Subscribe
Share
Share
Embed
Health Affairs This Week places listeners at the center of health policy’s proverbial water cooler. Join editors from Health Affairs, the leading journal of health policy research, and special guests as they discuss this week’s most pressing health policy news. All in 15 minutes or less.
00;01;03;22 - 00;01;07;10
Michael Gerber
Hello everyone. You're listening to Health Affairs This Week. I'm Michael Gerber.
00;01;07;25 - 00;01;29;13
Leslie Erdelack
And I'm Leslie Erdelack. This is the weekly podcast where the editors at Health Affairs talk about the health policy news and stories we've been following throughout the week. Today, we're talking about a major acquisition that happened recently, a deal between two large health systems that attracted the attention of health industry leaders across the spectrum as consolidation in health care continues to flourish.
00;01;29;18 - 00;01;36;20
Michael Gerber
That's right, Leslie. But I know before we get into that, you wanted to talk about a new contest that we just launched at Health Affairs.
00;01;36;21 - 00;02;02;20
Leslie Erdelack
Yeah, so I love our health policy Valentine's Day contest just as much as the next person, but I am really excited about this one. It's a new competition heading into the summer, and the premise is simple. All you have to do is finish the statement, “You're a health policy wonk if...” and I know as a wannabe wonk, I'm going to work on mine.
00;02;02;20 - 00;02;04;23
Leslie Erdelack
And Michael, you've probably got a few in mind already.
00;02;05;23 - 00;02;22;28
Michael Gerber
Yeah, I don't think we're eligible to win as Health Affairs employees, which is probably good, because for the Valentine's contest, I spent a little too much time probably writing Valentines and neglecting other things I should have been doing, but it was a lot of fun. And I like this stuff too.
00;02;22;29 - 00;02;45;01
Leslie Erdelack
We're taking submissions through the end of the month and we'll link to the form in the show notes and we'll run our favorite submissions on Health Affairs Forefront in July. And the first place winner, in addition to some serious bragging rights, will receive a Health Affairs tumbler and a free Health Affairs Insider Unlimited membership for a year. So who doesn't love that?
00;02;46;13 - 00;02;56;06
Leslie Erdelack
So anyway, if you think you're a health policy wonk, now's your chance to own it. And I can't wait to see these submissions start rolling in. So let's go.
00;02;57;06 - 00;03;16;29
Michael Gerber
Speaking of the contest, I do think you might be a health policy wonk if your friend sends you a text message after two big health systems announce a merger and asks you if it's a big deal, which is what happened to me last week when Kaiser Permanente and Geisinger made a surprising announcement. And it is a big deal, both literally as it involves two massive systems.
00;03;16;29 - 00;03;43;08
Michael Gerber
And it's also unlike any other merger I think we've seen even in this era of consolidation. But it seems there's still a lot we don't know, even among the experts. So I'll talk a little bit about what we do know. So Kaiser Permanente is acquiring Geisinger Health. Kaiser, as I'm sure everyone listening knows, is a nonprofit California based health system that's best known for its integrated closed model of care.
00;03;43;27 - 00;04;05;08
Michael Gerber
Kaiser is more than 12 million members in its health plan, and many of them are served by the system's 39 hospitals and more than 20,000 doctors and other providers. Geisinger’s footprint isn't quite as large, but it's still a major health care and hospital system and insurer based in eastern Pennsylvania. It has, I think, ten hospitals and around 600,000 members.
00;04;05;27 - 00;04;26;14
Michael Gerber
That said, it's also known for integrating care and pursuing value based care models, which were key buzzwords that the leaders of the systems both used when making this announcement last week. What makes it a little different, I think, from other recent mergers and acquisitions is that it involves the creation of a new nonprofit entity, which they've called Risant Health.
00;04;26;15 - 00;04;46;28
Michael Gerber
I think I'm saying that right. Pending regulatory approval, Geisinger will be the first health system to join Risant and Geisinger’s current CEO will become the CEO of the new organization. But Geisinger itself will retain its name. It won't become Kaiser East or Kaiser Pennsylvania. And for the most part, they're saying now that not a lot will change there immediately.
00;04;46;28 - 00;04;56;18
Michael Gerber
So it really means to be seen exactly what Risant, which apparently got its name by combining the words “rise” and “constant”, intends to do to extend value based care to more communities.
00;04;57;06 - 00;05;22;10
Leslie Erdelack
Right. And so in creating Risant, you know, it's a new nonprofit Geisinger becomes part of this very, and now I know, cleverly named organization while it continues to operate independently and the thinking behind this initiative, you know, according to both the executives who are kind of brokering this deal and as you just said, Michael, the goal is to really promote and expand access to value based care throughout the country.
00;05;22;20 - 00;05;56;21
Leslie Erdelack
And so this new subsidiary would look to acquire four or five more hospital systems over the next five years. And this move is really the latest in a series of deals to merge doctors and clinics and other operations with health insurance units. So Kaiser, again, in having such a well-established integrated care model and by standing up this new organization, they're hoping to bring on more health systems and in particular more community based health systems like Geisinger that were already working toward moving into value based care.
00;05;56;22 - 00;06;29;05
Leslie Erdelack
And so you mentioned that they've pursued similar models, I think, and others have pointed out, too, that both systems seem to put a lot of emphasis on things like prevention and home health services. So it's a union that would seem to make a lot of sense. I was reading one article that said Geisinger's position at the front of the line, you know, being first through the door also gives it the opportunity to help shape Risant’s strategy and operational model from the very beginning.
00;06;30;03 - 00;06;52;20
Leslie Erdelack
I also saw a quote from Sachin Jain, who's the CEO of Scan Health Plan, which also announced a merger late last year. He's also published in Health Affairs, who said, and I think he's totally right, he said this will be the latest experiment to test the notion that non geographically contiguous health care organizations could support each other's success through a higher degree of collaboration.
00;06;52;20 - 00;07;13;29
Leslie Erdelack
But the bigger question is whether these kinds of combinations can improve quality and reduce costs. So as more systems move from a fee for service model to value based care where you pay for and you incentivize things like preventive care to help keep patients healthy so that they need less of those types of specialty and hospital care services.
00;07;14;08 - 00;07;18;00
Leslie Erdelack
The challenge is really to demonstrate that this type of approach works.
00;07;19;09 - 00;07;41;01
Michael Gerber
Yeah, that's definitely going to be interesting to follow. I think one important thing also is that while Kaiser and Geisinger have somewhat similar approaches and they're both payors and health care systems, they're also quite different. Kaiser is known more for its closed system, treating Kaiser patients at Kaiser facilities by Kaiser employed providers, as they do throughout much of the coverage area they have.
00;07;41;01 - 00;08;07;18
Michael Gerber
While Geisinger is a bit different, its health plan members can access care elsewhere and more importantly, it as a hospital and health care system treats a lot of patients who are covered by other payors. Another important point that several experts noted is that as Kaiser has expanded or tried to expand beyond California and beyond the West Coast, their model hasn't always stayed the same.
00;08;08;15 - 00;08;30;09
Michael Gerber
In fact, a lot of people don't realize that Kaiser is active near Geisinger and its mid-Atlantic region, which includes where I am in Washington. And it's a different model here. When I was a paramedic here, I would often pick up Kaiser patients and there was no Kaiser Hospital to take them to. But they were very adamant to go to the hospitals that Kaiser had relationships with.
00;08;30;09 - 00;09;01;23
Michael Gerber
So it was somewhat close, but not the same, where they were being always seen at Kaiser facilities by Kaiser patients. And one thing experts have pointed out is that in some of the places they've expanded, their model hasn't always been as successful as it's thought to be in California and in where it currently is working. So that might explain why they're here trying something completely new by creating a new entity, partnering and acquiring a new hospital system, rather than just expanding the Kaiser approach and the Kaiser brand.
00;09;03;21 - 00;09;29;17
Michael Gerber
What's clear is that there's still some skepticism. I found a couple of experts who were familiar with Health Affairs who had some interesting thoughts. Jeff Goldsmith, a longtime analyst and a member of our editorial board, told Stat News that Kaiser has zero experience in turning around an organization like Geisinger. He said they, quote, “They do not have operational knowledge of running a tertiary hospital in a multiple carrier environment.
00;09;29;18 - 00;10;00;15
Michael Gerber
The mystery to me is what Kaiser brings to this outside of their brand.” That said, he thought there would be a line around the block from health systems hoping to join, possibly because of the $5 billion that Kaiser said they'll invest in this. And another frequent contributor to Health Affairs, University of Southern California researcher Genevieve Kanter, put it a little more bluntly when she was asked about Risant's claim that it would, quote, “Scale expertise and resources to allow communities where integrated care and coverage alone can't succeed to have access to value based care.”
00;10;00;26 - 00;10;06;13
Michael Gerber
She told Stat, “I have no idea what this means. Either a completely different model or a word salad.”
00;10;07;04 - 00;10;36;25
Leslie Erdelack
Yeah, and it's funny. It did strike me sort of how vanishingly few details there were about these models, you know, in the press release and in some of the media reports. But I don't think it's, you know, it's not entirely unexpected this early on. What we do know is that, you know, value based payment models have become more common across the health system and that roughly 40% of U.S. health care payments are tied to alternative payment models in 2021.
00;10;36;25 - 00;11;01;09
Leslie Erdelack
But this means that obviously more than half of these payments are still based on fee for service. And CMS has been testing, you know, different voluntary, both voluntary and mandatory programs for several years now. Medicare Advantage has the highest uptake of these models. And studies on value based programs seem to suggest that they can reduce costs and improve quality of care.
00;11;01;09 - 00;11;31;18
Leslie Erdelack
Although results have been mixed. And there's been a lot of focus more recently on how value based models impact the hospitals that serve and care for predominantly nonwhite and low income communities. You know, are the financial penalties associated with some of these programs being targeted correctly, or did they disproportionately penalize certain types of health systems? Health Affairs published a research brief about six months ago looking at value based payment as a tool to address excess health spending in the U.S..
00;11;31;29 - 00;11;48;00
Leslie Erdelack
And in that brief, they talk about the relatively modest results of CMS value based payment models to date, saying that they might be related more to challenges in the design and implementation of these programs than to, you know, sort of the fundamental conceptual approach.
00;11;48;27 - 00;12;18;27
Michael Gerber
Yeah, that's true, Leslie. And value based care was certainly mentioned a lot during the announcements from Kaiser and Geisinger, and they're clearly trying to keep the focus on that. On the other hand, a lot of the reaction is more about consolidation and what this means for continued consolidation. You know, a lot of the research is unclear on the impacts of consolidation, although much of it doesn’t seem to show that it might actually raise prices as consolidated systems gain more leverage with payors.
00;12;19;21 - 00;12;43;24
Michael Gerber
A counter to that is that consolidation is really necessary to some extent to provide true value based care, which requires coordination and collaboration between different parts of the health care system. In fact, last week, Health Affairs Forefront published an article by an economist at RTI International, Fang He, who said that the evidence doesn't show a direct link between alternative models and consolidation.
00;12;44;13 - 00;12;53;02
Michael Gerber
He argues that we need to look at the issue, quote, “Otherwise, the modest savings from these models may be overshadowed by the price increases triggered by more consolidation.”
00;12;53;16 - 00;13;28;03
Leslie Erdelack
Yeah, health care is definitely becoming increasingly consolidated, which has prompted, you know, something of an outcry. I think justifiable concern as these large for profit companies like health insurers and other corporate entities are kind of buying up these physician practices and urgent care centers faster than ever, it seems like. And a lot of hospitals are facing financial headwinds that escalated during COVID, causing them to kind of seek out new business opportunities and partnerships and both Kaiser and Geisinger reported operating losses in 2022.
00;13;28;10 - 00;13;52;03
Leslie Erdelack
You mentioned that Kaiser had some trouble expanding into new markets. Geisinger also stumbled a bit with acquisitions a few years ago that didn't go through and all of this activity, of course, has gotten the attention of federal regulators and the Federal Trade Commission, which has opposed several hospital mergers recently, mainly deals involving hospitals and health systems in the same market or adjacent regions.
00;13;52;28 - 00;14;04;26
Michael Gerber
Right. And many of the other concerns about consolidation and acquisitions relate more to who is buying health care systems, hospitals, physician practices and other entities, especially when it comes to private equity.
00;14;05;08 - 00;14;31;02
Leslie Erdelack
And so as far as what happens next, you know, financial terms and a timeline for the Kaiser-Geisinger deal have not been disclosed. We don't know if federal regulators will intervene. But the question that may be on people's minds, you know, is whether we're seeing a fundamental shift in the way health care is delivered. That remains to be seen, I think, as you and I have talked about.
00;14;32;02 - 00;15;00;08
Leslie Erdelack
But the interest in value based payment is certainly not diminishing. A piece in Forbes last week talked about how value based care is a growing trend among health care organizations, with one forecast suggesting that the global value based payment market could reach more than 6 billion by 2032. And that article also talked about sort of the proliferation of new startups and organizations trying to move into value based payment, commercialize it more, I guess.
00;15;00;09 - 00;15;16;11
Leslie Erdelack
And we're seeing new tech companies that promise to help independent physicians transition to value based payment alongside those kind of offering services to support value based care focused practices. Kind of leaning into this idea that this is sort of the next era of health care.
00;15;16;29 - 00;15;37;18
Michael Gerber
Yeah, I thought it was interesting and a lot of the articles I read about this merger that a lot of the people saying positive things were more investors and people on the tech side, while some of the researchers sounded a little more skeptical. So we'll see how much they can actually find savings and figure out ways to expand value based care.
00;15;38;10 - 00;15;44;16
Michael Gerber
I think that's all the time we have for today, though, and we'll certainly talk about this more in the future. Thanks a lot, Leslie.
00;15;44;21 - 00;15;53;13
Leslie Erdelack
Yeah, thanks. And thanks to everyone listening. Don't forget to tell a friend, leave a review and subscribe to Health Affairs This Week wherever you listen to podcasts. See you next week.