Disruptors are finding expansion into healthcare a bumpy ride when it comes to the primary care business.
Walmart is delaying the opening of health centers in two regions amidst expansion in other states as it recalibrates its strategy pushing for a bigger market share.
The company’s change of plans comes as multiple retail giants deal are reconfiguring their approach to optimize networks and get the most out of their foray into healthcare.
In the case of Walmart, it planned to open more than 30 new centers in 2024 to nearly double its total number of locations to 75 by the end of this year. However, challenges with construction resources have forced it to now move the target for its 75 locations to the end of 2025.
Walmart still plans to open 22 new locations this year, including expanding its presence within Texas with 18 centers and entering the Kansas City market with four centers.
The delayed openings are happening with six locations planned for Phoenix and four locations planned in Oklahoma City.
Dr. David Carmouche, Walmart’s senior vice president of healthcare delivery, stated that the company’s outlook to expansion is deliberate.
“As we have from the beginning, we are taking a measured approach to growing our footprint, taking into account the unique needs of each community,” Carmouche said, according to Forbes.
Walmart’s health centers are located next to a Walmart Supercenter and offer access to primary care, dental, behavioral health, labs, x-ray, community health, and telehealth. Flexible scheduling options are available with care offered seven days a week at convenient hours.
Retailer hiccups
Walmart isn’t the only retailer dealing with some struggles in its efforts to grow its offerings in healthcare.
Walgreens, which has invested billions of dollars into primary care chain VillageMD, has shuttered 140 clinics as of March and said it plans to close 160 in total.
Underwhelming returns from VillageMD resulted in Walgreens reporting nearly $6 billion in net loss for the second quarter.
The lack of profitability of the primary care business model means that many disruptors that are entering the market are having to find ways to cut costs to prop up clinics.
Scaling primary care will remain a hurdle for retailers as they establish their hold on the market. This also means that traditional providers continue to have an advantage as the incumbents, though the growing presence of disruptors means hospitals and health systems must find ways to innovate to not get left behind.
Health systems, virtual care companies, and health plans are dealing with important moves at the top.
From leaders stepping down at organizations to stepping away completely from the profession, healthcare is experiencing significant shake-up at the highest level of the C-suite.
As hospitals and payers plan for sustainability, the result is often a shift in leadership direction, while many leaders are choosing to call it a career and put succession plans in motion.
After 2023 saw 146 CEO changes at hospitals and health systems, which marked a 42% increase from 2022, more turnover is expected through the end of this year.
Here’s a look at three recent noteworthy CEO moves:
Teladoc Health
Jason Gorevic, who has been CEO since 2009, is departing the virtual care company effective immediately, Teladoc’s board of directors announced.
The change comes as the company looks to weather financial storms, including a concerning drop in stock and scaled-back forecasts. In 2022, Teladoc experienced a historic net loss of $13.7 billion, mostly due to the dwindling value of its acquisition of Livongo.
Teladoc CFO Mala Murthy will step into the vacated role while the board searches for Gorevic’s permanent successor.
“We are confident that this leadership transition will position the company for long-term success and value creation,” David Snow, Jr., chairman of the Teladoc board, said in a statement.
Banner Health
Following 24 years at the helm of the Phoenix-based health system, CEO Peter Fine will retire, making way for president Amy Perry.
Fine will continue as CEO emeritus through January 2025 while also stepping down from the board as the operator marches forward with a fresh face.
Perry previously served as chief operating officer after joining Banner in 2021 and played a vital role in leading the system during the COVID-19 pandemic and the aftermath, according to the news release.
She will add a “technology-forward, people-centered approach” to the position, board chair Anne Mariucci said in the announcement.
L.A. Care Health Plan
The country’s largest publicly operated health plan will see its CEO John Baackes retire at the end of the year, the payer announced.
Baackes held the role for the past nine years and will now closely work with L.A. Care’s board of governors to search for his successor. The health plan is looking for a “dynamic leaders who will help carry on his impactful legacy and blaze new trails for the agency,” according to the news release.
During his tenure, Baackes steered L.A. Care towards growth and expansion, while improving the payer’s ability to serve low-income and vulnerable populations.
Four to five other health systems are expected to be pursued by Risant in the coming years.
Risant Health has taken the first and most important step to forming its value-based network by completing the acquisition of Geisinger Health, nearly one year after announcing its plans for the unique model.
In Geisinger, Kaiser Permanente’s Risant has its initial health system for building out its organization, which is expected to add four to five other systems in the next half-decade to reach a total revenue of $30 to $35 billion.
Despite some concerns that regulators may intervene, the deal appeared to meet little resistance and was approved by federal and state agencies, Risant said, likely due to the lack of geographical overlap between the operators.
Geisinger will keep its name and continue in its mission, but now with “access to capital, technology and resources to fuel improvements in facilities, drive innovation and investment in patient care, and continue the expansion of Geisinger Health Plan.”
Jaewon Ryu, who has served as Geisinger’s president and CEO since 2019, will transition to CEO of Risant, while Terry Gilliland will take over Ryu’s previous role.
“Geisinger is proud to formally join Risant Health as its inaugural health system, which will accelerate our vision to make better health easier, more affordable and more accessible for the communities we serve,” Ryu said in the release. “Geisinger now can extend its vision, strategy and impact to more Pennsylvanians because of the access to an expanded set of tools, expertise and capital that joining Risant Health provides.”
When Risant turns its attention to acquiring the next system to add to its network, it’s likely to follow a similar blueprint that led it to Geisinger.
After the announcement of the planned affiliation last year, Ryu told HealthLeaders: “Through Risant Health, Kaiser Permanente has shared its desire to seek out like-minded entities that are committed to quality care and improving access and affordability by promoting value-based care models in different geographic areas.”
Risant has made clear that it can benefit potential partners by providing them with “initial platform solutions” that will deliver evidence-based care, as well as by helping systems and their patients “know how to easily understand, access and navigate to the right care at the right time and place.”
The influx of resources that Risant can inject into a system makes joining its network an appealing proposition for organizations that are dealing with financial uncertainty.
Risant isn’t the only effort by nonprofit operators to shake up the healthcare landscape. Months after Kaiser made its intentions known, venture capital firm General Catalyst announced its plan to purchase a health system to test new technology in pursuit of value-based care. That system became Ohio-based Summa Health earlier this year.
Lake Washington Physical Therapy CEO Ben Wobker shares his approach to pursuing technology.
For CEOs at provider organizations, choosing where to put your technology investments is often a difficult decision.
Improving the patient billing experience, however, can be a surefire way to ensure payments are coming in a timely, efficient manner, leading to a healthier bottom line.
That's been the case for Kirkland, Washington-based Lake Washington Physical Therapy (LWPT), which has benefited from implanting electronic billing and mobile payment strategies.
Specifically, the rehabilitation facility has brought on PatientPay for convenient bill pay and Luma Health to coordinate the patient journey, and the investments are paying dividends, founder CEO Ben Wobker told HealthLeaders.
Wobker has always been someone who likes to be an early adopter and he's pushed his teams to beta test most of their technologies. For example, when many providers were still using paper for documentation, LWPT went online with HTML5.
"I've kind of always pushed our team, sometimes with the little resistance because there's always going to be mistakes and pitfalls and learning that occurs when you adopt a new technology," Wobker said. "But what we've seen across the board on everything that we've adopted, we've seen huge returns on that."
LWPT's experience with implementing PatientPay has been "shockingly awesome," with Wobker noting that the organization has decreased their accounts receivable by 47% in the first month.
"The way our staff is paid is they get a percentage of what they bring in, so this was a very welcomed change for them as well," he said.
When LWPT introduced Luma to improve their online waitlist text reminder system, cancellations decreased by 1.5% while capacity went up 11%.
"We saw more volume, better margins, and less open spaces," Wobker said. "PatientPay and our billing services have helped us get a best-in-class payment per visit, which is really important. We don't have to see as many people because we're getting what we actually are billing."
While LWPT's investments have led to ROI, that isn't necessarily happening for most provider organizations.
According to a recent survey by Ernst & Young, 71% of payer and provider executives said the implementation of new technologies hasn't lowered hospital expenses. Nonetheless, nearly all the respondents (96%) agreed that investment in new technology is still worth the cost.
The patient billing experience is an area CEOs should have near the top of their list as an area ripe for early ROI if there are identifiable processes to clean up.
Cash on hand will be useful to deal with whatever challenges are lurking around the corner.
While hospital finances on average continue to show encouraging signs, operators’ coffers are in serious need of building up to survive future turbulence.
Following the challenges of the past two years, hospitals’ days cash on hand has weakened and put many organizations in a financially unstable position, according to a report by Syntellis, now part of Strata.
The data from over 1,900 hospitals revealed that the median change in days cash on hand dropped 25.4% in February 2024, compared to February 2022. Year-over-year, cash reserves improved 0.6%, highlighting how difficult it has been for hospitals to create cash on hand in the current climate.
“The steep decrease versus two years ago highlights continued financial uncertainties for the sector, as having lower cash reserves means hospitals are less prepared for unexpected emergencies or sudden market changes, such as natural disasters or mass casualty events,” the report stated.
Matt Heywood, president and CEO of Aspirus Health, recently spoke to HealthLeaders about the importance of a strong balance sheet for hospitals right now, especially in the wake of the Change Healthcare attack.
What the American Hospital Association (AHA) deemed “the most significant cyberattack on the U.S. health care system in American history” is still wreaking havoc after taking place on February 21.
Based on a survey of nearly 1,000 hospitals by the AHA, 82% of operators reported impacts on their cash flow, of which 60% said that the impact to revenue is $1 million per day or greater.
“When you throw things like the cybersecurity incidents, you throw these other issues on, then the balance sheets are weakened from these last two or three years of challenges and it's just continuing to pound down the healthcare industry and that's where you're starting to have the 'have and have-nots,’” Heywood said.
Building up a cash reserve is no easy feat at the moment, but hospital leaders must do their best to manage their income statements and balance sheets to give themselves financial flexibility, according to Heywood.
It will be necessary to weather the storm because “God knows what's coming,” Heywood said.
If we as a country are okay with free-market healthcare, we have to let situations play out, says one CEO.
In this episode of HL Shorts, Matt Heywood, president and CEO of Aspirus Health, shares his views on private equity's presence in healthcare and what the industry can take away from those outcomes.
The antitrust agency is seeking a preliminary injunction on the sale after previously challenging through a lawsuit.
The Federal Trade Commission (FTC) has put on a full-court press to stop Novant Health’s proposed purchase of two Community Health Systems (CHS) hospitals.
Regulators are taking aim at more M&A of late and the deal between Novant and CHS is the latest case of the FTC trying to make an example out of a transaction for anticompetitive reasons.
The agency filed a request for a preliminary injunction to bar the $320 million sale from continuing, arguing that Winston-Salem, North Carolina-based Novant taking control of Mooresville, North Carolina-based Lake Norman Regional Medical Center and Statesville, North Carolina-based Davis Regional Medical Center “would irreversibly consolidate the market for hospital services in the Eastern Lake Norman Area in the northern suburbs of Charlotte.”
The action comes on the heels of the FTC suing to block the deal in January, almost a year after the proposed acquisition was announced.
The two aspects of the purchase that the FTC is contending are the resulting market share and the removal of direction competition.
According to the agency, the transaction is “unlawful” because it would create an “eye-popping 64% share of the market in the Eastern Lake Norman Area.” The FTC cited that the Supreme Court has previously held mergers presumptively unlawful if any single entity grabs a 30% market share.
Secondly, the FTC alleged that the sale would significantly threaten competition in the area, harming patients in several ways.
“Today, aggressive competition between Novant Huntersville and Lake Norman Regional benefits patients through lower prices, improved quality of care, and new service offerings,” the court documents read. “The proposed transaction would immediately wipe out this competition, reducing Defendants’ incentives to invest in quality and leaving fewer options for patients.”
In response to the FTC’s lawsuit in January, Novant said in a statement that it “will pursue available legal responses to the FTC's flawed position.”
The increased scrutiny of deals is partly due to regulators stepping in to challenge more often, but it’s also because of the M&A climate which is seeing organizations seek out partners at a greater rate and often to alleviate financial struggle.
As more health systems pursue M&A this year and beyond, regulators are likely to continue being heavily involved. However, that shouldn’t stop stressed organizations from being aggressive to work out deals that improve their long-term sustainability.
A study by the Lown Institute puts the spotlight on the value of nonprofits' community contributions.
Eighty percent of nonprofit hospitals are spending less on community support than what they're receiving in estimated tax breaks, according to a report by the Lown Institute.
The analysis by the think tank questions the value nonprofits are providing to their community while receiving tax breaks under federal, state, and local laws with the expectation that they'll pay it forward through financial aid and wellness programs.
Using 2021 IRS data for 2,425 nonprofit hospitals across the country, researchers found that more than 1,900 operators pay less than their "fair share." The combined fair share deficits of nonprofits totaled $25.7 billion, or enough to erase 29% of the country's medical debt, the report stated.
Only five states had a majority of hospitals with a fair share surplus: Delaware, Montana, Maryland, Texas, and Utah. Meanwhile, Michigan, West Virginia, Louisiana, Washington, and Rhode Island had 97% or more hospitals with a fair share deficit.
On average, hospitals spent 3.87% of their budget on charity care, but the proportion varied widely depending on the hospital.
Among the biggest offenders of skimping on community spending were Catholic health systems, which made up five of the top 10 systems with the greatest fair share deficits: Providence (-$1 billion), CommonSpirit (-$923 million), Trinity (-$784 million), Ascension (-$614 million), and Bon Secours Mercy (-$488 million).
Some of the hospitals the report highlighted for having significant fair share surpluses were Atlanta-based Grady Memorial Hospital, which had a fair share surplus for the third year in a row ($71 million), Chicago-based Mount Sinai Hospital ($67 million), and Los Angeles-based Martin Luther King Jr. Community Hospital ($14 million).
The Lown Institute also published a policy brief alongside the report to recommend changes for improving fair spending, including minimum thresholds for community spending and enforcement actions for noncompliance.
"Federal regulation of community benefit spending is woefully ineffective and in need of reform," Vikas Saini, president of the Lown Institute, said in the release. "Though hospitals are required to report their community contributions to the IRS, there is no minimum spend, there are many loopholes, and enforcement is practically nonexistent."
In response to the report, American Hospital Association president and CEO Rick Pollack released a statement saying the analysis "cherry-picks categories of community benefit and ignores other areas of great importance" and "suffers from the same biases, flaws and shortcomings as its previous reports."
The Lown Institute's findings don't fully take into account aspects like underpayments from Medicaid and Medicare, or Medicaid expansion, according to the AHA.
Nevertheless, nonprofit hospital leaders must focus on meeting charity goals to ensure the sustainability of not only their community, but of their own organization.
Michael Slubowski, president and CEO of Trinity Health, told HealthLeaders last year: "We're being very proactive in making sure that people realize that we are living out our charitable purpose, and for us being a faith-based health system, it's endemic to our mission."
Aspirus Health CEO Matt Heywood shares how to approach a potential merger.
As more health systems turn to M&A to achieve financial stability and growth, CEOs should be prepared to get the most out of a deal.
Matt Heywood, CEO of Wausau, Wisconsin-based Aspirus Health, just completed his own merger with Duluth, Minnesota-based St. Luke’s and believes hospital leaders must act with intent when bringing on a partner.
In a conversation with HealthLeaders, Heywood highlighted three key strategies fellow CEOs should utilize when taking steps towards a merger.
The Connecticut-based operator cut 60 positions to offset the costs associated with Medicare Advantage delays and denials.
Repeated Medicare Advantage (MA) claim denials left one Connecticut hospital in financial peril, causing it to significantly cut down on staff.
Bristol Hospital CEO Kurt Barwis told the Hartford Courant that in an effort to save on costs stemming from lack of reimbursement from insurers, the operator will eliminate 60 jobs, 21 of which will result in layoffs.
The MA “abuse” is the latest instance of the private program causing problems for providers, with Barwis reporting that MA insurers continue to increase their rate of denials while further delaying payments that aren’t denied.
Bristol Hospital, which operates 154 beds and physician and lab networks in 20 locations, has 63% of its Medicare patients on MA plans, while 5 to 6% of the hospital’s budget goes to insurer administrative expenses, the Courant reported.
The hospital has been facing a financial crunch in recent years and reported a $12.8 million operating loss in fiscal 2023. By slashing 60 jobs, Barwis revealed that the organization will save $6.1 million.
“We went through an extensive process to find ways to make our processes more efficient and find any opportunity to reduce positions that wouldn’t affect patient care,” Barwis told the Courant. “We don’t have a choice. All the nice-to-haves are being taken out by the lack of insurance payment and the lack of reimbursement.”
MA specifically has been criticized for delays and denials, with recent data by Kodiak Solutions finding that the value of claims taking longer than 90 days to be paid has increased by over 40% for MA plans since 2020.
“Our primary care is to take care of patients, their single focus is shareholder value and profits,” Barwis told the Courant. “The Medicare Advantage abuse is outrageous.”
Turning to termination
Many hospitals and health systems are resorting to terminating their MA contracts to counteract the financial and administrative burden of the program.
Scripps Health is one of those organizations, with two medical groups within the system ending their MA contracts for 2024 due to low payments and denials.
Chris Van Goder, president and CEO of Scripps, told USA Today that after failing to negotiate more favorable reimbursement rates, the system decided to cut loose to alleviate their $75 million in annual losses.
That strategy isn’t a viable path for every hospital, but providers may have more options than they think.
“Providers are becoming more capable in measuring the impact of the slow or rejected payments, and providers are looking at the actual cost of care by patient,” Britt Berrett, managing director and teaching professor at Brigham Young University and former CEO with HCA, Texas Health Resources, and SHARP Healthcare, told HealthLeaders. “Payers need to be aware that.”