Healthcare in the age of the coronavirus

Jul 21, 2020

Mark McCombe, BlackRock’s Chief Client Officer, hosted conversations with three senior leaders from the healthcare industry — Gianrico Farrugia, President and CEO of Mayo Clinic; Craig Thompson, President and CEO of Memorial Sloan Kettering Cancer Center; and David Wichmann, CEO of UnitedHealth Group. They discussed how the efforts to combat the coronavirus are progressing, how technology and telemedicine are impacting the industry and what the future of healthcare may look like.

After the conversation, Erin Xie, BlackRock’s Head of Health Sciences Investing for Active Equities, provided perspectives on how the topics discussed are affecting the opportunity set for healthcare investors.

  • Mark McCombe: Well, thank you for that introduction Zach.  Now, I’m delighted to welcome three leaders in healthcare who’ve been in the eye of this pandemic that has swept the globe. 

    First, I’d like to introduce Dr. Gianrico Farrugia, President and CEO of the Mayo Clinic.  Dr. Farrugia has spent over 30 years with the Mayo Clinic, which remains one of the preeminent healthcare institutions in the world, and he took over as CEO in 2019.

    Dr. Craig Thompson, President and CEO of Memorial Sloan Kettering also joins us.  Dr. Thompson became President and CEO in November 2010 after a long and distinguished career with Memorial Sloan Kettering.  Memorial Sloan Kettering is the world’s oldest and largest private institution devoted to cancer prevention, treatment, research and education.

    Later on in the session, I will be having a conversation with Dave Wichmann, CEO of United Health Group, the largest health insurer in the US.  And then, finally, I’ll discuss investment implications for the healthcare sector with BlackRock Erin Xie, who heads our Health Sciences Investment Group within our Active Equities Business.

    Mark McCombe: Well, Dr. Farrugia and Dr. Thompson, you’ve very kindly allowed me to call you by your first names.  So, let’s get started.  And Craig,  Perhaps just could you situate for us a little bit your experience as a long-term healthcare professional of just what you've seen and experienced in New York with regard to this pandemic?

    Craig Thompson: Well, certainly, Mark.  It was, as everyone knows, just an unprecedented event as New York became the epicenter beginning in March.  it really was amazing to be part of the care response here in New York as our death total reached over 20,000 here in the City and our infection rate got to over 230,000 people over the last four months.  It really required a coordinated level of effort at the state, the federal, and all of the individual hospitals that make up New York’s extensive healthcare system. 

    This is the first time in my medical career of over 40 years that we faced an entirely new pathogen that had this level of transmissibility. 

    Past viruses had either been very different in how severely ill they made people and that limited its infection, or they weren’t very transmissible.  Other coronaviruses before us, like SARS-1, had not been particularly transmissible.  So, even when it arrived in the United States, contact tracing did extremely well.  We did not appreciate the transmissibility.

    It got way ahead of our normal mechanisms of controlling an epidemic and it required a full conversion of all the hospitals here in New York to just being capable to care for the surge of COVID patients.  At our own hospital at the time it started, we were treating 150,000 patients actively with cancer.  We knew from the Chinese and Italian experience that they were more at risk for getting COVID and from dying potentially of COVID.  So,  That mean establishing massive increases in our PPE supplies to be able to do that, as well as to develop treatment protocols.

    So, as we see the surge now in the Southwest part of the United States, there are better treatment protocols.  Our PPE supply lines are better and that’s what is changed as from the emergent emergency that we saw March, April, and May to now this resurgence where the healthcare system has better protocols to deal with it.

    Mark McCombe: perhaps, Gianrico, I can turn to you, because, you know, the Mayo Clinic has a lot of operations in Florida and Arizona, two of the states that are seeing this resurgence.  What have you learned from the experience out of New York and how are you applying that as this resurgence takes place in these different southern states?

    Gianrico Farrugia: Thank you.  And as you heard from Craig, we’ve learned a lot, learned a lot from what’s going on outside of the United States, from New York, and from our own work. 

    Therefore, a lot of the models were built around the fact that what did we understand about previous pandemics and that included the pandemic, the Great Influenza pandemic of a huge surge and then a second wave.  .  We learned from it by physical distancing and later by masking, by testing, by contact tracing.  The surge did not appear as much in other parts of the country and, therefore, it left a lot of people exposed.  And now, we’re seeing that play out.

    It’s relevant that in some countries this resurgence was stopped because there was an ability to clamp down.  But, in a country as big as ours with states playing different roles, we’ve seen how it is really important to learn and be able to identify quickly and then intervene.  And what we’ve done is we’ve co-op’d resources with our partners to predict what’s going to happen next two or three weeks and then we have to live with this for several more months at least.  And, therefore, like Craig, we’re going to have look after patients with COVID and patients with complex and/or serious disease and do them both at the same time.  And, therefore, predicting and then being able to juggle the two and modulate who’s coming to our hospital has been a big help.

    We’ve also developed our own testing to be able to keep our hospital safe.  And importantly, this resurgence, this innovation around telemedicine has allowed us to modulate how many people actually need to come to see us, combining that with a partnership we have with Medically Home developing new models of keeping patients with serious disease safe.

    Mark McCombe: there’s obviously a lot of debate about testing and testing protocols. there’s a lot of debate about CDC guidelines around things like wearing masks.  Can you just give us a sense how would you inform us of the importance of testing?

    Gianrico Farrugia: This virus is different in the sense that it is highly infectious, as you heard, and it’s infectious even when somebody has it and is asymptomatic.  Without testing, you simply cannot know who has the infection.  You cannot contact trace and, therefore, you cannot limit spread.  Therefore, if we want to be able to safely reopen our economy, if we want to be able to control this surge and future waves, and as I’ve said, I believe there’s going to be a frequency of about eight weeks of a wave

    We have to be able to test and give results to people as quickly as possible a big push for Mayo Clinic as we developed our own testing capabilities is to make sure we can give results within that 24-36 hour time period, which is crucial. 

    Mark McCombe: Craig, I'd love to get your perspectives in how you’re seeing people’s behavior change given the uncertainty.  are you seeing people beginning to reengage with healthcare in the normal course of business or is there still a great deal of uncertainty and fear

    Craig Thompson: Sure.  at the start of March, we were treating 150,000 patients.  Our hospital was filled, our outpatient clinics. 

    Our ability to treat patient with radiation oncology was completely full, because that’s pretty much how we run as a referral center.  We were down on our cancer care delivery about 80% by the end of April.  We have recovered back to nearly 90% of our pre-COVID levels now, because we’ve been able to control the epidemic here in New York. 

    This week, we had the first day with no one having died of COVID since March in the greater New York area.  And, in addition, we are gone now multiple days without any new patients being diagnosed as part of our screening procedures.

    We’re able to, as Gianrico said, now do surveyance testing of all of our staff.  We test every patient as they come to care

    PPE is the biggest issue that makes a difference and the PPE that really matters that he pointed out is the universal masking of everyone involved in healthcare.  It is really the first, second, third, fourth, and fifth thing that really controls the spread of this virus. 

    So, all measures of hygiene, hand washing, changing your clothes, protective gowns, were equal, given equal importance. 

    But we are getting public health fatigue, And so, we’re trying to focus on the central messages of what they should do, that we still need social distancing wherever possible.  And at the same time, we are engaging people in returning to normal activities of healthcare and self-maintenance. 

    Where we are concerned is that the 20-somethings here in New York have experienced a resurgence in the incidence of surveyance testing and their caseload.  All other age groups are declining still in New York.  But, we are worried that the social congregation when they initially opened up restaurants and bars led the 20-somethings to thinking this was over and we’re reinforcing that message, starting in the healthcare industry That's what the US needs to understand as we move forward.

    Mark McCombe: With so many people on the frontline and dealing with these extraordinarily traumatic situations, how have you been dealing with your colleagues from a mental health point of view and just a resilience in managing through this pandemic? 

    Gianrico Farrugia: Look.  So, this is a real phenomenon.  You just heard Craig describe what happens when you have to deal with something for week after week, now month after month.  It’s a mixture of pride and exhaustion, both from the healthcare worker standpoint, as well from the hospital itself.  They’ve supported each other.  They’ve kept each other going and the results show.

    At the same time, it is incredibly hard to put on protective equipment several times a day, to go home and also be careful to keep physically distanced so that you don’t bring infections back to the hospital.  increasingly, we have to look after the mental health, the physical health of our workers so they can continue to provide help to patients.  And that will include finding ways of unexpected joy in the workplace and that’s what we’re working on at the moment

    Mark McCombe: As you think about where we are today, the US is on a different path from many other countries.  What insights would you bring about the importance of having a national strategy to respond to a pandemic like this, as well as obviously the local nuances that exist within the state structure? 

    Craig Thompson: So, I want to reinforce something Gianrico said.  What really helped the most for us at Memorial Sloan Kettering beyond the masking and the PPE was the ability to test.  And we were lucky in that we were able, through our Research division our Laboratory Medicine program the first FDA approved test for New York City. 

    That testing was critical to limit the spread of infection. 

    We need a national strategy of testing that duplicates that, that we all can feel confident we’re getting the same test results.  And, as Gianrico said, it’s got to be done in real-time.  We return results now within 12 hours everywhere in our care mission.  We need that on a national level.  That has to have national leadership. 

    The other area that’s critically important on a national level was to reestablish supply chains of PPE those supply chains were broken and there was no way to reestablish them.

    The national effort to reestablish that working publicly and private has given a lot more confidence to the healthcare system as we move forward.  But we need that to continue on into the future if we’re going to do this effectively. 

    Mark McCombe: Gianrico, Can you give us a little bit of your kind of perspectives go – looking forward as to what changes in the healthcare system now then also perhaps just a little bit of a view on things like the national strategy?

    Gianrico Farrugia: Yes.  Let me start off by saying that in times of crisis it is important to speak with one voice.  Even when there’s uncertainty, you need to have some sort of clarity with the understanding that things may change over time.  as we deal with this pandemic, it becomes crucially important to understand that funding, the National Institute of Health, funding NCI, funding the FDA, funding state healthcare departments is critical. Funding has to remain a priority.

    We have to further integrate telehealth with face-to-face visits so that they’re not either/or. (Chyron: Gianrico Farrugia says we have to further integrate telehealth with face-to-face visits.)  They become one whole experience for the patient.  And fundamentally, we have to as healthcare workers, as a healthcare industry, take the reins and say we are going to transform healthcare from within.  We know how to do it, we’ve shown that we can do it, and we have to make sure that we do not let up on some of the change that needs to happen within our system.

    Mark McCombe: Craig, We're three years or five years down the line from today.  When we look back on this experience, what lessons do you think we should have learned?  And secondly, how as a non-healthcare professional, how do you think COVID-19 will be viewed and treated in that point of time? 

    Craig Thompson: Yeah, I think we’ll have some experimental vaccines even within this year.  But one that will be safely given to the entire 300 million Americans probably will take several years. (Chyron: Craig Thompson believes we’ll have experimental vaccines this year. But it will be several years before all Americans can be vaccinated.) And so, we’re going to have to continue to use public health measures to control this and to continue providing healthcare to all the other diseases. 

    The opportunity to change, which is what Gianrico introduced, is telemedicine’s time is there.  The ability to use digital platforms to deliver and enter people into care we have got to expand on in this opportunity.  The federal government and the state governments have been very helpful in that in relaxing restrictions.  It will be a terrible shame if we revert to the things that restricted our ability to communicate with patients on digital and telemedicine platforms and to do remote access and monitoring of patients as we go forward. 

    Mark McCombe: Well, Gianrico and Craig, I'd just like to thank you again for both of you for giving up your very valuable time and wish you all the very best to all your colleagues as we move forward through this pandemic.  Thank you.

    Well, I'm thrilled now to be joined by Dave Wichmann, CEO of the United Health Group. 

    You have over 300,000 serving 140 million people worldwide, you probably have an incredible seat on and view on what’s been going on with this pandemic.  I wonder if we could just tee things off with you giving us a bit of perspective on how you think the healthcare industry has managed through this unprecedented global shock. 

    Dave Wichmann: Yeah.  Well, I appreciate it, the opportunity to do so and give strong recognition to, first of all my team, the 325,000 people globally of which about 120,000 of them are clinical workers and they’re on the front lines of care and they’re on the front lines of care that you read about.  .

    I think the health system has done a very good job not knowing exactly where to go, there is no known treatment for COVID-19.  And so, it was really the individual ingenuity of the people that are in hospital systems and care delivery practices that made a very large difference in managing this pandemic to date. 

    I'd say one of the things that we focused on very early was we realized that testing was going to be a constraint in healthcare.  And so, we had to go from, modest amount of tests per day to, you know, nearly a million. 

    So, one of the things you don’t see in our company is the scientific capacities..

    We also, adapted to working with the healthcare delivery system on creating an infectious disease model and a way to protect the health workforce.  we created a mechanism so that when people encountered a COVID-19 infected patient, would actually follow a clinical protocol at the same time make sure that they were safe and not transmitting virus onto other patients.  So, that was designed in collaboration with HCA and some others to make that happen.

    And then we needed to address health equity issues.  There’s a high correlation to the impact of the disease and the living conditions of individuals.

    Now overall, I think the industry has adapted nicely

    Mark McCombe: I think you’ve reported previously has been the delaying of elective procedures.  Could you perhaps give us a bit of perspective on is that a sort of second health crisis as more and more people have decided to stay away from the hospital systems or delay important procedures.  And as you look forward, how do you think the health industry will cope with perhaps the catch-up that needs to happen over the coming months and years?

    Dave Wichmann: Yeah.  That's a very good question.  We like to refer internally here that there’s three pathogens.  One’s COVID-19, the virus, the second is the economic downturn and the third is the deferred care that’s occurred.  There’s been a measured reduction in the number of heart attacks and in strokes and you know that that’s not because of the fact that the prevalence has dropped, but rather people did not seek care for their heart attack or stroke. 

    you see the same thing with respect to access to primary care and specialists. an almost three-quarter reduction in access to those services in the initial instance and that resulted in a material reduction in what we call first time fills for pharmacies as well. 

    Dave Wichmann: So, what we showed in our earnings call, was that there was a significant deferral of procedures through the second quarter and our expectation is that procedures will be seasonally up in the third and the fourth quarter of this year and we expect that the acuity levels of those visits will be up as well.

    Mark McCombe: Can you tell us a little bit about like what does it actually mean practically and how are you as an organization thinking about kind of the use of technology in the healthcare system going forward?

    Dave Wichmann: Yeah.  Well, just to give you a perspective, telemedicine was used thirtyfold in the month of April relative to the month of January this year.  So, we engaged a full four million telemedicine visits, you know, as just in our own operations.  we enabled telemedicine visits directly with their own doc and that’s where telemedicine needs to go. 

    What we’re doing is we’re building a broader capacity around the home, which we think is essential.  It’ll be part of the care, of the clinic of the future. (Chyron: Dave Wichmann says that the home will be part of the clinic of the future.) What that really requires is that you have a really strong digital signaling platform, which gives the biometrics are of the patient. 

    And I think you’ll see advances in all these fronts.  I know you will from us over the course of the next six months and I imagine the industry broadly will advance.

    Mark McCombe: Can we talk just for a second about kind of the future of the health industry, both in the US and globally?  what do you see in terms of the cost dynamic of healthcare?  And does telemedicine, for example, reduce the cost?  are there other measures that have to be brought in that will actually increase costs? 

    Dave Wichmann: Yeah.  Well, I think the – you're going to see rising use of information for decision making and greater alignment of incentives to the health system around achieving strong outcomes experiences and lower cost structures broadly. 

    I think telemedicine in general will continue to be utilized. 

    So, making sure that the physicians and the patient actually know based upon a unified portable medical record which has AI deployed to determine next best action.  That's where telemedicine needs to go.  all in an order to achieve the triple aim, which is to reduce healthcare costs, improve experiences, and to improve outcomes for the patient. 

    Mark McCombe:  As you look forward, over the next three years or five years, what do you think will change forever as a result of this pandemic and what things have we learned that you think will actuallyguide medicine and healthcare?

    Dave Wichmann: I think the biggest transition you’ll see in the next five years is how ambulatory care becomes –what we’ve learned is there’s a lot of myths about procedures that have to be performed in facilities, either doctor’s offices, hospitals, outpatient centers, that really simply don't need to. 

    I think you’re going to see the home and the ambulatory markets, meaning the primary care through ambulatory surgery, just explode.  

    Mark McCombe: thank you again for joining us on a very busy day and taking the time out to speak to our colleagues and partners across the world.

    Dave Wichmann: Well, we appreciate it.  We’re going to keep working for America, for South America, and the world and aiding new discovery around treatment, around cure

    Mark McCombe:  All right, well let me bring in Erin here.  Erin’s the head of BlackRock’s Health Science’s investing arm, which invests actively across the healthcare sector.  Erin’s a PhD and has been with BlackRock for coming up on 20 years, all dedicated to healthcare industry. 

    Erin, welcome to the session and thanks for spending time with us.

    Mark McCombe: in what areas are you seeing some of the more important innovations in healthcare and what are some of the key themes that make up your macro investment thesis today?

    Erin Xie: Sure.  So, I like to think we actually are really at the inflection point of genomics revolution and digital, digital revolution. (Chyron: Erin Xie says we are at the inflection point of the genomics revolution and the digital revolution.) From the genomics side, I think the industry is really benefiting from decades of genomics research.  So, we really have much deeper understanding of human biology and also the causes of diseases. 

    So, across multiple therapeutic areas we’re seeing some really exciting new medicines emerging.  For example, in cancer therapy versus historical chemotherapy, we’re really seeing new ways of medicine targeting specific cancers.  there are companies, for example Seattle Genetics was really at the forefront of a so-called antibody drug conjugate, which they very smartly designed antibody that look for specific cancer cells and also drag a toxin linked to the antibody and when the antibody look for the cancer cells, the toxin does the double killing.  And it’s this type of technology and many other very exciting cancer drug pipeline that really are pushing a new wave of medicines.  And this is not just in cancer.  We’re seeing great medicine emerging in autoimmune diseases and as well as genetic diseases. 

    Elsewhere, we’re also seeing robotic surgery being developed and still we’re very early in either.  So, quite bit of room to improve the technology and adoption.  Even hospital beds these days have smart function.  There’s also many new device and tools for remote monitoring of people’s health conditions, such as, you know, your blood sugar or heart, you know, heart rate.  All of this, I think, really the – really make the underlying companies great investment opportunities.

    Mark McCombe: Erin, you’ve been an investor in health sciences for nearly two decades now.  I'm sure you’ve seen some incredible changes and evolutions during that time.  But perhaps you could just give us a few examples of how you – you’re taking advantage of the dispersion in the market as you think about your investment strategies.

    Erin Xie: when hospitals really tried to dedicated resources to take care of the COVID patients, a lot of the elective procedures were canceled or delayed.  So, there’s some really high-quality medical device companies manufacturing elective procedure products.  Their stocks really got hurt badly. 

    We think from a long-term perspective this actually represents very attractive price point for these securities as we think the elective procedures will come back as the COVID situation normalize at some point.  It’s really a matter of when, not if.  And this is act – the market actually make such securities, some very high-quality companies, for example, Boston Scientific, Stryker, so forth, very attractive.

    Mark McCombe: Erin, thank you for that.

    We’ve heard from two of the leading CEOs of some of the most renowned hospital systems in the country and globally, and also from Dave Wichmann from United Healthcare Group, who’s really given us insight into how that healthcare industry is evolving.  And Erin, you’ve brought us home with some really fascinating investment insight. 

    So, I'd just like to say thank you, again, to all the panel members and particularly to all of those colleagues of theirs working on the frontlines to get us through this pandemic.  So, with that, Zach, I'd like to hand it back to you.  And thank you.


Extended conversation with Dr. Gianrico Farrugia and Dr. Craig Thompson

Watch the entire interview with Dr. Farrugia, CEO of the Mayo Clinic & Dr. Thompson, CEO of Memorial Sloan Kettering

Extended conversation with David Wichmann

Watch the entire one-on-one interview with United Health CEO David Wichmann

Key insights from this session

Combatting the virus

Without testing, you simply cannot know who has the infection, you cannot contact trace and, therefore, you cannot limit spread. Therefore, if we want to be able to safely reopen our economy, if we want to be able to control this surge and future waves, we have to be able to test and give results to people as quickly as possible. We need a national strategy of testing that we all can feel confident in, and it’s got to be done in real-time.

Quotation start

"We need a national strategy of testing that we all can feel confident in, and it’s got to be done in real-time.”

Quotation end
Craig Thompson President and CEO of Memorial Sloan Kettering Cancer Center

Rise of telemedicine

The use of telemedicine has exploded during the pandemic, and it will continue to be utilized going forward. But we also need to see further advances in the technology. As telemedicine grows, it’s critical to make sure that physicians and patients have access to unified portable medical records that leverage artificial intelligence to help determine the best course of action. We need a much more informed and engaged consumer and physician experience based upon the best available evidence in order to achieve a triple aim: to reduce healthcare costs, improve experiences and improve outcomes for the patient. And we’ve shown that we can do this by managing integrated systems of care that are supported by information and technology.

Future of healthcare

In the past few months, a lot of myths have been shattered about the quality of services that patients can receive and the scope of practice that can be conducted in home or ambulatory settings. We showed that these alternative places of care can serve the needs of consumers in a much broader way than they have in the past. As a result, we believe the home and ambulatory markets, from primary care through ambulatory surgery, look to be set for tremendous growth.

Attendee polling results

Do you plan to overweight or underweight healthcare across your equity portfolios in the next year?

Attendee polling results from the healthcare session.

Source: BlackRock. Number of respondents = 317.

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Dr. Gianrico Farrugia
CEO, Mayo Clinic
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Mark McCombe
Chief Client Officer, BlackRock
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Dr. Craig Thompson
CEO, Memorial Sloan Kettering
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David Wichmann
Chief Executive Officer, United Health
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Erin Xie
Head of Health Sciences Investing, Active Equities, BlackRock
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BlackRock Future Forum 2020

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BlackRock Future Forum 2020