Our Take: Intermountain launches value-based care spinoff
Jul 22, 2019
Intermountain Healthcare announced Tuesday that it has formed a “comprehensive health platform company focused on elevating value-based care capabilities.”
The new organization, named Castell, will be led by Rajesh Shrestha as president and CEO. Shrestha will continue to serve as vice president and chief operating officer of Intermountain’s community-based care line of business.
“Health care’s ongoing shift from volume to value-based systems of care enables providers, health systems, and payers to take a more holistic approach to managing the health of their patients, but also creates more financial risk or rewards,” said Shrestha. “The health platform capabilities, tools, and resources that Castell provides will strengthen the ability of the health ecosystem to thrive in a value-based care environment.”
Our Take: Intermountain continues to be a health care trailblazer. Consider some of its recent moves.
In May 2015, the Salt Lake City-based integrated health system acquired the remaining 50% of Intalere (formerly Amerinet), one of the nation’s largest group purchasing organizations, from Administrative Resources, Inc. Intermountain already owned 50% of the GPO.
In January 2018, Intermountain announced that it was forming a generic drug company with several other nonprofit health systems; collectively, the group represented 263 hospitals. That company became Civica Rx, with many other health systems signing on to be partners — as of this past March, the company represented 800 hospitals. More recently, the company announced that it had about 40 employees in its new headquarters in Lehi, Utah. Civica Rx is attempting to alleviate drug shortages for hospitals while improving access to generics and lowering costs.
Also earlier this year, Intermountain announced an expanded home care program for its most complex and chronically ill patients. The new service, Intermountain at Home, is using technology and a range of caregivers to keep people healthier and out of the hospital. The program offers post-acute, palliative, and hospice care, as well as virtual urgent care visits through a “virtual hospital.”
With last Tuesday’s announcement, Intermountain is showing a substantial commitment toward moving to a value-based system of care. For years, Intermountain has focused on perfecting risk by DRG, rather than pursuing bundled payments.
“Intermountain has fairly explicitly said that we’re not going to pursue bundled payments,” one executive told us, speaking under the condition of anonymity. “We don’t believe that bundles have the ability to really bend the cost curve to the extent that we would want to, and we’re a nonprofit organization that pretty adamantly states that we’re not profit maximizing.”
Until recently, the health system had shied away from shared savings arrangements, but in 2018 it launched the Intermountain Accountable Care MSSP. Our research suggests that it hasn’t entered into commercial ACO arrangements, likely because of its SelectHealth line of health plans, which, with 800,000 members in Utah and Idaho, is one of the largest IDN-based payers in the country.
“If you’re at full capitation, then a payer doesn’t really have any type of incentive to ensure that when they’re going out and bidding for new business, they’re following good underwriting practices, because they’re going to pass all of the risk over to a provider organization,” the executive continued. “So shared savings arrangements build into them an insurance, or assurance, rather, that the payer keeps some skin in the game.”
Castell is an outgrowth of lessons learned from Intermountain’s “Reimagined Primary Care” initiative in 2018, in which the health system focused on preventive measures broadly and on high-risk patients, and incentivized physicians through quality-based payments.
According to Intermountain, after one year, the program led to a 60% reduction in Medicare Advantage admissions, 25% fewer commercial insurance admissions, 20% decreased per-member per-month costs, improved patient ratings, and improved physician satisfaction.
Castell will help Intermountain move toward value but will focus on external partners, as well.
“Backed by Intermountain’s day-to-day frontline experience with a focus on population health management, Castell will deliver impactful solutions that help other organizations improve outcomes and keep costs more affordable,” Shrestha said.
What else you need to know
Gilead Sciences entered into a 10-year research and development collaboration with Belgian biopharmaceutical company Galapagos NV, the firms announced in a press statement last week. Galapagos will receive $3.95 billion up front and a $1.1 billion equity investment from Gilead. In return, Gilead’s ownership stake in Galapagos will increase from approximately 12.3% to 22%; pending shareholder approval, Gilead could ultimately own 29.9% of Galapagos. The two companies also agreed to amend certain terms of their existing collaboration on filgotinib, an investigational drug for rheumatoid arthritis and other inflammatory diseases. The current deal is expected to close late in the third quarter if all closing conditions are met.
Genentech is on a tear. The Roche subsidiary entered into a research agreement last Tuesday with Sosei Heptares, a Japanese-Anglo drug discovery firm specializing in medicines that modulate G protein-coupled receptor (GPCR) targets. Under the deal, Sosei Heptares is eligible to receive $26 million in the near term and more than $1 billion in milestone payments. On the same day, Genentech also entered into a license agreement with Waltham, Mass.-based Skyhawk Therapeutics to develop drug candidates for oncology and neurodegenerative diseases. Skyhawk could end up receiving more than $2 billion, including an upfront payment, opt-in fees, and milestone and royalty payments. And Genentech entered into a third collaboration on Tuesday with Cleveland’s Convelo Therapeutics that will focus on developing a new class of drugs to treat neurological disorders such as multiple sclerosis; terms of that agreement were not disclosed.
The week before, Genentech entered into a research collaboration with Clover Therapeutics, a newly launched drug development subsidiary of San Francisco-based Medicare Advantage insurer Clover Health. That collaboration will center on evaluating genetic factors associated with the risk for ocular diseases such as macular degeneration.
Walnut Creek, Calif.-based John Muir Health (JMH) is forming “a comprehensive relationship” with Optum intended to help the health system maintain its independence while expanding its use of value-based care and data analytics. Optum, part of UnitedHealth Group, will take over some of JMH’s nonclinical operations, including information technology, revenue cycle management, analytics, purchasing, and claims processing, the companies noted in a press statement. As part of the arrangement, more than 500 JMH employees will become Optum employees, although they will continue to directly support the health system.
Nearly twice the number of physicians participated in CMS’ Advanced Alternative Payment Models in 2018 compared with a year earlier, CMS Administrator Seema Verma noted in a recent blog post — increasing from 99,076 to 183,306. She said the improved participation could be the result of additional participation opportunities in 2018, “particularly through accountable care organizations (ACOs) in the [Medicare] Shared Savings Program.” Further, she pointed out that “flexibilities” CMS introduced last year “led to 98% of eligible clinicians participating in [the Merit-Based Incentive Payment System] in 2018, up from 95% in 2017.”
Michigan’s Together Health Network has closed, Crain’s reported. Ascension Michigan and Trinity Health of Michigan formed the physician-led clinically integrated network in 2014, and Michigan Medicine — part of the University of Michigan in Ann Arbor — joined in 2016. Together Health contracted with payers and employers to achieve shared savings for the hospitals, physicians, and other providers in the network. According to Modern Healthcare, sources told Crain’s the network wasn’t able to generate enough shared savings to convince the participating physicians to make the necessary clinical changes in their practices to reduce costs.
Care New England (CNE) has withdrawn from merger discussions with Lifespan and Brown University. The three organizations, all based in Providence, R.I., began to explore a possible merger at the behest of Gov. Gina Raimondo in early June, after Boston-based Partners HealthCare backed out of its plans to merge with Care New England. In a press release disseminated last Tuesday, CNE said it “has implemented a remarkable turnaround with significant improvements” and, after careful deliberation, the health system’s board “has concluded that it is in the best interest of CNE and the community it serves to end the tri-party discussions.”
Memorial Hermann Health System will have a new president and CEO on Sept. 1, Texas Medical Center (TMC) announced Thursday in a press release. Dr. David Callender, who is president of the University of Texas Medical Branch and has held various executive positions at multiple TMC institutions, will succeed Charles “Chuck” Stokes. Stokes’ retirement, announced in February, is set to take place at the end of the year.
In last week’s editorial on the U.S. District Court proceedings on the Patient Protection and Affordable Care Act, we admittedly took a pessimistic view of the future, should the entire law be struck down. One Pharma account executive took a different view, writing:
“Thank you for this excellent summary. Just my opinion (or hope) but it is possible that insurance companies won’t automatically revert back to the pre-ACA world. There is a lot of benefit for them to compete with the benefits they can offer without the ACA. Your list of things that could happen certainly sound dire. Eliminating the Essential Health Benefits alone would allow more customizable plans for individuals to purchase. It could happen.
“Back before 2006 and the Medicare Modernization Act went into effect, drug coverage by a Medicare HMO was not required by law, but just about all of them offered drug coverage. It was a competitive benefit and an important selling point. How the formularies looked was up to the HMO. Just my two cents, you never know how things will evolve.”
What we’re reading
Price Increases of Protected-Class Drugs in Medicare Part D, Relative to Inflation, 2012-2017. JAMA (subscription required), 7.16.19
Biosimilar Approvals And The BPCIA: Too Soon To Give Up. Health Affairs, 7.19.19
Direct and Indirect Cost Considerations in Drug Selection. AJMC, 7.20.19