Healthcare Horizons

Healthcare Transformation Tracker – Summer 2024

Portrait of Dawn Carter

Dawn Carter

An AI-generated rural landscape, in muted colors, with three arrows pointing upward toward the horizon

Healthcare transformation is going on every day, in every corner of the healthcare ecosystem. Just keeping track can be a full-time job.

At Ascendient, we regularly try to analyze news stories that might indicate a developing trend – but those trends may or may not develop the way we expected. Every now and then, it’s worth updating yesterday’s news to get a better sense of where the healthcare industry might be headed tomorrow.

That kind of transformation tracking is something that we do regularly inside the firm, though we haven’t always reported it publicly. Here’s our effort to share some of the updates that we’ve been watching in three important areas: hospital at home, retail competition, and consumer health tech.

A More Permanent "Home"

What We Said: Over the past several years, we’ve commented regularly on hospital at home programs, perhaps the decade’s biggest disruption in acute care delivery. As early as 2021, we wrote that hospital at home was something “no CEO can afford to ignore” because it was “the emerging trend most likely to literally re-draw the map of healthcare delivery in many communities.”

We also showed how innovators like Mayo are extending their reach across thousands of miles using hospital at home, and how satellite connectivity could quickly bring such programs to rural areas without physical broadband infrastructure. The consistent message has been: Whether you view it as an opportunity or a threat, hospital at home is here to stay.

What’s Changed:

  • Earlier this month (May 2024), the House Ways and Means Committee unanimously passed a five-year extensionfor the hospital at home waiver program. The vote was remarkable not only because it was unanimous – something that almost never happens in Washington nowadays – but also because five years is a relative eternity for a Medicare waiver. (By contrast, various other aspects of telehealth got only a two-year extension in the same bill, known as the Preserving Telehealth, Hospital, and Ambulance Access Act.)
  • Weeks later, Sens. Tim Scott (R-SC) and Tom Carper (D-Del.) introduced the Hospital Inpatient Services Modernization Act of 2024, which likewise includes a five-year extension for hospital at home. Notably, an earlier version of the bill included only a two-year extension, proving that hospital at home is quickly building support and momentum.
  • New technologies continue to broaden the use cases for hospital at home. For instance, Medically Home, a nationwide platform for in-home acute care services, recently announced new diagnostic capabilities including ultrasound, CT scans, and lab-quality blood analysis. By offering more diagnostic options, the company says it can expand the pool of patients eligible for hospital-level care in their homes.

What We’re Thinking Now: Hospital at home is no longer speculative. As Washington makes the model more permanent and technology makes it more widespread, we see some urgency for all providers – regardless of size or geography – to include hospital at home in their strategic planning.

Retail Retreat?

What We Said: In early 2022, we took a dive into Walgreens’ $5 billion investment in VillageMD, including plans for 1,000 new primary clinics nationwide. We noted that retail competition was “1,000% percent better than the countervailing trend of private equity buying up physician practices,” but we also warned about increased competition for providers, higher marketing costs, and fragmented patient relationships.

It wasn’t just Walgreens, of course. Since 2018, we’ve been tracking Amazon’s healthcare aspirations, including the nationwide expansion of its hybrid Amazon Care model, announced in 2021. “In decades of assisting clients with healthcare provider recruitment,” we noted at the time, “we’ve never seen such a sharp increase in corporate hiring” of physicians and advanced providers.

What’s Changed: Corporate hiring continues unabated, but it’s mostly on the payer side, with United Health and other insurance behemoths gobbling up physician practices as fast as they can. In the retail space, however, things have taken a dramatic turn.

  • Barely a year after announcing the expansion of Amazon Care, Amazon pulled the plug on its hybrid model and bought the bricks-and-mortar chain One Medical instead. Despite hundreds of layoffs in early 2024, Amazon has gradually expanded the footprint of One Medical while forging partnerships with local health systems in an effort to provide access to specialized care, when needed.
  • Meanwhile, for the big pharmacy chains, retail medicine has become a financial quagmire. In March of 2024, Walgreens took a $6 billion charge for losses at VillageMD – roughly equal to the $6.2 billion that it paid for a majority stake in the company just a few years earlier. Walgreens also said it would close 160 locations across six states and that it has no plans to invest in additional primary care assets.
  • CVS came late to the primary care party, with several multibillion-dollar acquisitions in 2023. Financial results won’t be clear for several quarters, but it’s certain that the drugstore giant will have limited strategic options after soaring costs in Medicare Advantage led to a 19% stock plunge on April 30, 2024 – the biggest drop in 15 years.
  • On the same day as the CVS implosion, Walmart announced it was shutting down its entire network of 51 primary care clinics operating under the Walmart Health banner. “This is a difficult decision,” the company said, “and like others, the challenging reimbursement environment and escalating operating costs create a lack of profitability that make the care business unsustainable for us at this time.”

What We’re Thinking Now: It’s not entirely surprising that some of the biggest names in retail can’t figure out a profitable model for primary care, because providing healthcare services is completely different than selling books or groceries. Even with all their advantages in scale, data, and capital, big retailers have been walloped by the complexities of reimbursement in the healthcare space.

But you know who “gets” reimbursement? Those big insurance companies that write the checks. Despite the current angst at Aetna over Medicare Advantage costs, we think payers may take up the slack as retailers retreat from the business of primary care. In many ways, payers are more formidable competitors, so we still think these four strategy lessons from our 2022 blog post hold true:

  • Embrace experimentation
  • Practice the pivot
  • Check your channels
  • Perfect your partnerships

Turning Competition on Its Head

What We Said: So, retailers aren’t great at healthcare, but is it possible that health systems might succeed in one corner of retail? Last year, we wrote a lengthy analysis of trends in smart health devices and why health systems might just be the most logical place for consumers to shop for the latest technology. By helping people find the right devices for their health needs – without pushy salespeople or brand bias – hospitals could generate new revenue and create stronger patient relationships. We also argued that hospitals had perceived expertise in health devices, which made them a natural place for consumers to turn (unlike Best Buy, for instance).

What’s Changed:

  • This spring, Apple obtained an historic FDA clearance for using the Apple Watch in clinical trials for A-fib. This suggests that America’s best-selling “wearable” is starting to gain official recognition as a medical device – something it explicitly lacked when we first wrote about this topic. As consumer awareness starts to grow, Apple’s brand recognition should drive even greater interest in smart health devices.
  • In December 2023, Best Buy announced partnerships with several leading health systems, including Atrium and Geisinger. At this point, the partnerships don’t involve retail sales, but rather technology support for hospital at home programs. Still, the news reminds us that Best Buy is looking for opportunities in healthcare – and we’re pretty sure that smart health devices are on the radar.

What We’re Thinking Now: We think the business case is only getting stronger for health systems to experiment with technology retailing. Even without insurance coverage, consumers are spending billions of dollars out of pocket to buy smart health devices. Once AI starts to permeate the field, spending will only rise, and payers may get on board if the data show positive health outcomes.

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