CVS-Aetna merger closes, but hardly ‘rubber stamped’ in Federal court

The deal is done, but expect unhappy holidays. As expected, the $69 million CVS-Aetna merger closed the week after Thanksgiving, on Wednesday 26 November, and are proceeding with their integration. Later that week, a Federal judge in the Washington, DC District Court complained at a hearing that both companies had treated him as a “rubber stamp” for the agreement. He was “less convinced” than the Department of Justice that the merger was legal under US anti-trust law. Yesterday (Tuesday 3 Dec), Judge Richard Leon ordered both companies and the DOJ to file briefs by 14 December “to show why their integration should not be halted while he considers whether or not to approve the consent decree reached in October,” according to Reuters.

This is despite various pounds of flesh:

  • The Department of Justice imposing the condition that Aetna sell its Medicare Part D drug plan business to far smaller WellCare Health Plans
  • New York State’s Department of Financial Services extracting concessions around their concerns: acquisition costs will not be passed onto consumers through increased premium rates or to affiliated insurers; maintaining current products for three years; privacy controls; cybersecurity compliance. Oh yes, a small $40 million commitment to support health insurance education and enrollment. (Healthcare Finance 26 Nov)
  •  But New York is a piker in its demands compared to California. The Department of Managed Health Care Director approved the merger based upon:
    • Minimal increases in premiums–and no increase due to acquisition costs
    • Investing $240 million in the state healthcare delivery system, including $166 million for state healthcare infrastructure and employment; $22.8 million to increase the number of healthcare providers in underrepresented areas like Fresno and Walnut Creek by funding scholarships and loan repayment programs; and $22.5 million to support joint ventures and accountable care organizations (ACOs) in value-based care (Healthcare Finance 15 Nov)

A CVS spokesman said in an email after the hearing: “CVS Health and Aetna are one company, and our focus is on transforming the consumer health experience.” (CNBC)  That transformation according to CVS president Larry Merlo involves expanding healthcare services beyond their present clinics to managing high-risk, chronic conditions, and transitions in care. Aetna’s expertise will be invaluable here as well as in an rumored expansion to urgent care (Seeking Alpha). All to out-maneuver Amazon, of course, which is promoting (on TV) PillPack and has applied for additional pharmacy licenses to ship drugs to customers in Washington, New Mexico and Indiana from their Phoenix facility (Healthcare Finance).

It appears that Judge Leon has his own serious reading of the 1974 Tunney Act, which requires a Federal court to ensure the agreement is in the public interest, despite the states and the DOJ.

The 50,000 foot pick as CEO of the JP Morgan Chase-Berkshire Hathaway-Amazon health joint venture

US healthcare is abuzz at the choice that JP Morgan Chase-Berkshire Hathaway-Amazon made to head their healthcare JV: Dr. Atul Gawande, currently practicing general and endocrine surgery at Brigham and Women’s Hospital and teaching as a professor at the Harvard T.H. Chan School of Public Health and Harvard Medical School. Dr. Gawande is presently an executive director of Ariadne Labs, a healthcare innovation center, a writer of four best sellers on healthcare and noted as an outspoken theorist on how the ‘broken’ healthcare system in the US can be fixed. (This Editor’s definition of ‘broken’ is slightly different, encompassing countries like Venezuela, Cuba, Zimbabwe, post-WWII Germany, and the Ceausescu-era Romania where the basics are simply not there for the average person.)

Dr. Gawande will transition to chairman of Ariadne and retain his surgical and teaching positions.

Praise for Dr. Gawande comes from many quarters. Andy Slavitt, the former head of CMS during the previous administration, said “There are few better people in health care” and praised his ‘moral leadership’ when approached by Messrs. Dimon, Bezos, and Buffett. Jeff Bezos: “We said at the outset that the degree of difficulty is high and success is going to require an expert’s knowledge, a beginner’s mind, and a long-term orientation. Atul embodies all three, and we’re starting strong as we move forward in this challenging and worthwhile endeavor.”

What is missing from this sterling public health advocate and practitioner’s resumé is obvious: real business management experience. Among his three soon-to-be-bosses, there is plenty of pontificating from 50,000 feet–for but one example, see this Editor’s POV on Jamie Dimon’s annual shareholder letter [TTA 10 Apr]. Here is what they stated as the purpose of the JV back in January: “partnering on ways to address healthcare for their U.S. employees, with the aim of improving employee satisfaction and reducing costs” and setting up an independent company “free from profit-making incentives and constraints. The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.” And more in that vein. (Whew!) It was eye-rolling, even shortly after the announcement back in February.

But actually getting this done is not a TEDTalk. First, there is the hard in-the-trenches work to bring both the management and the 1 million employees of three very different companies onto the same page. Second, it is running the gauntlet of regulations on the national level (that CMS and HHS) plus in 50 states, if this combine chooses to operate as an insurer or PBM. Third, if they don’t, there is getting the cooperation of insurers (payers) who aren’t in business to lose money. There is not only regulation, but also what they are willing and can afford to do. This Editor noted back in January that large companies, including these three, “generally self-insure for healthcare. They use insurers as ASO–administrative services only–in order to lower costs. Which leads to…why didn’t these companies work directly with their insurers to redo health benefits? Why the cudgel and not the scalpel?”

This Editor would expect that a group of skilled senior, operationally focused executives will be hired to work under Dr. Gawande in Boston, where this unnamed-yet venture will be headquartered. There may be some more high-profile senior executives with unconventional backgrounds. From this (lower than 50,000 feet) perspective, Dr. Gawande will be the attention-getting CEO, spokesman, and pace-setter; others will be doing the heavy lifting behind the scrim. 

Beyond the usual glowing coverage on CNBC and TechCrunch, those in the business of healthcare are already expressing more sanguine opinions on the enterprise and how Dr. Gawande will be leading it with multiple medical, teaching, and writing commitments. Modern Healthcare has a fairly balanced article.

CHC breaking news: Qualcomm on 5G’s $1T impact, Think Fast stroke VR

From the Connected Health Conference in Boston

Qualcomm announced today two releases: an analysis on the effects of 5G mobile on the healthcare sector and the Think Fast virtual reality (VR) simulation program for stroke diagnosis.

5G Mobile: Qualcomm’s study, “5G Mobile: Impact on the Health Care Sector”, found that 5G’s increased data speed, reliability, and security will have a substantial and positive impact on healthcare both in quality and financially. 

  • It will enable the ‘personalization of healthcare’ through permitting the continuous real-time gathering of healthcare data through sensors and on the back end, to process that data usefully. Qualcomm calls this the Internet of Medical Things (IoMT) which works for this Editor as long as the devices and apps are secure. (Having worked in telehealth where network drops and latency in many areas, particularly rural, often made check-in via tablet connectivity a matter of the stars aligning right, this is good news–Ed. Donna)
  • It will better support remote diagnosis and imaging, including the application of VR
  • It will facilitate distributed computing, which is data processing closer to the patient, for the greater use of predictive analytics 
  • Faster and more data will help in the transition from volume-based to value-based/outcome-based care
  • Financial impact is estimated by IHS Markit at more than $1.1 trillion in global sales in healthcare by 2035. broken down as follows:
    • $453bn in the healthcare vertical: hospitals, doctors, medical equipment, pharma
    • $409bn in supply chain and related
    • $253bn in added value sectors: payers, data analytics providers, cloud data services

The study was authored by Prof. David J. Teece, Tusher Center for Intellectual Capital, Haas School of Business, UC Berkeley, and supported by Qualcomm. Study PDFPreviously in TTA: Ericsson’s less rosy 5G international healthcare survey [TTA 13 June].

Think Fast VR: FAST–Facial drooping, arm weakness, speech difficulties and time to call emergency services–is the acronym for what to watch for when someone is having a stroke. But if you could observe it in reality, it would be far less ambiguous and more memorable. Think Fast is a VR simulation program that lets the user (a med student, nurse, healthcare educator, or average person) observe a stroke’s effects as if it was happening to them. By stepping inside a stroke victim’s world, it educates on warning signs and critical steps for care. It was designed by ForwardXP using Qualcomm’s Snapdragon VR SDK and Unity 5.6 plugin. Stroke is the fifth leading cause of death in America and a leading cause of adult disability–which can be minimized or prevented with quick response within three hours. Video below. Hat tip to Ashley Settle of Weber Shandwick

HealthIMPACT East Monday 5 June (NYC)

HealthIMPACT East
Monday, 5 June, Union League Club, New York, NY

The HealthIMPACT series of mainly single-day events on health tech/HIT’s effect on healthcare now covers several major cities in the US. What this Editor likes about them is that they compress a great deal of information in a single day, with well-presented, relaxed panel discussions with top executives and figures in the industry. They are also held in interesting venues like the Union League Club in NYC. HealthIMPACT East is co-produced with NODE Health. This fifth annual meeting will focus on evidence-based digital health, healthcare innovations, cybersecurity, and how to achieve value-based care. Speakers are from academic and provider organizations like Yale University, Jefferson Health, Mount Sinai, Northwell Health, PCHAlliance, New York-Presbyterian, NJIT, and Partnership Fund for NYC, Panels are being hosted this year by former colleagues from Health 2.0 NYC Megan Antonelli of Purpose Events and “The Healthcare IT Guy” Shahid Shah. It’s not too late to register for this full day, including breakfast, lunch, and cocktail reception, here. TTA is a media partner for HealthIMPACT East.

Artificial intelligence with IBM Watson, robotics pondered on 60 Minutes

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2016/06/robottoy-1.jpg” thumb_width=”150″ /]This Sunday, the long-running TV magazine show 60 Minutes (CBS) had a long Charlie Rose-led segment on artificial intelligence. It concentrated mainly on the good with a little bit of ugly thrown in. The longest part of it was on IBM Watson massively crunching and applying oncology and genomics to diagnosis. In a study of 1,000 cancer patients reviewed by the University of North Carolina at Chapel Hill’s molecular tumor board, while 99 percent of the doctor diagnoses were confirmed by Watson as accurate, Watson found ‘something new’ in 30 percent. As a tool, it is still considered to be in adolescence. Watson and data analytics technology has been a $15 billion investment for IBM, which can afford it, but by licensing it and through various partnerships, IBM has been starting to recoup it. The ‘children of Watson’ are also starting to grow. Over at Carnegie Mellon, robotics is king and Google Glass is reading visual data to give clues on speeding up reaction time. At Imperial College, Maja Pantic is taking the early steps into artificial emotional intelligence with a huge database of facial expressions and interpretations. In Hong Kong, Hanson Robotics is developing humanoid robots, and that may be part of the ‘ugly’ along with the fears that AI may outsmart humans in the not-so-distant future. 60 Minutes video and transcript

Speaking of recouping, IBM Watson Health‘s latest partnership is with Siemens Healthineers to develop population health technology and services to help providers operate in value-based care. Neil Versel at MedCityNews looks at that as well as 60 Minutes. Added bonus: a few chuckles about the rebranded Siemens Healthcare’s Disney-lite rebranding.