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What To Make Of The Steward-Optum Deal · CareTalk: Healthcare. Unfiltered.

• 0:00
  Steward Healthcare is floundering and its hospitals are in danger of closing.
• 0:04
  Now Optum has emerged as a buyer for Steward's physician network, offering a financial lifeline but stirring up concerns by politicians and regulators.
• 0:13
  Why is Optum buying physician practices?
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  And is it good or bad news for the healthcare system?
• 0:23
  you Welcome to Care Talk, America's home for incisive debate about healthcare business and policy.
• 0:32
  I'm David Williams, President of Health Business Group.
• 0:35
  And I'm John Driscoll, the Senior Advisor at Walgreens Health.
• 0:39
  Come join our ever -growing Care Talk community on LinkedIn, where you can dig deep into healthcare business and policy topics, access Care Talk content, and interact with the hosts.
• 0:49
  And please be sure to leave us a rating on Apple or Spotify while you're at it.
• 0:54
  So David, you are the expert.
• 0:56
  at this kerfuffle between the Foundering Steward Health System, which was hospitals and docs in Massachusetts.
• 1:05
  You're an expert on Massachusetts.
• 1:07
  I don't know whether you know anything about Optum, but tell us what's going on.
• 1:11
  Maybe start with who is steward, what is Optum, and why do we care?
• 1:17
  OK, John.
• 1:17
  Well, that's a lot to say.
• 1:18
  So Steward Healthcare is a integrated healthcare delivery system.
• 1:23
  They have hospitals, they have physician groups, they have some other pieces, but that's the main part of it.
• 1:27
  Optum is a part of United Healthcare.
• 1:29
  They provide a lot of different services, including they own physician practices.
• 1:33
  And as you say, Steward is either floundering or foundering, and they've decided basically to sell their physician practices and Optum is a buyer.
• 1:43
  So that's primary care and specialty practices.
• 1:46
  It's about...
• 1:47
  5 ,000 providers across 10 states.
• 1:50
  And so why I initially I recall Stewart as being a for -profit attempt to actually turn around what what were a group of inner city hospitals and doctors and perhaps the for -profit people ended up going too much for profit.
• 2:09
  As I recall, the CEO had a big yacht.
• 2:12
  Yeah.
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  Making him probably the baby may have overreach.
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  But Stuart is now like a lot of healthcare systems in trouble as margins have declined through COVID and post -COVID.
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  There were a lot of hospitals and doctors were propped up by a lot of COVID assistance.
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  And now the market has gotten much tougher and Optum, the physician arm of the large, probably the most profitable, most successful healthcare services company and insurance company in America United, is talking about bailing them out.
• 2:48
  Why is your buddy Elizabeth Warren all hot and bothered about this one?
• 2:54
  You know, there's two things that that Senator Warren and others, including Senator Markey, have cited as issues.
• 3:00
  One, they're worried about whether this will mean the hospitals are weaker.
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  Elizabeth Warren stated that her number one priority was to make sure that these steward hospitals remain open.
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  And she's concerned that if you separate the hospitals from the physicians, that they'll make the hospitals less likely to stay open.
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  The second concern is about antitrust.
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  And her point is that Optum controls physicians, about 10 % of physicians across the United States, and this raises antitrust concerns within Massachusetts and more broadly.
• 3:32
  That's the concern.
• 3:33
  I don't happen to share either one of those concerns.
• 3:35
  And so let's start with the second one first, because antitrust gets everybody all upset appropriately in many cases, because there are, you know, tech oligopolies or monopolies.
• 3:48
  It does feel like some of the bigger companies have been charging because they can.
• 3:53
  The most recent lawsuits against the Apple app store as being a big tollbooth for Apple, but not necessarily for entrepreneurship.
• 4:04
  People have got, there's some legitimate concerns about large scale combinations in other sectors.
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  Is the antitrust concern, which again is the the premise of the Antitrust Act, which goes back a long ways, is that as organizations get larger, they can influence prices in a coordinated way that sort of reduces the impact of market.
• 4:31
  Is that a legitimate concern here?
• 4:34
  Are doctors going to jack up prices because they're part of Optum?
• 4:40
  So a lot of times when you're dealing with antitrust, it does...
• 4:43
  Depend on what market you're defining now the relevant market for healthcare is more local even within a city but it's certainly within a state and in massachusetts we actually do have a problem of monopoly or duopoly but it's not called optum it's called past general brigham formally partners and beth israel deaconess lehi yeah lehi and these are two very large players in massachusetts steward is actually a fairly small player and the question is what's gonna happen if optum comes in.
• 5:12
  They're still going to be a lot smaller in Massachusetts than these other players that are there.
• 5:18
  If we look at the whole extent of what Optum has, so Stuart, that is, has 5 ,000 physicians or so in Massachusetts.
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  Mass General Brigham has 7 ,500.
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  Optum has 90 ,000 nationwide out of a million or so physicians.
• 5:37
  So this isn't even actually adding much to them.
• 5:40
  The only dynamic it's going to reinforce in Massachusetts, it's you're going to have now a third strong player that's not beholden to the local market, unlike the two players that are there now.
• 5:50
  So it actually should make things better for antitrust in Massachusetts rather than worse.
• 5:55
  And I think that the the separation of the doctors in the hospital is sort of reverse.
• 6:01
  I mean, to your point, the people's Republic of Massachusetts has a very high concentration of power in the part of the hospitals that are primarily in the eastern part of the state near Boston, Mass General and B .I.
• 6:16
  Leahy, because actually they control so many of the doctors, they really do have pretty amazing pricing power over the insurers because you can't really leave them out of network.
• 6:27
  So I don't know how much negotiation happens.
• 6:30
  And that would be the premise of the way a market should work.
• 6:32
  I think is it possible, just possible that senators and Markey and Warren are a little bit concerned about the for -profit, not -for -profit competition?
• 6:43
  I think what they're worried about is actually about hospitals.
• 6:48
  You know, a hospital is a real symbol these days of economic development.
• 6:52
  You know, if you go and, never mind Boston, which has a lot of buildings, but if you go, you know, drive around the country and you come to a place that's relatively impoverished or whatever, you'll pull up from outside 10, you can see, hey, there's a sparkling new building.
• 7:03
  It's almost always a hospital.
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  Okay, so there's a lot of spending on hospitals.
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  And when your local hospital fails, you get upset about it and that that could cost votes for for Warren and for Markey.
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  So it's something to rally around now.
• 7:15
  Well, and to be fair, hospitals are usually the largest employers in the cities that they serve.
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  I mean, they're massively important, but they're also really important from a care perspective.
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  And they anchor all academic medical medicine.
• 7:29
  I mean, it's not like you're not anti hospital, David.
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  Are you?
• 7:35
  Well.
• 7:36
  I think we have too many hospitals in too much hospital capacity and in fact that too much of our spending in too much infrastructure is actually in hospitals now we're supposed to be moving toward value based care and moving care out of the hospital that's been a theme ironically it takes capital to do that and the organizations that actually tend to have capital are the hospital based system so that's why mass general the i lay here this is true around the country it's usually organizations started hospitals.
• 8:04
  Now they're the ones that are supposed to be moving care into the community.
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  It's kind of reversed.
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  So in a way, it's better to have more of a physician organization leading things.
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  You had Atreus as an example of a physician organization in Massachusetts.
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  They couldn't quite make it on their own.
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  They went to Optum.
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  That has been OK.
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  So am I anti -hospital?
• 8:22
  I'm not pro -hospital.
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  I'm not in favor of opening new hospital capacity.
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  I'm in favor of redistributing hospital spending to clinics, physician offices, and care at home and prevention.
• 8:32
  But this this is primarily Elizabeth Warren and Senator Markey kind of going after United and Optum's purchase.
• 8:43
  But without a real clear this antitrust thing is doesn't really make a lot of sense to me.
• 8:48
  Cheer point with the amount of doctors that Stewart has, they're not going to be able to control pricing.
• 8:53
  It feels like a bias against the private sector, which in some cases may be warranted.
• 8:58
  And when it just feels a little bit overwrought.
• 9:01
  I guess though that I would be a little bit more cautious about closing hospital beds right after a pandemic where hospitals were so important.
• 9:11
  I mean, David, how do you respond to people who say, look, well, wait a second, people were kind of attacking the fixed infrastructure and all of the care that was sort of bed -based and move it out to the community and be more home -based, which obviously I'm a fan of in some ways.
• 9:28
  But does what happened in the pandemic, kind of give you any concern to about this accelerated sort of thinner and thinner margins for hospitals?
• 9:39
  Shouldn't we keep these hospitals open because we may need them?
• 9:43
  Yeah, I mean, there's a real concern about a sudden closure of hospitals.
• 9:46
  And that is where a steward, I don't think it's because it's for profit or not for profit.
• 9:50
  They had been sort of scofflaws and they haven't done a good job of reporting what's going on and just even fulfilling their promises to the state.
• 9:59
  And so maybe, You know with the for -profit organization that's more likely they're going to behave that way.
• 10:05
  And so now that the state is suddenly in a position where you might have a sudden closure and that would be a problem.
• 10:11
  But I think an orderly reduction in the amount of hospital spending relative to the rest is good.
• 10:18
  Now you make a good point about the pandemic and the need for kind of surge capacity.
• 10:23
  I think it could be done more kind of on a flexible basis.
• 10:26
  Um, and not expecting that routine care is going to be done in the hospital, but having some reserved capacity, um, which may be in the form of, you know, we're not, not going to get rid of the buildings.
• 10:36
  Um, but, uh, having more, you know, temporary kind of pop -up opportunities, what you've seen anyway happened during the pandemic.
• 10:44
  So it is a separate point to have some, you know, spare capacity, uh, in case of, uh, of a pandemic.
• 10:50
  Yeah.
• 10:51
  I think that's right.
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  And so how is this all going to get resolved?
• 10:54
  I mean, you've got.
• 10:55
  Elizabeth Warren and Senator Markey and Warren, they get a lot of attention around the press release.
• 11:01
  Do you think this is really going to have an impact on Optum's purchase of the physicians?
• 11:08
  I think that they're mainly making noise because that's the main tool they have.
• 11:14
  I don't know that within Massachusetts that the state has actually that much that they can do in order to slow things down.
• 11:21
  I think that the senators would like to see further investigation into Optum and United in general.
• 11:27
  And this is sort of a bully pulpit.
• 11:30
  I think it is weird when you hear about antitrust concern and you hear 10 % of the market.
• 11:34
  I never heard anybody say, well, Google has 10 % of the search volume.
• 11:38
  Let's go after them for that.
• 11:40
  That's a weird number.
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  It's just a very low amount.
• 11:43
  Because again, at 10%, you can't really influence pricing.
• 11:46
  I mean, that's really, or it's a...
• 11:51
  It's and it's even less if you I think if you look at the number of doctors in the relevant markets that they're that stewards actually serving.
• 12:00
  What happened?
• 12:01
  I mean, Optum has some history here in the state of Massachusetts.
• 12:05
  They bought Atrius, which was the one of the largest independent and pretty well managed physician groups in Massachusetts.
• 12:13
  What happened after Optum purchased Atrius?
• 12:16
  Was that was that was that a devastating blow to the competitive medicine and service, health care services market in for consumers in Massachusetts?
• 12:28
  Yeah, so Atrius had been for some time an independent organization not tied with with the hospitals originally tied to the health plan.
• 12:35
  And people were sad to see it go because actually an innovator in value based care.
• 12:42
  There was no concern that Atrius was looking to put more people in the hospital.
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  In fact, they were looking for things like hospital at home.
• 12:51
  you know, alternatives that were going to improve care and quality for their patients and cost without saying, Hey, I've got this hospital I have to keep filled.
• 13:00
  So the concern with Atrius that I had was, well, was Atrius going to be purchased by one of these big hospital systems and therefore start funneling more patients to the hospital.
• 13:10
  So in a way I was happy to see that Atrius was bought by somebody else who didn't have that interest.
• 13:18
  I haven't heard.
• 13:19
  Honestly that much about you know new things that are going on with with atrius.
• 13:23
  It certainly hasn't been the death knell for I don't think I think it's been a nothing burger I mean, yeah, you actually have history of Optum buying doctors in Massachusetts.
• 13:32
  I was heading your softball here David.
• 13:34
  No, I was well I'm gonna smack it out of the car You didn't even you didn't even swing well, well, here's the thing John.
• 13:40
  So No, it has it hasn't been a problem.
• 13:44
  But the question is has how much of the opportunity has been realized so?
• 13:47
  I think when Atrius was independent, it was more focused on moving toward value-based care and making it happen.
• 13:55
  Now, the concern I would have for Optum, and what I would be pushing Optum to do is, okay, you're going to do this.
• 14:00
  Let's actually see you move toward value-based care because Optum doesn't auto, just because they control physician groups, they may still find it more profitable actually to go after fee for service revenue.
• 14:12
  Really?
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  Yeah.
• 14:13
  Because...
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  It's not automatic that they're going to make more.
• 14:15
  They're mostly going to be billing other insurers in Massachusetts, right?
• 14:19
  Blue Cross, Harvard Pilgrim, and so on.
• 14:22
  They're not billing themselves mostly.
• 14:24
  United is a fairly small player.
• 14:26
  So they don't automatically going to move toward value -based care just because they're buying physician groups.
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  They just may try to optimize the profits of the physicians.
• 14:33
  And we have to keep in mind where the senators would do better would be actually to focus on who pays most of the bill, which is actually Medicare and Medicaid, and have them be pushing toward programs and payment systems that actually reward value -based care.
• 14:49
  You're using this entire conversation about Steward as a vehicle for your articulation of the accelerated move towards value -based care that you have not seen happen yet.
• 15:04
  Is that really what we're talking about here?
• 15:07
  Yeah.
• 15:07
  I'll give you an example, John, an analogy that you can...
• 15:12
  put that down or throw water on cold water.
• 15:16
  So you look at the number of fires, the number of fires is dropped by about 50 % over the past four decades.
• 15:22
  And so great, because to me, when there's a fire and the fire department has to come out to your house and throw water on it and all that, that's like a hospitalization.
• 15:31
  You're glad it's there if you need it, but you don't want to go to the hospital is like a failure.
• 15:36
  I'd rather stay home and be healthy and not like I have a terrible thing happen.
• 15:40
  I have to go to the hospital and have to do a huge intervention.
• 15:42
  Okay, so in the fire, they've been able to do the equivalent of prevention and primary care.
• 15:47
  So prevention is building materials, building codes that make it so there's less likely to be a fire in the first place.
• 15:53
  And then primary care, if something starts, you get a fast notice of it from smoke detectors and sprinkler systems that put stuff out.
• 16:01
  So they've done the equivalent.
• 16:02
  So that's the prevention and then primary carriers, the sprinklers and the smoke detectors.
• 16:06
  Well, guess what?
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  The number of firefighters actually gone up because it's actually difficult.
• 16:11
  to get rid of and sort of reduce entrenched spending.
• 16:14
  Now it's hard to change that.
• 16:16
  Now we have an opportunity with hospitals being in trouble to say, hey, maybe we don't actually long -term need that much hospitals and we should shift the focus and let's not do everything to save the hospitals.
• 16:28
  Let's make sure it's orderly, but let's not just preserve the status quo.
• 16:31
  I think we've extinguished, if you will, most of the issues regarding steward.
• 16:38
  But I think the most important point you're making, it took you some time to get there, was that focusing primarily on keeping a hospital open misses the point of where a lot of the care is happening, should happen, and we'll set up the wrong priorities if we manage our health care system with the hospitals as our biggest concern.
• 17:03
  That's right, John.
• 17:04
  And to add to that, if we want to worry about monopolies, we shouldn't be looking at somebody with 10 % of the national market.
• 17:10
  With no pricing power.
• 17:12
  We should be looking at somebody with 50 % of the local market.
• 17:15
  Well, John, I think that's it for yet another episode of Care Talk.
• 17:18
  We've been talking about steward costs, fire departments, and so on and so forth.
• 17:23
  I'm David Williams, president of Health Business Group.
• 17:25
  And I'm John Dresschil, senior advisor at Walgreens.
• 17:27
  If you like what you heard or you didn't.
• 17:29
  Please subscribe on your favorite service and please leave us a review.
• 17:32
  We look forward to reading.