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The Keckley Report

Outsiders are Re-Shaping Healthcare Delivery

By October 18, 2021March 1st, 2023No Comments

While vaccine mandates and the advisability of boosters and its devastating impact on the healthcare workforce dominate media attention, opportunists with deep pockets outside traditional health delivery have taken advantage of the delivery system’s pandemic pause. Consider these announcements last week:

  • Goldman Sachs Asset Management completed its acquisition of Boca Raton-based MDVIP, a national network of 1,100 primary care physicians that serves 362,000 patients.

  • Walgreens Boots Alliance acquired majority stakes in primary care clinic operator VillageMD ($5.2 billion for 63% ownership, already in 52 of Walgreens’ 9000 locations) and care coordinator CareCentrix ($330 million for 55% ownership) to expand its service offerings inside its stores and in people’s homes. It also paid $1 billion last month to increase its ownership to 71% of Shields Health Solutions, a company that helps hospitals run their own specialty pharmacies.

  • Electronics retailer Best Buy announced plans to acquire digital health company Current Health complimenting its 2018 acquisition of GreatCall to build out its “last mile strategy” with health consumers.

  • Walmart announced a new partnership with Livongo-founder Glen Tullman’s start-up Transcarent that offers self-insured employers second opinions, medication reviews, referral coordination and care management complimenting its virtual mental health venture with Doctor on Demand, telehealth provider MeMD and sponsorships of Medicare Advantage and Medicare Part D plans.

  • Devoted Health completed its Series D funding raising $1.23 billion. Devoted Health, a startup using technology to provide better care for older Americans, now values the company at $12.7 billion.

  • HeadSpace and Ginger finalized their merger creating a $3 billion mental health that provides teletherapy services to 2,700 enterprise and health plan customers with combined bookings of nearly $300 million expected this year.

  • GlaxoSmith Kline acknowledged its intent to spin off its consumer unit drawing attention from private equity players like Carlyle, Blackstone, CVC, KKR and others who see demand for consumer health products market’s double-digit global growth.

And many others.

The conditions for deals like these couldn’t be better-the environment is advantageous to outsiders:

  • Dissatisfaction with the status quo in healthcare is high. Per Accenture, only 33% of consumers rate their experiences with hospital and physician service favorably and polls show affordability a growing concern to consumers and employers.

  • Capital is accessible. Venture capital funding for start-ups and early-stage healthcare companies is at an all-time high: per Pitchbook, VC fund assets hit an all-time high of $471.7 billion at the end of 2020 and are ahead of that pace in 2021. Healthcare-focused private equity funds are flush having just recorded their 7th straight quarter of funding growth ($34.7 billion). Interest rates for debt are low as the Fed seeks to nudge post-pandemic GDP growth. The stock-market’s adjusted price-to-earnings ratio (CAPE) is the highest it’s been since early 2000 and large-cap strategic investors like Walmart, Amazon and Walgreens have recorded record profits this year.

  • The regulatory environment in healthcare is paralyzed by political dysfunction and partisan brinksmanship. The partisan standoff over the reconciliation bill, ongoing debate about the debt ceiling (which hits again December 3) and Campaign 2022 posturing means legislative productivity will be low and political rhetoric high.

For traditional players in healthcare delivery—hospitals, physicians, post-acute providers and others, these conditions favor outsiders. That’s reality.


A closer look at common themes in these deals suggests resources are being deployed in two areas: retail primary care and the “last mile” logistics. Neither is a foreign concept to traditional players, but novel operating models and targeted deployment of capital by their investors/sponsors are strategic advantages.

Retail Primary Care

Retail primary care includes physical and mental health, dentistry, nutrition, prescriptions, over-the-counter therapies and monitoring devices, mental health counseling, self-care coaching and digital connectivity so consumers can access their medical records, pricing estimates and clinical evidence personalized to their needs. Demand for “whole person” primary care is being driven by consumer and employer discontent and growing evidence that primary care gatekeeping done well improves health and reduces costs. Payment is conducive to capitation, risk sharing arrangements and fee-for-service with performance bonuses PLUS direct selling to consumers for health and wellbeing services, functional foods, dietary supplements and therapeutic travel. It’s more than physicians and walk-in clinics. And it’s captured eye-popping valuations for PC-centric start-ups like Devoted Health, Iora, ChenMed, Oak, Cano and others.

Last Mile Differentiation

The ‘last mile’ involves operational investments and tactical mechanisms that optimize user experiences in navigating the complex world of healthcare delivery i.e. discharge instructions, online scheduling, televisits, in-home/workplace care and more. Regrettably, the healthcare system’s tendency has been to put convenience and service for its caregivers above last mile concerns of its patients. Traditional players are playing catch-up mindful that weighting for patient/member experience scores is doubling in key programs like CAHPS and others and they’re investing in digital solutions at a frenzied pace: since 2010, more than $106 billion has been invested in 6000 digital health deals targeting last mile solutions for hospitals, physicians and plans. But the outsiders have the advantage in digital strategy: it’s central to their operational processes and standardized in their workflows.

Ironically, in announcements about these deals, there’s no mention of workforce shortages, burnout price transparency, Medicare reimbursement or constraints on consolidation by regulators. All are funded by private investment, all target national markets and all are advancing their advocacy positions on issues that are less protective of major incumbents with whom they’ll compete or partner.

The traditional delivery system is handicapped by its complicated regulatory matrix and aversion to risk. These dealmakers aren’t.



2021 Accenture Health and Life Sciences Experience Survey

“Private Equity Firms Circle GlaxoSmithKline’s $54 Billion Consumer Arm”; October 12, 2021; Bloomberg

Mercom Capital Group’s Digital Health 2020 Annual Funding and M&A Report


Key Data as of October15, 2021 (CDC, WHO, Hopkins)

  • Deaths: 1,818/day in last week; 722,714 total in U.S.; 22,285 in past 2 weeks (-19%); 1 in 267 people infected

  • Cases: 44,804,117; 1,220,309 in past 2 weeks (-25%); daily average below 87,000 for last 14 days.

  • Unvaccinated: 66 million eligible most in the 12-50 age bracket with cases rising in Alaska, New Hampshire, Montana, and 8 other western states.

  • Boosters: 362,000 boosters administered per day over the past week, 57% higher than 231,000 average daily first doses.

Study: Global Rates of Anxiety, Depression Increase during Pandemic

Researchers conducted a systematic review of data reporting the prevalence of major depressive disorder and anxiety disorders during the COVID-19 pandemic and published between Jan 1, 2020, and Jan 29, 2021. Findings:
In 2020, rates of depression and anxiety increased globally by 25%, major depressive disorder increased 28% and anxiety disorders 26%.

“Global prevalence and burden of depressive and anxiety disorders in 204 countries and territories in 2020 due to the COVID-19 pandemic”; October 8, 2021; The Lancet

Study: VA Clinic Visits Decrease Significant during Pandemic

The Veterans Health Administration (VHA) manages an integrated health care system that has expenditures of nearly $100 billion per year and serves more than 9 million enrollees. The VHA provided or paid for 179.5 million encounters for 6,737,274 unique patients between January 2019 and March 2021. Analysis:

  • Health care use decreased substantially in March and April 2020 (1.97 million encounters in the last week of February 2020 vs 1 million in the first week of April 2020), and virtual care expanded swiftly (90,400 encounters in the last week of February 2020 vs 404,000 encounters in the first week of April 2020).

  • The number of total encounters has not yet recovered to pre-pandemic levels (1.97 million encounters per week in February 2020 vs 1.7 million per week in February 2021). The estimated total number of missing encounters relative to the previous year was 16.5 million.

Rose et al “Assessment of Changes in US Veterans Health Administration Care Delivery Methods During the COVID-19 Pandemic”; October 14, 2021; JAMA Network Open

Axios Poll: Majority Favor Mandates for Schools, Employers

Per the latest Axios/Ipsos poll:

  • Compared to earlier this year, the number of Americans thinking a return to normalcy will take year or more has tripled to 30% since June (9%).

  • 65% support requiring all people in a healthcare setting to be vaccinated against COVID-19.

  • 65% support requiring federal employees, businesses with 100 employees or more, and their own employer enacting vaccine requirements but 14% say employees who defy or break the rule requiring staff to be vaccinated or undergo regular testing should be fired. Another 22% believe they should be placed on unpaid leave. On the other end, 29% say nothing should happen to them.

“Many Americans see post-COVID life as Farther Away”; October 12, 2021; Ipsos


ACO Supporters Call for CMS to Consider Pandemic in Re-Setting Program Results

On August 25, the Centers for Medicare and Medicaid Services (CMS) released performance results for the eighth performance year (2020) of the Medicare Shared Savings Program (MSSP).

In a Health Affairs blog last week, several prominent promoters of the Medicare Shared Savings Program aka ACOs encouraged CMS to consider the impact of the pandemic in calculating benchmark costs for 2020 (which will be used to calculate Medicare savings for the 513 ACOs that participated). They calculate that ACO program produced $1.86 billion190/beneficiary) in net savings to CMS compared to benchmarks—the fourth year MSSP produced savings beyond benchmarks and an increase over the $85–$88 net program savings per beneficiary from 2019.

Last Tuesday, a group of 12 healthcare associations sent a letter to the Centers for Medicare and Medicaid Services (CMS), urging Medicare to better account for the COVID-19 pandemic in accountable care organizations’ (ACOs) financial targets. The letter was signed by the American College of Physicians, American Hospital Association, American Medical Association, AMGA, America’s Essential Hospitals, America’s Physician Groups, Association of American Medical Colleges, Federation of American Hospitals, Health Care Transformation Task Force, Medical Group Management Association, NAACOS, and Premier healthcare alliance.

Notably, CMS reported that 67% of ACOs received the shared savings bonus in 2020, compared to 50–57% of ACOs in 2019 with higher savings for ACOs that accepted two-sided risk. And physician-led ACOs received bonuses and generated savings at rates of 70%and 85%, compared to hospital-led ACOs at 66% and 78%, respectively, and integrated ACOs at 63% and 85%, respectively.

Zhu et al “The Medicare Shared Savings Program In 2020: Positive Movement (And Uncertainty) During A Pandemic”; October 14, 2021; Health Affairs

KFF Poll: Majority Favor Drug Price Controls, find PharMA Claims Unconvincing

Per Kaiser Family Foundation’s latest Tracking Poll:

  • 83% say they either “strongly favor” or “somewhat favor” allowing the federal government to negotiate with drug companies as do 84% of older adults (65 and older), 95% of Democrats, 82% of independents, and 71% of Republicans.

  • 67% find the argument that Medicare negotiation will lead to fewer drugs unconvincing.

“The Public Weighs In On Medicare Drug Negotiations”; October 12, 2021; Kaiser Family Foundation

Morning Consult Poll: Financial Wellbeing Drops in September

Morning Consult’s Financial Well-Being Scale September 2021 results:

  • Financial wellbeing decreased well-being for the average American in September to 50.27, compared with 51.24 in August.

  • % agreeing that “finances control my life” (change from August to September): All adults: 36% (+3%), Gen Z 41% (+5%), Millennials (45% (no change), Gen X 41% (+6%), Boomers 24% (+1%)

  • % agreeing “”I could handle a major or unexpected expense”:All adults: 38% (-1%), Gen Z 19% (-4%), Millennials 27% (no change), Gen X 21% (-2%), Boomers 35% (no change)

“Morning Consult Financial Wellbeing Index”; October 12, 2021; Morning Consult

Kaiser Permanente: Key Union Votes to Strike

Last week, 96% of those who took part in the online vote elected to approve a strike according to United Nurses Associations of California/Union of Health Care Professionals which represents 24,000 Kaiser nurses.

At issue is Kaiser Permanente’s offer of an annual raise of 1% for current employees, plus an additional 1% annual bonus for the next three years. KP is also proposing that new hires be paid using a different — and lower — pay scale than existing workers, a “two-tier” system that critics say would give the company a financial incentive to push out older employees.

In negotiations, unions are pushing for an across-the-board pay increase of 4% per year, as well as retaining employees’ eligibility for a 1% contribution to their retirement savings, which the company has proposed eliminating for new hires.

“Health care workers at Kaiser Permanente vote to authorize strike, rejecting pay cuts for new hires”; October 12, 2021; Business Insider

Advocacy Efforts for Hospital at Home Accelerating

Following up on their $100 million investment in at-home acute care company Medically Home, Mayo Clinic and Kaiser Permanente are headlining Advanced Care at Home Coalition, a new advocacy movement backed by nearly a dozen other health systems from across the country.

Founding members in addition to Medically Home include Mayo, Kaiser, Adventist Health, ChristianaCare, Geisinger Health, Integris Health, Johns Hopkins Medicine, University of Michigan, Novant Health, ProMedica, Sharp Rees-Stealy Medical Group, UNC Health and UnityPoint Health.The group is being managed by McDermott+Consulting.

Related efforts:

  • The Moving Health Home coalition founded by Amazon Care, Intermountain Healthcare and Ascension.

  • AdventHealth partnership with startup DispatchHealth to expand a Tampa, Florida-based deployment across Daytona Beach, Ocala and Orlando, as well as into the Kansas City

  • Henry Ford Health System partnership with Contessa—a provider of home recovery care services and recent subsidiary of Amedisys—to build and launch hospital-at-home, skilled nursing facility (SNF)-at-home and palliative-care-at-home programs for its communities.

  • UnityPoint Health partnership with healthcare and community care coordination technology company WellSky for its SNF-at-home program.

“Mayo Clinic, Kaiser Permanente recruit 11 health system partners for new hospital-at-home advocacy coalition”; October 14, 2021; Fierce Healthcare

Study: Telehealth for Mental Health Shifting to Nurse Practitioners, Psychologists and Social Workers for Medicare Enrollees

This was a cross-sectional study and descriptive analysis of telemedicine utilization by 10.4 million fee-for-service Medicare beneficiaries from 2010 to 2019. Data analysis was performed from June 6, 2019, to July 30, 2020.

  • A total of 0.9% of all fee-for-service rural beneficiaries had a telemedicine visit in 2019 compared with 0.2% in 2010. In 2019, there were 257 979 telemedicine visits or 34.8 visits per 1000 rural beneficiaries and most (75.9%) of these visits were for mental health conditions.

  • In 2010 to 2019, telemedicine for mental health conditions shifted away from psychiatrists (71.2% to 35.8% of all telemedicine visits) to nonphysician clinicians, eg, nurse practitioners, psychologists, and social workers (21.4% to 57.2%).

Barnett et al “Trends in Outpatient Telemedicine Utilization Among Rural Medicare Beneficiaries, 2010 to 2019”; October 15, 2021; JAMA Health Forum


Study: Accelerated Approval Drugs Used Widely in Medicaid Programs

Researchers analyzed the number and class of drugs approved through the FDA’s accelerated approval pathway from 2015 through 2019. Findings:

  • Since the inception of the FDA’s accelerated approval pathway in 1992 through 2020, 216 product-indication pairs granted accelerated approval were identified, comprising 149 unique products.

  • 28 of 30 (93.3%) product-indication pairs receiving accelerated approval in 2020 being indicated for cancer.

  • Despite their infrequent use, drugs with accelerated approval represented a minimum annual net spending on all drugs covered by Medicaid of 6.4% ($2.2 billion of $34.6 billion) in 2015 and a maximum of 9.1% ($2.5 billion of $27.6 billion) in 2018.

Sachs et al “Recent Trends in Medicaid Spending and Use of Drugs With US Food and Drug Administration Accelerated Approval”; October 8, 2021; JAMA Health Forum

CDC: Overdose Deaths at New High

More than 96,000 Americans died from drug overdoses in the 12-month period ending in March, marking a new record high, according to preliminary CDC data released Oct. 13.

The U.S. reported 96,779 fatal overdoses during this time period, which included the nation’s first major COVID-19 surge and lockdowns–up 29.6% from the 74,679 overdose deaths reported in the 12-month period ending in March 2020.

Every state except for New Hampshire, South Dakota and New Jersey reported increases in overdose deaths in the 12-month period ending in March.

“Provisional Drug Overdose Accounts”; October 12, 2021; CDC

Labor Department: Unemployment Claims Fall to Lowest Level since Pandemic

Per the Labor Department’s September Report:

  • Unemployment claims dropped 36,000 to 293,000 last week, the second straight drop, the lowest number to apply for benefits since March 14, 2020, when the pandemic intensified, and the first-time claims have dipped below 300,000.

  • Nearly 3% of the workforce (4.3 million) quit in August– the fifth straight month of near-record quits.

  • Employment in health care changed little in September (-18,000). Job losses occurred in nursing and residential care facilities (-38,000) and hospitals (-8,000), while ambulatory health care services added jobs (+28,000). Employment in health care is down by 524,000 since February 2020, with nursing and residential care facilities accounting for about four-fifths of the loss.

  • The unemployment rate fell to 4.8% from 5.2%.

  • Average hourly pay increased 4.6% in September from a year earlier, and for restaurant workers wage gains in the past year have topped 10%.

“The Employment Situation- September 2021”; October 8, 2021; BLS

Commerce Department: Spending Up, Prices Up

Sales at retail stores, restaurants and online sellers rose a seasonally adjusted 0.7% in September from the previous month, the Commerce Department said Friday. The rise in sales reflects persistently strong demand and higher consumer prices. Findings:

  • The retail sales, which aren’t adjusted for inflation, rose 13.9% in September from a year earlier. Consumer inflation increased 5.4% in that time.

  • Households are sitting on roughly $1.6 trillion in savings, representing 9.4% of their disposable income, well above pre-pandemic levels, according to the Commerce Department. Private-sector hourly wages were up 4.6% in September over the previous year.

  • The U of Michigan Index of consumer sentiment dropped in October to 71.4 from 72.8 in September.

“Retail Sales Rise, Showing Strong Consumer Demand, Higher Inflation”; October 15, 2021; Wall Street Journal