This weekend, the American Hospital Association kicks-off its annual Leadership Summit in San Diego. Its agenda is organized around 8 themes: Transforming Care Delivery and Payment, Patient Centricity Through Digital Transformation, Building a More Flexible and Sustainable Workforce, Financial and Operating Excellence, Igniting Innovation, Elevating Health Equity, Improving Behavioral Health and Governance Excellence. They’re important.
But unless hospital leaders and their boards address three existential issues, they’re destined for obsolescence:
1-Affordability
According to the Bureau of Labor Statistics’ Consumer Price Index data, the CPI for all items increased 3.0% in the last 12 months (June 2023-June 2024). Essentials increased less: food (+2.2%), energy (+1.0%) along with some healthcare categories (physician services +0.8% and health insurance -4.2%). But hospital inpatient and outpatient prices increased +6.9% contributing to stronger operating margins and heightened sensitivity to hospital finances by elected officials, employers, insurers and special interests.
The data are clear:
- The majority of Americans are worried about the affordability of their healthcare. Per the Kaiser Family Foundation: “Unexpected medical bills and health care costs top the list of expenses that adults, regardless of partisanship, say they worry about affording, with three in four adults saying they are “very” or “somewhat worried” about being able to afford unexpected medical bills (74%) or the cost of health care services (73%) for themselves and their family. Just over half (55%) report worrying about being able to afford prescription drug costs, and about half of insured adults (48%) say they are worried about being able to afford their monthly health insurance premium.”
- The majority think the U.S. health system cares more about its business interests than caring for people. Per the November Keckley Poll: 60% believe the system puts its profits above patient care vs.13% who disagree. 49% think the majority of physicians care more about caring for their patients more than their income vs. 38% who are unsure and 17% who disagree. And 55% believe tax exemptions given not-for-profit hospitals are justified by the community benefits they provide vs. 45% who are unsure/disagree.
- The majority believe hospitals are complicit. Consumers (voters) are dissatisfied and looking for solutions: 74% think price controls on hospitals is a possible solution. Congress thinks revisiting hospital consolidation, increased price transparency and limits on tax exemptions for large not-for-profit hospital operators might be answers. In some states, legislators are going even further. While recognizing that drug prices and insurer business practices contribute to higher costs and prices, legislators and regulators have concluded that hospital business practices are also to blame. The public shares their view.
In 2010, the Patient Protection and Affordable Care Act passed. By 2013, it had been abbreviated by media and industry pundits to “the Affordable Care Act.” But it has failed to make care affordable.
More recently, in its re-brand March 18, 2024 from the “Coalition to Protect America’s Health Care” to the “Coalition to Strengthen America’s Healthcare: Protecting 24/7 Care”, the consortium of hospital trade groups announced 5 aims: Defending Medicare, Funding Rural Health, Holding Corporate Insurers Responsible, Protecting Access to Care, Supporting the Workforce. Making hospital care affordable is not among them.
While the AHA lists “Affordability” among 10 topics in its Advocacy resources, readers are directed to” Cost of Caring” Fact sheets that characterize hospital affordability as the net result of increased costs for supplies, drugs and labor coupled with unfair corporate insurer reimbursement. Hospital prices and affordability are therefore, the net result of outside factors and hospitals are hapless to redress them.
Regulators disagree. Certain business practices in hospitals add cost unnecessarily. Prices for most hospital services remain opaque. Price setting, balance billing, patient collections and administrative overhead fall within the pursue of hospital controls and so on.
The bottom line is this: for hospitals, placing blame on insurers and drug companies is the norm; taking direct, substantive action to make hospital services more affordable is the exception.
2-Vision
The majority of Americans are dissatisfied with the U.S. health system and uncertain about its future.
The majority (69%) think it is “fundamentally flawed and in need of major change,” 28% think it is heading in the right direction vs. 26% who disagree and 43% who are unsure, and the majority of hospital trustees (75%) believe that its future is not a repeat of its past.
They’re right: the system in its current form is not sustainable: its inequitable access, uneven outcomes, inadequate investment in prevention and public health and eye-popping costs are well-documented and widely known. Consensus breaks down in defining alternatives. Some believe incremental reforms are adequate to address the shortcomings, some think a wholesale re-set is needed and all acknowledge that its price tag (17.6% of the GDP, 5.6% annual spending increase) is unsustainable. Last year, for instance, total spending increased 7.5%–well above inflation, GDP and wage growth. Long-term spending forecasts range from 5.6% to 6.5% increases—also well above inflation and wage growth. Conservatively, the share of the economy devoted to its health system in 2032 will be 20% or more and more than half will be funneled through the facilities and medical practices operated by hospitals.
But local hospital boards—especially those who serve voluntarily– are inadequately prepared to address the trends and issues that impact its future. The tolerance of employers in providing employee health benefits, the growth of vertically integrated systems of health, disruptions from technologies and operating model alternatives, the loss of tax exemptions to not-for-profit health systems are among topics that require board understanding and contingency planning.
Hospital governance has three responsibilities: Setting direction (vision and strategy) for the organization, securing adequate capital to fund the strategy, and hiring and retaining competent leadership. It’s a fiduciary responsibility taken seriously, but market surveillance and scenario planning on which the hospital’s vision and strategy are built is often incomplete and inadequate.
And, at a national level, the imperative is the same: defining the role for hospitals in the future system of health requires comprehensive “outside-in” market analysis and a deliberative process of planning with all key constituents input considered. An echo chamber that spews grievances against others is a non-starter. A long-term vision and strategy for hospitals in a transformed system of health remains unfinished work needing urgent attention.
3-Trust
Affordability cannot be addressed nor a vision for the future of hospitals created lacking underlying trust.
Gallup has measured public confidence in 16 of America’s key institutions annually since 1979: Overall confidence in every institution has eroded and the “medical system” is no exception. It currently ranks 4th overall with 34% expressing confidence behind small business (65%), the military (63%) and the police (43%) and well above the bottom 3 (Congress 8%, Big Business 14% and TV News 14%).
In the November 2023 Keckley Poll, 807 U.S. adults were asked: “How much trust and confidence do you have in … to develop a plan for the U.S. health system that maximizes what it has done well and corrects its major flaws?” The findings for hospitals are a mixed bag:
While physicians and hospitals enjoy more trust and confidence than insurers and the federal government to fix the health system’s issues, it’s not a wholesale endorsement for either. An overwhelming majority of Americans don’t trust any of the four to do the job.
| % Trust and Confidence | A Great Deal | Some | Not Much/None |
| Health Insurers | 18.4 | 43.2 | 38.4 |
| Physicians | 32.5 | 52.9 | 13.6 |
| Hospitals | 27.7 | 51.9 | 20.7 |
| Federal government | 14.2 | 42.4 | 43.5 |
Keckley Poll 807 US Adults November 2023
The public is not sure who to trust and anxiety is high: 83% think having health insurance is necessary to fending off medical bills that could decapitate their finances but 43% hold medical debt. And 76% think politicians can’t be trusted to solve healthcare issues because they’re complex and politically risky.
Populist movements rooted in voter distrust and dissatisfaction led to the recent overthrow of incumbent governments in France and the U.K. Hospitals enjoy recognition as essential contributors to community health but they do not enjoy deep reservoir of public trust. Regrettably, many are seen more as ‘Big Business’ that ranks 13 of 14 in Gallup’s institutional trust surveys.
Final thought:
Last Wednesday, the S&P 500 hit an all-time high of 5613. Fed Chair Powell told Congress inflation is in check and the labor market is stabilizing. And the partisan sniping between Red and Blue war camps took a breather as the assassination attempt Saturday forced a pause and needed reflection.
Collectively, that’s welcome news for a nation that’s anxious and divided. The current state in U.S. healthcare is much the same. It needs its hospitals to step up.
Some Boards and their hospital leadership teams take affordability, vision and trust seriously. Some don’t.
Paul
PS: The following sections provide additional resources about the changing marketplace in which hospitals operate today and tomorrow.
Resources
- Consumer Price Index – 2024 M06 Results (bls.gov)
- KFF Health Tracking Poll February 2024: Voters on Two Key Health Care Issues: Affordability and ACA | KFF
- S. Confidence in Higher Education Now Closely Divided (gallup.com)
- An Update to the Budget and Economic Outlook: 2024 to 2034 | Congressional Budget Office (cbo.gov)
- 2024 Medicare Trustees Report (cms.gov)
- Hearing Before the US Senate Committee on Health, Education, Labor & Pensions; What can Congress Do to End the Medical Debt Crisis in America? July 11, 2024. 2024. https://www.help.senate.gov/hearings/what-can-congress-do-to-end-the-medical-debt-crisis-in-america
- Keckley Poll: Which Institution is Best Positioned to Solve the Health System’s Flaws? – Paul Keckley
Sections in this Report
- Quotables
- Care Management
- Governance
- Hospitals
- Insurers
- Investors
- Litigation
- Physicians
- Polling
- Prescription Drugs
- Regulators
Quotables
Re: medical debt: “There are several reasons why health care costs in the United States are significantly higher than that of other countries. First, the United States spends significantly more on administrative costs than any other nations. In 2022, health expenditures were $12,555 per person in the United States, which was over $4000 more than any other high-income country…
Second, there is a lack of price transparency competition within the health care market…The business of health care is by definition not patient centered, it is a business with the goal of delivering a service while maximizing profits.”
Third, government policies have favored large health care players and detached patients from their health care spending decisions…
- The 340B program, which allows certain hospitals to buy drugs at discounted prices but sell them at high markups. This ultimately gives these hospitals a financial advantage over non-340B hospitals and physician practices.
- Site-based payment policies that pay hospitals more than independent physician practices for the same services.
- Restrictions on physicians establishing their own hospitals limits market competition.
These policies have enabled large health systems to acquire physician practices and smaller hospitals, allowing them to gain market power and raise prices.”
How Can Congress Solve the Medical Debt Crisis in America? (ajmc.com)
Re: Implications of SCOTUS Chevron ruling: “The Supreme Court’s ruling in Loper Bright Enterprises v. Raimondo on June 27 overturning what’s known as “Chevron deference ” prioritizes business interests over public health in a decision that weakens the ability of agencies to enforce regulations, such as restricting power plant pollution . It says that agencies like the Environmental Protection Agency (EPA) are actually not the experts in environmental protection, but rather judges are. Now, agencies must go to court with industries that dump pollutants into the water or that poison our air because their right to make money precedes everyone’s right to breathe…. The downstream consequences of the ruling are broad. Anything that requires regulation could be affected: from publicly funded health insurance programs (CMS) to the food and drug review systems (FDA) to our environment. For decades, Chevron deference has protected programs like Medicare and Medicaid, with expert federal agencies like CMS being charged with interpreting and implementing the regulations. Issues related to environmental, public, and individual health are extremely complex and should be in the hands of experts, but after this Supreme Court ruling, experts’ hands are tied.”
With the End of Chevron, Health and Environmental Experts’ Hands Are Tied | MedPage Today
Re: Powell on monetary policy from semi-annual testimony to Congress last week: “Elevated inflation is not the only risk we face. We’ve seen that the labor market has cooled really significantly across so many measures.…It’s not a source of broad inflationary pressures for the economy now.”
Context: The economy has continued to add more than 200,000 jobs a month, on average, this year. But the unemployment rate has inched up—to 4.1% in June from 3.7% in December, according to last week’s report. Powell described the job market as roughly back to conditions seen before the pandemic hit, when it was “strong, but not overheated. Meanwhile, inflation fell to 2.6% in May, according to the Fed’s preferred gauge, down from 4% one year earlier but still above the Fed’s 2% target.
The Fed raised rates at the fastest pace in 40 years in 2022 and 2023 to combat inflation that also rose to a four-decade high. Officials have held their benchmark rate in a range between 5.25% and 5.5%, their highest level in more than two decades, since last July.
Powell Inches the Fed Closer to Cutting Rates – WSJ
Re: international health spending comparisons: “…the U.S. has the lowest life expectancy amongst large, wealthy countries” while their per capita healthcare cost has moved past $12,500 as of 2022
In fact, the U.S. is an outlier for both healthcare costs (+$4,600 from next-highest Germany), and in life expectancy (-3.2 years from Germany). From the 12 developed countries in the analysis, the average healthcare per capita cost is at $6,700 with a life expectancy of 82.2 years. Americans spend nearly double the amount while living 5 years less on average (77.5) Peterson-KFF also notes that in 1980, the U.S. had similar health spends and life expectancies as all its peers. Trends have since diverged.
Of course, both health care spending and life expectancies are influenced by a variety of socioeconomic factors. For example, the UK has the lowest costs ($5,500) amongst its European peers in the group, thanks in part to its National Health Service.
At the same time, Japan has one of the highest life expectancies in the world (84 years) while its per capita health costs come in at $5,300. Their low red meat intake and high fish consumption are partially credited with maintaining good health in the population.”
Life Expectancy vs. Health Spending Per Capita, by Country (visualcapitalist.com)
Re: Thai universal coverage, public health focus: “Thai health care is among the most effective in the world. The average Thai can expect to live to 80, much longer than their regional counterpart (the South-East Asian figure is 73) and even slightly longer than the average American and European (each roughly 79), according to the latest data from the United Nations. Last year a whopping 99.5% of the population of 72m was covered by health insurance. Remarkably, Thailand has achieved this as a developing country: its income per person was roughly $7,000 in 2023, more than 11 times smaller than America’s. Even in the middle of the pandemic in 2021, its public-health bill was 6% of GDP, compared with 17% in America and 11% in the European Union…
Particularly striking is the fact that universal health coverage is not only affordable for beneficiaries, but also for the government. The program is funded through tax revenues, but spending is controlled. Every year district hospitals are provided with a fixed amount of money per patient in their catchment area, regardless of the treatment they get. This “capitation” model ensures efficiency and predictability in funding. Thailand’s spending on health had remained largely steady at around 3-4% of GDP until the pandemic, even as its programs expanded.
Why is Thai health care so good? (economist.com)
Care Management
Trilliant: Changes in cancer prevalence 2018-2023:
- Despite the nationwide decline in healthcare utilization during the COVID-19 pandemic, patient volumes for prostate, corpus uterus, kidney and pancreatic cancers, as well as melanomas, generally increased between 2018 and 2023. In contrast, patient volumes for colon and lung cancer generally decreased, while volumes for breast and bladder cancers remained relatively consistent. Comparing Q1 2018 to Q4 2023, patient volumes rose by 10.8% for prostate cancer, 8.7% for kidney cancer, 11.5% for melanomas, 10.2% for corpus uterus cancer and 6.7% for pancreatic cancer. Conversely, volumes decreased by 0.6% for breast cancer, 1.1% for lung cancer, 5.0% for colon cancer and 0.4% for bladder cancer.
- Comparing Q4 2018 to Q4 2023, patient volumes rose by 10.8% for prostate cancer, 8.7% for kidney cancer, 11.5% for melanomas, 10.2% for corpus uterus cancer and 6.7% for pancreatic cancer.
Healthy Aging: Characteristics of those who live to 100:
- They have a spouse. Married people have a better chanceof living to 100 than singles.
- They’re resilient. Super-agers make the best of a stressful situation and move on.
- They have thicker brains. Specifically, a thicker cingulate cortex, which is involved in memory and decision-making. Worth watching: The proportion of older people with dementia is declining.
- They have a specific gene. Half of centenarians have a genethat taps the brakes on height and weight. Of note: Smaller animals, like certain dog breeds, live longer than larger ones.
- Their siblings become centenarians. It’s genetics.
- They prioritize exercise and eating well “It’s the right combination of both that gives us an advantage,” Kole writes.
- They’re extroverts. Most are outgoing, optimistic and easygoing.
- They’re white women. A majority Racial inequalities can age people.
The Big 100: The New World of Super-Aging: Kole, William J.: 9781635768565: Amazon.com: Books
Study: Acupuncture efficacy in methadone treatment: Background: “Methadone maintenance treatment (MMT) is effective for managing opioid use disorder, but adverse effects mean that optimal therapy occurs with the lowest dose that controls opioid craving. Researchers analyzed the efficacy of acupuncture versus sham acupuncture on methadone dose reduction. Results:
Of 118 eligible participants, 60 were randomly assigned to acupuncture and 58 were randomly assigned to sham acupuncture (2 did not receive acupuncture). At week 8, more patients reduced their methadone dose 20% or more with acupuncture than with sham acupuncture (37 [62%] vs. 16 [29%]; risk difference, 32% [97.5% CI, 13% to 52%]; P < 0.001). In addition, acupuncture was more effective in decreasing opioid craving than sham acupuncture with a mean difference of −11.7 mm VAS (CI, −18.7 to −4.8 mm; P < 0.001). No serious adverse events occurred. There were no notable differences between study groups when participants were asked which type of acupuncture they received.”
Consumers
BLS: June CPI: U.S. consumer prices fell for the first time in four years last month amid cheaper prices at the pump and moderating rents. The consumer price index (or CPI) dipped 0.1% in June, the first decrease since May 2020, after being unchanged the month before. Highlights of the June report:
- The medical care index rose 0.2% in June after rising 0.5 percent in May. The index for physicians’ services rose 0.1%the month, as did the index for hospital services. The prescription drugs index was unchanged in June.
- The all-items index for the last 12 months increased 3.0%. Medical care services were up 3.3%.
Consumer Price Index Summary – 2024 M06 Results (bls.gov)
Governance
NACD: Governance, Risk: “Directors play a critical role in risk oversight, a responsibility that has significantly increased in complexity and has challenged most organizations’ risk management processes. Now, directors face navigating headwinds in the financial sector, supply chain issues, talent shortages, and macroeconomic factors.
- The changing business environment and increasing focus on stakeholder capitalism are altering organizations’ risk exposures, requiring stronger governance and risk oversight.
- Boards’ core responsibilities are expanding due to evolving governance practices, complex business environments, and increased disclosure requirements.
- Boards must consider how to allocate risk oversight across committees and the full board due to the expanding risk agenda.”
The Risk Environment Is Evolving. Is your Board Prepared? (nacdonline.org)
NACD: nom-gov committee significance: The average level of investor support for the election of Russell 3000 nominating and governance committee chairs fell below 90 percent for the first time in 2023, according to The Conference Board. Additionally, the average support for nominating and governance committee chairs (88.6%) was significantly lower than the median level of support for directors overall (97%) in 2023. More than 100 nominating and governance committee chairs faced dramatic protest votes in 2023: 94 (5.5%) saw support below 70 percent and 14 (0.8%) failed to receive majority support.
These meaningful shifts reflect a troubling reality for many companies: investors are becoming more comfortable withholding support from directors for supposed governance failures and nominating and governance committee chairs are a common target for a number of reasons, many of which we have catalogued in our NomGov Chair Vulnerability Tracker.
It is critical that boards pay attention to what’s driving this weakened support and get ahead of evolving investor focus areas.
Case Study: Boeing: “At the turn of the century Boeing launched an advertising blitz to show what a marvel of American manufacturing it was. Called “Forever New Frontiers”, it highlighted its pioneering work on some of the 20th century’s biggest breakthroughs, from passenger and fighter jets to space rockets and satellites. Coming a few years after its merger with McDonnell Douglas, a smaller rival, Boeing stood tall in the fast-consolidating aerospace industry.
How far it has fallen since. On July 7th the American government said Boeing had agreed in principle to plead guilty to fraud in connection with two deadly crashes by its 737 max jets in 2018 and 2019. This latest frontier, its most disgraceful yet, makes it the corporate equivalent of a criminal. Looking back over the decades, it becomes clear that Boeing’s embrace of what were once the defining trends in American business have come back to haunt it.
First, its acquisition of McDonnell Douglas in 1997 was part of what The Economist then approvingly called “one of the great industrial upheavals of all time” …The second trend was outsourcing….Third, like many listed American firms, Boeing showered stockholders with cash via share repurchases and dividends rather than investing in non-financial innovation.
All three trends delighted Wall Street. They made the American economy more efficient and made waves around the world. They helped propel Boeing’s market value to more than $200bn in 2019. But Boeing’s travails, which have torched around $100bn in shareholder value, suggest they can be taken too far.
Consider them in reverse order. The obsession with short-term shareholder returns, which may have contributed to shortcuts undermining the safety of the 737 max, is widely seen as dating back to Boeing’s landmark merger with McDonnell Douglas. Though Boeing was by far the stronger company, it absorbed the smaller firm’s Wall Street-obsessed culture, particularly when it came to prioritizing the generation of cash from legacy planes rather than pouring cash into creating new ones.”
Once high-flying Boeing is now a corporate criminal (economist.com)
Hospitals
Kaufman Hall: National Hospital Flash Report for May 2024: Highlights:
- Average hospital margins year to date remained at 3.8% vs. average margin of 1.9% for 2023
- The average hospital margin was up in January to 4.6% and then decreased slightly in February and March. “From April to May, the monthly average operating margin index dipped from 4.2% to 3.7%. Operating margins increased 23% year to date over the same period last year.”
- “Average net operating revenue per calendar day increased 7% year over year for the month with inpatient and outpatient revenue both jumping 8%. Operating EBITDA margin was up 3% year over year in May and 15% year to date. Expenses per calendar day increased 6% year over year in May, while labor expenses per calendar day were up 7% and supply expenses jumped 9%.”
- “The widening gap between higher-performing and lower-performing hospitals illustrates the need for longer-term strategic investments. ..For success in the future, the report authors recommended hospitals differentiate from their competitors and define their future direction. They also noted analyzing all aspects of current operations and using data to rework the operating model will help hospitals thrive.”
Report: Monthly Volume Changes in Inpatient Admissions vs 2022:
- April 2023: 4.0%
- May 2023: 5.8%
- June 2023: 4.0%
- July 2023: 4.0%
- August 2023: 3.7%
- September 2023: 3.6%
- October 2023: 4.4%
- November 2023: 2.4%
- December 2023: 4.2%
- January 2024: 14.0%
- February 2024: 18.9%
- March 2024: 9.6%
strata Performance Trends Report, First Quarter 2024
NBER Study: Economic effects of hospital consolidation:” Hospital mergers can mean rising prices for individual patients, but there also may be implications for the larger economy, including higher unemployment costs and reduced tax revenue, according to a study published Monday by the National Bureau of Economic Research.
The study analyzed data provided by independent research group Health Care Cost Institute, representing 28% of people in the U.S. with employer-sponsored insurance, and pulled information from Labor Department and Internal Revenue Service filings. Key takeaways:
- Hospital mergers could lead to job losses. Hospital mergers led to inpatient and outpatient prices rising an average 1.2% in the two years after a transaction, based on data from 304 hospital mergers between 2010 and 2015. Approximately 40% of the hospitals involved in those 304 mergers raised prices by more than 5%. An average hospital that raises prices by 5% following a merger would result in more than 200 healthcare and non-healthcare job losses, due to an employer’s need to cut costs when premiums rise, the study said.
- Employers trim payrolls when premium costs rise. Many working-age adults are covered by employer-sponsored health plans. Workers likely are more willing to accept the cost burden from rising premiums if the quality of healthcare services and benefits is also rising… As a result, a 1% increase in healthcare prices leads employers to reduce payroll by 0.4%, the study found.
- Higher healthcare prices result in lower tax revenue. A 1% increase in healthcare prices reduces federal income tax revenue by 0.4% as workers are laid off. Unemployment insurance payments rise by about 2.5%, according to the study.
- The middle class is hardest hit when prices rise. Workers earning more than $100,000 annually aren’t as affected by layoffs stemming from higher premiums. Changes to premiums act like a “head tax,” as those costs are generally uniform among employees. As a result, paying a $5,000 premium for one employee earning $100,000 annually ends up being cheaper than paying that premium for two employees each earning $50,000 annually. Workers earning less than $20,000 annually also aren’t affected by layoffs because low-wage employees don’t typically receive health insurance from their employer.
- Rising healthcare prices are connected to suicide and overdose rates. About 1 in 140 workers die of an opioid overdose within a year of losing their job, the study found. A 1% increase in healthcare prices, coupled with the downstream effects, leads to a 2.7% increase in deaths from suicides and overdoses among adults aged 25 to 64.”
When Hospital Prices Go Up, Local Economies Take a Hit – WSJ
State actions: Provider taxes to fund Medicaid match: “Hospitals are volunteering, sometimes begrudgingly, to pay bigger taxes to help states close Medicaid budget gaps.
When fiscal 2025 began in most states July 1, health systems in Delaware, Idaho, Kansas, Maine, Missouri, Nebraska, New Mexico and elsewhere are on the hook for higher taxes in exchange for Medicaid reimbursement increases or coverage expansions.”
Background: The federal government pays 90% of costs for those enrolled in the adult Medicaid expansion authorized under the Affordable Care Act of 2010, which all but 10 states have adopted. States use provider taxes to maximize federal Medicaid matching funds and minimize spending from state general funds.
States levy these taxes on hospitals and other providers and direct the money to their Medicaid shares, which enables them to draw down more federal dollars without tapping the rest of their budgets. CMS authorizes states to tax providers up to 6% of net patient revenue. Requiring hospitals to attest they are not participating in hold harmless agreements with states could dampen state Medicaid spending and lead to payment cuts.”
Medicaid taxes on hospitals increase to help states cover budgets | Modern Healthcare
Insurers
Analysis: HDHPs with HSAs: “Wealthy and educated people are more likely to use HDHPs (high deductible health plans) with HSAs (health savings accounts) and to contribute more to their accounts than people with less income and education. The inherent regressivity of this policy was originally justified by the belief that HDHPs with HSAs would generate an increase in cost-consciousness, and therefore in efficiency. In fact, however, people who have HDHPs with HSAs are becoming less likely over time to report financial barriers to access to care—the source of HDHP cost-consciousness—than are people with private insurance plans not linked to HSAs.
In short, HSAs are a tax advantage for better-off people, masquerading as a health care efficiency increase that was never very likely and is not occurring now. There is no remaining justification for a regressive tax break that failed to achieve its policy goal and is used disproportionately by higher-income people.
Health Savings Accounts No Longer Promote Consumer Cost-Consciousness | Health Affairs
WSJ investigation: MA overcharges: Per the WSJ’s 2-year investigation: “Private insurers involved in the government’s Medicare Advantage program made hundreds of thousands of questionable diagnoses that triggered extra taxpayer-funded payments from 2018 to 2021, …The questionable diagnoses included some for potentially deadly illnesses, such as AIDS, for which patients received no subsequent care, and for conditions people couldn’t possibly have, the analysis showed. Often, neither the patients nor their doctors had any idea.
Medicare Advantage, the $450-billion-a-year system in which private insurers oversee Medicare benefits, grew out of the idea that the private sector could provide healthcare more economically. It has swelled over the last two decades to cover more than half of the 67 million seniors and disabled people on Medicare.
Instead of saving taxpayers money, Medicare Advantage has added tens of billions of dollars in costs, researchers and some government officials have said. One reason is that insurers can add diagnoses to ones that patients’ own doctors submit. Medicare gave insurers that option so they could catch conditions that doctors neglected to record. The Journal’s analysis, however, found many diagnoses were added for which patients received no treatment, or that contradicted their doctors’ views.…Medicare Advantage has cost the government an extra $591 billion over the past 18 years, compared with what Medicare would have cost without the help of the private plans, according to a March report by the Medicare Payment Advisory Commission, or MedPAC, a nonpartisan agency that advises Congress. Adjusted for inflation, that amounts to $4,300 per U.S. tax filer.”
Insurers Pocketed $50 Billion From Medicare for Diseases No Doctor Treated – WSJ
Investors
Rock Health: Digital health funding recovering: Venture capital funding of U.S.-based digital health companies totaled $5.7 billion in 266 deals during the year’s first half. –down from $6.1 billion and 244 deals in 2023’s first six months. Key focus: AI, mental health.
Rock Health, Digital-Health Venture Investment Rises, but Many Deals Have Yet to Pay Off – WSJ
Pitchbook: PE Investing in healthcare: Considerable confusion about the scope and emphasis of PE’s current involvement in US healthcare is circulating widely in news articles, white papers, and even government missives… PE-backed providers represent less than 4% of the US healthcare provider ecosystem by revenue.
PE investment in healthcare providers is neither new nor surging. Such investment grew as a proportion of overall PE activity between 2000 and 2018 but has declined proportionally since then. Year-over-year growth in the total number of PE-backed companies has slowed steadily over the past six years, dipping below 1% in the first quarter of 2024.
The growth in physician employment is not primarily PE driven. More than half of all physicians, and more than 70% of all employed physicians, are employed by hospitals. Current PE deal activity in hospitals and skilled nursing facilities is near zero. There has not been a major PE investment in a US hospital or health system since 2018.
In general, the role of PE investment within the broader US healthcare ecosystem has been vastly overstated. According to the Centers for Medicare & Medicaid Services’ National Health Expenditure data, total annual US spending on healthcare provider categories is projected at about $3.5 trillion for 2024.
Quantifying_PE_Investment_in_Healthcare_Providers.pdf (d2vnc87hommcxj.cloudfront.net)
Litigation
Litigation: Purdue Pharma update: “The official committee of Purdue’s creditors filed a proposed complaint against the Sackler’s last week after the Supreme Court last month rejected a $6 billion settlement agreement to resolve the mass opioid-related lawsuits against the company’s family owners.
Purdue supports granting the creditors committee the legal standing to sue, according to last Monday’s filing. The company also is seeking to restart negotiations with the Sackler’s, whose wealth has been estimated near $11 billion.
The creditors committee, composed of individuals and entities with opioid-related claims against Purdue, is seeking to recover more than $11.5 billion that the Sackler’s allegedly moved out of the company.
Family members previously have denied wrongdoing in court filings and said that all profit distributions they received from Purdue were legal.
Attorneys general for more than 40 U.S. states said in a court filing last week that while they support extending the Sackler’s’ protections for 60 days, they wouldn’t support any further extensions if a new settlement isn’t reached.”
Purdue Pharma Backs Creditor Lawsuit Against Sackler’s for Shifting Assets – WSJ
Walmart pricing practices challenged: Per a court order issued July 3, Walmart faces a class-action lawsuit alleging that it deceives customers by charging higher prices at the checkout counter than it advertises.
A district court dismissed Khan’s lawsuit on the grounds that Walmart provides customers with a receipt to compare the scanned price with the shelf price, meaning there is “no possibility for deception.” The appeals court reversed that dismissal last week, saying a receipt isn’t sufficient to dispel potential deception or unfairness caused by an inaccurate shelf price. The court also cited several cases where state agencies-imposed fines on Walmart for similar practices. California, for example, levied a $2 million fine against Walmart in 2021 for violating a 2008 ruling requiring it to resolve pricing errors at checkout.
Walmart faces lawsuit for ‘deceptive and unfair pricing practices’ (qz.com)
Medicare Advantage broker ruling threatens open enrollment: On July 3, the U.S. District Court for the Northern District of Texas ordered a stay against the final rule the Centers for Medicare and Medicaid Services published in April that prohibits insurers from offering volume-based bonuses to top Medicare Advantage marketers, thereby suspending the regulation’s cap on broker fees.
Judge Reed O’Connor has not issued a final decision in the case, but wrote in his July 3 order suspending the regulation that he intends to comply with the plaintiffs’ request for a ruling this month.
But no matter what O’Connor decides, either party can appeal, which would indefinitely delay a final outcome just as insurers gear up for enrollment season, which begins Oct. 15 and ends Dec. 7. Medicare Advantage insurers that opt to restore their previous compensation tactics would risk having to scrap their plans at the last minute, Meekins said.
Medicare Advantage marketing ruling leaves 2025 enrollment in flux | Modern Healthcare
Physicians
Commonwealth Report: PCP Coordination with Social Services: Percentage of U.S. primary care physicians who report they or other health care professionals in their practice frequently coordinate care with social services or other community providers, by practice characteristics:
- Community health center practice: 62%
- Majority Medicare patients: 59%
- All PCPs: 44%
- Solo practice: 38%
- Majority privately insured patients: 30%
Commonwealth Fund, How U.S. Health Care Providers Are Addressing the Drivers of Health, May 2024
AMA: Physician Burnout 2023 vs. 2022: Per 12,400 responses from physicians across 31 states were received from 81 health systems in the AMA Organizational Biopsy®
- For the most stressful medical job in 2023, the highest percentages of burnout occurred in six physician specialties. Emergency medicine: (56.5%—down from 62%), Internal medicine: (51.4%—down from 52%), Obstetrics and gynecology: (51.2%—down from 54%). Family medicine: (51%—down from 58%). Pediatrics: (46.9%—down from 55%). Hospital medicine (44%—down from 59%).
Practice Transformation: Measure | American Medical Association (ama-assn.org)
Polling
Pew: Opinions about the American dream: Per the Pew Research Center survey of 8,709 U.S. adults conducted April 8-14, 2024:
- 53% of Americans think living the American dream is still possible vs. 41% who say it was once possible for people to achieve – but not anymore and 6% who say it was never possible
- Americans ages 50 and older are more likely than younger adults to say the American dream is still possible. About two-thirds of adults ages 65 and older (68%) say this, as do 61% of those 50 to 64. By comparison, only about four-in-ten adults under 50 (42%) say it’s still possible for people to achieve the American dream.
- Higher-income Americans are also more likely than others to say the American dream is still achievable. While 64% of upper-income Americans say the American dream still exists, 39% of lower-income Americans say the same – a gap of 25 percentage points. Middle-income Americans fall in between, with a 56% majority saying the American dream is still possible.
Can the American dream be achieved? Americans have divided views | Pew Research Center
NORC-U of Chicago: financial security among seniors: Per the poll conducted by NORC at the University of Chicago for IHPI and administered online and via phone in February and March 2024 among 3,379 adults age 50 to 101:
- 53% feel stress about their finances
- 52% have cut back on their spending including reducing savings (29%), using credit cards less & paying interest expense only (19%) and cutting spending on necessities (15%).
- 47% say they have been impacted a great deal by inflation
- Younger people 50-64, women more than men, and people of color are more likely to have faced cutbacks in their everyday expenses in the past year.
- Those in poor or fair health that are much more likely to face household financial cutbacks ()76% compared with their healthier older peers (49%),
- One in four people 50 and over said they or someone in their households had taken money out of their savings or retirement plan to cover spending.
Opinions about IVF: “Moral inconsistency is a pretty normal part of the human condition. Attitudes to in-vitro fertilization (ivf) are a case in point. While the vast majority of Americans support access to the technology, which now accounts for over 90,000 births per year, many struggle with a key component of it: the destruction of embryos in the process. Indeed, whereas 82% of Americans believe ivf is morally acceptable, only 49% say the same about destroying excess embryos, according to recent polling by Gallup. This presents moral purists with a conundrum.
So far, Americans have mostly been able to hold such competing views. Even among those who believe that an embryo is a person with rights, only about one in ten say access to ivf is a “bad thing”, according to Pew Research Centre…
Americans are far from alone in having complex feelings about embryos. In Germany, embryos have a particular status which falls short of “personhood” but is more than just gametes, a legacy of the Nuremberg trials. Several countries prohibit genetic testing or donation of embryos. Most European countries prohibit selecting embryos based on sex, though America allows it. Yet whereas most other countries allow for moral flexibility, whereby politicians can be anti-abortion but pro-ivf, or pro-ivf but uncomfortable with embryo destruction, in America cultural wars around reproductive rights leave less room for such elasticity.”
Will IVF really be the next frontier in America’s culture wars? (economist.com)
Blackrock survey: Retirement preparedness by generation: BlackRock surveyed 2,616 fully employed adults Jan. 29-Mar 5, 2024 asking how many have at least $5000 set aside for retirement: % Yes by generation:
Gen Z: 77% Millennials: 72%, Gen X: 60%, Baby Boomers: 68%
Nataxis: Gen X retirement preparedness: “Generation X is the stubborn middle child of demographics. Perpetually stuck between older, more popular Baby Boomers and younger, more precocious Millennials, Generation X has been overlooked for most of the 21st century.
But while the world focused on their siblings, Gen Xers (born between 1965 and 1980) rose from their slacker beginnings and the low-paying McJobs that marked their early years, and now 51% of business leadership roles globally are held by members of Generation X…
Beyond the savings and planning challenges, two critical issues may be shaping Generation X’s fatalistic thinking about retirement – one short term and one long term.
In the short term, they’re coming to grips with the reality of inflation. Surveyed in Q1 and Q2 of 2023, when inflation was well above the average for the past 15 years… 83% of Generation X investors say the recent bout of inflation has revealed just how big a threat rising prices are to their retirement security…. 69% say inflation has hurt their ability to save for retirement…55% report that they are saving less because they are facing higher everyday costs…33% say high inflation has motivated them to save more.”
Generation X Report | Natixis Investment Managers
Politics
RNC Platform: Key Healthcare elements: The Republican National Committee begins in Milwaukee today with ratification of its platform on the agenda. Four sections are specific to proposed healthcare policy changes:
- Chapter 4, BRING BACK THE AMERICAN DREAM AND MAKE IT AFFORDABLE AGAIN FOR FAMILIES, YOUNG PEOPLE, AND EVERYONE. Affordable Healthcare Healthcare and prescription drug costs are out of control. Republicans will increase Transparency, promote Choice and Competition, and expand access to new Affordable Healthcare and prescription drug options. We will protect Medicare, and ensure Seniors receive the care they need without being burdened by excessive costs.:
- CHAPTER SIX: PROTECT SENIORS Our Commitment: President Trump has made absolutely clear that he will not cut one penny from Medicare or Social Security.
- CHAPTER EIGHT: BRING COMMON SENSE TO GOVERNMENT AND RENEW THE PILLARS OF AMERICAN CIVILIZATION. We will restore Trump Administration reforms to expand Veterans’ Healthcare Choices, protect Whistleblowers, and hold accountable poorly performing employees not giving our Veterans the care they deserve
- CHAPTER NINE: GOVERNMENT OF, BY, AND FOR THE PEOPLE 4. Republicans Will Protect and Defend a Vote of the People, from within the States, on the Issue of Life We proudly stand for families and Life. We believe that the 14th Amendment to the Constitution of the United States guarantees that no person can be denied Life or Liberty without Due Process, and that the States are, therefore, free to pass Laws protecting those Rights. After 51 years, because of us, that power has been given to the States and to a vote of the People. We will oppose Late Term Abortion, while supporting mothers and policies that advance Prenatal Care, access to Birth Control, and IVF (fertility treatments)
2024-gop-platform-july-7-final.pdf (nucleusfiles.com) Released Monday July 8, 2024
Prescription Drugs
AEI analysis: Inflation Reduction Act drug price controls potentially harmful to seniors: “Recent analysis suggests that most beneficiaries are unlikely to see a substantial reduction in their out-of-pocket costs from the federal price setting, and for many, costs will actually increase. Seven of the first ten selected drugs are predominantly on formulary tiers that require a fixed copayment, meaning beneficiaries’ out-of-pocket costs will typically remain the same regardless of the underlying price of the drug. For the remaining three drugs, the cap on out-of-pocket costs would make the total costs the same for drugs with and without a price control in most instances. Moreover, while the law requires plans to cover the drugs with price controls, they can still impose utilization management hurdles. The Inflation Reduction Act introduces another change to the benefit structure that, when interacting with the government price setting, will cause roughly 3.5 million beneficiaries to pay more if they are taking a drug with a government-set price, many of them low-income and in employer group plans.
The Medicare Part D program relies primarily on competition, with federal oversight, to provide beneficiaries with options for drug coverage through private insurance plans… as Medicare is further modified due to the Inflation Reduction Act, CMS and Congress need to anticipate emerging problems. “
Changes to Medicare Could Make It More Expensive | American Enterprise Institute – AEI
Regulators
CMS issues CY 2025 physician, hospital outpatient proposed payment rules: Last Wednesday, CMS issued its rules:
Physicians: The rule proposes to cut the conversion factor by 2.8%, to $32.36 in CY 2025, as compared to $33.29 in CY 2024. This reflects the expiration of the 2.93% statutory payment increase for CY 2024; a 0.00% conversion factor update under the Medicare Access and Children’s Health Insurance Program Reauthorization Act; and a .05% budget-neutrality adjustment
Hospital OP: the proposed rule that would increase Medicare hospital outpatient prospective payment system rates by a net 2.6% in calendar year 2025 compared to 2024. This includes a proposed 3.0% market basket update, offset by a 0.4 percentage point cut for productivity. The proposed rule would also keep the existing rate structure with two intensive outpatient program ambulatory payment classifications — one for days with three services per day and one for days with at least four services per day. CMS is proposing using 2023 claims data and current cost information for rate setting in 2025.
Fiscal Year (FY) 2025 Hospice Payment Rate Update Proposed Rule (CMS-1810-P) | CMS
FTC: PBM Investigation: “In its 73-page report issued last Tuesday, the Federal Trade Commission described the PBM industry as highly concentrated among a handful of companies that use their market power to put pressure on clients and competitors. It stopped short of breaking up pharmacy benefit managers from the insurers and drugstores but suggested “urgently warrant further scrutiny and potential regulation.”
The PBMs highlighted in the report include CVS Health’s Caremark, Cigna’s Express Scripts, UnitedHealth Group’s Optum Rx, Humana’s Pharmacy Solutions, Prime Therapeutics and MedImpact. Together, they control 94% of all US drug prescriptions, and the FTC says the combined companies are enormous “conglomerates that can exercise vast control over huge swaths of the healthcare sector.”
