setting, careful consideration needs to be given to the selection of frequencies, balancing range, speed, interference, and reliability.
Hospitals already experience connectivity issues with some of their network-connected devices (e.g., computers on wheels) that roam around a hospital and can find areas of poor network connection. To solve coverage challenges at a large scale, carriers are leveraging a combination of low band, mid-band, and high band spectrum. Hospitals will have to carefully consider range and speed when deploying 5G networks.
The AHA applauded the Supreme Court's announcement in a statement released Friday morning.
The U.S. Supreme Court announced Friday morning that it would review a Court of Appeals ruling that upheld cuts to the 340B Discount Drug Program by the Centers for Medicare & Medicaid Services (CMS).
The Supreme Court granted certiorari in American Hospital Association v. Becerra, a case that asks the Court to consider CMS payment cuts for prescription drugs acquired by hospitals through the program.
In its 2018 Outpatient Prospective Payment System (OPPS) final rule, CMS reduced the reimbursement rate at the average sales price (ASP) from plus 6% to minus 22.5%.
AHA filed a lawsuit that CMS lacked statutory authority to reduce the reimbursement rate, which a federal judge agreed with in a December 2018 ruling.
However, a three-judge panel at the U.S. Court of Appeals overturned the lower court ruling in July 2020 and a full-court declined to reconsider the panel ruling in October 2020.
In addition to the question presented by the AHA's petition, the court stated that both parties are direct to argue whether the petitioners' suit challenging HHS' adjustments is precluded by 42 U. S. C. §1395l(t)(12).
The AHA applauded the Supreme Court's announcement in a statement released Friday morning.
"We are pleased that the U.S. Supreme Court has agreed to hear the compelling arguments in our case on payments cuts to the 340B drug pricing program that are adversely impacting care to patients," Melinda Hatton, General Counsel at AHA, said in a statement. "We are hopeful that the Court will reject the appellate court decision deferring to the government’s interpretation of the law that clearly imperils the important services that the 340B program helps allow eligible hospitals and health systems to provide to vulnerable communities, many of which would otherwise be unavailable."
Similarly, 340B Health, an advocacy group for the federal program, released a statement praising the Court's decision to hear the case.
“We are pleased that the Supreme Court has agreed to review the appellate court decision, which we believe was legally flawed," Maureen Testoni, CEO of 340B Health, said in a statement. "We are hopeful that the justices will reverse the lower court decision that upheld these damaging cuts to many 340B hospitals treating patients with low incomes. In the meantime, we continue to urge the Biden administration to change this harmful policy by abandoning the payment cuts for 2022 and beyond.”
"We view partnerships as foundational to our efforts to provide quality care to our patients, and we believe this joint venture will lead to improved care coordination," Sam Hazen, CEO of HCA, said in a statement. "Our objective is to be the healthcare system of choice, and the addition of these services to our network of care improves our ability to meet the care needs of our patients."
The deal was reached more than one month after HCA agreed to a deal with Google to develop healthcare algorithms using patient records.
HCA will release its Q2 earnings on July 20 before markets open.
Ann Joo Kim spoke about the strategic focus of Flume, how healthcare coverage options for employers and their workers are changing, and what her expectations for innovation are as the pandemic subsides.
Earlier this year, Haven Healthcare, the collaborative effort between Amazon, Berkshire Hathaway, and JPMorgan Chase, disbanded.
The project was much heralded at the time of its announcement in mid-2018, led by CEO Atul Gawande, but struggled to gain traction in addressing its most ambitious goals of improving healthcare options for employees.
Recently, Ann Joo Kim, former program director at Haven, joined Flume Health, a New York-based digital third-party administrator (TPA), to serve as COO.
Joo Kim spoke with HealthLeaders about the strategic focus of Flume, how healthcare coverage options for employers and their workers are changing, and what her expectations for innovation are as the pandemic subsides.
This transcript has been edited for clarity and brevity.
HealthLeaders: What drew you to join Flume?
Joo Kim: I've always been passionate about the healthcare space; I've been there for quite some time. I came in from the clinic administration side, went through management consulting, and also had the opportunity to work on some of the early initiatives that Oxford did in terms of the bundled arrangements that we now call value-based contracting.
That led to opportunities for me to work with a much larger TPA, where I saw the movement in terms of how it's effectuating that healthcare [industry], and had the opportunity to also work for Haven, which was incubating ideas.
For me, I noticed that the delivery of care was one of the more challenging components, so I started to see how the movement from the fully insured to the self-insured market was quite appealing as I worked with a lot of plan sponsors that were large.
When I met [Flume CEO Cédric Kovacs-Johnson], we had a conversation and were aligned in terms of thinking about where there would be opportunities and how we can make an impact. I'm passionate about the fact that I want to be able to actually make a change, not just part of the process here, and move the needle in terms of how access to care is provided for the members via the employers.
We have the current ecosystem where more than 50% of the population is being serviced through an employer-sponsored entity. The taxation that these employers are paying is somewhere between 50% to 70% of the premiums, in addition to the fact that we know that the medical cost trend is increasing 6% to 7% in this year alone.
The taxation on the employer is high, and their ability to recruit talent and service their employees make it challenging. When you look at how the self-insured market has been evolving to disaggregate and make more tailored programs for that population, it has taken on a life of its own. [Additionally], there are a lot of point solutions that are moving in the marketplace as well, and that's also making it more attractive for the self-insured marketbecause then, with all this disaggregation taking place and these centers that are making significant inroads, you still need a central chassis that's going to be able to deliver on that.
That's why I joined [Flume]. I love the process of being able to be a fundamental part of that. As I come into the role as the new COO, my job is to make this chassis run smoothly and scalable. There's a big lift there, but given the fact that [my]history, having worked for organizations and run TPAs as well, makes it not as daunting.
HL: In your opinion, what differentiates innovative health plans in the marketplace?
Joo Kim: Part of it is in terms of benefit design, and the optionality that they give in terms of the benefits designs for your employers and, in essence, to the employees. The other part about it is the execution, so it's two-pronged.
The benefit designs are something that's evolving. The ability to be flexible and accommodate groups, that's one component. The other part is being able to navigate the member experience. We've seen that employees have a greater deal of influence now than they had in the past; their voice and choice are important. That didn't take place too much in the past, but now with more choices and options that are available, employees' opinions about those things become important, so making sure that the targeted population's needs are met becomes much more important.
The point of having health plans or benefit designs leveraging a chassis that's able to pull together those components specifically relevant to your employee population is key and we see the migration with that. Even about four years ago, the movement in terms of employer space and plan sponsors, would only affect the mid-sized to larger [employers]. They had that ability, but it was partly because of the risk associated with it. But now we're becoming much savvier, employers are becoming much savvier, there are better tools and platforms, and the movement to lower-sized employers is amazing.
I used to advise [employers] that it they were not at least 300 [employees] in size to go fully insured because there was too much risk. There was so much effort, there was the disaggregation, and there was the administrative component behind it. Now, we see [employers] with 100 [employees] or lower that are using the self-insured platform because [Flume] can do all of that for them. We're able to navigate the employees for them, there's less disruption than [employers] had anticipated, so we're able to centralize all of that data and also do the steerage that they could have never possibly envisioned before.
HL: What are the short-term and long-term growth strategies for Flume?
Joo Kim: My six-month plan is to make sure that the chassis is solid and bring it to scale. Flume had a big raise, which enabled me to bring on additional talent on the concierge side as well as on the claim side to beef that up and make it metric-driven so that we're solid on that part.
For the long-term vision, in terms of the overall strategic vision of the organization, over the past 18 months Flume has been working in terms of growing the size with the employers, making [the services] more accessible to smaller employers. We were working with entities that came off fully insured plans and introduced them to self-insured plans because it enabled cost savings and steerage. We also focused on member engagement and giving them transparency.
We'll continue to do that, but I think the big vision is the fact that we will be the 'main engine.' TPAs continue to do the aggregation and we will certainly provide that service—we've done it for a while now—but I think our flexibility and our technology competency enable us to be more than just a TPA and rather be a platform.
HL: How do you assess the state of healthcare innovation and the staying power of services that gained mainstream popularity during the pandemic, like telemedicine?
Joo Kim: I think there's still growth [opportunity]. However, whenever there's so much growth at a certain point, then there's consolidation. In terms of centers of excellence (COE), there are slices and dices of growth. Originally, you could only do surgery but now there are COEs for a specific line of surgery; so there can only be so much that the market can hold.
Teladoc Health used to have the dominant entity [in telehealth] but now there are a lot of entities that do telemedicine. To use a comparable, Livongo is the entity that [Teladoc] purchased, but there's another set of companies that popped up and saw the value in having disease management controlled in that way.
I do think there are still going to be different innovations that take place and are tailored for a specific population. Do I see that after a certain point there will be aggregations? I think that might be the case. I'm not sure that we're there yet, however, all of that is a wonderful growth opportunity for Flume because all of those components need to latch on to some type of chassis to serve the self-employed population.
Anthem Inc. completed its acquisition of MMM Holdings, LLC Wednesday morning.
The deal to acquire InnovaCare Health's Puerto Rico-based affiliates was first announced in early February.
The Indianapolis-based insurer adds more than 275,000 Medicare Advantage members and 314,000 Medicaid members as a result of the MMM transaction.
“We’re pleased to complete the acquisition of MMM and work with our new colleagues to serve Medicare and Medicaid-eligible individuals and consumers in Puerto Rico," Gail K. Boudreaux, CEO of Anthem, said in a statement. "With our vision to be an innovative, valuable and inclusive healthcare partner we remain committed to enhancing their healthcare experience by providing services that drive greater value and meet their diverse needs."
The diabetes care announcement marks the latest healthcare foray by the retail giant.
Walmart announced the launch of its private brand analog insulin through the ReliOn brand Tuesday morning.
The company stated that analog insulin vials will be available for $72.88, while FlexPen® will be available for $85.88, offering customers significant savings compared to branded analog insulin products. Customers will need a prescription to purchase the products.
Walmart's new private label ReliOn™ NovoLog® Insulin, an insulin aspart injection, is manufactured by Novo Nordisk and will be available in stores this week, followed by a rollout to Sam's Club locations in mid-July.
"We know many people with diabetes struggle to manage the financial burden of this condition, and we are focused on helping by providing affordable solutions," Dr. Cheryl Pegus, executive vice president of Walmart Health & Wellness, said in a statement. "We also know this is a condition that disproportionately impacts underserved populations. With ReliOn NovoLog® insulin, we’re adding a high-quality medication for diabetes to the already affordable ReliOn line of products and continuing our commitment to improve access and lowering cost of care."
The diabetes care announcement marks the latest healthcare foray by the retail giant.
In May, Walmart announced plans to acquire MeMD, a Phoenix-based telemedicine provider, in a deal set to close in the coming months.
In October 2020, Walmart and Clover Health, the Nashville-based technology-oriented Medicare Advantage company, announced that the two companies would jointly offer two Medicare Advantage products to seniors in Georgia in 2021.
