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The Keckley Report

Outsiders are Looking beyond the Pandemic: the Four Vulnerabilities they are Likely to Pursue

By July 13, 2020March 1st, 2023No Comments

Healthcare delivery in the U.S. is big business: annual spending for hospitals, physicians, allied health professionals, post-acute services and the prescriptions and tests they order represents almost 80% of the $3.8 trillion we spend. They’re the insiders.

In recent months, outsiders have stepped up their investments in healthcare delivery: consider these announcements last week:


Last week, Walmart announced its entry in the health insurance sector by selling a Medicare Advantage plan from Walmart Insurance Services in Texas later this year. It also announced a partnership with PBM startup Capital Rx, which provides health plans real-time information on prescription drug prices. It is also building out its Community Health Centers that offer primary care, optometry, counseling, audiology, fitness and nutrition (Tivity Health), X-ray, dental and lab services. Two pilots in Georgia opened last year with others expected.


Walgreens Boots Alliance announced it will invest $1 billion for a 30% stake in VillageMD to open 500 to 700 physician-staffed clinics in its drugstores in 30 U.S. markets in the next five years. The new clinics, called “Village Medical at Walgreens” will occupy be 3,300-9,000 square feet with a separate entrance and staffing by physicians—a contrast to CVS HealthHubs staffed by nurse practitioners. In the third quarter, Walgreens lost $1.7 billion. Last week, the company announced layoffs of 4000 at its Boots Alliance operation in the United Kingdom.


Last week, Anthem’s pharmacy benefit manager (PBM), IngenioRx, acquired pharmacy startup Zipdrug to offer its on-demand medication delivery in Anthem health plans and as a standalone service. Zipdrug’s app works by automating in-home prescription ordering and delivery to improve medication adherence. The app also offers services that determine which pharmacies have the lowest copay.

Context: Anthem signed a 5-year partnership with and CVS Health last year to create IngenioRx. Improper prescription medication adherence costs the U.S. system $32 billion in 2018. The median US household spends more than $3,700 annually in out-of-pocket costs alone for prescription drugs.

Note: the PBM market is highly concentrated: CVS Health (Aetna, Anthem IngenioRx): 30%, Express Scripts (Cigna): 23%, and OptumRx (United): 23%

These join a growing list of big-name outsiders making big plays in healthcare delivery: CVS, Apple, Google, Kroger, Intel, Optum, Microsoft, Humana and others are betting the future of the delivery system is not a repeat of its past.

My Take

The pandemic has paralyzed insiders while the finances for most outsiders are stronger. The playing field is not level. Elected officials are not beating a drum to require insurers to care for those who don’t pay premiums, retail pharmacies to provide free products or drug manufacturers to give away their drugs. Instead, all are focused on the Covid-19 virus, drugs to treat it and vaccines to prevent it. That’s where we are. Looking past the pandemic is hard especially for insiders. 

Outsiders are opportunistic. They’re thinking past the pandemic. Akin to the announcements by Walmart, Walgreens and Anthem, outsiders are focused on four insider vulnerabilities that are inevitably part of health delivery post-Covid:

  • They invest in holistic primary and preventive health services to reduce unnecessary costs for hospitals, specialty care and prescription drugs and enhance individual wellbeing. (Vulnerability: lack of clinical models that address whole person care and wellbeing)

  • They leverage technology to deliver better services anytime anywhere. (Vulnerability: failure to leverage technology effectively aka a ‘tools, not rules’ approach)

  • They integrate insurance and delivery in their models, so costs are predictable and transparent up front. (vulnerability: lack of simplicity and affordability)

  • They treat individuals as consumers, not patients. And they monitor their needs, wants and factors that influence their actions. (vulnerability: a paternalistic predisposition toward individuals)

The pandemic is forcing every hospital, physician, and long-term care provider to think about the future: for most, a return to normalcy is their desired destination. For outsiders, like Walmart, Walgreens and Anthem, a return to normalcy in healthcare delivery is precisely the wrong destination, and they are likely to play a bigger role.

P.S. Campaign 2020 is here: the election is 120 days away. Last week, the Biden campaign announced its health policy platform which includes a public insurance option, a crackdown on hospital mergers, lowering the Medicare eligibility age to 60 from 65, adding vision, dental and hearing benefits to Medicare, free testing for Covid-19, implementation of prescription drug pricing constraints, allowing Medicare to negotiate drug prices directly with manufacturers and a minimum wage of $15/hour for healthcare workers. Stay tuned.


“Walmart will begin offering health insurance to consumers” Business Insider July 10, 2020;

“Walgreens to cut over 4,000 jobs at Boots on a dark day for U.K. jobs” MarketWatch July 10, 2020

“Walgreens and VillageMD to Open 500 to 700 Full-Service Doctor Offices within Next Five Years in a Major Industry First” VillageMD July 8, 2020;

“Anthem’s PBM buys pharmacy startup Zipdrug” MedCity News July 6, 2020

“Anthem’s pharmacy benefit manager snapped up pharma startup Zipdrug” Business Insider July 8, 2020


Current Status: July 13,2020

  • GlobaI:12,910,357 total cases/569,128 deaths

  • U.S.: 3,304,192 cases/135,205 deaths

  • Hot spot states based on the past 7-day rolling average: Florida: up 1,393%, S.C.: up 999%, Arizona: up 858%, Texas: up 680%, Georgia: up 245%.

  • The U.S. just experienced its worst two-week stretch, with more newly confirmed cases than at any point since its coronavirus outbreak began in early 2020. From June 25 to July 8, 674,750 Americans were diagnosed with coronavirus, and the nation’s tally grew by one million cases over the span of the past month

Sheryl Gay Stolberg “As Virus Spreads, States Face a Truth: ‘We Cannot Test Our Way Out of This’” New York Times July 8, 2020;

CDC: Characteristics of Persons Who Died with COVID-19 in the United States, February 12–May 18, 2020

The CDC Morbidity and Mortality Weekly Report released July 10 summarized statistics about U.S. deaths from the pandemic:

  • 60.6% were male, 74.8% were aged ≥65 years, 24.4% were Hispanic, 24.9% were black, 35.0% were white, 6.3% were Asian, 0.1% were AI/AN, 0.1% were NHPI, 2.9% were multiracial or other race, and race/ethnicity was unknown for 6.3%

  • Median age was 71 years among Hispanic decedents, 72 years among all nonwhite, non-Hispanic decedents, and 81 years among white decedents. The percentages of Hispanic (34.9%) and nonwhite (29.5%) decedents who were aged <65 years were more than twice those of white decedents (13.2%)

  • At least one underlying medical condition was reported for 76.4%: the most common– cardiovascular disease (60.9%), diabetes mellitus (39.5%), chronic kidney disease (20.8%), and chronic lung disease (19.2%).

“Characteristics of Persons Who Died with COVID-19 in the United States, February 12–May 18, 2020”CDC Morbidity and Mortality Weekly Report July 10, 2020

CDC: 5000 Covid Infections in Hospital

Between May 14 and June 21, U.S. hospitals have identified 5,142 coronavirus infections acquired inside hospitals according to figures provided to The Wall Street Journal by the Centers for Disease Control and Prevention. The figure could be higher; the reporting is voluntary.

.“Hospitals Struggle to Contain Covid-19 Spread Inside Their Walls” Wall Street Journal July 6, 2020;

KFF: 1.5 Million Teachers are at High Risk if Schools Re-Open

The Kaiser Family Foundation analysis of risk factors based on the 2018 National Health Interview Survey estimates nearly 1.47 million teachers have health conditions that put them at higher risk of serious illness if they were to contract COVID-19. This represents nearly one in four (24%) of all teachers around the country. While children are at less risk for serious illness from COVID-19 than adults and often have mild or no symptoms when infected, teachers and other adult staff in schools face higher risk. 

Claxton et al “How Many Teachers Are at Risk of Serious Illness If Infected with Coronavirus? Kaiser Family Foundation” Kaiser Family Foundation July 10, 2020;

Axios-Ipsos Coronavirus Index: 3 of 5 Concerned about Covid

According to the latest Axios-Ipsos Coronavirus Index:

  • Since March, the overall share of Americans feeling “extremely or very concerned” about coronavirus climbed, peaked, fell, rose again, and settled at 58%. Among Democrats: 72% in March, 81% at peak and 77% in June; among Republicans, 49% in March, 54% at peak and 36% in June.

  • Younger, working-class Republican men take the pandemic least seriously vs. women and 65+ Americans take the threat most seriously.

“The coronavirus pandemic has returned to the center of Americans’ concerns” Axios June 30, 2020

Sage Growth: Big Differences in Views of Surgeons vs. Other Specialties

In “Exploring Physicians’ Perspectives on How COVID-19 Changes Care” conducted May 28 – June 3, Sage Growth surveyed 4,380 physicians across primary care, medical specialties, surgical specialties, and behavioral health comparing results to their May 20 survey. Highlights:

  • Access to Covid Patients: The majority of primary care (85%) and medical specialists (79%) are seeing Covid patients already vs. only 19% of surgical specialists.

  • Practice Finances: By June, 55% (excluding behavioral) had either been furloughed or taken pay cuts. Across all specialties, 10-12% of physicians plan on closing their offices for an extended period or even permanently.

  • Telehealth: 62-64% of primary care, behavioral health, and medical specialties are providing telehealth services vs, 24% of surgical specialties.

  • Reimbursement Preferences: Physicians prefer fee-for-service (FFS) reimbursement and upside-only risk contracts post-COVID-19.More vs less FFS: Primary care (92% vs. 2%), Medical specialists (80% vs. 5%), surgical specialists (83% vs. 0%),behavioral health (75% vs. 15%); preference for upside only/upside + downside or capitated payments: Primary care (77%, 44%, 28%) Medical specialists (74%, 18%, 12%), surgical specialists (81%, 12%, 6%) behavioral health (83%, 39%, 40%)

“Exploring Physicians’ Perspectives on How COVID-19 Changes Care” Sage Growth Partners July 2020;

Iowa Study: Stay in Place Orders Reduce Death, Hospitalizations

University of Iowa researchers found shelter-in-place orders (SIPOs) implemented between March and May 15, 2020 reduced the daily mortality growth rate after nearly three weeks from enactment and the daily growth rate of hospitalizations two weeks after enactment. After 42 days from enactment, the daily mortality growth rate declined by 6.1%. resulting in 250,000–370,000 deaths possibly averted. The daily hospitalization growth rate declined by up to 8.4% after 42 days. “This evidence suggests that SIPOs have been effective in reducing the daily growth rates of COVID-19 deaths and hospitalizations.”

Wei Lyu, George L. Wehby “Shelter-In-Place Orders ReducedCOVID-19 Mortality And Reduced The Rate Of Growth In Hospitalizations” Health Affairs;


Prevalence of Mental Health, Substance Use Increasing in U.S.

Per Kaiser Family Foundation’s analysis of U.S. Census Bureau, Household Pulse Survey, June 2020:

  • 19% of U.S. adults suffer from mental illness ranging from 16.1% in New Jersey to 25.3% in Utah.

  • 36.5% report symptoms of anxiety or depressive disorder, up from 11.0% in 2019 ranging from Wisconsin (27.2%) to Louisiana (42.9%).

  • In 2018, age-adjusted suicide rates/100,000 is 14.2: ranging from 7.4/ 100,000 in the District of Columbia to 25.0/ 100,000 in New Mexico

  • Death rates due to drug overdose increased fourfold from 1999 to 2018: the 2018 age-adjusted death rate for all drug overdoses was 20.7 per 100,000 ranging from South Dakota (6.9/100,000) to West Virginia (51.5/100,000)

  • In 2017-2018, 34.3% of adults with serious mental illness (SMI) in the past year did not receive mental health treatment ranging from 19.2% in Tennessee to 54.9% in Alaska

  • Across all states, average out-of-pocket spending for adults with mental illness enrolled in large employer health plans is higher than average out-of-pocket spending for adult enrollees without mental illness ($1,347 vs. $671) ranging from $998 in Michigan to $1753 in Connecticut.

“Mental Health and Substance Use State Fact Sheets” Kaiser Family Foundation July 10, 2020

Green Survey: Primary Care Hard Hit in Pandemic

The survey of 735 clinicians conducted June 26 through 29, 2020 conducted by The Larry A. Green Center in collaboration with the Primary Care Collaborative (PCC) and 3rd Conversation, found:

  • 37% of clinicians reported new layoffs and furloughs in the last four weeks and another 28 %t said they have skipped or deferred salaries during that time.

  • 35% said they are not ready to address increased patient needs from the pandemic and over 40% said they are unprepared for a second pandemic wave.

  • In the last four weeks, 61% reported reducing in-person visits between 30 and 50% for a variety of reasons: Need to maintain physical distance in the office (55%), shifting of patients with stable chronic conditions to telehealth (64%), and patient choice (53%) the most common reasons.

  • 28% said patient contact is at an all-time high because of telehealth services turned on during shelter-in-place orders but 16% reported claim denials for telehealth claims.

Primary care practices lost $15 billion during the first wave of the pandemic, according to new research from Harvard Medical School and American Board of Family Medicine.  Insufficient investment in primary care is one reason that the US health care system continues to underperform relative to the health systems in other high-income countries.1 States and countries with greater access to primary care clinicians and more robust primary care services have better outcomes and lower costs.2,3 For this reason, Rhode Island and Oregon have mandated measurement and targeting of primary care expenditures, and other states are considering related legislation.

“QUICK COVID-19 PRIMARY CARE SURVEY” Larry Green Center July 2020

Martin et al “Primary Care Spending in the United States, 2002-2016” JAMA Intern Med. 2020;180(7):1019-1020. doi:10.1001/jamainternmed.2020.1360

KFF: Commercial Insurers Pay 2.5 X Medicare Rates

Last week, Kaiser Family Foundation reported that private insurance rates were up to 2.5 times higher than Medicare rates across 10 DRGs and vary widely:

  • Private insurance rates “varied more widely” than Medicare rates and that the average private insurance rates for diagnoses related to coronavirus disease 2019 (COVID-19) rose up to 22% between 2014 to 2017.

  • if Medicare’s temporary 20% add-on for hospitals that treat patients infected with COVID-19 were applied in 2017, the gap with private insurers would have been smaller.

  • KFF found that the average private insurance payment rate for patients on a ventilator for more than 96 hours is $60,000 more than the average amount paid by Medicare for the same service.

  • Similarly, respiratory infections result in average private insurance payment rates of $33,786 compared to an average Medicare payment rate of $13,297.

  • For common diagnoses not related to COVID-19, private insurance rates still ranged 1.6 to 2.2 times high than the average Medicare payment in 2017.

Related: In May 2019, a study released by RAND Corporation found that private health plans paid hospitals 241% of what Medicare would have in 2017, up from 236% in 2015. According to this analysis, the greatest price variation occurred at hospital systems, ranging from 150% to above 400% of what Medicare paid.

Claxton et al “Comparing Private Payer and Medicare Payment Rates for Select Inpatient Hospital Services” Kaiser Family Foundation July 7, 2020

CMS Announces Transitional Add-On Payment for Home Dialysis

Last Monday, the Center for Medicare and Medicaid Services announced a new payment method intended to encourage providers use home dialysis machines to treat end-stage renal disease (ESRD) patients instead of dialysis centers. The rationale: Medicare beneficiaries with end-stage renal disease are in the most at-risk group for COVID-19. In May, CMS announced a change allowing ESRD patients to enroll in Medicare Advantage plans in 2021.

About 750,000 Americans have ESRD: 530,000 have Medicare benefits, 85% travel three times a week or more to receive dialysis treatment and 1,341 hospitalizations per 100,000 people in this category. CMS expects it will pay $10.3 billion in 2021 for renal dialysis services. It increased the prospective payment system rate from $239.33 to $255.59.

New Hospital Ranking System Includes Community-Mindedness and Avoidance of Unnecessary Care in Ratings

A new hospital rating system developed by The Lown Institute, a Massachusetts not for profit think-tank, incorporates quality measures along with a hospital’s community-minded policies (charity care, financial aid, living wage staff compensation) and avoidance of unnecessary care (avoidance of 13 procedures of questionable value i.e. benefit knee arthroscopy, spinal fusions, et al). In its rankings, quality of care indicators (i.e. staffing levels, patient outcomes) account for 50% of a hospital’s composite ranking, civic leadership counts for 30% and value of care 20%. Notable conclusions

  • Hospitals with good clinical outcomes tend to score poorly in addressing inequities that affect the health of their communities. And even when hospitals perform many low-value procedures, patients generally have a low risk of dying both in the hospital and after being discharged, as well as a low risk of having to be readmitted.

  • Not a single hospital in the top 100 for patient outcomes was in the top 100 for civic leadership, and vice versa.

Lown Institute Hospitals Index

Med Students challenge AAMC to use online application process

The Association of American Medical Colleges (AAMC) is being challenged to improve its handling of the Medical College Admission Test (MCAT) and other facets of the application process by Students for Ethical Admissions (SEA), a group of 55 students. The issue: AAMC’s requirement that the MCAT be taken in person rather than online. Beyond online testing, AAMC has encountered pandemic-related challenges in obtaining student undergraduate transcripts needed for medical school applicants and an unusually high call volume to its contact center from students seeking information about the application process.

Joyce Frieden “AAMC Continues to Take Heat Over Policies on MCAT, Med School Applications” MedPage Today July 8, 2020