At the first day of the J.P. Morgan Healthcare Conference, “[T]he answer to the ultimate question of life, the universe and everything is 42.” Recognize that famous line? No, it’s not something from ChatGPT, it’s Douglas Adams’ “The Hitchhiker’s Guide to the Galaxy of Healthcare.” Well, not healthcare…for that you have to be here in San Francisco for the 42nd edition of this conference. It was indeed an intriguing day, for even without major announcements, there were very clear signs and portents of our coming year in the healthcare industry.
First, artificial intelligence (AI) is clearly here and indeed will be transformational. The most jam packed, standing room only session of the day was NVIDIA Corporation, presenting for its fifth year. What did NVIDIA discuss? Accelerated computing and generative AI that they predicted will enable a new class of generative AI computer aided drug discovery tools that will create a massive expansion of drug discovery research and development. By digitizing (and imaging) biology and representing it and chemistry in a computer through a generative AI system that can be trained in days, not years, it will allow for design, testing for side effects and pathogenicity, sorting of compounds with multiple filters to test for ability to satisfy multiple objectives and understanding of cell interaction and gene expression. NVIDIA, which is investing in selected customer partners, also predicted that computer aided drug discovery can generate a trillion dollar company. On the healthcare services side, NVIDIA mentioned GI Genius, which has an FDA approved AI-assisted endoscopy device that provides real-time identification and decision support to the provider conducting the endoscopy. NVIDIA also predicted that the wearables industry will be facilitated by the large compute power and generative AI capabilities now available. Wearables in turn will generate a deluge of personalized data that can in turn be analyzed only if there is sufficient compute power, such as equivalent to the life sciences solution NVIDIA is providing that allows for modeling of a tissue with 6,000 targets that creates six terabytes of data per sample. It’s not worth collecting all the personalized data from wearables unless we can process and analyze it, and now it looks like we may be starting to get there.
But, AI was not mentioned only by NVIDIA. Somatus, a kidney care company, talked about the challenge of identifying early stage kidney disease in patients – a difficult challenge – which, if possible, can potentially result in the delay or halting of decline into end stage kidney disease. Somatus is looking to use AI to generate automated prediction of cost model events. This is a critical objective, as patients with kidney disease often have multiple chronic conditions that are difficult and expensive to treat, unless earlier identified and addressed. For example, according to Ikenna Okezie, CEO of Somatus, 90% of chronic kidney disease patients have hypertension, 65% have cardiovascular disease and 50% have diabetes, with 10-12 drug prescriptions from multiple providers being common. Somatus often provides care in the home in 2-3 hour visits, which together with its payor data, risk adjustment data and lab data, can be used to predict the presence or progression of chronic kidney disease. This is an important goal, as Hemant Taneja of General Catalyst, together with Mark Harrison, the former CEO of Intermountain Healthcare, listed the same objective last Fall at the HLTH conference of finding early kidney disease patients when announcing the launch of their Healthcare Transformation Company (in the context of moving a health system to global risk to align with preventive care to reduce the burden and systemic cost of chronic disease conditions). The Somatus model is an interesting one, as it takes a whole person approach to kidney care, that reduced the medical loss ratio (MLR, the comparison of medical costs to total revenue, and ideally below 85% for Medicare patients) for kidney care patients by 21.9%, which is a remarkable number.
Cleveland Clinic’s presentation today focused in part on the potential for developments in personalized and individualized cancer care in the next five to ten years. To aid that, Cleveland Clinic this year partnered with IBM to put a quantum computer on its main campus dedicated to the biomedical sciences. This is part of Cleveland Clinic’s computational infrastructure and its new “innovation district” that may revolutionize cancer care. Cleveland Clinic’s care model is to provide high quality complex care to its patients through multidisciplinary teams, which approach also is what works well with leading Medicare Advantage and PACE programs. More on the Cleveland Clinic tomorrow.
Oncology was often mentioned today. It is one of the higher margin focus objectives for many health systems on a go-forward basis (together with musculoskeletal disease (MSK), which I am skeptical as to since many MSK/ortho procedures are now moving out of the ORs into ASCs, such as joint replacements, on a lower unit cost basis and in ASCs often not owned by the hospitals or only partially owned by the hospitals). So let’s take a look at what was said about cancer today at J.P. Morgan’s conference.
A panel titled “Cancer Moonshots Across the Continuum” noted that for mid-size and larger employers today, cancer is the leading cost of care. Karen Knudsen, MD, CEO of the American Cancer Society, noted also that approximately 42% of cancers related to addressable or preventable human behaviors (a scary thought, but then again remember that smoking cessation public health advertising and programs has resulted in an approximately 30% decrease in cancer deaths in the past thirty or so years). We can make a difference if we as a society choose to act. Cervical cancer also has significantly declined as a result of the HPV virus vaccine.
On the not-so-good news side, prostate cancer is growing five percent year on year in incidence and will account for one-third of all new cancer diagnoses in the United States. And, there is a growing trend of early onset colon cancer in the United States, which is concerning because the population suffering from it is younger than when colonoscopy screening “best practices” commenced. What is causing this wave of colon cancer in people in their twenties and thirties? Diet related, plastics related or something else entirely?
The Moonshots panel, which included Vineeta Agarwala, MD of Andreessen Horowitz (a16z), talked about the need for oncology navigators to remodel and improve the patient experience with oncology, to get patients to the right specialist or facility the first time and with the right diagnosis and treatment plan. As a side note, a recent other conference with the CFOs from Memorial Sloan Kettering, MD Anderson and Fred Hutchinson Cancer Centers noted that cancer patients who went to a non-academic or non-cancer center site, such as a community hospital, for cancer treatment had a 40% higher cost of care and a 40% higher incidence of mortality. Yikes! Where’s my navigator when I need them?
Dr. Agarwala talked about how effective navigation, such as that being undertaken by Thyme Care, can reduce the total cost of care and be supportive of both patient and payor interests. A recent study by Thyme Care showed value for oncology navigation at all stages of the disease. This allows for effective payor/provider alignment that is in the best interest of the patient and improvement of health equity. CMS is supporting patient navigation in the 2024 Medicare fee schedule with payment for certain oncology patient navigation services. It will be interesting to see how this program is put into effect by providers.
AI also is supposed to make our lives easier, right, such as getting computers to fill out those forms and enter the same information we have to write time and again when going to the doctor. Phreesia caused me to rethink that today. Phreesia, which manages access (patient scheduling and registration) and revenue cycle management at point of service for what they report as almost 10% of U.S. patient visits, spoke of the benefits of moving more tasks to the patient through technology. Rather than office staff seeking and entering patient information, the unpaid patient can do that, with the added benefit according to Phreesia’s CEO of obtaining more information from the patient than the office staff could provide. That additional information allows for a better understanding by the doctor of the patient’s situation and concerns, a better patient visit, and better access for Phreesia to such data, which allows it to better understand the patient, better automate responses to patient needs and also create additional products and services to sell through its pipeline to its provider clients. Phreesia also now is providing a network and resource to help patients find and schedule appointments with specialists.
Another theme of the day was the increasing cost of doing business in healthcare. MLRs and healthcare expenditures have been trending upward this year as noted earlier in the year by UnitedHealthGroup and Humana. Today, CVS noted that its MLR may exceed its 2023 guidance of 86%, which followed agilon’s guidance last week of higher costs as well. These various announcements over the course of the year generally have been met with stock price drops, but the lack of visibility to these increased costs really should not be surprising. According to the Advisory Board, more than 70% of all Medicare Advantage downstream payments to providers still are in some form of fee for service (FFS) payment, and are not risk or capitation based. As such, FFS payments can vary, unlike monthly capitated payments to primary care physicians or specialists, and expense trend surprises can occur. The dirty little secret of the risk-based Medicare Advantage program is that there still isn’t much risk there to the providers, and until we move more toward that objective, we won’t have real payor/provider alignment or effective total cost of care reduction.
CVS did note, on the positive side, that they expected about 800,000 new Medicare Advantage members for 2024, with about one-third of them being dual eligible (Medicare Advantage/Medicaid, or Medi/Medi) and the dual growth being primarily on HMO contracts (which can allow for more effective cost containment). Duals tend to have higher revenue than general enrollment Medicare Advantage members, which is beneficial, but they also can have higher costs (depending on geography and behavioral health burdens).
Interestingly, the CVS growth was reported to be about 75% coming from “switchers,” i.e., Medicare Advantage members switching from one health plan to another, rather than “age-in” members who are new to Medicare. Switchers can potentially be better managed and potentially at lower MLR cost. What wasn’t mentioned was the continuing impact on the switching of Medicare Advantage members by brokers and field marketing organizations (FMOs),which has created market volatility in the last two to three years. CMS has proposed new rules that will revamp compensation to brokers and FMOs which, if adopted, may reduce some of the larger membership shifts and volatility and help stabilize membership.
As stability of membership is a key element in promoting chronic care management, we have to think about the balance between patient choice, market economics and creating enough stickiness to be able to make sufficient progress in disease state management that creates a return for both the patient and the payor. For example, why do we have to have annual open enrollment? Why not every two, three or four years for a healthcare insurance policy term? Imagine how much marketing spend would be saved with longer term policies, not to mention the fact that health plans could maintain membership long enough to better pay for and justify preventive care and other investments in their members’ health. Why are we as a society allowing for such short-term thinking – is it just because public companies have to report financially each quarter and annually, so there’s an interest in creating short-term movement of both members and stock prices? Something for CMS and all of us to ponder!
More on Medicare Advantage headwinds, health plan woes, hospital mergers and acquisitions and other market conditions in tomorrow’s blog!