ACO Update: A Third Horse Enters the Race

A few months ago, we noted that the release of regulations for ACOs would trigger an ACO services race across the healthcare landscape, where market participants would be sprinting to create service offerings that would help hospitals and physician practices become compliant with the CMS ACO regulations for sharing financial risk and the rewards.  So where do things stand six months later?

Just like earlier this year, the “Big Two” – Optum and Aetna – seem to be squarely in the lead of creating a turnkey ACO solution.  And in the last few weeks, we’ve seen a couple items of note from these two.  The first was an interview with Charles Kennedy, CEO of Aetna’s ACO division on HISTalk.  In the interview, Kennedy talks about how Aetna is pursuing the ACO opportunity via three go-to-market offerings:

• Clinical integration (basically an HIE via Medicity)
• A population-based approach with chronic disease management tools that typically rolls out to hospital employees as a way of deploying a light version of an ACO
• A full, private-label health plan, where a delivery system has their own health plan “powered by Aetna”

Last week, Optum announced that it has brought together its own ACO division with more than 700 people (!) focused on enabling “Sustainable Health Communities,” which is Optum’s version of the ACO concept.  Optum’s press release calls out its own five-part strategy:

• Patient and population health management
• Informatics, analytics, and technology
• Clinical integration, network development, and physician change management
• Payment model, contracting, and actuarial expertise
• Operating expertise

Interestingly, the press release also mentions that Optum is also bringing solutions to market targeted at commercial health plans and government payers – the other side of the ACO/shared risk/bundled payment equation.

The big question we have been trying to figure out here at TripleTree is who is going to follow “the Big Two” and their industry-leading ACO partnership announcements (specifically: Optum with Tuscon Medical Center and Aetna with Carilion Clinic)?  Where are the other healthcare companies that are going to pursue this mammoth opportunity?  Wellpoint’s acquisition of CareMore, McKesson’s acquisition of Portico, and Harris Corporation’s acquisition of Carefx certainly point to their interest in this market, as does Premier’s burgeoning alliance with IBM – but we have yet to see any of these or other players signal their interest in developing a broader set of provider-focused bundled payment service offerings.

This past week we think have finally seen another company unequivocally throwing its hat in the ring:  The Advisory Board Company announced the creation of a new company called Evolent Health, in partnership with the UPMC Health Plan.  Evolent intends to provide a platform for population and health plan management to leading health systems as they develop their value-based care strategies.  This follows ABCO’s earlier acquisitions of Crimson, Concuity, and Cielo MedSolutions – all earlier signals that the company was pursuing the hospital analytics, contracting, and registry marketplaces in a big way.

It makes perfect sense for The Advisory Board to do this – with nearly unparalled access to hospital c-suites across the country, it was only a matter of time before they launched a solution to address the many, many requests they must be getting to help with hospitals’ new risk-sharing strategies.  We see this as a welcome development in this space, and hope to see other HCIT players, undoubtedly facing their own questions from their healthcare clients, enter the fray as well.  Where are you, Accenture, Microsoft, and Elsevier?

Let us know what you think.

Conor Green

Conor Green is a Vice President at TripleTree covering the healthcare industry, and specializing in revenue cycle management and tech-enabled business services. You can email Conor at cgreen@triple-tree.com.

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TripleTree, LLC Advises Connextions in Sale to OptumHealth

Year to date, we’ve used the tag “consumerism” several times to reference innovation and consolidation where health care payers and providers are yielding control to consumers regarding more control in healthcare decision making.

TripleTree research is often brought to life through our deal flow, and we were pleased last week to announce that our client Connextions, announced its acquisition by OptumHealth – a seminal illustration of why consumerism in healthcare is so relevant.

Click here to read the full press release.

Carriers, providers, employers and other healthcare stakeholders are realizing that optimizing customer experience needs to become a critical component to their service delivery platforms.

The Connextions platform and use of analytics around member behaviors have created a unique acquisition, retention and up-sell platform for top carriers in the U.S., and a growing number of public and private hosts of insurance exchanges.

Click here to learn more about TripleTree’s perspectives on the impacts of consumerism and look for future research from our team on Seniors, Informatics, ACOs, Consumer Engagement and Social Media – all topics where consumerism is a key undercurrent.

Have a great week!

Chris Hoffmann

Chris Hoffmann is a Senior Director at TripleTree covering Cloud, SaaS and enterprise applications and specializes in CRM, loyalty and collaboration solutions across numerous industries. Follow Chris on Twitter or e-mail him at choffmann@triple-tree.com.

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Data Management Strategies for ACO’s Will Be a Good Harbinger of Success

With many providers currently assessing the viability and strategy to become an Accountable Care Organization (ACO), our team has been gauging what a successful ACO might look like in the post-healthcare reform world.

To know what one might look like, denotes having a handle on its core IP. And while many healthcare consultancies (both large and boutique) are attempting to map out strategic plans for their provider clients; the capabilities, resources and systems that providers must implement to become true risk-bearing entities is complex. Yet, we’ve boiled it down to two core competencies which will be table stakes for success.

• Care management/care coordination – Leveraging capabilities that extend the providers reach into the day-to-day lifestyles of their patients:
  • Prospective medical home assessments
  • Chronic care coordination
  • Critical care interventions
  • Remote-patient monitoring
  • Data-driven healthcare communities
  • Provider network coordination

• Data analytics/decision support – Establishing a 360° view of the patient condition to establish appropriate, patient-centric profiles
  • Data mining
  • Decision support
  • Evidence-based medical rules
  • Behavior-based messaging
  • Real-time analytics monitoring

While these two competencies have generally been managed by health plans – with the help of many third-party technology-enabling solutions – we think they will need to become core components for providers interested in sustaining a successful ACO. Beyond the sub-components listed above, our research also underscores risk for these providers, and moreover their ability to manage it.

The risk bearing providers of the future will likely address these components similar to the way health plans do it today, but the ACO model will promote better utilization. We’re in the midst of finalizing our research agenda our informatics and decision support for a formal Report Q2’11…it would be great to know what you think about this dynamic, high growth arena.

Jamie Lockhart

Jamie Lockhart is a Vice President with TripleTree covering healthcare software and service providers with a focus on consumer directed healthcare.  You can contact him at jlockhart@triple-tree.com

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A Simplified View Of The Healthcare Informatics Landscape

Our team is closely watching the most recent moves in Washington D.C. regarding the healthcare overhauls destined to impact healthcare business operations and related software applications.

Specifically, we’re focused on the investments being made in technologies that bring payers and providers closer to better care via informatics and analytics.  The applications for informatics in healthcare are vast and will profoundly impact care delivery – as such, its the central theme to a research effort we recently launched and which will culminate in a report scheduled for publication in Q2.  Looking at technologies in the healthcare provider sector alone, significant opportunities exist for operational efficiencies that touch areas like:

• Patient Identification: The ability to appropriately integrate healthcare data into a master data management / enterprise master patient index (EMPI) is mandatory for making data meaningful and actionable.
• Patient Surveillance: Drug safety, infection control and real-time patient monitoring are only possible with advanced data collection and processing against mass databases of content.
• Predictive Analytics:  Predictive analytics applied throughout the administrative and clinical functions within a hospital (care coordination, A/R management, and revenue cycle) enables clinical decision support that can increase staff productivity and enhanced care.
• Computer Assisted Coding:  Incorrect medical coding and billing costs millions of revenue dollars to healthcare providers. Using sophisticated technology, such as computer assisted coding, to help manage clinical information and allow hospitals and clinics to appropriately code treatment will become increasingly important as the industry transitions from ICD-9 to ICD-10.

As analytic capabilities continue to evolve, a full spectrum of valuation metrics have been achieved spanning from 8x (TEV/EBITDA) to 75x multiples via recent M&A transactions.  Content centric global acquirers made the first bets – Elsevier acquired MEDai, a predictive analytics and data mining company in 2008, and last year ThomsonReuters acquired Healthcare Data Management (a healthcare data analytics for self-insurance health benefits plans) and ProfSoft (a physician and hospital performance analytics provider to payers).  Additionally Wolters Kluwer acquired PharmacyOne Source at the end of last year.   Traditional healthcare players like Ingenix, Cardinal Health, and Medco all made similar moves in 2010.

As the proliferation of value-based purchasing continues across CMS and the private sector (just last week CMS issued a proposed rule that would establish a federal value-based purchasing program), the demand for informatics to better manage healthcare will continue to grow.

As TripleTree assesses the market and builds out our perspectives for the upcoming report, let us know what you think. Thanks and have a great week!

Emma Daugherty

Emma Daugherty is a Senior Analyst at TripleTree covering the life sciences sector with a focus on provider technologies and patient safety.  You can contact her at edaugherty@triple-tree.com.

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Ingenix Sells Clinical Development Outsourcing Business to Focus on the Safety and Effectiveness of Drugs and Devices

This morning, inVentiv Health announced that it will acquire Ingenix’s clinical development outsourcing business. According to press releases from both organizations the proposed transaction covers “businesses that generate approximately $400 million in annual gross revenue” and business units being acquired by inVentiv Health will retain the i3 brand name.

This is a bold move for inVentiv Health, which was taken private in August of 2010 by Thomas H. Lee Partners. Previously known more for its sales and marketing-related services to the life sciences industry than its clinical services, inVentiv Health now becomes a major player in the contract research organization (CRO) market. As part of inVentiv Health, i3 will continue to be led by CEO, Glenn Bilawsky, a CRO industry veteran with a proven track record of driving growth and innovation.

Now that inVentiv Health has a broad and deep portfolio of assets across the clinical and post-marketing life sciences services market, the most intriguing part of this transaction will be to see how and if inVentiv Health can integrate these different service lines and whether they will be able to successfully leverage customer relationships that both companies have in their respective businesses today to drive additional revenue. Historically, the sales and marketing teams in life sciences companies have had very little interaction with research and development, so it will be interesting to see if inVentiv Health is able to create new types of services that drive more collaboration across their clients’ operations and ultimately lead to better life sciences products.

From the Ingenix standpoint, this transaction is a clear illustration of the increased focus healthcare payers and providers are placing on health outcomes and comparative effectiveness of life sciences products. The remaining assets from i3 that are not being sold to inVentiv Health, including the Innovus, Quality Metric, Pharma Informatics, and Drug Safety/Epidemiology business units, and the CanReg and ChinaGate Regulatory Consulting businesses will be part of a newly-formed Ingenix Life Sciences division. According to a press release from Ingenix, these units “offer global solutions for evaluating health economics outcomes and late phase research, market access and reimbursement, data and informatics services, epidemiology and drug safety, patient-reported outcomes and regulatory consulting.”

With more and more blockbuster drugs going off patent and the economic pressures being felt across the healthcare industry, life sciences manufacturers can no longer rely on large marketing budgets to drive demand for their products. Healthcare payers have become much more selective in the products they will reimburse and have sponsored outcomes studies and comparative effectiveness research to help determine which care regimens create the highest return on investment. Additionally, with additional reimbursement risk being shifted to providers as a result of healthcare reform, physicians are and will continue to seek out products that will create the best outcomes for the lowest costs. These dynamics are clearly the impetus behind today’s announcement from Ingenix.

For now, we’ll continue to monitor this deal and new emerging ramifications of this deal on the sector…we’d be interested to know what you think.

Have a great week!

Jason Grais

Jason Grais is a Director at TripleTree covering the healthcare industry specializing in healthcare IT, population health management and emerging services in the life sciences sector. You can email him at jgrais@triple-tree.com

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Beyond Substance Abuse: Drug Safety Becoming a Major Health Concern

According to fda.gov, the Human Drugs Program monitors over 10,000 currently marketed drugs in the U.S.  According to the Centers for Disease Control (CDC), prescription drug spend in 2008 doubled from the previous decade as 10% of Americans now use five or more prescription drugs.

It’s not controversial to assert that drug information, education and compliance is a huge, complex and important issue confronting the healthcare landscape.

Given this complexity, it has become exceedingly difficult for physicians to track potential adverse reactions to drugs and maintain appropriate antibiotic prescriptions, particularly when they are diagnosing or administering care at the patient bedside.

Below is some backdrop and perspective on why TripleTree is following this so closely:

• The FDA currently tracks adverse drug events through a post-marketing surveillance program, compiling the results in their adverse event reporting system (AERS). While this is helpful to identify black box warnings, it is not designed to help the physician stay up to speed with new medical knowledge.
• The issues surrounding the use of prescription drugs are most severe in the hospital setting where patients are vulnerable to unforeseen interactions or medical errors that take place during the medication use process.
  • Many hospitals today are fighting these challenges pre and post-event, using clinical informatics tools that focus on reducing errors in prescribing or retroactively treating patients who have experienced an adverse event.
  • Unfortunately most events take place during the “monitoring stage” of the medication use process, when the adverse effects are most difficult to catch. For an outline of the five stages of the medication use process, see U.S. Pharmacopeia.
• Few hospitals have a system in place to monitor drug use during the patients’ stay.  According to a study conducted at the University of California, only one third of CA hospitals are using tech-enabled surveillance tools to help identify infections and those that did saw significant improvements in infection control practices and patient outcomes.
• Appropriate antibiotic use, known as antimicrobial stewardship, has been in the spotlight lately as the failure of antibiotics to effectively treat certain strains of bacteria becomes a more acute concern. Even with the constant influx of new drugs, many modern antibiotics have been so heavily (and often inappropriately) used that bacteria have developed resistance and rendered them ineffective.

For physicians who are not accustomed to employing clinical data and evidence-based guidelines for real-time decision making at the point of care, a change to incorporate drug safety at the point of care could been seen as a disruption to their workflow and very costly. However, the ramifications for ignoring adverse drug events (and increasing patient deaths) in the face of reform are equally concerning.

While the American Recovery and Reinvestment Act is oriented around the interoperability of healthcare data, significant hurdles exist to stimulate provider adoption.   TripleTree is paying close attention to the innovative vendors who offer clinical informatics technologies, decision support tools and patient surveillance systems.  These tools are bending the cost curves, and patient safety concerns, of drug safety enough to encourage physicians to adopt point of care solutions and will play a key role as health reform evolves.

We’d be interested to know what you think – have a great week!

Emma Daugherty

Emma Daugherty is an Analyst at TripleTree covering the life sciences sector with a focus on provider technologies and patient safety.  You can contact her at edaugherty@triple-tree.com.

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