CVS searches for ‘the right asset’: Day 2 at J.P. Morgan 2023 healthcare conference

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The 41st annual J.P. Morgan Healthcare Conference continues for its second day at the Westin St. Francis hotel in San Francisco, where a veritable who’s who of the healthcare industry is gathered to talk pricing, patients, public policy and much more. Modern Healthcare will be providing live updates throughout the four-day event.

7:45 p.m. CT: Health Catalyst shifts focus

Health Catalyst has pivoted its strategy as its health system customers focus less on long-term return on investment.

“We’ve needed to shift away from the parts of our portfolio that deliver a long-term, clinical improvement objective or long-term ROI, and focus much more specifically on near-term, hard-dollar financial improvements,” CEO Dan Burton said.

Anything that can’t help relieve financial pressures is off the table, CEO Dan Burton said. “We have to meet them where they are at,” he said. “They’re in a near-term hell.”

As part of it strategy, the healthcare data analytics and services company is expanding its outsourcing services relationships with health systems. In December, the company said it was partnering with Urbana, Illinois-based health system Carle Health to provide tech-enabled managed services in the areas of analytics, data management, reporting and project management.

The agreement also transfers employees of Carle Health’s clinical and business intelligence functions to Health Catalyst. Burton said it was a “kinder” version of outsourcing as the employees will stay local.

Health Catalyst will turn a profit this year, Burton said. The company’s goal is to generate a profit margin of 10% by 2025 through revenue streams such as outsourcing contracts and by cutting operating expenses, Chief Financial Officer Bryan Hunt said.

—Gabriel Perna

5:45 p.m. CT: Cigna raises premiums after ‘tough negotiations’

Cigna implemented a small premium adjustment this year to account for rising labor costs among providers, CEO David Cordani said.

“These are tough negotiations, back and forth, make no doubt about it, because the employer on the backend cannot afford perpetual rate increases,” Cordani said.

Cigna’s employer-sponsored insurance business, which represents 85% of its revenue, is growing, Cordani said. “We’ve been in net shared gains in the commercial space, net growth and margin expansion, which is a difficult thing to do,” Cordani said.

Medicare Advantage, which accounts for just 5% of Cigna’s business, grew in the “high single-digit range” during open enrollment for 2023, which Cigna anticipates will be in line with the industry at large, he said.

Cordani said digital services could serve as a solution to the physician shortage. After purchasing telehealth platform MDLive, Cigna rolled out a virtual-first primary care health plan for employers in some markets, and early adoption has been high, he said.

“We believe fully 40% of all healthcare will be able to delivered virtually” in the future, Cordani said.

Cigna remains interested in owning virtual care platforms, behavioral health services, specialty pharmacy and home care delivery providers, he said. The insurer is particularly interested in growing its Accredo specialty pharmacy and CuraScripts medication distribution platforms, he said.

—Nona Tepper

5:25 p.m. CT: Newly spun off GE HealthCare’s future involves a lot of AI

GE HealthCare is investing in artificial intelligence and connected devices to further embed its presence in the health system market, CEO Peter Arduini said.

The company, which spun off from General Electric on Jan. 4, is aiming to grow its AI and connected devices business, Arduini said. GE HealthCare’s biggest revenue generator is its legacy radiology and imaging equipment business, but the AI and connected devices segment is growing at a faster rate and creates recurring revenue, he said.

“This is a great business for driving cash,” Arduini said. “In the next couple of years, we won’t have any products coming out that don’t have embedded AI in them. It’s just the way things are going.”

Already, GE HealthCare has embedded AI into several applications and products, including new ultrasound and radiology devices.

“Machine learning is [being used] across the board,” Arduini said. “We want to index more towards the data because it is a great enabler for the company.”

While Arduini admitted inflation is affecting GE HealthCare’s bottom line, but said demand for its products remains strong. This is partially due to the backlog of procedures postponed during the first year of the COVID-19 pandemic, he said.

On Monday, GE HealthCare agreed to purchase Imactis, an advanced radiology equipment manufacturer. Arduini said the company will continue to be active in mergers and acquisition and will specifically seek digital ecosystem partnerships.

In advance of its fourth-quarter and full-year earnings report, GE HealthCare announced it generated $18.9 billion in revenue for 2022, a 4% increase. The imaging equipment business represented half of that revenue.

—Brock E.W. Turner

5:15 p.m. CT: Walgreens eyes growth opportunities

Walgreens Boots Alliance sees 2023 as another growth year, jump-started by the Jan. 3 closing of its $8.9 billion deal to buy Summit Health-CityMD. Its full acquisition of CareCentrix is set to close in the third quarter.

“My hope for this company and all my executive team is that you’ll see great execution out of us,” Walgreens CEO Rosalind “Roz” Brewer said. “We have built a foundation on three very strong acquisitions–the Shields business, which really supports what we need to do in our specialty pharmacy, which is one of the fastest-growing areas in pharmacy; our CareCentrix business, which is at-home care; and then the VillageMD business. We have to integrate those.”

The company hopes to achieve 30% year-over-year growth in adjusted earnings for the second half of 2023, driven in part by fewer COVID-19 headwinds and recovery in prescription volumes. Its full-year guidance, however, still projects lower earnings than 2022.

As a result of the Summit deal, Deerfield, Illinois-based Walgreens estimates it will achieve $150 million in annual efficiencies by 2027, $60 million of which will be cost savings through limited vendor contract spending, improved processes and automation. The other $90 million would stem from subsidiary VillageMD’s efforts to accelerate Summit’s transition to a more risk-based payment model, Brewer said.

The company sees opportunities to take on more risk via Medicare Advantage plans.

Walgreens is also expanding its footprint in multi-specialty care with incremental investments over the next few years and continues to build out its clinical trials business. The company plans to invest in its technology base and incorporate those tools to show how it can reduce healthcare costs. CFO James Kehoe told investors the company is open to future deals to boost its presence in population health and provider-enablement capabilities.

—Caroline Hudson

4:20 p.m. CT: Northwell expands outpatient network

Northwell Health plans to grow its ambulatory network 5% this year to nearly 900 facilities.

The nonprofit health system looks to add 22 specialty care sites, 11 primary care clinics and six urgent care facilities this year, according to the company’s presentation.

Northwell, based in New Hyde Park, New York, is building a $450 million outpatient pavilion on Manhattan’s Upper East Side that’s slated to open in the fall of 2025. The 200,000-square-foot facility will offer oncology, neurology and cardiac care as well as imaging and lab services, chronic care management and wellness services. Northwell partnered with GoHealth Urgent Care last year and expanded its Northwell Health at Home program, which provides acute care in patients’ homes.

Northwell also is diversifying its business through its for-profit venture company, Northwell Holdings.

Northwell Health formed a $100 million partnership with Aegis Ventures last year to try to improve care through digital technology. The joint venture launched a virtual care startup in November, Upliv, which partners with employers to offer telehealth services to women experiencing menopause.

At the conference Tuesday, Northwell Holdings and Aegis Ventures launched Caire, a national virtual care offering that will incrementally target a specific chronic disease, clinical indication or care gap, according to the presentation. Caire will initially focus on women’s health.

More than half of Northwell’s approximately $16.5 billion of annual revenue comes from its ambulatory business, Northwell CEO Michael Dowling told Modern Healthcare in November.

“We are moving everything out of the hospitals as much as we can,” he said. “Hospitals are one piece, a very important one, but they are not the center of the universe anymore.”

—Alex Kacik

2 p.m. CT: Clover Health reports flat Medicare Advantage sign-ups

Clover Health expects to start the year with the same number of Medicare Advantage members as last year, the company disclosed in a news release ahead of its J.P. Morgan Healthcare Conference presentation Tuesday.

That means the insurance company likely lost a net of more than 8,000 Medicare Advantage customers during open enrollment for 2023. The insurtech reported 88,136 Medicare Advantage members as of Sept. 30, up from 80,283 at the beginning of last year.

“During the most recent Medicare Advantage enrollment period, we intentionally priced our insurance plans with profitability in mind as opposed to growth,” CEO Andrew Toy said in the news release. “Due to this strategic shift, we expect to start 2023 with insurance membership approximately in line with our insurance membership as of Jan. 1, 2022.”

Clover Health anticipates generating $1.2 billion in insurance revenue this year. The company aims to spend up to 91% of premiums on patient care, slightly higher than the 85% medical loss ratio required under federal law.

Toy also reiterated Clover Health’s plan to streamline its clinician partners for the Medicare Accountable Care Organization REACH program “in connection with an increased prioritization of profitability.”

Clover Health does not need to raise outside capital, Chief Financial Officer Scott Leffler said in the news release. “We also continue to feel comfortable with the company’s current liquidity position, which helps to insulate us against a challenging market environment,” he said.

—Nona Tepper

12:45 p.m. CT: Fresenius to shrink clinic footprint

Fresenius Medical Care plans to close some of its U.S.-based dialysis clinics in 2023 as its patient volumes continue to decline.

Year-over-year, the Germany-based dialysis chain treated 1% fewer patients through the nine months ended Sept. 30 across its approximately 2,700 U.S. clinics. Fresenius will shrink its clinic footprint and expand its home care network as it grapples with higher supply chain costs, elevated labor expenses and ongoing COVID-19 challenges, said Helen Giza, who took on the CEO role in December.

“We know we need to improve profitability and optimize our portfolio,” Giza said.

Fresenius plans to trim its clinic footprint in the U.S. and “take a hard look” at its international markets as the company sees its patient volumes decline, she said.

Competitors also experienced a decline in dialysis patients, likely indicating that more patients were treated in hospitals or delayed care, Giza said. It is unclear when patient volumes will rebound, she said.

Fresenius implemented a new operating model in 2023, replacing its regional management system with a more centralized structure. The company will look to expand its value-based care programs, particularly among its chronic kidney disease patients, and provide 25% of its dialysis treatments in the U.S. in the home by 2025, Giza said.

“We have a competitive advantage in our home offering,” she said.

—Alex Kacik

12:15 CT: CVS Health looking for ‘the right asset’

CVS Health CEO Karen Lynch said the company was in the market for a primary-care asset but she steered clear of directly addressing speculation the company was exploring an acquisition of Oak Street Health.

She did not name companies viewed as potential acquisition targets. “We want to make sure it’s the right asset, at the right time and continue to evaluate options,” Lynch said. “This isn’t a one-and-done.”

Citing people familiar with the matter, Bloomberg News on Monday reported CVS was exploring an acquisition of  Chicago-based Oak Street Health that would value the primary care provider at more than $10 billion, including debt.

Much of Lynch’s presentation was an update on subsidiary Aetna’s Medicare Advantage membership enrollment. She said membership grew by low- to mid-single-digits during the annual sign-up period this year. “This result is due to a highly competitive open enrollment period,” she said.

Aetna counted 3.2 million Medicare Advantage members as of Sept. 30.

While Lynch said she was “disappointed” in the insurer’s ability to capture new Medicare Advantage members, Aetna reported strong sales among customers dually eligible for Medicare and Medicaid and from employers buying group Medicare Advantage plans for their retired workers, she said.

The enrollment miss comes as Aetna’s largest Medicare Advantage plan will lose the large quality bonuses associated with the Medicare Advantage star ratings quality program. That represents a headwind for 2024, Lynch said. “We’re going to work really hard with our distribution channels, and with our benefit designs, to mitigate that risk for individuals,” she said.

The insurer has received approval from federal regulators to diversify its main preferred provider organization contract, which will help mitigate some of the risk in 2024, Lynch said. Aetna has also focused on improving members’ experience in its Medicare Advantage plan, which will drive its ratings upward, she said.

Aetna has experienced a strong open enrollment season among customers shopping for individual coverage on the state and federal exchanges. The company expects to add more than 700,000 new individual marketplace members in 2023, bringing its total to 750,000 exchange lives. Open enrollment ends Jan. 15.

“The individual marketplace has had another year of disruption, driving members to select new plans,” Lynch said.

The company expects to close its $8 billion acquisition of Signify Health, a home health and physician enablement technology company, during the year’s first half.

—Nona Tepper

10:30 a.m. CT: FDA chief calls for better trial access, attention to misinformation

Drug developers, researchers and regulators can do better when it comes to clinical trials, Food and Drug Administration Commissioner Dr. Robert Califf said Tuesday.

That includes ensuring evidence is properly structured for definitive studies, making clinical trial processes more efficient and routinely using data from electronic health records, Califf said. “There’s often an assumption that in human clinical studies you can ignore things like missing data,” he said.

One ongoing challenge is equitable access to research trials, particularly in low-income and rural areas. It’s difficult to conduct specialty research in regions where the relevant services aren’t provided, Califf said.

“It’s asking a lot of the clinical research system to overcome structural failures of our healthcare delivery system,” Califf said. “I’m 100% in favor of doing everything we can in the clinical research system to deal with things like inequities in participation in research. But we also need to turn that focus a little bit and say, ‘What is it about our healthcare system that makes it so we start out from that perspective?'”

Califf noted the Biden administration’s efforts to bring high-speed internet to rural communities, which he said would eliminate a major reason why the researchers don’t recruit patients in those areas.

Califf also spoke of the challenges with rampant misinformation, especially online. The misinformation problem is moving in the wrong direction, and there is no clear path for how to fix it, he said. The FDA needs to be more aggressive in identifying outright lies, which he views as distinct from legitimate dissenting opinions, he said.

—Caroline Hudson

In case you missed the conference’s first day, here’s a quick rundown of the highlights:

  • Humana added at least 625,000 Medicare Advantage members during open enrollment this year, representing 13.6% year-over-year growth and far outpacing competitors, Chief Financial Officer Susan Diamond said.
  • CommonSpirit Health is making progress on its performance improvement goals, pursuing $500 million in cost savings for fiscal year 2023.
  • Oak Street Health, the Chicago-based primary-care provider for Medicare-aged patients, has big plans to open new clinics in 2023.
  • Teladoc Health’s CEO said the company is better prepared than rival telehealth providers to weather economic headwinds.
  • Centene’s exchange business is surging while its Medicare Advantage sign-ups slowed during open enrollment for 2023, CEO Sarah London said.

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