Deals, tech and cost-cutting at J.P. Morgan
SAN FRANCISCO—The J.P. Morgan Healthcare Conference offers companies an annual shot at having many of their investors and potential investors in one place at the same time. While the podiums are far more populated by pharma and biotech companies, major health systems and insurers find it an invaluable setting for dealmaking, schmoozing and articulating their strategies for the upcoming year.
Here are some overarching themes discussed at this year’s meeting:
Rationalizing the deals
The M&A focus was mainly on making the case for mega-deals, especially for those that still have skeptics.
One example was CommonSpirit Health, the pending combination of not-for-profit health systems Dignity Health and Catholic Health Initiatives. Dignity CEO Lloyd Dean said people ask him all the time why he’s doing it.
“Size is not our driver at all, but we are proud of the fact that we will be a significant player in the healthcare community of this nation,” he said. “With our combined footprint, we have the capability of touching 1 of out every 4 Americans in this country.”
The companies expect to close the deal by Jan. 31, a one-month delay from the previous timetable.
Baylor Scott & White leaders explained their pending merger with Memorial Hermann will land the system in Houston, one of the fastest-growing areas of Texas. CEO
Jim Hinton told Modern Healthcare the added scale will create efficiencies that drive down costs. He noted that Baylor Scott & White has saved nearly $740 million, 128% of its goal, since being formed by consolidation in 2013.
During a packed session, Larry Merlo said that CVS Health and Aetna are “unequivocally” one company, despite a federal judge’s ongoing review of the deal. The CVS CEO said he expected the company to start showing results on “effective prices” by the first quarter of 2019 and medical cost savings by year-end.
Companies not negotiating or digesting major deals readily described their ideal partners. Centene Corp. CEO Michael Neidorff told Modern Healthcare he wants to find something on par with the company’s acquisition of Fidelis Care, which allowed it to enter New York.
“We don’t look for bad companies we can make good,” he said. “We look for good companies that can avail themselves of our technology and capability.”
Comparing notes on cost cutting
Providers were also eager to exhibit the fruits of their cost-cutting efforts, with a specific focus on how their integrated health plans provide cheaper care and pass the savings along to members. Intermountain Healthcare, for example, lowered its exchange plan premiums 2.7% on average from 2018 to 2019, CEO Dr. Marc Harrison told Modern Healthcare. He estimated Intermountain’s interventions have saved Utah consumers $10 million to $15 million.
Karen Murphy, Geisinger’s chief innovation officer, said Geisinger’s Steele Institute for Healthcare Innovation is in the midst of an affordability project in which it’s studying how much it has to lower the cost of care for patients to generate a return for its health plan members. “We’re going to put a stake in the ground on goals,” she said.
The right skills in short supply
Dean made a bold move on behalf of the future CommonSpirit Health: He put out a recruitment call.
“We want to be the place that many of the other providers and employees want to migrate to,” he told the audience, and then joked: “We will be setting up applications outside of the room. For those of you that are trying to reduce costs, we are trying to gain quality expertise.”
As the industry pivots toward value-based care, systems are competing for a limited pool of talented hospital and physician leaders who truly understand risk. Many of today’s leaders have spent decades in a fee-for-service environment.
Using emerging technologies
The promise of artificial intelligence and machine learning was talked about a lot at last year’s conference, but this year, health systems were more explicit about how they’re using those technologies.
Geisinger is studying how it can use AI and machine learning to lower its operating costs, Murphy said. The trick will be figuring out which repetitive actions can be targeted. She highlighted administrative processes as ripe for investment.
Using technology to promote patient engagement was nearly ubiquitous across health systems’ presentations. At this point, if a health system’s patients can’t make appointments using their phones, it’s falling behind.
“This year, there wasn’t a single presentation I went to that didn’t say ‘patient engagement’ at least one time,” said Eric Klein, a partner with law firm
The annual J.P. Morgan Healthcare Conference offered numerous opportunities for learning, as well as schmoozing and dealmaking.