If you’re a U.S. health industry watcher, it would appear the $4.5 trillion system is under fire at every corner. Pressures to lower costs, increase accessibility and affordability to all populations, disclose prices and demonstrate value are hitting every sector. Complicating matters, state and federal legislators are challenging ‘business as usual’ seeking ways to spend tax dollars more wisely with surprisingly strong bipartisan support on many issues. No sector faces these challenges more intensely than hospitals.
In 2022 (the latest year for NHE data from CMS), hospitals accounted for 30.4% of total spending ($1.35 trillion. While total healthcare spending increased 4.1% that year, hospital spending was up 2.2%–less than physician services (+2.7%), prescription drugs (+8.4%), private insurance (+5.9%) and the overall inflation rate (+6.5%) and only slightly less than the overall economy (GDP +1.9%). Operating margins were negative (-.3%) because operating costs increased more than revenues (+7.7% vs. 6.5%) creating deficits for most. Hardest hit: the safety net, rural hospitals and those that operate in markets with challenging economic conditions.
In 2023, the hospital outlook improved. Pre-Covid utilization levels were restored. Workforce tensions eased somewhat. And many not-for-profits and investor-owned operators who had invested their cash flows in equities saw their non-operating income hit record levels as the S&P 500 gained 26.29% for the year.
In 2024, the S&P is up 5.15% YTD but most hospital operators are uncertain about the future, even some that appear to have weathered the pandemic storm better than others. A sense of frustration and despair is felt widely across the sector, especially in critical access, rural, safety net, public and small community hospitals where long-term survival is in question. The cynicism felt by hospitals is rooted in four conflicts in which many believe hospitals are losing ground:
Hospitals vs. Insurers: Insurers believe hospitals are inefficient and wasteful, and their business models afford them the role of deciding how much they’ll pay hospitals and when based on data they keep private. They change their rules annually to meet their financial needs. Longer-term contracts are out of the question. They have the upper hand on hospitals.
Hospitals take financial risks for facilities, technologies, workforce and therapies necessary to care. Their direct costs are driven by inflationary pressures in their wage and supply chains outside their control and indirect costs from regulatory compliance and administrative overhead, Demand is soaring. Hospital balance sheets are eroding while insurers are doubling down on hospital reimbursement cuts to offset shortfalls they anticipate from Medicare Advantage. Their finances and long-term sustainability are primarily controlled by insurers. They have minimal latitude to modify workforces, technology and clinical practices annually in response to insurer requirements.
Hospitals vs. the Drug Procurement Establishment: Drug manufacturers enjoy patent protections and regulatory apparatus that discourage competition and enable near-total price elasticity. They operate thru a labyrinth of manufacturers, wholesalers, distributors and dispensers in which their therapies gain market access through monopolies created to fend-off competition. They protect themselves in the U.S. market through well-funded advocacy and tight relationships with middlemen (GPOs, PBMs) and it’s understandable: the global market for prescription drugs is worth $1.6 trillion, the US represents 27% but only 4% of the world population. And ownership of the 3 major PBMs that control 80% of drug benefits by insurers assures the drug establishment will be protected.
Prescription drugs are the third biggest expense in hospitals after payroll and med/surg supplies. They’re a major source of unexpected out-of-pocket cost to patients and unanticipated costs to hospitals, especially cancer therapies. And hospitals (other than academic hospitals that do applied research) are relegated to customers though every patient uses their products. Prescription drug cost escalation is a threat to the solvency and affordability of hospital care in every community.
Hospitals vs. the FTC, DOJ and State Officials: Hospital consolidation has been a staple in hospital sustainability and growth strategies. It’s a major focus of regulator attention. Horizontal consolidation has enabled hospitals to share operating costs thru shared services and concentrate clinical programs for better outcomes. Vertical consolidation has enabled hospitals to diversify as a hedge against declining inpatient demand: today, 200+ sponsor health insurance plans, 60% employ physicians directly and the majority offer long-term, senior care and/or post-acute services. But regulators like the FTC think hospital consolidation has been harmful to consumers and third-party data has shown promised cost-savings to consumers are not realized.
Federal regulators are also scrutinizing the tax exemptions afforded not-for-profit hospitals, their investment strategies, the roles of private equity in hospital prices and quality and executive compensation among other concerns. And in many states, elected officials are building their statewide campaigns around reining in “out of control” hospitals and so on. Bottom line: Hospitals are prime targets for regulators.
Hospitals vs. Congress: Influential members in key House and Senate Committees are now investigating regulatory changes that could protect rural and safety net hospitals while cutting payments to the rest. In key Committees (Senate HELP and Finance, House Energy and Commerce, Budget), hospitals are a target. Example: The Lower Cost, More Transparency Act passed in the the House December 11, 2023. It includes price transparency requirements for hospitals and PBMs, site-neutral payments, additional funding for rural and community health among more. The American Hospital Association objected noting “The AHA supports the elimination of the Medicaid disproportionate share hospital (DSH) reductions for two years. However, hospitals and health systems strongly oppose efforts to include permanent site-neutral payment cuts in this bill. In addition, the AHA has concerns about the added regulatory burdens on hospitals and health systems from the sections to codify the Hospital Price Transparency Rule and to establish unique identifiers for off-campus hospital outpatient departments (HOPDs).” Nonetheless, hospitals appear to be fighting an uphill battle in Congress.
Hospitals have other problems: Threats from retail health mega-companies are disruptive. The public’s trust in hospitals has been fractured. Lenders are becoming more cautious in their term sheets. And the hospital workforce—especially its doctors and nurses—is disgruntled. But the four conflicts above seem most important to the future for hospitals. However, conflict resolution on these is problematic because opinions about hospitals inside and outside the sector are strongly held and remedy proposals vary widely across hospital tribes—not-for profits, investor-owned, public, safety nets, rural, specialty and others.
Nonetheless, conflict resolution on these issues must be pursued if hospitals are to be effective, affordable and accessible contributors and/or hubs for community health systems in the future. The risks of inaction for society, the communities served and the 5.48 million (NAICS Bureau of Labor 622) employed in the sector cannot be overstated. The likelihood they can be resolved without the addition of new voices and fresh solutions is unlikely.
Paul
PS: In the sections that follow, citations illustrate the gist of today’s major message: hospitals are under attack—some deserved, some not. It’s a tough business climate for all of them requiring fresh ideas from a broad set of stakeholders.
PS If you’ve been following the travails of Mission Hospital, Asheville NC—its sale to HCA Healthcare in 2019 under a cloud of suspicion and now its “immediate jeopardy” warning from CMS alleging safety and quality concerns—accountability falls squarely on its Board of Directors. I read the asset purchase agreement between HCA and Mission: it sets forth the principles of operating post-acquisition but does not specify measurable ways patient safety, outcomes, staffing levels and program quality will be defined. It does not appear HCA is in violation with the terms of the APA, but irreparable damage has been done and the community has lost confidence in the new Mission to operate in its best interest. Sadly, evidence shows the process was flawed, disclosures by key parties were incomplete and the hospital’s Board is sworn to secrecy preventing a full investigation.
The lessons are 2 for every hospital: Boards must be prepared vis a vis education, objective data and independent counsel to carry out their fiduciary responsibility to their communities and key stakeholders. And the business of running hospitals is complex, easily prone to over-simplification and misinformation but highly important and visible in communities where they operate. Business relationships, price transparency, board performance, executive compensation et al can no longer to treated as private arrangements.
I live part-time in Asheville: the issues at Mission were avoidable. They pre-date HCA but involve them along with others and they’re complicated. Trust in Mission has been destroyed. Rebuilding it will be difficult but necessary and doable.
As Steward’s finances stumble, spotlight turns to CEO’s yachts (beckershospitalreview.com) February 12, 2024
Mission Hospital CMO Spensieri ‘steps away’ after Immediate Jeopardy (citizen-times.com) February 16, 2024
HCA Mission Hospital submits correction plan to revoke immediate jeopardy status (beckershospitalreview.com) February 9, 2024
Sections in this week’s report:
- Quotable
- Hospitals
- Physicians
- Polling
- Population Health
- Regulator Reports
- Retail Health
Quotable
Re: Tax exempt debt and not-for-profit hospitals: In October 2021, a Pennsylvania judge denied the property tax exemption for three hospitals owned by a Pennsylvania hospital system, claiming that operations at the hospitals in question had become too similar to for-profit facilities to warrant tax-exempt status. The judge’s ruling found that the hospitals in question met only the first prong of the five-prong test that qualifies organizations as tax exempt: They must advance a charitable purpose; donate a substantial portion of their service; benefit a substantial or indefinite class of persons; relieve the government of some of its burden; and operate entirely free from profit motive. This was one of several cases in recent years in which courts denied nonprofit hospitals their local property tax exemption on the grounds that they behaved too similarly to taxable organizations to warrant public subsidies…
Whether nonprofit hospitals deserve their tax-exempt status has been the subject of debate in recent years in both the academic and lay press. As an August 2022 Wall Street Journal article proclaimed: “Nonprofit medical institutions get federal benefits in exchange for providing support to their communities but often lag behind their for-profit peers.” Part of this debate centers on the fact that it is difficult to distinguish between nonprofit and for-profit hospitals in terms of financial performance and quality. They report similar profit margins, patient mix, and burden of bad debt, while offering services that are seemingly quite similar in quality and only modestly different in scope. In addition, mounting evidence shows minimal differences in charity care spending between nonprofit and for-profit hospitals. These findings have led some to label nonprofit hospitals as “for-profits in disguise.”
An Overlooked Hospital Performance Metric: Bond Ratings | Health Affairs
Re: CVS’ Oak Street Health growth strategy: “In 2024, CVS priced its MA plans low to maximize member growth, adding 800,000 lives signaling to me they believe in the OSH-Signify-Pharmacy flywheel long-term. To me, Oak Street Health’s high-touch clinic model with high-needs, chronic patients is the linchpin in the flywheel to drive overall organizational success by keeping patients within the CVS model across health plan, PBM, pharmacy, and care delivery.
Adding to the above, Oak Street Health’s main business goals from day 1 aimed to lower total cost of care by preventing unnecessary acute events and managing chronic disease, all while providing a better patient experience. All of these goals hit on major financial objectives for CVS over the coming years including the largest near-term lever: boosting its MA plan star ratings.”
Blake Madden Analyzing Oak Street Health’s Growth Trajectory from Private, to Public, to Vertically Integrated with CVS – (workweek.com) February 15, 2024
Re: physicians in safety net settings: “Safety-net health systems provide essential care to people who are uninsured, underinsured, or low income… This mission, within a context of constrained resources, shapes the most salient ethical issues faced by safety-net clinicians and leaders, as well as by the broader health care ecosystem…
Patient “dumping” is an unethical practice whereby certain health care providers inappropriately transfer or steer uninsured or low-income patients, usually toward safety-net health systems. Less obvious, but similar, is the cooptation of 340B drug discounts and the Disproportionate Share Hospital (DSH) program, which were originally designed to support the mission of the safety net but have been warped to benefit other (often better-resourced) providers. Whether by steering patients or misdirecting funds, such practices often harm patients and undermine the financial solvency of safety-net health systems.
Without universal health coverage, “fair share” issues will continue to plague health care in the United States. America’s Essential Hospitals, the trade group for safety-net health systems, has made protecting and better targeting the 340B and DSH programs central to its policy advocacy…
Clinicians working in the safety net may be more likely than others to encounter countervailing ethical guidelines, requiring them, for instance, to balance respect for patient autonomy with culturally sensitive care…”
Ethical Issues in Providing Care in Safety-Net Health Systems | NEJM February 15, 2024
Re: Berwick on Medicare Advantage: “I think the original ancestral idea of Medicare Advantage to allow Medicare beneficiaries to have the advantage of properly managed care that is coordinated, proactive and population-based was a healthy impulse 30 years ago. Based on the track record of the best managed health plans at that time, it could have reduced costs by a substantial amount, or about 10% to 15% lower costs compared to Medicare then. Who would not welcome better care and lower costs at the same time? But that’s not what happened.
Over time, financially driven interests, especially insurance companies, recognized that given the rules around Medicare Advantage, they could continually increase their revenue per beneficiary and make the program very attractive by offering zero premiums and extra benefits. It was quite a deal. Over the past decade, Medicare Advantage became the most profitable component of many major insurance companies around the country. It did not, in my opinion, fulfill its original promise of saving money. I’m thoroughly convinced now that apples to apples, Medicare Advantage plans cost the taxpayer, the Medicare trust fund and even beneficiaries, much more than traditional Medicare does
Former CMS administrator: ‘I would like to see Medicare Advantage slowed or stopped’ | Becker’s (beckerspayer.com) February 8, 2024
Re: workforce education: Facing a long-term labor shortage, employers are looking to expand the pool of potential workers. One group—people without a college degree—holds particular promise. They make up nearly two-thirds (68%) of the U.S. population over 25, and traditionally have been ineligible for many managerial and technical positions…
Many employers say they know time and demographics aren’t on their side. Baby boomers are aging out of the workforce, U.S. birthrates are low, and shifting immigration policies make it difficult to count on reinforcements from abroad. Meanwhile, college enrollment is on the decline. Only 38% of Americans over age 25 have at least a bachelor’s degree…
Over the past few years, major employers such as medical device maker Medtronic, IBM, Delta, Google, Walmart and General Motors have eliminated degree requirements from hundreds of their job postings. They are among the early members of a movement known as skills-based hiring, where employers evaluate job candidates on their skills rather than their education.
The college enrollment rate for recent U.S. high-school graduates is on a steady decline, dropping to 62% in 2022 from a peak of about 70% in 2009, according to the Labor Department.
62% of Americans Lack a College Degree. Can They Solve the Labor Shortage? – WSJ February 16, 2024
Re: ageism and Presidential performance: “…there is no direct correlation between a leader’s health and performance in office. Many historians give a healthy President Carter (who is now age 99) low marks for performance. President Franklin D. Roosevelt was paralyzed by polio at age 39 in 1921 and died of a stroke at age 63 after experiencing high blood pressure and coronary artery disease for years. Still, Roosevelt is judged as one of America’s greatest presidents.
That’s because age is more a physiological state of health than a chronological number — a state that can be difficult to measure and is open to varying interpretations; people grow old in different ways at different times in various patterns, making chronological and physiological ages distinct entities. Because candidates rarely release actual medical records, I have learned that the most reliable way to evaluate who is up for the physical and mental demands of the White House is through extensive interviews with the candidates and their doctors. Short of that information, it’s left to the candidates to convince voters they are fit to serve a full term.
Reporting on presidential health from Reagan to Trump and Biden (statnews.com) February 16, 2024
Re: role of employers in health system: “… the employer is and has been, if unknowingly, the primary customer of every health economy stakeholder for decades. It is axiomatic that “he who has the gold makes the rules,” and employer-sponsored health insurance is the fuel of the U.S. health economy. As health plan price transparency reveals the fact that price is not correlated with quality, every other health economy stakeholder should assume that employers will begin to reconsider how they are spending their gold.
A curious observer might ask why employers are even involved in the U.S. healthcare system, much less the participant with the most latent power. The answer? The War Board’s 1943 decision to exempt employer-sponsored health insurance from the wage freeze introduced by the Stabilization Act of 1942.
Joseph Schumpeter stated that “history is a record of the ‘effects’ the vast majority of which nobody intended to produce,” and there is no better example than employer-sponsored health insurance, the “elephant in the room” of the U.S. healthcare system. No part of the U.S. health economy better exemplifies the status quo than the way that human resource departments administer employer-sponsored health insurance. Peak status quo manifests annually during “open enrollment,” in which employers, relying on sensitivity analyses prepared by benefits consultants, shift as much of the ever-increasing cost of health insurance to employees without creating an insurrection.
There is nothing that would unleash innovation in and transformation of the U.S. health economy more than the elimination of the tax deduction for employer-sponsored health insurance, which is why the status quo has never allowed that to happen. And, so, as illogical and distasteful as it may be, the employer is and will be the epicenter of the U.S. health economy, until it collapses under its own weight
Know Your Customer | Trilliant Health Field Guide
Re: impact of hospital consolidation: “These cases underscore the devastating impact on access and affordability that hospital consolidation is having on patients, employers, and insurers. Less competition is harmful to consumers. But for patients, it can distort their quality of care and where they receive it, leading to higher costs and reduced access to vital health services, including cancer treatment.
As this issue continues to spiral out of control, federal and state policymakers must implement policies that rein in hospitals and healthcare systems’ use of these anti-competitive tactics. Through common-sense reforms, we can ensure access to high-quality, affordable, and local healthcare for patients nationwide.”
Cancer Patients Caught in the Crosshairs of Hospital Consolidation | MedPage TodayFebruary 16, 2024
Re: distinction between NFP and FP hospitals: “The not-for-profit tradition in America’s hospitals derives not from organized social policy decisions about the appropriateness of different organizational forms but from the historical origins and evolution of hospitals as charity institutions providing care to the poor. Embedded in this tradition is the idea that medical care is a fundamental right, that there are certain moral and ethical values inherent in the provision of medical care, and that the not-for-profit form is best suited for providing this care.
Conclusive evidence has not shown ownership status to be a major determinant of behavior, an accurate predictor of a hospital’s costs to the community, an indicator of profitability, or a measure of willingness to provide charity care. The traditional assumption is that the not-for-profit form is best suited for our US healthcare delivery system. Unfortunately, the discussion about ownership and the role of the profit motive in healthcare is often wrought with emotionalism, traditionalism, and misplaced idealism. It is a prime example of the problem of the “value-free” debate and the extent to which personal values, unconscious prejudices, and social biases become as much a part of our ideas as do reason and logic. The focus on the “investor-owned versus not-for-profit” question deflects attention from other issues that are more pertinent to the integrity of our healthcare system.”
Hospitals
Trilliant: Hospital ED utilization trends for adults: The Trilliant Compass report provides a retrospective on hospital emergency department utilization by adults from 2017-2022 using its All-Payer Claims Database. Highlights:
- Relevance: “National hospital spending was $1.35T in 2022– more than half of hospital admissions originate in the ED.”
- Utilization: “Overall adult ED utilization has trended slightly downwards compared to pre-pandemic averages. From 2017 to 2019, annual adult ED volumes declined slightly with an average annual growth rate of -2.7%. However, in 2022, volumes were 8.5% below utilization in 2019. By age, utilization has most closely rebounded to pre-pandemic levels for patients ages 18-44, down 3.3% from 2019 to 2022. In contrast, 2022 utilization declined 13.0% and 9.5% from 2019 for patients ages 45-64 and over 65, respectively.
- Principal Diagnosis: Analysis of emergency department (ED) visits from 2017 to 2022 revealed notable shifts in diagnosis patterns across (adult) age groups. “While no singular trend is driving changes in ED utilization over time, cardiac, behavioral health and genitourinary conditions have seen an increase in their share of ED visits, while the share of respiratory conditions in the ED has declined.”
Trilliant Health February 18, 2024 https://www.trillianthealth.com
Chartis: Rural hospital status: Key Findings from Chartis Center for Rural Health analysis of data from CMS and the Cecil G. Sheps Center for Health Services Research:
- The percentage of America’s rural hospitals operating in the red jumped from 43% to 50% in the last 12 months.
- 55% of independent rural hospitals are operating in the red, while 42% of health system-affiliated rural hospitals are operating at a loss. Nearly 60% of rural hospitals are now affiliated with a health system.
- Medicare Advantage now accounts for 35% of all Medicare-eligible patients in rural communities. In 7 states, Medicare Advantage penetration exceeds 50%.
- Access to inpatient care continues to deteriorate as 167 rural hospitals since 2010 have either closed or converted to a model that excludes inpatient care.
- 2023 was a record-breaking year for rural healthcare. Inpatient care disappeared in 28 rural communities—easily surpassing the previous high of 18 set in 2020. Hospital closures and the loss of inpatient care continue to be concentrated highest in states such as Texas (26), Tennessee (15), Kansas (10), Missouri (10), and Georgia (10).
- 418 rural hospitals are “vulnerable to closure” according to a new, expanded statistical analysis.
- Between 2011 and 2021, 267 rural hospitals dropped OB services. This represents nearly 25% of America’s rural OB units.
- Between 2014 and 2022, 382 rural hospitals have stopped providing chemotherapy services.
- Report based. Introduced in January 2023, the REH designation offers a pathway for struggling rural hospitals to retain some healthcare services within their communities. Rural hospitals converting to REH are no longer able to provide inpatient care, participate in the 340B drug program, or take advantage of swing beds.
chartis_rural_study_pressure_pushes_rural_safety_net_crisis_into_uncharted_territory_fnl_02.13.24.pdf February 16, 2024
Turquoise Health: State of Hospital Price Transparency Update: % of Hospitals Posting MRF*s and Service Rates (as of 12/15/23):
- 7% of hospitals required to post an MRF have done so
- Negotiated rates posted: 83.1%
- Cash rates: 77.3%
- Surgery rates: 80.4%
- Imaging rates: 80.8%
- BUCAH* rates: 81.3%
- Diagnostic-related group rates: 65.1%
- Drug rates: 69.4%
Turquoise Health, Moving into 2024: State of Price Transparency, January 2024
Commonwealth Study: health worker discrimination against patients: Based on its 2023 survey of 3000 hospital workers:
- 52% say discrimination against patients by health workers is a major issue/crisis vs. 43% who think it’s not a major issue and 5% who aren’t sure
“Health care workers’ perception of how big a problem racial and ethnic discrimination against patients is varied by the patients they interact with and where they work. For example, mental health care workers are more likely to say racism is a major problem or crisis compared to the health care workforce as a whole (68% vs. 52%). In community-based health care facilities like health centers or school clinics, 63% of health care workers said racism against patients is a crisis or major problem, compared to 51%in long-term care facilities, 47% in outpatient facilities, and 55% in hospitals. 79% of health care workers in facilities with majority-Black patients and 66 % working in facilities with majority-Latino patients said discrimination based on race or ethnicity is a crisis or major problem. This compares to 52% for health care workers in facilities with majority-white patients and 47% for facilities with no majority racial or ethnic group.”
Revealing Disparities: Health Workers Observations Discrimination | Commonwealth Fund February 15, 2024
KFF: Site neutral payment pits hospitals against critics: “In the battle to control health care costs, hospitals are deploying their political power to protect their bottom lines.
The point of contention: For decades, Medicare has paid hospitals — including hospital-owned physician practices that may not be physically located in a hospital building — about double the rates it pays other doctors and facilities for the same services, such as mammograms, colonoscopies, and blood tests.
The rationale has been that hospitals have higher fixed costs, such as 24/7 emergency rooms and uncompensated care for uninsured people…
In December, the House passed a bill (Lower Costs, More Transparency Act with 166 Republicans and 154 Democrats voting in favor) that included a provision requiring Medicare to pay the same rates for medical infusions, like chemotherapy and many treatments for autoimmune conditions, regardless of whether they’re done in a doctor’s office or clinic owned by a hospital or by a different entity. The policy, known as site-neutral payment, has sparked a ferocious lobbying battle in the Senate, not the first of its kind, with hospitals determined to kill such legislation.
Don’t bet against them. The House legislation would save Medicare an estimated $3.7 billion over a decade, according to the Congressional Budget Office. To put this in perspective, the program is projected to pay hospitals upward of $2 trillion during that same period. But hospitals have long argued that any adoption of site-neutral payments would force them to cut jobs or services, or close facilities altogether — particularly in rural areas. And senators are listening…
Large hospital systems with the money to buy physician practices, Miller said, have exploited the disparity between Medicare payments to physician offices and hospitals to increase their revenue and consolidate.”
In Fight Over Medicare Payments, the Hospital Lobby Shows Its Strength – KFF Health News February 13, 2024
Adventist Health System files 340B Lawsuit against Drug Manufacturers: The lawsuit filed last week in the District Court of the Central District of California alleges AbbVie, AstraZeneca, Novartis, and Sanofi and some subsidiaries overcharged the federal government and numerous hospitals by hundreds of millions of dollars from 2011-2018 for various medicines that exceeded the statutory limit of inflation:
Paragraphs 11-13 of the Complaint: “Defendants—some of the largest drug manufacturers in the world— have unilaterally elected this path and have drastically increased the prices for many of their drugs far in excess of the rate of inflation for many years. Given the magnitude of these price increases, the correct Ceiling Price calculation for these drugs was $0.01. However, instead of following the very simple statutory formula, Defendants knowingly disregarded the formula. In short, Defendants wanted it both ways: enjoying the benefit of price increases through the generation of additional revenue from non-340B customers while avoiding the requirement to provide 340B pricing to Covered Entities. To accomplish this, Defendants simply pretended that the statutory Ceiling Price formula did not exist. Through their misconduct, Defendants have illegally overcharged 340B Covered Entities and caused those entities to unwittingly submit false claims to the Medicare and Medicaid Programs. Relator brings this action to recover the hundreds of millions of dollars of damages that Defendants’ misconduct has caused to government-funded healthcare programs.”
adventist-vs-abbvie-azn-et-al-2.pdf (statnews.com)
Baptist files suit against Humana for 340B underpayments: Baptist Health has filed a lawsuit against Humana for allegedly underpaying it for outpatient drugs purchased through the 340B drug discount program and given to Medicare Advantage patients.
The lawsuit may hinge on whether federal regulations on the 340B drug discount program apply to commercial insurers that manage Medicare Advantage contracts. The 340B program offers estimated 25%-50% discounts on outpatient prescription medicines to safety-net hospitals and other providers that treat low-income and uninsured patients.
Baptist, which has a Medicare Advantage contract with Humana, alleges the insurer should retroactively adjust Medicare Advantage reimbursement rates based on federal policy changes following a 2022 Supreme Court decision that undid 340B reimbursement rate cuts from 2018 to 2022. Humana based its reimbursement rates for 340B drugs used to treat Medicare Advantage patients on the invalidated payment cuts and has refused to increase those payments, the suit alleges.
The Montgomery, Alabama-based nonprofit system seeks unspecified damages. The suit was filed last month in an Alabama state court and transferred Friday to the U.S. District Court for the Middle District of Alabama.
Humana sued over alleged 340B underpayments in Medicare Advantage (yahoo.com)
Legislation filed to define “essential hospital”: A bill to “amend title XVIII of the Social Security Act to establish a definition of essential health system in statute”. was introduced last week by Rep. Lori Trahan, D-Mass., and Rep. David Valadao, R-Calif., to solve that problem create a new federal designation: “essential health system.” The bill’s crafters said the measure would be given to the more than 1,000 hospitals nationwide that deliver five times more uncompensated care on average than their peers, but are historically underfunded. The qualification proposed defines eligible hospitals as private, non-profits designated as a “disproportionate share” qualifier with a Medicare disproportionate % of at least 35%.
Bob Secours joins Ascension in outsourcing deal: Bon Secours Mercy Health outsourcing its home care to Compassus: Friday’s announcement reflects a trend among health systems to outsource certain services for the purpose of lowering their operating costs and participating in value creation in the new entity. Bon Secours Mercy Health is the second hospital system to offer home health and hospice services through Compassus. St. Louis-based Ascension Health and investment management company TowerBrook Capital Partners acquired Compassus in 2019. Since then, Compassus has been providing home-based care for Ascension.
Bon Secours, Compassus partner on hospice and home health | Modern Healthcare February 16, 2024
Steward (Massachusetts): “In light of continuous reports on Steward’s financial history and challenges, along with reports that its Massachusetts hospitals are short on medical tools and essential supplies, local news outlets are now zeroing in on Steward CEO Ralph de la Torre’s lifestyle.
Dr. de la Torre is the “proud owner” of a $40 million yacht, which he purchased as Steward was facing hundreds of millions in annual rent after Dr. de la Torre and his private equity partners sold land and buildings from under their hospitals, according to a Feb. 9 Boston Globe opinion article authored by former Globe editor Brian McGrory, who now chairs the journalism department at Boston University. Dr. de la Torre also has a second yacht, valued at $15 million, Mr. McGrory reported.
It was also reported in January that Steward owes approximately $50 million to Medical Properties Trust, the largest hospital landlord in the U.S.
While local politicians also continue to put pressure on Steward leaders over its financial situation, Mr. McGrory suggested that Steward’s owners are continuing to put their own financial well-being in front of the health of both their patients and their hospitals. “
As Steward’s finances stumble, spotlight turns to CEO’s yachts (beckershospitalreview.com) February 12, 2024
Insurers
Private equity investing in Medicare Advantage dropped in 2023: Per the report released last week by the Private Equity Stakeholder Project, private equity investment in Medicare Advantage has declined in recent years amid rising interest rates and an unfavorable regulatory environment. “This investment shift coincides with a difficult business environment marked by high interest rates, and with a slew of federal policies that have squeezed Medicare Advantage margins for health insurance companies, including stricter marketing regulations. Medicare Advantage carriers are looking ahead at possible benefit cuts and premium increases if the Centers for Medicare and Medicaid Services finalizes a proposed rule that would slightly reduce the benchmark payment rate in 2025.
From 2016 through 2023, private equity firms invested in 80 Medicare Advantage companies, the Private Equity Stakeholder Project found. According to the organization, private equity investors were especially attracted to Medicare Advantage marketing and brokerage firms, which are subject to less government oversight than insurance companies, are not capital-intensive and tend to have free cash flow.
Private equity Medicare Advantage investment slumps: PESP report | Modern Healthcare February 13, 2024
Tennessee Study: eviction and Medicaid disenrollment: Researchers “analyzed eviction filings and completed evictions after a large, mandatory Medicaid disenrollment in Tennessee in 2005. We conducted a difference-in-differences analysis using data from the Eviction Lab at Princeton University and found that relative to other southern states, the TennCare disenrollment led to a 27.6% greater increase in the average annual number of eviction filings at the county level during the period 2005–09 and a 24.5% greater increase in the average annual number of completed evictions at the county level during that same period. Our findings have implications for the housing stability of Medicaid recipients today, many of whom are being disenrolled because of the unwinding of the Medicaid continuous enrollment provision that is occurring across the country. To protect housing stability for people disenrolled from Medicaid, policy makers may wish to consider new initiatives aimed at preventing an increase in eviction.”
Physicians:
Survey: work-life balance: Highlights: Per Medscape’s “Physician Lifestyle & Happiness Report 2024” based 9,226 responses across 29 specialties
- 54% would take less pay for work life balance vs. 53% in ’23 and 55% in ‘22
- 82% of married physicians say their marriage is “good/very good” vs. 14% “fair” and 4% “poor
- 69% report they have a spiritual/religious belief vs. 26% “no”
Medscape Physician Lifestyle & Happiness Report 2024: The Ongoing Struggle for Balance February 13, 2024
Polling
Study: Medicare eligibility and program expansion: Harvard Researchers analyzed the association between Medicare eligibility and support for recent proposals to expand program participation and benefits. Findings:
“Medicare eligibility was not associated with a discontinuous increase in support at 65 years for any proposals to expand the program. For a public option, it was associated with decreased support… These findings suggest that policymakers looking to expand Medicare should not count on beneficiaries to lend outsize support.”
Medicare Eligibility and Reported Support for Proposals to Expand Medicare | Health Care Economics, Insurance, Payment | JAMA | JAMA Network February 12, 2024
Population Health
McKinsey: Pop health focus should be cities: The McKinsey Health Institute estimates that a focus on immediately influenceable interventions at the city level can add approximately 20 billion to 25 billion years of higher-quality life at a global level—that’s 5 years per person living in urban areas.
- “The global population living in cities is projected to grow to about 70% by 2050. Large disparities in health outcomes within urban populations suggest that a city-level focus has significant potential to improve health…
- Immediately influenceable interventions, grounded in a rich existing evidence base, are a starting point to improve health at a city level. For example, interventions could add to residents’ healthy longevity and brain health, lessen the impacts of climate exposure, and improve health worker capacity.”
Better health for all starts at the city level | McKinsey February 9, 2024
Regulator Reports
FTC: RFI for hospital drug procurement practices initiated: Last Wednesday, the Federal Trade Commission (FTC) and HHS jointly issued a request for information on the practices of “opaque middlemen (GPOs and PBMs)” in the pharmaceutical supply chain and what role they play in ongoing generic shortages including chemotherapies and others:
The request emphasized the agencies’ interest in learning more about the market concentration and contracting practices of GPOs and drug wholesalers, particularly in the following areas:
- “Whether and to what extent market concentration among GPOs and drug wholesalers has impacted smaller healthcare providers and rural hospitals”
- “Whether and to what extent concentration among GPOs and drug wholesalers has disincentivized suppliers from competing in generic drug markets”
- “The impact of the prevailing GPO compensation model, which may rely on rebates, chargebacks, and administrative fees from manufacturers and suppliers in exchange for favorable treatment, on generic manufacturers and other suppliers”
Note: Three groups purchase drugs on behalf of most hospitals in the U.S., while the three leading wholesalers supply about 90% of drugs to hospitals and other buyers across the country.
Per WSJ reporting “The inquiry is the latest instance of the FTC’s scrutiny of competition in healthcare. The agency in September sued one of the country’s biggest anesthesiology providers, challenging a private-equity practice of combining small physicians’ practices into a larger entity. In November, it challenged more than 100 drugmaker patents that it said were improperly listed with the Food and Drug Administration, delaying generics from entering the market.”
U.S. Probes Role of Supply Chain Middlemen in Generic Shortages | MedPage Today February 15, 2024
Drug February 15, 2024 Shortages Trigger FTC Probe – WSJ February 15, 2024
BLS: Consumer Price Index Summary January 2024: The CPI for All Urban Consumers (CPI-U) increased 0.3 % in January on a seasonally adjusted basis, after rising 0.2% in December. Over the last 12 months, the all-items index increased 3.1% before seasonal adjustment. Unadjusted trailing 12-month CPI for key items thru January:
All items: +3.1%, Food +2.6%, Energy -4.6%, Medical care commodities +3.0%, Medical care services .6%
“The medical care index rose 0.5% in January. The index for hospital services increased 1.6 % over the month and the index for physicians’ services increased 0.6% The prescription drugs index fell 0.8 percent in January.”
Consumer Price Index Summary – 2024 M01 Results (bls.gov) February 13, 2024
CMS: Independent Dispute Resolution Reports for First Half 2023: Findings:
“Health care providers and facilities won 72% of the 24,305 payment disputes where a payment determination was made involving out-of-network emergency and non-emergency items and services in 1Q 2023; and 79% of the 53,806 payment disputes where a payment determination was made involving these items and services in 2Q 2023.”
Independent dispute resolution reports | CMS
CMS: surprise billing: In the first half of 2023, there were 288,810 disputes submitted to the federal system for handling surprise billing cases between providers and insurers– 13 times greater than what the federal government initially expected for a full calendar year, and the volume of disputes has grown each quarter. Groups certified to handle the disputes made about 84,000 payment determinations in the first six months of 2023, over five times the amount from all of 2022.
Supplemental Background on Federal Independent Dispute Resolution Public Use Files (cms.gov)
CMS: Medicare Advantage enrollment: Roughly 33.4 million adults older than 65 and people with disabilities were enrolled in a Medicare Advantage plan as the calendar flipped to 2024…Enrollment increased 7.1% year over year, which would make this year’s annual growth rate identical to last year’s.
The data reinforce how America’s Medicare program continues to shift toward a more privatized version that has not saved any money for taxpayers, has been linked to inappropriate coding practices, and has restricted care for older and vulnerable patients. And even though the federal government made several changes to Medicare Advantage for 2024 — changes that were vehemently opposed by the health insurance industry — the program’s growth has not been stunted, nor did insurers dramatically slash their offerings.
CMS February 15, 2024
Medicare Advantage enrollment grows 7.1% to 33.4 million people – STAT (statnews.com) February 16, 2024
Retail Health
CVS survey: Pharmacists Interests in Widening Pharmacists’: Findings of CVS pharmacists survey:
A majority of pharmacists surveyed by CVS express interest in performing duties beyond filling prescriptions, including…
- Providing immunizations: 97%
- Providing heart health services: 89%
- Education on diseases or conditions: 96%
- Sharing practical tips for prescription savings: 84%
- Counseling about medications: 94%
- Offering diagnostic tests for illnesses: 75%
CVS Health, The Rx Report: The future of community pharmacy opens doors to healthier communities, January 2024
