Welcome to The Donut Hole’s weekly summary. The news doesn’t stop. Lucky for you, we are here to help you take in the week that was in the business of healthcare.
Hospitals are taking on a surgical robot "monopoly"
Franciscan Health, Valley Medical Center, and Kaleida Health have mounted a legal battle against Intuitive Surgical, the company that makes the da Vinci surgical robot, alleging its monopoly position gives the company a "near-stranglehold" on the market for all the parts and services the robots need after hospitals buy them.
Some of the allegations are pretty wild. In one, a hospital says Intuitive Surgical remotely shut down a robot "in the middle of a procedure" which forced the surgeon "to convert the procedure to open surgery with the patient on the operating table," after the hospital said it was considering a service contract with a third party.
Intuitive Surgical sells the da Vinci surgical robot to hospitals for anywhere from $500,000 to $2.5 million each. A majority of Intuitive Surgical's $4 billion of annual revenue, though, comes from instruments, accessories, and service contracts that are needed to keep the robots operating.
It's worth remembering there is no evidence robotic-assisted surgeries lead to better outcomes than traditional minimally invasive surgeries.
Potential impact on you: The debate over Intuitive’s monopoly position is likely interesting to those of you in surgery. To us, this is emblematic of a larger problem in our healthcare system. Namely, this highlights the idea that health system investments in advanced equipment is, at best, a mixed bag. When hospitals purchase expensive devices or make other sexy or cosmetic investments that don’t improve quality, the public and patients are the ones who ultimately fund those purchases via higher priced care. You could argue that patients would’ve been better off if the health systems that sued Intuitive instead used the money spent on the da Vinci device to make marginal quality improvements and more importantly lower prices.
Large self-insured employers lack power in hospital price negotiations
Well, this is hardly a shock. As some employers look to contract directly with hospitals in an effort to lower healthcare costs, researchers found that large self-insured employers likely do not have enough market power to extract lower prices, according to a study published in The American Journal of Managed Care. The study examined the relationship between employer market power and hospital prices every year between 2010 and 2016 in the nation's 10 most concentrated labor markets and found that hospital market power far outweighs employer market power, suggesting employers will not be successful in lowering prices alone. Instead, the paper recommends that employers may want to consider forging purchase alliances with local government employee groups.
In recent years, some larger employers have cut out the middlemen to strike deals directly with hospitals. For example, General Motors entered into an arrangement with Detroit's Henry Ford Health System in 2018. Walmart, Walt Disney and Boeing have executed similar strategies. By circumventing traditional health insurers, companies hope they themselves can negotiate better deals. This study throws cold water on that approach.
Potential impact on you: This article highlights the market power most large health systems enjoy. To truly bend the healthcare cost curve, policies will need to focus on hospital prices.
Truveta Grows to Represent More Than 15% of all U.S. Patient Care with Three New Health Provider Members, closing Series A with $95 Million in Funding
Truveta, a for-profit company formed by a collection of health systems, announced a $95M Series A and three additional health system members. Truveta offers de-identified clinical data for research and patient care use cases.
Truveta’s 17 health provider members provide more than 15% of all patient care in the United States. Participating health systems include Providence, Advocate Aurora Health, Trinity Health, Tenet Healthcare, Northwell Health, AdventHealth, Baptist Health of Northeast Florida, Baylor Scott & White Health, Bon Secours Mercy Health, CommonSpirit Health, Hawaii Pacific Health, Henry Ford Health System, Medstar Health, Memorial Hermann Health System, Novant Health, Sentara Healthcare, and Texas Health Resources.
Potential impact on you: The real world data space has attracted significant venture capital and private equity investment over the past 5-10 years. This is a pretty cool example of health systems partnering to form an entity they themselves control. Presumably, this will make more clinical data available for high value use cases that should benefit overall care (e.g. more new therapies to market, improved care quality etc.). There is a debate to be had here around if the health systems or the patients should own this clinical data. We’ll be watching to see if patient advocates turn their attention to this issue as Truveta grows.
PBMs and Drug Spending in 2020: Data from CVS Health, Express Scripts, Navitus, and WellDyne
As always, Drug Channels surfaces some excellent data on drug spend. The article does an excellent job describing the limitations of the PBM-reported data, but there are still some clear trends you should keep in mind.
All major PBMs report flat or declining spend on tradition (i.e. small molecule) drugs but high single digit to double digit growth in specialty (i.e. biologics) drug spending in 2020
Specialty drug spend accounted for greater than 50% of total drug spend for 4 of the 5 reporting PBMs. The growth of specialty spending has been driven by higher levels of generic substitution for traditional drugs, deeper rebates on traditional drugs, and faster utilization growth for specialty drugs
Higher utilization, not unit cost changes, is driving more of the specialty drug spending increase
Potential impact on you: This likely doesn’t have a huge impact on you, but it’s a good reminder that the debate over drug costs in this country needs to be a nuanced one. There are certainly areas of inefficiency where drugs cost far more than they should, but overall costs are increasing only marginally. The larger driver of spending is utilization.
Related to the debate is the opportunity to reform drug plan design to avoid punishing patients for needing expensive medication. But that’s a discussion for another issue!
Other news you may like:
Teladoc Health and Microsoft Collaborate to Create a Unified Practice Experience for Clinicians
How Doximity parlayed its popularity with doctors into a blockbuster IPO
DeepMind and a rival release dueling code for protein-folding AI
MedStar Health taps real-world data company COTA to advance cancer care
Biden executive order sparks debate on physician noncompete agreements
Davita, former CEO charged for alleged noncompete conspiracies
Wugen unveils $172M to take natural killer cell therapies to solid tumors
Have a great week!
— Hannah and Caleb Bank, Co-founders
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