Last Thursday, NBC News reported that HCA Healthcare, the nation’s second biggest hospital operator, was guilty of nurse under-staffing at Asheville NC Mission Hospital endangering patient care. The 182- hospital chain countered its hospitals operated safely as evidenced by earning A/B from Leapfrog in 80% of its hospitals.
It comes the day of a settlement between 7,000 New York State Nurses Association against 4 hospitals and the same day healthcare industry leaders and investors vacated the 41st JP Morgan Healthcare Conference in soggy where CEOs heard about a mild recession, the shifting investment landscape in healthcare, near-term operating challenges and opportunities for hospitals operators
Background: The Players
The impetus of the story is a 57-page investigative report sponsored by the Service Employees International Union (SEIU). The NBC News investigative team conducted interviews with 17 current/former staff of Mission. Per SEIU, HCA Healthcare persists in nurse understaffing putting its shareholders ahead of patient care in its day-to-day operations noting ”In 2021, during the height of the pandemic and fueled by its $7 billion in profits, HCA made over $8 billion in share repurchases alone. HCA’s share repurchases were so high, that out of thousands of publicly traded companies, HCA had the 17th largest share purchases that year. Additionally, HCA had the most share purchases
in 2021 of any company in the US healthcare industry.” The report notes that in 19 of 20 states where HCA operates hospitals, its staffing levels are 20% or more below staffing standards necessary to patient safety (even after adjusting for positions relocated to corporate services.
SEIU has been around since 1921: its first contract in 1934 was with the San Francisco Hospital District covering 11 hospitals. Today, more than half of its 2 million members work in healthcare settings. They’re predominantly hourly employees including nurses and others who’ve traditionally gotten less attention than physicians from hospital boards.
HCA was founded in 1968 at a time of considerable social unrest in the U.S.—the assasinations of Martin Luther King and Robert Kennedy, the Tet offensive in Vietnam that sparked the anti-war movement and passage of the Civil Rights Act marked the Republic’s most consequential year in its history. In Nashville, Dr. Thomas Frist Sr., Dr. Thomas Frist Jr. and Kentucky-Fried chicken founder Jack Massey envisioned hospitals a fruitful opportunity to give choices to patients and physicians for whom options were limited in most communities. They bet on the new Medicare program’s funding formula vis a vis payroll taxes and the desire among physicians for create physician-friendly hospitals. They also created a unique culture in which leaders were groomed internally by the company and flashiness unacceptable.
They built the company to 182 hospitals, 125 surgery centers, 284,000 employees and $59 billion in revenue. Then, as now, the company had critics: famed New England Journal of Medicine Editor Arnold (Bud) Relman bemoaned HCA’s role in “the medical industrial complex” and SEIU has claimed the company’s “efficient operating model” is a way to put profit before nurse wellbeing.
Mission Hospital (Asheville) was acquired by HCA in February 1, 2019. It previously operated under a COPA arrangement (Certificate of Public Advantage) wherein it operated as a 6-hospital regulated monopoly in western North Carolina. HCA paid $1.5 billion for Mission committing capital to major future projects and creating the Dogwood Trust to fund community health projects.
As is SOP for hospital managers, HCA reduced staffing and restructured its contracts with physicians prompting vocal criticism internally and community concern externally. Since the deal, HCA Healthcare has reduced its national footprint from 185 hospitals in 21 states to 182 hospitals in 20 states. And after finding Mission charges to privately insured patients by Mission were 300% above Medicare, NC State Treasurer Dale Folwell asked the company to sell the hospital back to the community.
My take:
In one respect, Mission is a case study applicable to every hospital in the U.S. health system. Pressure to reduce operating costs and increase revenue is a constant.
It’s especially sensitive in markets where 1 or 2 hospitals dominate: quasi-monopolies in communities are widespread and a target of FTC scrutiny.
But the lessons illustrated in Asheville are NOT limited to hospital funding and workforce shortages. They’re bigger and wider:
- Bigger because they are likely to incite state-regulations around minimum staffing, workforce performance, hospital price controls and more. And the delineation between “for-profit” and “not-for-profit” hospitals may be revisited in light of research showing the designation is not correlated to better quality or community benefits. (Per studies, individual health system differ but ownership status per se is inconsequential).
- Wider in that it’s applicable to insurers, biopharma and retail health heavyweights who’ve emerged from the pandemic profitable and stronger. Media attention to healthcare is increasing, and with it, more aggressive scrutiny of capital deployment, board independence, executive compensation and more.
I have followed HCA Healthcare closely as a life-long resident of Nashville: it sparked creation of the Nashville Healthcare Council and anchors the economy of the city. And I live part-time in Asheville so I followed this story closely.
There’s no doubt SEIU and others will benefit by taking on HCA. Mass discontent with the healthcare industry is palpable and the hourly workforce in (4 million) hospitals is sympathetic.
So, while some might call it a cheap shot, most in the Asheville community and beyond are inclined to believe the balance between profit and purpose in healthcare is disappearing. Healthcare moneyball is a sensitive issue for hospitals and everyone else in the health system. Old explanations, legal constructs, governance policies and tax-status may be artifacts of the past. Thus, this story about Mission and SEIU is more than a predictable shot; it’s part of something much bigger for hospitals?
Paul
PS I had the misfortune of using our air travel system last week: six flights over four days. One on time, 3 cancellations and 5 incorrectly attributed to “technical issues” and “weather delays.” If healthcare operated like the air travel system, we’d kill millions and blame everything other than our well-documented flaws. We’re far from perfect, but relatively speaking, we’re not bad and getting better. The same can’t be said for air travel.
Resources
SEIU HCA: Higher Healthcare Costs for America https://hcavsamerica.org/wp-content/uploads/2022/02/SEIU_Investigative_Report_
Morgenson et al Some workers at U.S. hospital giant HCA say it puts profits above patient care NBC News January 12, 2023 www.nbcnews.com/author/gretchen-morgenson-ncpn
Quotable
We’re also proud to present our 2022 nursing strategy, which focuses on advocacy and leadership, staffing and care team support, education and academic partnerships, and professional practice. Nurses are the cornerstone of patient care, and HCA Healthcare is committed to investing in and advancing nurses while addressing staffing challenges. “Sam Hazen CEO 2022 Impact Report “www.hcahealthcare.com
“The well-earned healthcare hero halo effect for health systems seems to have largely subsided. Health systems find themselves squarely in the crosshairs of media, unions, and regulators alike. Many are frustrated by the narrative building against them and the lack of advocacy from state and national associations.” Anne Hancock Toomey, Hollie Adams and Crista StarkThe Big Story: 5 takeaways from the 2023 J.P. Morgan Healthcare Conference Jarrard January 15, 2023 https://jarrardinc.com/jarrard-insights/quick-think/2023/01/stormy-weather-at-jpmorgan-healthcare-conference/
“At a time when tech executives are bracing for a slowdown in revenue growth, many at the JPM conference sought to remind investors of the economic resilience of their sector by emphasizing that illnesses, either acute or chronic like mine, don’t disappear during economic downturns. JP Morgan said in its earnings call on Friday that the bank’s economists are expecting a mild recession to hit in the fourth quarter of this year… The objective for these companies has always been to capture a bigger slice of the enormous “fixed” pie, which in 2021 accounted for over 18% of US GDP. Nevertheless buzzwords like “margin expansion” and “path to profitability” were the phrases du jour heard from established public and VC-backed companies alike.” Marina Tempkin Pitchbook January 15, 2023 www.pitchbook.com
Covid
Covid cases increasing: The seven-day average of weekly new COVID-19 cases in the U.S. increased 16.2% to 67,243 compared with the previous average of 57,847, according to data published Friday by the Centers for Disease Control and Prevention.
CDC www.cdc.gov
Study: Covid perception mildly influenced by media utilization: The U of Mo. researchers examined factors that shape perceptions of COVID-19 at the local level using questions from the 2020 Cooperative Election Study (CES. Findings:
“Respondents’ perceptions are correlated with actual case rates, although liberals and Democrats estimate the pandemic as more severe than Republicans and conservatives, as do CNN viewers compared to Fox News viewers. We found only limited evidence of a relationship between perceptions of the pandemic in a respondent’s county and political outcomes. Results add to accumulating evidence that both news media and political predispositions shape perceptions of COVID-19, but raise important questions about whether and how the pandemic has shaped, and will continue to shape, political outcomes.”
Jake Haselswerdt, Sarah Gollust Awareness of COVID-19 at the Local Level: Perceptions and Political Consequences Journal of Health Politics, Policy and Law 10351896.https://doi.org/10.1215/03616878-10351896
Moderna sets price for its Covid vaccine: Last Monday, Moderna announced it is considering pricing its Covid-19 vaccine in a range of $110 to $130 per dose in the U.S. when it shifts from government contracting to commercial distribution of the shots. The range is similar to the one Pfizer Inc. said in October it was considering for the Covid-19 vaccine it developed with BioNTech SE.
The expected price for commercial insurers would be significantly higher than the per-dose cost in Moderna’s supply contracts with the federal government: $26 per dose in its federal supply contract (July 2022) and $15 to $16 per dose in earlier supply contracts. The company said Monday it expects minimum Covid-19 vaccine sales of about $5 billion for 2023, with the potential for more vs. $18.4 billion in Covid-19 vaccine sales in 2022.
Moderna Considers Price of $110-$130 for Covid-19 Vaccine Wall Street Journal January 9, 2023 www.wsj.com/articles/moderna-considers-price-of-110-130-for-covid-19-vaccine
Physicians
Study: PE acquired medical practice clinical workforce changes: Researchers estimated changes in clinician workforce composition in PE-acquired practice sites relative to non-PE-acquired independent practice sites for dermatology, ophthalmology, and gastroenterology specialties for the period 2014-2019. Findings:
“In aggregate and across the study period, the clinician replacement ratio was higher for PE-acquired practices compared with non-PE-acquired controls (1.75 versus 1.37), as well as within each specialty and clinician type (physician versus advanced practice provider). Relative to non-PE-acquired control practices, we also found significant yearly increases in the number of advanced practice providers at PE-acquired practices after acquisition. Taken together, these findings suggest differential changes in workforce composition at PE-acquired practices, especially a shift toward advanced practice providers for care delivery.”
Bruch et al Workforce Composition in Private Equity–Acquired Versus Non–Private Equity–Acquired Physician Practices January 2023 https://doi.org/10.1377/hlthaff.2022.00308
AAMC: More women and older physicians in workforce:, Per AAMC’s 2022 Physician Specialty Data Report, which provides the numbers of physicians, residents, and fellows in 48 largest specialties in 2021:.
- The largest number of active physicians are in primary care specialties: internal medicine (120,342 physicians), family medicine/general practice (118,641), and pediatrics (60,305).
- 37.1% of the active physician workforce in the U.S. were women.
- The physician workforce is aging: 46.7% of active physicians in the U.S. were age 55 or older—up from 44.9% in 2019 and 37.6% in the first specialty report, which covered 2007
Physician Specialty Data Report AAMC www.aamc.org
Health Insurers
Study: Medicaid expansion associated with reduced hospitalizations as a result of postpartum coverage: Researchers evaluated whether the Medicaid expansions affected rates of postpartum hospitalization for the period 2010–17 to examine hospitalizations after childbirth. Key finding: We found a 17% reduction in hospitalizations during the first sixty days postpartum associated with the Medicaid expansions and some evidence of a smaller decrease in hospitalizations between sixty-one days and six months postpartum. Our findings indicate that expanding Medicaid coverage led to improved postpartum health for low-income birthing people.”
Note: Medicaid covers 4 in 10 births in the U.S. but only mandates postpartum coverage for 60 days. As of November, 40 states have expanded their Medicaid programs. More than half of the states, including some non-expansion states, have taken steps to extend postpartum coverage to one year.
Steenland, Wherry Medicaid Expansion Led to Reductions in Postpartum Hospitalizations Health Affairs January 2023 https://doi.org/10.1377/hlthaff.2022.00819
UnitedHealth Group reports strong financial results for 2022: UnitedHealth Group released its earnings Friday: Highlights:
- Total revenues in 2022 were $324.2 billion, up 12.7% year over year. In the fourth quarter, revenues were $82.8 billion. For 2023, the company projects revenues of $357 billion to $360 billion.
- Total net earnings in 2022 were $20.6 billion ($22.19/share), up 16.4% year over year.
- The company’s medical loss ratio was 82% for 2022 and 82.8% for the latest quarter. Days claims payable were 49.9 in the fourth quarter compared to 46.8 a year ago.
UHC www.uhc.com
Poll: insurer portal use high but suboptimal for solving enrollee problems: Harris surveyed 2,047 insured adults September 27-29, 2022, (ages 18 and over). Highlights:
- Insured Patients Use Patient Portals for test results (70%), appointments (64%), medical records (63%), finding a healthcare provider (58%) and reviewing insurance benefits (54%).
- 54% say they don’t know whom to contact if they have an issue with a bill or claim.
- 43% of insured Americans report receiving an unexpected bill because their insurance did not cover as much as expected—a decrease from a 2021 MITRE-Harris Poll Survey, when 47% reported a billing surprise.
MITRE-Harris Poll, December 20, 2022 www.mitre.org/news-insights/news-release/mitre-harris-poll-many-patients-feel-ignored-or-doubted
Prescription Drugs
Study: DTC ad spending high for drugs with limited therapeutic value: DTC drug advertising increased by nearly 5-fold from 1997 to 2016, with 663 000 television commercials reported in 2016. Television advertisements account for roughly two-thirds of total direct-to-consumer advertising spending. Researchers analyzed the therapeutic value (i.e., whether they represent advances over existing treatments) of 81 drugs subject to most direct-to-consumer television advertising from 2015 to 2021. Findings:
“Fewer than one-third of the most common drugs featured in direct-to-consumer television advertising were rated as having high therapeutic value, defined as providing at least moderate improvement in clinical outcomes compared with existing therapies. Manufacturers’ television advertising spending on included products rated as low therapeutic value was $15.9 billion from 2015 to 2021. “
Patel et al Therapeutic Value of Drugs Frequently Marketed Using Direct-to-Consumer Television Advertising, 2015 to 2021JAMA Netw Open. January 13, 2023;6(1):e2250991. doi:10.1001/jamanetworkopen.2022.50991
Hospitals
Study: 1 in 4 admissions associated with an adverse event: The Harvard research team analyzed the frequency, preventability, and severity of patient harm in a random sample of 2809 admissions from 11 Massachusetts hospitals during the 2018 calendar year. Findings:
- 23.6% had at least one adverse event, 32.3% of which required substantial intervention or prolonged recovery,
- A preventable adverse event occurred in 191 (6.8%) of all admissions, and a preventable adverse event with a severity level of serious or higher occurred in 29 (1.0%).
- Adverse drug events were the most common adverse events (accounting for 39.0% of all events), followed by surgical or other procedural events (30.4%), patient-care events (which were defined as events associated with nursing care, including falls and pressure ulcers) (15.0%), and health care–associated infections (11.9%).
Bates et al The Safety of Inpatient Health Care January 12, 2023 N Engl J Med 2023; 388:142-153 DOI: 10.1056/NEJMsa2206117
Fitch: Nonprofit healthcare systems are in for a tough 2023: The credit ratings agency downgraded the nonprofit health system sector to “deteriorating” in August and maintains that outlook in its latest report, acknowledging the likelihood that negative outlooks for health systems will outnumber positive ones for a time while concluding conditions will improve slightly later in the year. In December, Moody’s Investors Service reported 34 healthcare organizations were rated B3- or lower, holding nearly $65 million of combined outstanding debt. Improvements in the investment markets or debt waivers would soften some of the hit to credit ratings, the Fitch report noted.
Fitch Ratings www.fitchratings.com
Study: For-Profit hospitals getting greater share of GME funding: Between 2011 and 2020, nonprofit hospitals received the majority of GME payments. Although nonprofit hospitals’ participation increased by 13.4% (from 798 to 905 facilities), their subsidies decreased by 6.5% (from $9.42 billion to $8.81 billion). During this period, for-profit hospitals’ participation in GME increased by 49.2% (from 124 to 185 facilities) and their subsidies increased by 47.3% (from $565.2 million to $832.8 million).
“These findings suggest that the health care industry increasingly values GME as an asset rather than a money-losing endeavor…. This study did not find significant operational differences (e.g., intern/resident-to-bed ratios) between for-profit and nonprofit hospitals. However, the effect of profit status on educational outcomes remains unknown due to the lack of performance measures for GME.”
Kadalka et al Comparison of the Financial and Operational Characteristics of For-Profit and Nonprofit Hospitals Receiving Federal Graduate Medical Education Payments, 2011-2020 January 10, 2023 JAMA January 13,. 2023;329(2):173-175. doi:10.1001/jama.2022.21460
Opinion Polls
Study: Gen Z views on corporate purpose: U.S. consumers of all ages are increasingly skeptical that the brands they buy from behave ethically overseas, even as they say they want to buy from companies that reflect their social values. Relative to older generations, younger consumers express strong demand for corporate action on hot-button domestic issues like race and abortion but lower demand for activism on traditional geopolitical issues. “A loss of faith in American exceptionalism may be driving these preferences, particularly among Gen Z: Compared with baby boomers, the net share of Gen Z adults who say they are proud to live in the United States is 57 percentage points lower.”
For Gen Z, the Future of Corporate Activism Is Local First, Global Second Morning Consult January 9, 2023 https://morningconsult.com
Regulators
HHS extends COVID-19 public health emergency to April : The spending bill also extends Medicare telehealth flexibilities through 2024, which previously would have ended 151 days after the PHE expired. It also extends acute hospital care at home waivers and flexibilities for two years through 2024. Similar to telehealth, the deadline for hospital at home waivers was tied to the status of the PHE. More than 250 hospitals have been approved by CMS to participate in the acute hospital care at home program.
HHS www.hhs.gov
FTC using PBM inquiry to protect smaller companies: “The FTC has for years allowed mergers and business tactics that lower prices for consumers, even if they put small companies out of business. Now, under Chair Lina Khan, the agency is focused more on protecting competitors, especially small and medium businesses.
It’s a major philosophical shift in the world of antitrust enforcement, especially for industries whose practices the FTC polices, like PBMs. And those drug industry middlemen, which negotiate rebates with drugmakers in exchange for formulary placement, figure prominently into Khan’s plans to reinvigorate the FTC’s enforcement of fair competition.
It’s a major philosophical shift in the world of antitrust enforcement, especially for industries whose practices the FTC polices, like PBMs. And those drug industry middlemen, which negotiate rebates with drugmakers in exchange for formulary placement, figure prominently into Khan’s plans to reinvigorate the FTC’s enforcement of fair competition. Already in 2022, the FTC opened a formal investigation into several major PBMs, including CVS Caremark, Express Scripts, OptumRx, and Humana, and their role in shaping prescription drug costs.”
John WilkinsonWith the FTC’s more expansive approach to antitrust, PBMs are in the crosshairs Stat News January 13, 2023 www.statnews.com/2023/01/13/ftc-more-expansive-approach-pbm-crosshairs
