Last Monday, two lawsuits were filed that strike at a fundamental challenge facing the U.S. health system:
In the District Court of NJ, a class action lawsuit (ANN LEWANDOWSKI v THE PENSION & BENEFITS COMMITTEE OF JOHNSON AND JOHNSON) was filed against J&J alleging the company had mismanaged health benefits in violation of the Employee Retirement Income Security Act (“ERISA”). As noted in the 74-page filing “This case principally involves mismanagement of prescription-drug benefits. “Over the past several years, defendants breached their fiduciary duties and mismanaged Johnson and Johnson’s prescription-drug benefits program, costing their ERISA plans and their employees millions of dollars in the form of higher payments for prescription drugs, higher premiums, higher deductibles, higher coinsurance, higher copays, and lower wages or limited wage growth… Defendants’ mismanagement is most evident in (but not limited to) the prices it agreed to pay one of its vendors—its Pharmacy Benefits Manager (“PBM”)—for many generic drugs that are widely available at drastically lower prices.”
The issue is this: what liability risk does a self-insured employer have in providing health benefits to their employees? Is the structure of the plan, the selection of providers and vendors, and costs and prices experienced by employees subject to litigation? What’s the role of the employer in protecting employees against unnecessary costs?
On the same day, in the District Court of Eastern Wisconsin, an 85-page class action lawsuit was filed against Advocate-Aurora Health (AAH) claiming it “uses its market power to raise prices, limit competition and harm consumers in Wisconsin:
- Forces commercial health plans to include all its “overpriced facilities” in-network even when they would prefer to include only some facilities.
- Goes to “extreme efforts to drive out innovative insurance products that save commercial health plans and their members money.”
- Suppresses competition through “secret and restrictive contract terms that have been the subject of bipartisan criticism.”
- Acquires new facilities, which then allows it to raise prices due to reduced competition
… without intervention, the health system will continue to use “anticompetitive contracting and negotiating tactics to raise prices on Wisconsin commercial health plans and their members and use those funds for aggressive acquisitions and executive compensation.”
The issue is this: is a health system’s liable when its consolidation activities result in higher prices for services provided communities and employers in communities where they operate? Is there a direct causal relationship between a system’s consolidation activities and their prices, and how should alleged harm be measured and remedied?
Two complicated issues for two reputable mega-players in the U.S. health system. Both lawsuits were brought as class actions which guarantees widespread media attention and a protracted legal process. And each contributes directly to the gradual erosion of public trust in the health system since the plaintiffs essentially claim the business practices of J&J and Advocate-Aurora willfully harm the individuals they pledge to serve.
In the November 2023 Keckley Poll, I asked the sample of 817 U.S. adults to assess the health system overall. The results were clear:
- 69% think the system is fundamentally flawed and in need of major change vs. 7% who think otherwise.
- 60% believe it puts its profits above patient care vs. 13% who disagree.
- 74% think price controls are needed vs. 7% who disagree.
- 83% believe having health insurance that’s ‘affordable and comprehensive’ is essential to financial security vs 3% who disagree.
- 52% feel confident in their ability to navigate the U.S. system “when I have a problem” vs. 32% who have mixed feelings and 16% who aren’t.
- And 76% think politicians avoid dealing with healthcare issues because they’re complex and politically risky vs/ 6% who think they tackle them head-on.
The poll also asked their level of trust and confidence in five major institutions “to develop a plan for the U.S. health system that maximizes what it has done well and corrects its major flaws.”
| % A great deal | % Some | % Not Much/None | |
| Health Insurers | 18 | 43 | 38 |
| Hospitals | 27 | 53 | 21 |
| Physicians | 34 | 53 | 14 |
| Federal Government | 14 | 42 | 44 |
| Retail Health Companies | 31 | 51 | 28 |
Clearly, trust and confidence in the health system is low, and expectations about solutions fall primarily on hospitals and doctors. Lawsuits like these widen suspicion that the industry’s dominated first and foremost by Big Businesses focused on their own profitability before all else. And they pose particular problems for sectors in healthcare dominated by not-for-profit and public ownership i.e. hospitals, home care, public health agencies and others.
My take
These lawsuits address two distinct issues: the roles of employers in designing their health benefits for employees including the use of PBMs, and the justification for consolidation of hospital and ancillary services in markets. But each lawsuit s predicated on a legal theory that prices set by organizations are geared more to corporate profits than public good and justifiable costs.
Pricing is the Achilles of the health system. Pushback against price transparency by some, however justified, has amplified exposure to litigation risk like these two and contributed to the public’s loss of trust in the system.
It is unlikely greater price transparency and business practice disclosures by J&J and Advocate-Aurora could have avoided these lawsuits, but it’s clearly a message that needs consideration in every organization.
Healthcare organizations and their trade groups can no longer defend against lack of transparency by defaulting to the complexity of our supply chains and payment systems. They’re excuses. The realities of generative AI and interoperability assure information driven healthcare that’s publicly accessible and inclusive of prices, costs, outcomes and business practices. In the process, the public’s interest will heighten and lawsuits will increase.
Paul
P.S. Nashville is known as a hot spot for healthcare innovation including transparency solutions. Check out this meeting February 29: https://www.eventbrite.com/e/leaping-into-the-future-of-healthcare-2024-insights-tickets-809310819447
Resources
Lawsuit 119120873885 (documentcloud.org)
Microsoft Word – Aurora Class Action Complaint (FINAL filed Feb. 5 2024) (aboutblaw.com) February 5, 2024
The Keckley Report November 10, 2023 www.paulkeckley.com
Sections
- Quotables: Memory Loss
- Quotables: Industry
- Care Management
- Corporate News in Healthcare
- Health Insurers
- Physicians
- Regulators
Quotables: Comments about Biden Age, Memory Loss, Ageism in Response to Special Counsel Robert Hur’s 345-page Classified Documents Special Report
“We have also considered that, at trial, Mr. Biden would likely present himself to a jury, as he did during our interview of him, as a sympathetic, well-meaning, elderly man with a poor memory…Mr. Biden’s memory also appeared to have significant limitations…from 2017 are often painfully slow, with Mr. Biden struggling to remember events and straining at times to read and relay his own notebook entries.”
Read the full Joe Biden classified documents special counsel report | AP News
“The special counsel investigating President Joe Biden’s handling of classified documents, Robert Hur, released a report Thursday that describes the President as a “well-meaning, elderly man with a poor memory.” Biden will not face charges for “willfully” retaining classified documents, but the report has reignited concerns about the President’s mental acuity. In a late-night press conference, Biden forcefully pushed back against the report’s findings, declaring, “My memory is fine.” But the incident could be “incredibly damaging” to the President…because people recognize it as “potentially true and potentially a giant campaign issue.” Another octogenarian politician, the Senate Republican leader, Mitch McConnell, also had a bad week in Washington. The long-awaited bipartisan deal on border security and Ukraine aid collapsed, with Senate Republicans turning on their own leader. “
Can Joe Biden Squash Concerns About His Age? | The New Yorker February 9, 2024
“I think covid has pushed us back in whatever progress we were making in addressing the needs of our rapidly aging society. It has further stigmatized aging,”
John Rowe, 79, professor of health policy and aging at Columbia University’s Mailman School of Public Health.
“Joe is 81, that’s true, but he’s 81 doing more in an hour than most people do in a day. Joe has wisdom, empathy, and vision. He has delivered on so many of his promises as President precisely because he’s learned a lot in those 81 years. His age, with his experience and expertise, is an incredible asset and he proves it every day.”
Jill Biden My thoughts on this week – pkeckley@gmail.com – Gmail (google.com) February 11, 2024
“With the two major candidates set to be an aggregate age of a hundred and fifty-nine on Election Day—Biden will be eighty-one, Trump will be seventy-eight—age was always going to be a factor in the campaign. In the coming days, the White House will surely batten down the hatches and try to refocus attention on Biden’s record, which will be a challenge. On Friday morning, the New York Times, the Wall Street Journal, and the Washington Post all led their home pages with stories about the President’s age and memory…. Moreover, some recent developments have moved in Biden’s favor. The Republican leadership’s decision to torpedo a bipartisan deal on strengthening border security robs them of the opportunity to pin chaos at the border entirely on him; the House G.O.P.’s effort to tar him with the actions of his son Hunter haven’t succeeded; the economy is powering ahead; economic sentiment is improving; and the stock market is doing so well that Trump is trying to claim credit for it. The next time Biden holds a press conference, he’d be well advised to focus on some of these things.”
Biden’s Righteous Fury at Being Called an “Elderly Man with a Poor Memory” | The New Yorker February 9, 2024
“When there’s a considerable amount of disease, you might expect a more broad-based decline in memory as well as other [mental] skills. But they are really quite dissociable. And in fact, one of the ways that a lot of older people compensate for their memory problems is by having very good reasoning and planning and judgment.”
Joel Kramer, a professor of neuropsychology who directs the UCSF Memory and Aging Center What to know about memory and aging in wake of Biden report – pkeckley@paulkeckley.com – PaulKeckley.com Mail (google.com) February 12, 2024
Quotables: Industry
Re: FTC actions toward healthcare: “Last September, the FTC sued private equity firm Welsh, Carson, Anderson & Stowe and U.S. Anesthesia Partners, alleging the two parties conspired to create monopolies for anesthesia services. Both Welsh Carson and USAP have tried to get the case thrown out, but the FTC recently doubled down. The agency asked the judge last month to ignore those companies’ pleas, calling their arguments “unavailing” in recent legal filings.
It’s not surprising the FTC is spending more time and resources on a lawsuit it initiated. But experts say the agency’s meticulous arguments and persistence to put Welsh Carson and USAP’s business strategy on ice sends the clearest warning yet: Firms that try to consolidate markets for physician services as a means to jack up prices won’t get away without a fight.”
FTC sends signal to private equity on medical firm consolidations (statnews.com) February 12, 2024
Re: Mark Cuban Cost Plus Pricing for Drugs: “Whether cost-plus business models deliver value for money is a rhetorical question, the answer to which is “No.” Every cost-plus business model is an anathema to delivering value for money.
Anyone who can build a cost-plus business model based on marketing that touts how they will benefit is brilliant, if cynical. Anyone who does that is also part of the problem. Health economy stakeholders must eventually stop treating employers like Jimmy Buffett’s protagonist: “fins to the left, fins to the right, and you’re the only bait in town.”
Hal Andrews, CEO Trilliant Health Why the Mark Cuban Cost Plus Drug Company Is a Boon for the Pharmaceutical Industry (trillianthealth.com) February 7, 2024
Re: Senate HELP Committee hearing with drug company CEOs opening remarks by Committee Chair Bernie Sanders (D-VT): “The United States government does not regulate drug companies, with very few exceptions. The drug companies regulate the United States government … in a corrupt political system” in which their well-paid lobbyists — 1,800 last year in D.C. — “make sure Congress did their bidding.”
For the past 25 years, the entire pharmaceutical industry spent over $8.5 billion on lobbying and more than $745 million on campaign contributions. If you want to know why you’re paying the highest prices in the world, America, that’s why.”
Bernie Sanders, Chair Senate HELP Committee Senators Thrash Pharma CEOs for Pricing Drugs Higher in the U.S. | MedPage Today February 9, 2024
Re: Romney commentary about Senate HELP hearing with drug company CEOs: “Appreciate these executives taking time away from your responsibilities at your respective companies to be here to inform us, and in some cases to be berated by us, and give us an opportunity to pontificate on our various topics.”
Sen. Mitt Romney (R-Utah) opening comment at Senate HELP Committee Hearing on Drug Prices featuring testimony from Merck CEO Robert Davis, Johnson & Johnson CEO Joaquin Duato, and Bristol Myers Squibb CEO Chris Boerner Bernie Sanders gets little from pharma CEOs on drug prices (statnews.com) February 8, 2024
Re: Penn Health CEO opposition to provider-sponsored health plans: “I advocate for the patient and beat insurance companies into the ground to make sure our patients are getting the very best care. With insurance companies, their business model is to reduce the cost of care. … Health systems should not be an insurance company; we should partner with insurance companies like we have done with Independence Blue Cross where we are partners in population health [and share accountability for the health care of patients in a specific geographic region]. These kind[s] of things are a step in the right direction.”
Kevin Mahoney, CEO of the University of Pennsylvania Health System the Philadelphia Business Journal 2024 Economic Forecast Penn Health System CEO warns hospitals are at ‘inflection point’ in fight for survival – Philadelphia Business Journal (bizjournals.com) February 7, 2024
Re: health services deal activity in 4Q 2023: “PE dealmaking in healthcare services declined an estimated 16.2% year-over-year in 2023, while platform deals hit a seven-year low as acquirers reeled from high interest rates and a prolonged labor crunch. Healthcare services companies made up 20% of leveraged loan default value in 2023, and large deals remain difficult to finance, according to our Q4 2023 Healthcare Services Report.
In 2024, rainmakers will be closely following interest rate cuts and antitrust scrutiny targeted at PE healthcare services as they wait for more favorable exit opportunities.
2023 saw momentum shift fundamentally in the PE healthcare services market. PE sponsors announced or closed 788 deals in 2023, with the quarter-over-quarter pace throughout the year trending moderately downward. This makes 2023 the thirdstrongest year on record for PE healthcare services investing by deal count, well above pre-pandemic levels—but the high-level figure masks significant changes in the size and structure of deals getting across the finish line… the key trigger for the resumption of larger platform trades will be material interest-rate cutting by the Federal Reserve, which the market currently expects to happen in the second half of 2024”
Q4 2023 Healthcare Services Report | PitchBook February 8, 2024
Care Management
Study: Disparities in heart attack care: The study examined disparities of outcomes for older adults hospitalized for heart attacks in the U.S., Canada, England, the Netherlands, Israel and Taiwan. Finding:
The number of women hospitalized for heart attacks between 2011 and 2018 declined at a greater rate compared to men, according to a study that analyzed data from six different high-income countries. In all six countries, women had higher mortality rates and were less likely to receive cardiac interventions like catheterization or treatment to restore blood flow to the heart. In 2018, women in the U.S. hospitalized for severe heart attacks had an 18.4% chance of dying within 90 days, compared to 17.1% for men.
Corporate Reports (Announcements of Consequence to Entire Industry)
Beckers: Biggest companies in HC: Below is a list ranking 10 of the largest healthcare companies, including health plans and systems, by revenue over the most recent four quarters.
- UnitedHealth Group: $371.6 billion
2. CVS Health: $357.8 billion
3. McKesson: $301.5 billion
4. Cencora (Amerisource Bergen): $271.6 billion
5. Cardinal Health: $216.2 billion
6. Cigna: $195.3 billion
7. Elevance Health: $170 billion
8. Centene: $154 billion
9. HCA Healthcare: $65 billion
10. Molina Healthcare: $34 billion
Note: Of these, 6 are insurers, 3 are biopharma, and 1 (HCA) is a provider organization.
15 largest healthcare companies by revenue | Becker’s (beckershospitalreview.com)
CVS Health: CVS Health reported fourth-quarter revenue and adjusted earnings that topped expectations on strength in its health services business: health services generated $49.15 billion in revenue for the quarter, a 12.3% increase compared with the same quarter in 2022. But the company cut its full-year profit outlook, citing higher medical costs that are dogging the broader insurance industry. CVS lowered its 2024 adjusted earnings forecast to at least $8.30 per share, down from a previous guidance of at least $8.50 per share.
Significance: CVS Health (which includes Aetna) is expanding its services in direct patient care activities.
CVS Heath (CVS) Q4 2023 earnings (cnbc.com)
Everside Health- Marathon Health Merger announced: Last Thursday, the “providers of advanced primary care and occupational health for employer and union-sponsored clients” announced the combination will result enable growth with their network of 630 U.S. employer and union-sponsored clients, comprising 680+ near-site, onsite and network health centers in 41 states. “All existing shareholders, including General Atlantic, New Enterprise Associates and Oak HC/FT to Support the Combined Entity” per the company news release.
Marathon Health | Press (marathon-health.com) February 8, 2024
Health Insurers
Study: insurance premium increases associated with lower household income: Researchers analyzed the association of increasing health care premium costs with earnings inequality and wage stagnation among US families with employer-sponsored health insurance projecting findings across a 32-year period (1988-2019). Findings:
Health insurance premiums for a family on employer coverage made up about 8% of employees’ compensation in 1988. If they stayed at that level for the next 30 years, the typical US family with employer coverage would have earned an additional $8,774 in 2019… The cumulative value of lost earnings in that period for a typical family was $125,340 (in 2019 dollars).
This study suggests that increasing health insurance premium costs are likely associated with decreased earnings and increased income inequality, including by race and ethnicity, among US families receiving employer-sponsored health insurance and are meaningfully associated with wage stagnation.
Physicians
Study: PCP EHR use trends: Researchers followed EHR use by 141 primary care physicians for 4 years (2019-2023). Findings:
- “The average time PCPs spent in the EHR per 8 hours of scheduled clinic appointments increased (+28.4 minutes, 7.8%), as did time in orders (+23.1 minutes, 58.9%), inbox (+14.0 minutes, 24.4%), chart review (+7.2 minutes, 13.0%), notes (+2.9 minutes, 2.3%), outside scheduled hours on days with scheduled appointments (+6.4 minutes, 8.2%), and on unscheduled days (+13.6 minutes, 19.9%).
- Primary care physicians received more patient medical advice requests (+5.4 messages, 55.5%) and prescription messages (+2.3, 19.5%) per 8 hours of scheduled clinic appointments, but fewer patient calls (−2.8, −10.5%) and results messages (−0.3, −2.7%).
- While total time in the EHR continued to increase in the final study year (+7.7 minutes, 2.0%), inbox time decreased slightly from the year prior (−2.2 minutes, −3.0%). Primary care physicians’ average FTE decreased 5.2% from 0.66 to 0.63 over 4 years.
More Tethered to the EHR: EHR Workload Trends Among Academic Primary Care Physicians, 2019-2023 | Annals of Family Medicine (annfammed.org) January-February 2024
Study: Association between state abortion laws and OB-GYN residency: In this cross-sectional study of 2463 OBGYN residency program applicants, between 2022 and 2023, there was a small but significant decrease in the percentage of applicants to programs in states with stricter abortion laws. Note: State-specific abortion restrictions currently affect the training of approximately 44% of obstetrics and
Network February 7, 2024
Regulators
Senate 340B changes proposed: A Bipartisan Senate working group has proposed 340B Changes: The SUSTAIN 340B Act would allow 340B providers, including community health centers and hospitals, to contract with external pharmacies to deliver discounted medications to patients and also allows forTop of FormBottom of Form sites that are wholly owned and “clinically and financially integrated” with the 340B provider to qualify for discounts.
340B reform proposal comes out of Senate working group (statnews.com) February 2, 2024
Senate tackles physician pay: Minority Whip John Thune (R-S.D.) and Sens. Marsha Blackburn (R-Tenn.), John Barasso (R-Wyo.), Debbie Stabenow (D-Mich.), Mark Warner (D-Va.), and Catherine Cortez Masto (D-Nev.) announced their intent to develop long-term fixes to issues with Medicare’s physician payment structure and to update the Medicare Access and CHIP Reauthorization Act. The lawmakers said they will be reaching out for input from various groups invested in the issue on how to ensure financial stability for providers and improve patient outcomes.
Senators start work on Medicare physician payment reform – STAT (statnews.com) February 9, 2024
Senate Finance Committee hearing on AI in healthcare: Last week, the committee began deliberation about the need for legislation focused on payment policies, responsible use and accountability of AI in healthcare. Chair Ron Wyden (D-Ore.) is proposing a bill that would mandate companies assess the impacts of automated decision making and require reporting to the FTC.
Hearing | Hearings | The United States Senate Committee on Finance February 8, 2024
CMS: Medicare Advantage Final Rule Clarification: Last week, CMS issued a 14-page directive to Medicare Advantage sponsors clarifying requirements and clarifications relating to Medicare Advantage (MA) coverage criteria for basic benefits, use of prior authorization, and the annual review of utilization management tools
In the memo, Medicare said it’s fine for insurance companies to continue using firms like NaviHealth, whose software estimates how long someone might need to recover in a nursing home or rehab facility. “But that prediction alone cannot be used as the basis to terminate post-acute care services…”
Regulators emphasized in the memo that the use of AI tools may result in bias against individuals who are different from people whose data are used to train AI systems, pointing out that federal law prohibits discrimination on the lines of race, color, national origin, sex, age, or disability.
“MA organizations should, prior to implementing an algorithm or software tool, ensure that the tool is not perpetuating or exacerbating existing bias, or introducing new biases.”
Medicare Advantage plans can’t deny care with AI, CMS warns (statnews.com)
CMS: 2022 National Health Expenditure Report
- NHE grew 4.1% to $4.5 trillion in 2022, or $13,493 per person.
- Medicare spending grew 5.9% to $944.3 billion (21% of total NHE).
- Medicaid spending grew 9.6% to $805.7 billion (18% of total NHE).
- Private health insurance spending grew 5.9% to $1,289.8 billion (29% of total NHE).
- Out of pocket spending grew 6.6% to $471.4 billion (11% of total NHE).
- Other Third-Party Payers and Programs and Public Health Activity spending declined 10.2% to $564.0 billion (13% of total NHE).
- Hospital expenditures grew 2.2% to $1,355.0 billion, slower than the 4.5% growth in 2021.
- Physician and clinical services expenditures grew 2.7% to $884.9 billion in 2022, slower growth than the 5.3% in 2021.
- Prescription drug spending increased 8.4% to $405.9 billion in 2022, faster than the 6.8% growth in 2021.
CMS, December 2023
CMS: Restrictions on accrediting organizations: Following concerns of biased, inconsistent survey results and conflicts of interest, CMS issued a proposed rule to strengthen its oversight. Under its proposed rule, accrediting organizations* would be required to:
- Align their standards, survey activity requirements and staff training sessions more closely with state survey agency practices.
- Match the standards set under Medicare and Medicaid Conditions of Participation and Conditions for Coverage in their application process.
- Limit the fee-based consulting services provided to healthcare facilities the organizations accredit, and report how they will monitor, prevent and deal with conflicts of interest related to these services.
- Prohibit owners, surveyors or other employees with ties to a healthcare facility accredited by the organization from participating in surveys or related activities.
- Submit a public correction plan to CMS if the organization is performing poorly.
*Impacted organizations include the 9 accrediting organizations approved to survey and accredit Medicare-certified facilities including The Joint Commission, Center for Improvement in Healthcare Quality and Community Health Accreditation Partner, among others.
