August 18 2021
On this episode of PointByPoint, Dr. Mike Schatzlein, a former executive with Ascension Health, and Waller partner Jesse Neil discuss the “care at home” movement and what it means for providers, payors and patients. Innovative delivery models bring patient care into the home and can change the face of the industry in the near and long-term future. Hear where industry leaders are making progress, where the regulations stand and are heading, which companies are doing it well and much more.
Morgan: Welcome to PointByPoint. This is Morgan Ribeiro, Waller's Chief Business Development Officer and the host of the podcast. On today's episode, we are joined by Dr. Mike Schatzlein, former transplant surgeon, senior vice president at Ascension Health, healthcare investor and professor at Trevecca Nazarene University and Jesse Neil, a partner in Waller's healthcare compliance and operations group, who prior to Waller was in-house at a large multi-state hospital company for more than a decade. Today, we're going to talk about innovative delivery models that bring patient care into the home and how these models can change the face of the industry in the near and long-term future. Jessie and Dr. Schatzlein, thank you for joining us today.
Dr. Schatzlein: Happy to be here.
Jesse: Thanks for having me.
Morgan: Jesse, I'd like to turn to you first and ask you to elaborate for us before we get too far into the show, Waller calls this arena "Care at Home" and there are other names out there for this area or the sector, and it can be somewhat confusing. So can you first walk us through the alphabet soup, if you will, what are we talking about here and what are we not talking about when we say "Care at Home"?
Jesse: Like many things, this sometimes as best defined by what it is not. Historically the concept of home health agencies, they certainly filled a need. There were specific constraints and weaknesses with the model. There were also some very specific regulations that were developed at the state and the federal level that really regulated the delivery of care at home. And it includes everything from background checks to specific payment models.
That is distinct from what we are seeing today in terms of delivery of care at home. I generally put it into three buckets.
There's your (1) pre-acute, I'll call it primary care at home. Pediatric care at home. That sometimes population health.
(2) Acute-care. Hospital at home, hospitals without borders. That's a fairly well-developed sector.
And then (3) post-acute care that would include to a degree, the home health models and hospice, but it also includes a lot of the value-based coordination of care, post-acute follow-up, patient management that we see growing as well.
Morgan: I think that's really helpful to have that baseline understanding as we launch into this discussion because it really can mean so many different things. Dr. Schatzlein, tell us a little bit more about your background and why you were so passionate about innovation in healthcare, and how providing care inside the home will have a positive impact on the delivery of care nationwide.
Dr. Schatzlein: We do not have a U.S. healthcare system. We have an amalgamation of autonomous parts bound together by some federal regulations and some insurance industry policies. And we had also spent a trillion dollars that we don't need to spend on healthcare that either harms people or doesn't make them any better.
Care coordination, care management is the name of the game. It's the only way that we can get U.S. healthcare quality up and costs down. And so these alternate models, such as care at home, are ways to engage folks the way they want to be engaged. We're not going to get millennials to come and wait for a couple hours in an internist's office, once every other month, to take care of their maintaining their health.
And so these other models, virtual models, care at home models. And particularly care coordination models, sub-capitation companies, and in various ways that we can put people responsible and accountable for coordinating care are one of the keys to the future that we need to unlock for U.S. healthcare.
Morgan: As with so many other areas of healthcare today, there are clear benefits of this model, but there are of course reimbursement challenges. Jesse, I'd like to look to you to take some time to describe to our listeners what's happening in the payment landscape as it relates to the care at home setting. CMS has lacked reimbursement options in the past, but we're starting to see some renewed activity through a waiver. So maybe take a minute or two to walk through the reimbursement setting for us.
Jesse: The concept of a hospital at home, for example, is over 20 years old. It was pioneered by physicians and operators at Johns Hopkins. It has been developed and applied in commercial plans and Medicare Advantage plans where you've got some additional flexibility for the enrollees and the providers and the payers to develop it. As a response to COVID - necessity is the mother of invention - there had been in the works the development of a hospital without walls program.
From a public policy perspective, I don't think anyone thinks that we can solve the budget issues around healthcare in this country without including some substantial increase in home care - care delivered at home.
It's something that has been considered - there had been some studies, some pilot programs, but with COVID it really required a robust response from CMS. I think most people would say that they did a fairly rapid response in allowing both hospitals without walls, so that patients could be seen in their home, and an extension of that… an expansion that is acute care hospital at home. Both of those programs allow hospitals to get reimbursed at the inpatient rate for certain episodes of care in the home.
There's a number of requirements that are associated with that:
It sounds like a lot of specific requirements, but the good news is there are specific requirements and there've been a number of hospitals around the country who have taken advantage of this expansion and have really included it in its approach to population health and their patient health.
CMS has said in one form or another, there are 60 episodes of care that they believe, with the right presentation, can be handled and managed successfully from a clinical perspective in the home. So there is some roadway here to expand it and that's what they've done through COVID. The question is to what degree will the waivers that were developed turn into permanent policy after the emergency declaration has passed? I think most people will say there will be additional flexibility. The big question, of course, is the reimbursement. Are these services going to be paid? To what degree will they be paid? There are a couple of good studies that are out there. One was published in conjunction with CMS that showed great patient outcomes, a great patient experience and a reduction of almost 40% in the costs of the delivery of care.
I think that the payors, the patients, the providers see this as an opportunity to deliver care in the cost curve and I think that the big question now is how do they make the economics work for the Medicare population?
Dr. Schatzlein: I can just add to that that the reimbursement model in all of healthcare has, of course, been under evaluation for decades now. But one of the things that adding these additional modalities does is that it gives us an opportunity to get at that trillion dollars. And when I talked to my private equity clients about how to get involved in this space, or in healthcare just in general, it appears to me now that many of my colleagues from my operating days would be surprised about, is that the insurance companies are going to have to be involved. We're not going to reform healthcare in the United States and leave them out politically. It just won't happen. So Medicare Advantage becomes the model, I think, for healthcare going forward. I had hoped that providers would be able to step forward and operate Accountable Care Organizations and frankly just disintermediate the insurance companies. And, while that is appealing to doctors and operators, it's just not going to happen in the United States. So a model like Medicare Advantage, where you can get some leverage by reimbursing some of these sub-populations on a sub-capitated basis, I think it gives an opportunity for people operating in this space to use these new modalities, such as care at home, to coordinate care and actually improve both the quality and lower the costs, rather than just moving fee for service over into the care at home model.
Morgan: My next question was along these lines, which is, looking out at the marketplace, what's happening there in terms of coverage and access to care? Humana is among those making headlines for eyeing the space, but how is the industry responding and how will these models play out?
Dr. Schatzlein: Happy to take that one. Humana has been a leader in care coordination among the insurance companies for years now and so their expansion into this space is a welcome thing, and again, my old colleagues would be surprised that I was praising insurance companies, but they're the devil we know, and we're going to have to work with them.
So I do believe that there are opportunities in this space for Jessie's clients and others to take a sub-capitated position or to take some sort of a care coordination role on behalf of folks like Humana who are big enough and experienced enough to take global capitation risk.
So care at home is one of the components. Just for an example, when I was operating hospitals, I had a rule that everybody who came to the emergency room but didn't have a personal physician, would leave with an appointment with a personal physician. And I thought that would get people into the system so they could have their care coordinated and anybody with one or more chronic illnesses needs an ongoing relationship with a primary care entity. But the percentage of folks who kept those appointments was in the single digits. So if there was a way that we could, for example, contract to send somebody to the home of anybody who'd showed up at the emergency room with no primary care relationship, we could certainly increase the compliance rate for that and pull more people into the care coordination system, which is the first step towards increasing quality and lowering costs.
Morgan: I know there are many providers that have developed programs in this arena. I also think about tech-enabled organizations. Are there any really good examples of either providers or other companies that are leading the charge?
Jesse: I can say just off the top of my head just in covering the sector, Mount Sinai has had a joint venture with the Tennessee-based company Contessa to deliver hospitalization at home and I know that during the peak of the pandemic in the fall they reached a critical milestone of having their 1,000th patient who was admitted into the program -- that is a substantial achievement and something that's going to generate a lot of data, a lot of operational insights into what works. And, it also maybe finally gets the policymakers to realize some of the risks that had prevented them from promulgating some regulations that allow expansion and some flexibility. The risks that they had worried about are not coming to fruition with the right infrastructure.
We need to find a way to get the right care to the right patient in the right place and that dynamic -- it's hard to have a formula to do that, but I don't know how you do it without care at home. So I think that shows that there's going to be some strong tailwinds for the area.
Morgan: Dr. Schatzlein, anything to add to that in terms of examples of those that are doing it?
Dr. Schatzlein: I was actually going to mention Contessa as well. Travis has done a superb job -- he has worked with Ascension as well as with Mount Sinai. He's done it very well. There's another company, Physicians Housecall that one of the private equity firms I work with has a relationship with and does geriatric medicine at home. So the options are as broad as healthcare is broad. The drum that I keep beating is that the smart money is going to be, as the Council Capital folks say, on the right side of change. That means that just clicking the fee-for-service box has a limited margin available. You hire providers to take care of people. You collect a fee-for-service money, and you've got to live on the difference between what the providers need to make and what you can get on a fee-for-service basis. That is a hot potato because there's only so much money -- there's a limited margin there. If you can get into care coordination even on a sub-capitated basis, now you've got a chance at that trillion dollars that's wasted every year. And we'll all be dead before that trillion dollars is wrung out of the U.S. healthcare system. In the meantime, there's going to be a lot of people distributing that money to their investors.
Morgan: Now I want to switch over to outcomes. Jesse, what are you hearing from clients or sort of other contacts out in the industry right now in terms of outcomes and what's exciting to you?
Jesse: The hospital at home, I think, has got a lot of potential and it is probably more developed than what I'll call pre-acute care. But I do have a number of clients that are providing primary care at home either in conjunction with the Medicare Advantage or other structures and even pediatric care at home.
Those types of delivery models worked to a degree in COVID and also exposed some inherent efficiencies around them. I do think that there are going to be a number of private equity firms in Nashville that are building their thesis around care at home. Behavioral health at home, I think has got a lot of opportunities. I think that's got a lot of momentum at the moment, and I think that that is going to be one of the first to get a lot of the funds and the developments and the multiples that you see. And now in some of the hospital-based spaces that private equity firms are investing in.
Dr. Schatzlein: Let me just echo that behavioral health is a massive unmet need and fits right into the care coordination algorithm. And it's something that's very readily done either at home or virtually. The Nashville investor community is pretty sophisticated in these matters and I think that behavioral health is due for a major expansion and there's just not enough capacity to do it in facilities. So the ability to reach out either with mid-level providers going into homes or virtually is something that's that the care coordination arena badly needs.
Morgan: You mentioned the investor community, which is a great segue into my next question.
Do you see this area as ripe for investors, which I think we all know the answer to that and what are the growth characteristics that could make this model attractive to investors? I'd assume there are strategic attributes they should consider, and questions they should ask before they enter the mix?
Jesse: Sure. A couple items. Just today, the Senate Democrats announced a proposed $1 trillion healthcare agenda for the fall and the top of the ticket is $400 billion additional dollars for home and community-based care expansion.
That's a lot of dollars that are going to be on the table. And so the question, becomes how are the investors going to deliver that? And which sector are they going to focus on? So the money is going to be there. The reimbursement is going to have to catch up with the clinical models that are being developed. I think that the state and the federal regulations will follow the money as well. So if you look at just the 30,000-foot analysis, the budget for our Medicare and overall the healthcare spend in the United States is not sustainable. One thing that I think Dr. Schatzlein and I could probably talk a little bit about too is the development of technology has greatly expanded what can be done outside of the hospital. Things used to go from the hospital to an ASC or hospital to a specialist office. Now they can go from the primary care doctors or from the hospital into the home because of technological know-how from operators. So I think that it's going to be a perfect storm of there's a challenge to be met. And if the American healthcare system is built and designed for anything, it's solving problems in a way that makes investors money.
Dr. Schatzlein: I couldn't agree more Jesse, and again, Nashville healthcare investors are savvy. There's so much knowledge just walking down the street in Nashville. You absorb healthcare ideas and it's a great incubator for this sort of thing. I think the practice of medicine has changed so much. Just 30 years ago, the laying on of hands of the internist, feeling your liver, diagnosing whatever your problem was really has given way to so much imaging and laboratory testing and less in the way of hands-on physical diagnosis, which of course then lends itself to remote tech technologies, and 95% of the things the doctor can do for you in your presence, she can also do for you on a Zoom call or with a remote presence and a mid-level at your side in your home.
So these are all things that I think the public is now beginning to understand are available to them and their interest in waiting in a huge waiting room is further diminished from what it was. And particularly to generational things. Again, those young folks just won't do it. And so using technology to enable new forms of care means so much can be done in a less acute setting.
Morgan: Absolutely. We have covered a lot of the general basis as it relates to care at home. I know we could probably spend another episode going into a lot more of the technical details. Anything else that we have not discussed today that you may want to mention to our listeners?
Jesse: I'll just expand on what Dr. Schatzlein said about, the dynamic that's going to drive this growth is really the consumerism that is developed in healthcare individuals. One, the data shows there are having positive experiences. They're having good clinical outcomes. They have the technological capability to take advantage of some of the offerings that are coming to the home. And so as patients and their families demand it and seek it, the market will really respond to that. And it's not just arcane policy developments. It is meeting a clinical need, a consumer preference that I think is going to be a key component of it. And a silver lining of COVID is that people have realized that this can be an even more effective way to deliver care and manage health.
Morgan: Great. Thank you both for joining me today and look forward to talking again soon.
Jesse: Thank you, Morgan.
Dr. Schatzlein: I appreciate the opportunity to chat with Jesse and with you Morgan. And I think this should be helpful for your listeners.