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On the ground at J.P. Morgan's Health Conference


The J.P. Morgan Healthcare Conference kicked off in San Francisco on Monday. Updates can be found here throughout the conference with daily observations and news from finance reporter Tara Bannow. In addition, look for Tara’s reporter’s notebooks in our Modern Healthcare A.M. newsletter, additional news stories on or on Twitter @TaraBannow and @modrnhealthcr.

Monday, Jan. 7

Debt consolidation savings after a merger

Advocate Aurora Health consolidated its debt portfolio under a single indenture under its merger nine months ago, which health system Co-CEO Nick Turkal said will generate $301 million in cash flow savings in the first five years of the union. The system’s operating margin of 4.3% in the third quarter of 2018 and $383 million in operating income was similar year-over-year to the third quarter of 2017, according to Chief Financial Officer Dominic Nakis. Operating cash flow margin was 10.7%, or $1.2 billion, in 2017, and 9.7%, or $869 million, in the first three quarters of 2018. Headwinds include cost increases in labor and pharmaceuticals, as well as a payer mix shift toward Medicare and patients with high-deductible health plans. “These are the industry headwinds that we do all face,” Nakis said. The new health system has $18 billion in total assets, 262 days cash on hand, 27 hospitals and more than 500 sites of care.

Moving toward ‘one Intermountain’

Intermountain CEO Dr. Marc Harrison said the innovation that’s most important to his health system is its work around supply chain, the move toward “one Intermountain.” “We’ve really shifted from becoming a holding company to an operating company.” Intermountain is working to harmonize clinical quality across the enterprise. One way is through its virtual hospital, which now provides more than 40 services. “This is not a revenue maximization strategy. This is a human maximization strategy.” Intermountain plans to study keeping patients truly well using two geographic regions in Utah. The study, which began Jan. 1, will last three years.

Bert Zimmerli, Intermountain’s CFO, said Intermountain reduced its individual exchange health plan pricing for 2019 by 2.7%. “Some might say we left money on the table, but we do believe that’s the right thing to do.”

Intermountain, which has 95% of its assets in cash and investments, is also focused on nontraditional growth through Intermountain Ventures. Intermountain now has four spinoff companies, Zimmerli said.

Insurers look to managed care

Ken Burdick, CEO of WellCare Health Plans, said in a breakout session that his company is talking with regulators and elected officials in “literally every state” about the benefits of moving more of their population into a managed Medicaid setting. The company is championing Medicaid expansion in Florida and other states, as well as adding new categories of eligibility. “Costs are just getting prohibitive so they’re looking for solutions,” he said. “I’m convinced managed Medicaid is the solution as opposed to cutting people off of the roles.”

While other payers have been quickly buying up physician groups, Burdick said that’s not how WellCare plans to deploy its capital. Rather, he said the company can achieve effective, long-term partnerships through aligned incentive arrangements.

CHI-Dignity merger to close soon

Lloyd Dean, currently the CEO of Dignity Health said that leadership at Dignity and Catholic Health Initatives plan to close on CommonSpirit Health within the next few weeks. “Aligning ministries of this size certainly has complexity and we’re working to get it done.” Although Dignity and CHI presented together as CommonSpirit, Dean clarified they are still formally two separate organizations.

Dean said size is not the driver of the union, which he said will touch one in every four Americans once it’s completed. Rather, Dean said by combining the organizations’ expertise, resources and best practices with additional skills and capabilities, “We have an opportunity to impact healthcare in a way that certainly we could not do independently.”

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