Deals, tech and cost-cut­ting at J.P. Mor­gan

Modern Healthcare - - News -

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

Shep­pard Mullin.

TARA BAN­NOW

The an­nual J.P. Mor­gan Health­care Con­fer­ence of­fered nu­mer­ous op­por­tu­ni­ties for learn­ing, as well as schmooz­ing and deal­mak­ing.

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